Coca-Cola Company Analysis Coca-Cola Company Case Study

Excerpt from Case Study :

0

11,088.0

11,374.0

10,406.0

8,164.0

Gross Profit

22,426.0

19,902.0

20,570.0

18,451.0

15,924.0

Selling/General/Administrative Expenses, Total

13,158.0

11,358.0

11,774.0

10,945.0

9,431.0

Research & Development

0.0

0.0

0.0

0.0

0.0

Depreciation/Amortization

0.0

0.0

0.0

0.0

0.0

Interest Expense (Income), Net Operating

0.0

0.0

0.0

0.0

0.0

Unusual Expense (Income)

0.0

0.0

Other Operating Expenses, Total

0.0

0.0

0.0

Operating Income

8,449.0

8,231.0

8,446.0

7,252.0

6,308.0

Interest Income (Expense), Net Non-Operating

0.0

0.0

0.0

0.0

0.0

Gain (Loss) on Sale of Assets

0.0

0.0

0.0

0.0

0.0

Other, Net

5,185.0

40.0

39.0

Income Before Tax

14,243.0

8,946.0

7,506.0

7,919.0

6,578.0

Income Tax - Total

2,384.0

2,040.0

1,632.0

1,892.0

1,498.0

Income After Tax

11,859.0

6,906.0

5,874.0

6,027.0

5,080.0

Minority Interest

-50.0

-82.0

-67.0

-46.0

0.0

Equity in Affiliates

0.0

0.0

0.0

0.0

0.0

U.S. GAAP Adjustment

0.0

0.0

0.0

0.0

0.0

Net Income Before Extra. Items 11,809.0

6,824.0

5,807.0

5,981.0

5,080.0

Total Extraordinary Items

0.0

0.0

0.0

0.0

0.0

Net Income

11,809.0

6,824.0

5,807.0

5,981.0

5,080.0

Total Adjustments to Net Income

0.0

0.0

0.0

0.0

0.0

Preferred Dividends

0.0

0.0

0.0

0.0

0.0

General Partners' Distributions

0.0

0.0

0.0

0.0

0.0

Basic Weighted Average Shares

2,308.0

2,314.0

2,315.0

2,313.0

2,348.0

Basic EPS Excluding Extraordinary Items

5.12

2.95

2.51

2.59

2.16

Basic EPS Including Extraordinary Items

5.12

2.95

2.51

2.59

2.16

Diluted Weighted Average Shares

2,333.0

2,329.0

2,336.0

2,331.0

2,350.0

Diluted EPS Excluding Extraordinary Items

5.06

2.93

2.49

2.57

2.16

Diluted EPS Including Extraordinary Items

5.06

2.93

2.49

2.57

2.16

Dividends per Share - Common Stock Primary Issue

0.0

1.64

1.52

1.36

1.24

Gross Dividends - Common Stock

0.0

3,800.0

3,521.0

3,149.0

2,911.0

Interest Expense, Supplemental

Depreciation, Supplemental

1,443.0

1,005.0

Normalized EBITDA

9,904.0

9,612.0

9,843.0

8,511.0

7,431.0

Normalized EBIT

8,461.0

8,544.0

8,796.0

7,520.0

6,493.0

Normalized Income Before Tax

14,255.0

9,259.0

7,856.0

8,187.0

6,763.0

Normalized Income After Taxes

11,868.99

7,147.63

6,147.9

6,230.97

5,222.87

Normalized Income Available to Common

11,818.99

7,065.63

6,080.9

6,184.97

5,222.87

Basic Normalized EPS

5.12

3.05

2.63

2.67

2.22

Diluted Normalized EPS

5.07

3.03

2.6

2.65

2.22

Amortization of Intangibles

0.0

63.0

54.0

33.0

18.0

Source: http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=KO

The Coca-Cola Company is a complex global financial organization. The following rations represent their historical standing for the years 2006-2010.

2010

2009

2008

2007

2006

Current ratio

1.3

1.28

.94

.92

.95

Quick ratio

1.0

.95

.62

.58

.58

Collection Period

42

44

35

42

58

Inventory turnover

4.3

13.16

14.61

13.00

16.48

Asset utilization

0.66

0.70

0.76

0.61

0.78

Fixed asset utilization

1.32

1.09

0.87

0.80

0.73

Debt/equity

0.16

5.75

3.16

0.15

0.08

X Interest earned

N/a

N/a

N/a

N/a

N/a

Contribution margin

N/a

N/a

N/a

N/a

N/a

Profit on sales

69.5%

22%

18%

21%

21%

ROA

14%

14.02%

14.33%

13.82%

16.95%

ROE

27.2%

27.31

28.15

27.57

30.28

Sources of Financial Information: Forbes.com, Stock-analysis-on-net, ycharts.com, equity hive.com the Ratio analysis can provide investors with a snapshot of the health of the organization. The current ratio for Coca-Cola demonstrates the company's ability to pay back short-term liabilities with its short-term assets. The higher the ratio, the better the company is able to pay its obligations. A ration of less than 1 suggests that the company might not be able to meet its obligations. As one can see, in 2006, 2007, and 2008, the Coca-Cola company had a current ratio of under one, that in 2009 and 2010 there ratio improved, indicating better health. Both current ratios and quick ratios measure the company's short-term liquidity. As with the current ratio, the quick ratio should be high in order to assure that the company can meet their short-term obligations. The Coca-Cola Company's quick ratio was poor in 2006 but improved to acceptable by the year 2010.

In order for a company to be able to meet their own obligations, they must be paid by their clients within a reasonable time limit. This two has improved since 2006. However, it is currently over 30 days, which means that receivables come in at a much slower rate than bills due. Inventories turnover is closely connected to the collection period. This measure of the estimates the number of days that it takes of inventory to be sold from the time of it is produced. In 2000 this was over two weeks, but now it has been reduced to approximately four days. This is a dramatic improvement and will help their cash flow and the ability to meet short-term obligations.

Asset utilization and fixed asset utilization calculates the total revenue that is earned for every dollar of assets that the company owns. This measure corresponds to the company's efficiency in using its assets. This closely ties into the ability of the company to manage and leverage its assets. It is a direct reflection of managerial performance. The asset utilization refers to all of the company's assets, whereas the fixed asset ratio refers to just those that are tangible assets of known quantity and values such as buildings and equipment. In this respect, Coca-Cola has improved over the years, but they are still not using their assets as efficiently as they could be. Their utilization of total assets has declined, rather than improved.

The debt to equity ratio is another measure of the company's leverage that is calculated by dividing its total liabilities by stockholders' equity. This ratio indicates the proportion of equity and debt the company utilizes to finance its assets. The higher the debt to equity ratio, the more aggressive the company is in financing its growth with debt. This can lead to additional interest expense and it must be able to meet these additional liabilities with liquidity. This can mean that the company cannot withstand a shock that could affect its ability to pay back its debt. Compared to other competitors, Coke has a lower debt to equity ratio, therefore it does not spend as much as others in the industry to finance business growth (Wikiinvest, KO). Although the Coca-Cola debt to equity ratio has grown steadily over the past five years, it is still comparable to industry averages.

Information was not available on the X interest earned, nor the contribution margin. This may have been because the product lines and investment tools used by the Coca-Cola Company are of the highly complex and it is difficult to break them down into a single aggregate number. It may also be that the Coca-Cola Company does not release this information to the public. They could not be obtained for the purposes of this analysis.

Profit on sales is now a healthy 69.5%, which is a dramatic improvement over the 18 to 22% that it had been running for the past five years. The return on equity (ROE) and return on assets (ROA) measure the ability of the company to generate earnings from its investments. These are considered highly important ratios for many investors, as they are a direct the measure of how well management uses its resources and assets. Management has a responsibility to grow the company's value at an acceptable rate so that the investors get a considerable return for their money. Both Coca-Cola's ROE and ROA demonstrate healthy management practices in terms of generating profits with their assets and with their investors' money.

In summary, Coca-Cola's ratios have demonstrated dramatic improvement over the past five years, particularly of between 2009 and 2010. These ratios demonstrate an effective change within the organization that has helped to reduce debt and use of assets and investments more effectively than had been done in the past. When a comparison is made between Coca-Cola's financial ratios in 2006 and again in 2010, one would draw an entirely different conclusion about the company. It appears that changes have been made from within the company to bring them into a position of stability. Now let us examine some of the other factors that have an effect on the stability of the company for the long-term future.

Information Technology

Coca Cola's use of information technology to make their vending machines easier to operate from the customer standpoint of demonstrates effective use of information technology as an asset (Givens). Effective use of technology represents sound managerial use of assets and an awareness of waht the customer wants and needs. Coca-Cola has been known for employing the latest technology to help operate its business more efficiently, which is one of the reasons for Coca-Cola's success.

Environment

Coca-Cola understands that it has an opportunity to make a difference by using sustainable packaging, better energy management, and taking measures to protect the climate. Coca-Cola concentrates on taking the initiatives globally to help conserve water and to reduce transportation costs by sourcing supplies locally and through local distribution to its end customer. The Coca-Cola Company is also taking measures to recover and reuse packaging materials. The company is also taking measures of to make certain that plastic bottles are recycled into other items. Coca-Cola is currently researching the possibility of using plant-based bottles that will not remain in landfills for many years, but that will break down into compost more quickly (the…

Cite This Case Study:

"Coca-Cola Company Analysis Coca-Cola Company" (2011, February 19) Retrieved July 21, 2017, from
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"Coca-Cola Company Analysis Coca-Cola Company", 19 February 2011, Accessed.21 July. 2017,
https://www.paperdue.com/essay/coca-cola-company-analysis-4690