Coca-Cola Financial Ratio Analysis: Income & Balance Sheet
This paper presents a financial trend analysis of Coca-Cola Company covering fiscal years 2013 through 2015. Using data from Coca-Cola's income statement and balance sheet, the paper calculates and interprets key ratios including liquidity ratios, debt ratios, asset turnover, profitability margins, and return metrics. The analysis identifies a consistent decline in revenue, net income, and returns on assets and equity over the period, while noting that operating expenses remained relatively stable. The paper concludes with a DuPont analysis that decomposes return on equity into its component drivers and offers observations on how Coca-Cola might improve financial performance through cost reduction or revenue growth.
- Company and Industry Overview: Coca-Cola profile, global scope, and revenue decline
- Income Statement and Balance Sheet Trend Data: Tabular financial data across 2013–2015
- Key Financial Ratios: Derived liquidity, leverage, and profitability ratios
- Analysis of Performance Trends: Revenue decline vs. stable operating expenses explained
- DuPont Analysis and ROE Decomposition: ROE broken into margin, turnover, and leverage factors
- Conclusion and Strategic Observations: Strategies for improving ROE and financial performance
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What makes this paper effective
- Grounds every interpretive claim in specific numerical data drawn directly from the financial statements, making the analysis verifiable and precise.
- Uses the DuPont decomposition correctly, cross-checking the calculated ROE against the reported figure to validate the model.
- Balances technical ratio analysis with plain-language interpretation, making the findings accessible without sacrificing analytical rigor.
Key academic technique demonstrated
The paper demonstrates multi-period trend analysis combined with ratio decomposition. Rather than reporting ratios in isolation, the author tracks each metric across three years, identifies directional trends, and then uses the DuPont framework to explain why return on equity is declining — linking margin compression, stable asset turnover, and moderate leverage as the three contributing factors.
Structure breakdown
The paper opens with a brief company and industry profile, then presents raw income statement and balance sheet data in tabular form for 2013–2015. A derived ratio table follows, covering liquidity, leverage, efficiency, and profitability. The analytical section interprets the ratio trends — particularly the gap between declining revenues and sticky operating expenses. The paper closes with a DuPont ROE calculation that ties the analysis together and suggests two concrete improvement strategies.
Company and Industry Overview
The company examined in this report is Coca-Cola, operating within the "Beverages — Soft Drinks" industry, which represents nearly the entirety of its business. The company operates worldwide, manages much of its own distribution, and holds a diversified portfolio of non-alcoholic beverages. Coca-Cola's business is mature in most markets, as evidenced by shrinking revenues. The company recorded $48 billion in revenue in FY2013, and this figure declined in each of the following two years, reaching $45.998 billion in FY2015. Net income dropped approximately $2 billion over this same period, though the company remains widely popular and globally dominant in its category.
Income Statement and Balance Sheet Trend Data
The following tables present the trend analysis of Coca-Cola's income statement and balance sheet over the three-year period from 2013 to 2015. All figures are in billions of U.S. dollars.
Income Statement ($ billions)
Total Revenue: 2013 — 48.017 | 2014 — 46.584 | 2015 — 45.998
Cost of Goods Sold: 2013 — 19.053 | 2014 — 18.421 | 2015 — 17.889
Gross Profit: 2013 — 28.964 | 2014 — 28.163 | 2015 — 28.109
Operating Expenses: 2013 — 18.185 | 2014 — 18.205 | 2015 — 18.401
Operating Income: 2013 — 10.779 | 2014 — 10.228 | 2015 — 9.708
Net Income: 2013 — 9.019 | 2014 — 8.584 | 2015 — 7.098
EPS: 2013 — 2.00 | 2014 — 1.94 | 2015 — 1.62
Balance Sheet ($ billions)
Cash: 2013 — 16.551 | 2014 — 20.268 | 2015 — 21.675
Accounts Receivable: 2013 — 4.579 | 2014 — 4.873 | 2015 — 4.466
Inventories: 2013 — 3.264 | 2014 — 3.277 | 2015 — 3.100
Total Current Assets: 2013 — 30.328 | 2014 — 31.304 | 2015 — 32.986
Total Non-Current Assets: 2013 — 55.864 | 2014 — 58.751 | 2015 — 59.037
Total Assets: 2013 — 86.174 | 2014 — 90.055 | 2015 — 92.023
Current Liabilities: 2013 — 27.821 | 2014 — 27.811 | 2015 — 32.374
Non-Current Liabilities: 2013 — 25.185 | 2014 — 28.804 | 2015 — 29.088
Total Liabilities: 2013 — 53.384 | 2014 — 56.882 | 2015 — 61.703
Total Equity: 2013 — 32.790 | 2014 — 33.173 | 2015 — 30.320
Total Liabilities & Equity: 2013 — 86.174 | 2014 — 90.055 | 2015 — 92.023
Key Financial Ratios
From the financial statement data above, the following ratios were derived. These span liquidity, leverage, efficiency, and profitability measures across the three-year period.
Current Ratio: 2013 — 1.09 | 2014 — 1.13 | 2015 — 1.02
Quick Ratio: 2013 — 0.97 | 2014 — 1.01 | 2015 — 0.92
Debt Ratio: 2013 — 0.62 | 2014 — 0.63 | 2015 — 0.67
Debt-to-Equity: 2013 — 1.63 | 2014 — 1.71 | 2015 — 2.04
Total Asset Turnover: 2013 — 0.56 | 2014 — 0.52 | 2015 — 0.50
Gross Margin: 2013 — 60.32% | 2014 — 60.46% | 2015 — 61.11%
Net Margin: 2013 — 18.78% | 2014 — 18.43% | 2015 — 15.43%
Inventory Turnover: 2013 — 5.84 | 2014 — 5.62 | 2015 — 5.77
Accounts Receivable Turnover: 2013 — 10.49 | 2014 — 9.56 | 2015 — 10.30
Return on Assets (ROA): 2013 — 10.47% | 2014 — 9.53% | 2015 — 7.71%
Return on Equity (ROE): 2013 — 27.51% | 2014 — 25.88% | 2015 — 23.41%
Analysis of Performance Trends
The ratios confirm that Coca-Cola's financial performance declined in each of the past two years, with 2013 representing the peak within the five-year window. A closer examination reveals that while revenues fell by approximately $2 billion between 2013 and 2015, operating expenses did not decline by a comparable amount — they remained relatively stable, hovering between $18.185 billion and $18.401 billion throughout the period. The result is that the decline in top-line revenue translated almost directly into a decline in net income, which fell by roughly $2 billion over the same span.
This pattern suggests one of two things: either management failed to respond to the revenue decline with appropriate cost discipline, or — far more plausibly — management views the current slump as temporary and expects revenues to recover, making large-scale organizational reductions unnecessary and potentially counterproductive.
Conclusion and Strategic Observations
To improve its financial performance, Coca-Cola could pursue share buybacks, but this is generally regarded as a reactive measure and not a fundamental fix. A more sustainable path to improving ROE would be to reduce operating costs — thereby expanding net margin — or to grow revenue and increase total asset turnover. Both of these strategies address the root drivers identified in the DuPont decomposition and represent more durable improvements than financial engineering through capital structure adjustments.
References
Investopedia. (2015). DuPont analysis. Investopedia.com. Retrieved July 14, 2015, from http://www.investopedia.com/terms/d/dupontanalysis.asp
MSN Moneycentral: Coca-Cola. (2015). Retrieved July 14, 2015, from http://www.msn.com/en-us/money/stockdetails/financials/fi-KO?ocid=qbeb
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