WELCOME TO OUR PRESENTATION Topic: Financial Ratios Analysis of Coca-Cola 1
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WELCOME TO OUR PRESENTATION
Topic: Financial Ratios Analysis of Coca-Cola
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1. Priya Balani
2. Shoaib Ahmed Memon
3. Syed Jamal Shah
4. Yashpal Advani
5. Murtaza Mudeer
Group Members
Presented To : Ma’am Tazeen Imran
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Coca Cola International The Coca-Cola Company is the world's largest beverage
company.
It is no.1 brand according to fortune 2009 survey.
The company operates a franchised distribution system dating from 1889.
The Coca-Cola Company is headquartered in Atlanta, Georgia.
With local operations in over 200 countries around the world.
Coca Cola has 150,900 employees worldwide.
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The Coca Cola Company Mission Our mission is:• To refresh the world in mind, body and
spirit,• To inspire moments of optimism and
happiness through our brands and actions,
• To create value and make a difference.
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Financial Analysis• Assessment of the firm’s past financial
conditions• Done to find firm’s financial strengths
and weaknesses• Primary Tools:– Financial Statements– Comparison of financial ratios to past.
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Objectives of Ratio Analysis• Standardize financial information for
comparisons• Compare performance with past
performance
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Types of Ratios• Calculations of Ratios,
• Efficency/ Performance Ratios:– Activity (Turnover) Ratios,
• Liquidity Ratios.
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December 31, 2012 2011
(In millions except par value) As Adjusted
ASSETSCURRENT ASSETS
Cash and cash equivalents $ 8,442 $ 12,803Short-term investments 5,017 1,088
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 13,459 13,891
Marketable securities 3,092 144Trade accounts receivable, less allowances of $53 and $83, respectively 4,759 4,920Inventories 3,264 3,092Prepaid expenses and other assets 2,781 3,450Assets held for sale 2,973 —
TOTAL CURRENT ASSETS 30,328 25,497
EQUITY METHOD INVESTMENTS 9,216 7,233OTHER INVESTMENTS, PRINCIPALLY BOTTLING COMPANIES 1,232 1,141OTHER ASSETS 3,585 3,495PROPERTY, PLANT AND EQUIPMENT — net 14,476 14,939TRADEMARKS WITH INDEFINITE LIVES 6,527 6,430BOTTLERS’ FRANCHISE RIGHTS WITH INDEFINITE LIVES 7,405 7,770GOODWILL 12,255 12,219OTHER INTANGIBLE ASSETS 1,150 1,250
TOTAL ASSETS $ 86,174 $ 79,974
THE COCA-COLA COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
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LIABILITIES AND EQUITYCURRENT LIABILITIES
Accounts payable and accrued expenses $ 8,680 $ 9,009Loans and notes payable 16,297 12,871Current maturities of long-term debt 1,577 2,041Accrued income taxes 471 362Liabilities held for sale 796 —
TOTAL CURRENT LIABILITIES 27,821 24,283
LONG-TERM DEBT 14,736 13,656OTHER LIABILITIES 5,468 5,420DEFERRED INCOME TAXES 4,981 4,694THE COCA-COLA COMPANY SHAREOWNERS’ EQUITY
Common stock, $0.25 par value; Authorized — 11,200 shares;Issued — 7,040 and 7,040 shares, respectively 1,760 1,760
Capital surplus 11,379 10,332Reinvested earnings 58,045 53,621Accumulated other comprehensive income (loss) (3,385) (2,774)
Treasury stock, at cost — 2,571 and 2,514 shares, respectively (35,009)(31,304
)
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 32,790 31,635EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS 378 286
TOTAL EQUITY 33,168 31,921
TOTAL LIABILITIES AND EQUITY $ 86,174 $ 79,974
BALANCE SHEETS Cont’d
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Year Ended December 31, 2012 2011
(In millions except per share data)
As Adjuste
d
NET OPERATING REVENUES $ 48,017 $ 46,542Cost of goods sold 19,053 18,215
GROSS PROFIT 28,964 28,327Selling, general and administrative expenses 17,738 17,422Other operating charges 447 732
OPERATING INCOME 10,779 10,173Interest income 471 483Interest expense 397 417Equity income (loss) — net 819 690Other income (loss) — net 137 529
INCOME BEFORE INCOME TAXES 11,809 11,458Income taxes 2,723 2,812
CONSOLIDATED NET INCOME 9,086 8,646Less: Net income attributable to noncontrolling interests 67 62
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY $ 9,019 $ 8,584
BASIC NET INCOME PER SHARE1 $ 2.00 $ 1.88DILUTED NET INCOME PER SHARE1 $ 1.97 $ 1.85
AVERAGE SHARES OUTSTANDING 4,504 4,568Effect of dilutive securities 80 78
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 4,584 4,646
THE COCA-COLA COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME
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Calculations of RatiosGross Profit Margin:
Years 2011 2012
Gross Profit Margin % 60.90 60.32
The ratio should be high according to the definition. Because higher the ratio, higher will be the firm’s ability to produce goods and services at low cost with high sales. Here in this table there is small difference between the ratios in two years, but its still high, which means it is favorable.
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Net Profit Margin:
Years 2011 2012
Net Profit Margin % 21.80 24.59
Coca-Cola’s operating profit margin has increased in 2012 than the margin in 2011 by approximately 3%. This increase in Operating Profit Marin is mainly due to growth of net revenue, good cost control and strong productivity in company in 2012. This higher margin reflects that the Coca-Cola is more efficient cost management or the more profitable business.
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Return on Capital Employed:
Years 2011 2012
ROCE % 35.9 35.6
The decrease in Return on Assets indicates that the company is generatingless profits from all of its resources in the year 2012 as compared to the year 2011. The higher of this ratio is, the better for the company. Therefore this decrease in Coca-Cola’s ratio is indicating that the company is not that much prospering.
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Earning Per Share:
Years 2011 2012
EPS 1.21 1.28
In 2011 Coca-Cola company earned an income of 1.21 dollars per share which increased to 1.28 in 2012
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Liquidity RatiosCurrent Ratio:
09.127,821$30,328$
sLiabilitieCurrent AssetsCurrent :RatioCurrent
Years 2011 2012
Current Ratio 1.05 1.09
In 2011, the firm’s ability to cover its current liabilities with its current assets was 1.05. In 2012, the ratio goes up to 1.09 as compared to 2011, which means that the company has the ability to pay its liabilities, as the definition says that higher the ratio, greater the ability of the firm to pay its bills. This tells that Coca-Cola is improving their liquidity and efficiency, because their current ratio is improving.
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97.027,821$
064,72$sLiabilitieCurrent
Inventory-AssetsCurrent :RatioQuick
Quick Ratio:
Years 2011 2012
Quick Ratio 0.92 0.97
According to the definition of Acid Test Ratio, the company should have the ability to pay its liabilities through its most liquid assets. The table shows that in 2011, the firm has the ratio 0.92 cents. Then we observe a slight improvement in 2012. So we can figure out from the ratios that Coca-Cola still cannot pay its debts without its inventory. This leads us to believe that Coca-Cola is a somewhat risky business, even though it is the largest in the nonalcoholic beverage industry.
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Debt to Equity Ratio:
Years 2011 2012
Debt to equity ratio
0.299 0.307
The ratio shows the company’s ability to cover its debts to equity through its long term debts and equity. The ratio was 0.299 in 2011, then goes up in 2012. The ratio has to be low. So we can interpret that in the year 2012, the risk of the firm is getting higher as the ratio goes up.
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Working Capital Cycle:
Years 2011 2012
WCC 13.28 13.76
Turnover in days= 365/13.76= 26.5 days
Coca-cola Company has working capital cycle turnover days in 2012 decreased to 26.5days from 27.48 days in 2011
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Debtors Receivable turnover :
Years 2011 2012
Receivable Turnover 9.6 9.92
The ability of the firm of collecting the receivables in the specific time. Here in the year 2011 the turnover in days was almost 38, but the collection days decrease in the year 2012 and the collection period of approximately 36 days is well within the 60 days allowed in the credit terms. This shows that the collection is faster as compared to the previous year.
In days365/ inventory turnover = 365/9.92= 36.7=37 days
Efficiency/ Performance Ratios
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Creditors- Payable Turnover:
Years 2011 2012
Payable Turnover 2.05 2.15
Coca-Cola’s average period for payment has reduce to 170 days in 2012 which was 178 days in 2011. This reduction in average payment period shows that how efficiently company is paying back their creditors and also assuring that payments are being made in a prompt manner by Coke to its creditors. This period should remain low as much as possible.
In days365/ inventory turnover = 365/2.15= 169.7=170 days
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Inventory Stocks Turnover Ratio:
Years 2011 2012
Inventory Turnover 5.73 5.99
The Coca-Cola’s Inventory turnover ratios deteriorated from 2011 to 2012, which means that its ability to sell inventory has relatively come down. In 2012 Coca-Cola had a ratio of 5.99 and in 2011 has a ratio of 5.73
In days365/ inventory turnover = 365/5.99= 60.9=61 days
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ConclusionAfter applying all the ratios we got an idea that the Coca Cola Company is a profitable firm. Because through out the analysis of two years, we found that the company is getting profitable return on short term and long term investment, their profit margin has been increased as well and they are in the position to pay their debts with in their resources.
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Thank you!
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