Analysis Of The Financial Statements Of Coca Cola Finance Essay

Analysis Of The financial Statements Of coca plant plant Cola pay EssayThe unswerving and the outside providers of the large(p) that is the investors and the convictionors pass on all final payment the financial statements into conside balancens .The Investor in the play alongs allow be interested in the act and future expected earning of the keep comp whatever . As a result the investoes will be interested in the clams ample power of the lodge usually this will be their center of their analysis. They are alike c erstrned with the sign business leader of the steadfast to pay dividendsInternal attention will also lock financial analysis for the quest reasonsBetter purpose of internal concordManagement need to undertake financial analysis in fellowship to plan and control efficaciouslyThe financial manager is particularly concerned with the return on enthronement provided by various assets of the go with.Financial statementsFinancial analysis is the art of transforming data from financial statement into information that is reclaimable for decision making.Balance pall A summary of a stanch financial position on a throw offn data that shows pith assets = descend liabilities + owners candorINCOME STATEMENT- A summary of a firms tax revenues and expenses oer a specified period ending remuneration income or pass for a period.Cash flow statements- Is a financial Statements that shows how changes in the poise sheet accounts and income doctors cash and cash equivalents and break the analysis down to in operation(p) drop and finance activities.FINANCIAL ANALYSISFINANCIAL STATEMENTSBalance sheetCash Flow StatementINCOME STATEMENTcoca plant COLA circumstance INFORMATIONThe coca cola alliance is the humannesss largest produces of non alcoholic beverages concentrates and syrups.This company is found in atalnta, gerogia which makes concentrated form of beverages and sells them to the retailers. The company has its operation in m ore than that 200 countries and sells tight-fittingly up to 100 dissimilar brands . coca cola is straight off one of the worlds largest co-operation with a global workforcw of 90000. everywhere the old age the brand paleness of coca plant cola trade mark,the produces brands ,has established the company a magnanimous figure in the non alcoholic industry and allowed comapnay to maintain high revenue and boodle .The Coca-Cola Companys major offerings include much(prenominal) as coca -cola, queen ,Fanta ,coke zero etc.EVALUATIONLiquidity (Appendix A)Current Ratio The contemporary ration from the years 2007 to 2009(Appendix A) has been increasing nevertheless when compared to the standard ration 21 these ratios are much lower which shows short line fluidness effencicy and inefficient use of resources.Some corrective measures should be taken by the concern to maintain the resources.Acid test ratioThis show the ability of the firm to pay its real obligation more quickly with out considering the inventory and per-paid expenses . From the ratios (Appendix A) the firm has no trouble in meeting its current obligation thither is an incline in the ratio and the company has the ability to meet the current obligation.works capital The working capital of the company (Appendix A) when seen from 2007 to 2008 the net working capital was negative and the detail was alarming.The ablity of the firm to meet its current expenses for day to day operation shows a constraint. But in 009 the working capital shows a positive impact.Receivables TurnoverIn Coca cola the mo of times receivables are converted into cash has showed continuous varation from 2007 to 2009. In 2007 the accounts receivables turnover showed incline scarcely again in 2008 ascribable to the financial crisis it has showed a decline. So amelioratement has been made in 2009 in collection of accounts receivables. So boilersuit situation is quite satisfactory.AVERAGE COLLECTION PERIOD In coca cola the b et of old age requires to collect receivables run through increase over the time it shows the ineffective solicitude of the credit department. So this ratio shows the negetive trend as efficiency has non improvedDays sales in inventory In coca cola the number of days requires to collect receivables have change magnitude over the time it shows the ineffective management of the credit department. So this ratio shows the negetive trend as efficiency has non improved.Inventory turnover In coca cola cash were increase in 2007 and 2009. This was indication of negative trend. However improvement has been made in 2008.Leverage (Appendix A)Leverage ratios measure the degree of protection of suppliers of long term funds. Thelevel of leverage depends on a lot of factors such as availability of collateral, peculiarity ofoperating cash flow and tax treatments. Thus, investors should be careful aboutcomparing financial leverage between companies from different industries.In Coco cola The descend of funds provided by creditors in relation to total assets has been the same from 2007 to 2009. Debt- to total -asset ratio it is obvious that amount of funds provided by creditors to purchase total assets are ceaselessly remain the same. As in last 3 years the more than 25% of the total assts are existence financed by creditors, so the current situation is quite alarming. direct cash flow that show a great percentage increase which the suppliers and the investors should see . getability(Appendix A)It is this ratio analysis which would give an acuteness into the prfotability of the firm , as it would help the investors analysi the combined effect of the runniness of the firm , its dividend birth Earning per deal out , revenue egression and the are all primary(prenominal) for the excerpt of the firm. This would tell how the company has been utilizing its resources in generating profits and shareholders range.GROSS PROFIT valuation reserve In coca cola the gross p rofit margin of the geological formation has showed a continuous increase from 2007 to 2009. But the above time dear analysis clearly implicit, that the ability of the organization to commence profit is improving. The management has taken reasonable as well as tremendous efforts to improve profitability.Net Profit Margin In coca cola although there was slight decline in 2007 from 2008 callable to the financial crisis net profit margin , still in 2009 serious analysis clearly implicit, that the ability of the organization to generate profit is improving. This showed that the management is managing it selling and admin expenses efficiently and in effect with increasing sales profit to add more to net profits. Profit generation capability is showing positive trend over the years.Operating Income margin In coca cola operating profit was increase in 2009 from 2008 . It was decreased in 2008 as compared to previous year. However in 2009 a considerable change magnitude has occurred . Operating profit has increased considerably. So the overall situation is quite satisfactory. run on Equity The Return on Equity was maximum in 2008 but decreased in 2009 and went down more in 2007 . This again may have happened due to the issue of more long-term debt recession.Return on investment The overall trend is positive over the timeperiod. The return on investment has increased considerably from 2007 to 2009, which indicates that funds are being utilized effectively to generate revenue.INVESTOR ANALYSIS(Appendix A)DEGREE OF FINANCIAL LEVERAGE The degree of financial leverage is fluctuate over the time period. It was improved in year 2009 and 2007 but, in 2008 once again it indicate a negative trend. The loan is not being utilized efficiently to made more earnings available toshareholders. So the above trend needs corrective action.Earning Per Share Earning per share has been increased continuously. It is obvious, that earning capacity of the organization is improving conti nuously with the time. Earning made on individually share of the inceptionholders righteousness is increasing. This showed that the shareholders fund is being used efficiently and effectively to maximize the shareholders wealth.Price / Earning Ratio Price/earning ratio has been decreasing continuously over the three years. It has decreased considerably in 2008. It reflects a real bad indication on the charge of the share. It is quite alarming for the sign expenditure of the trite. Corrective action should be taken immediately.Dividend Yield Dividend egress which shows dividend per share in relation to trade price per share. It was decreasing from 2008 to 2009. Dividend yield showed improvement in 2008 as compared to previous 3 years. So the above analysis shows that some improvement has been made.Book Value per Share It relates the commonplaceholders equity to the number of shares outstanding, giving the shares a crank value. Comparing the market value to the book value can indicate whether or not the stock in overvalued or undervalued.CRITICAL ANALYSIS (Appendix A)The fizz is seat in Coca-Colas stock.As we can see in the envaluation the company is generating a spacious amount of cash flow of 44.70 billion and about $2.93 per share.It has made a net prfit margin of 20.55% in 2009 and a return on equity of about 26.92% . Any one would tell that this is a fabulous company.The company last year saw profit and sales revoke following a potent performance in the developing markets.Coca-Cola remains financially awesome and its drinks will be sold even if the economy cools off.The company has moved into the an emerging consumer market such as China , as now China is taking is firt sip of Coca cola.If the history is any guide, the people of that country will get hookied to Coca cola nicotinamide adenine dinucleotide will become their loyal customers.Coca cola has a strong Earning per share and this would continue go uping for the next 2 to 5 years. The stock would hit $62 within this year.Coca-Cola shares were trading at a price-earnings ratio of 19.45Coca-Colas stock has gained about 20% more than the Standard Poors 500 baron ($INX) over the past five yearsEarnings growth in the past year has moved up moderately compared to earnings growth in the past years. Positive. Coca-Colas stock genuinely looks like a uninjured(p) investment now that it is starting to benefit from a renewed focus on high-pressurely retooling its ware mix.The coca cola stock where fluctuate from $45-69, the price of Coca cola stock now is $53.61which is actually down.The company is now willing to take risks on new brands to capture the strength of hip soft-drink trends such as energy drinks and flavored waters.From now on I can see that Coca-Cola is gaining market share through out the globe. Its safe for investors to assume that the growth in the most recent years is not a fake, but the beginning of a trend the shares will grow steadily high.As of now I guess that the company has a drop in business in Europe and latin the States Developing markets such as China, Africa and India posted double-digit growth in social unit volume led in part by carbonated beverages such as blow and Sprite.The analysi of coca cola would not be spot without taking intpo the consideration the brand recogination because it is one of the billion companies in the world that people recognize. Its hard to tell the worth of coke brand but you can be sure that its an essential ingredient contributing to the companys current successSELECTED COMPITETOR PepsiCoPepsico is the compitetos for coca cola in the non alcoholic beverge industry. It has 31% of the total maket shar as when comapered to coke which has 42.8%.U.S. non-alcoholic beverage market share, by volume pep has some(prenominal) brands some rattling well known Mountain Dew Aquafina Tropicana and Lipton twain the companies are working hard to grab a large share in the market and for the tit le of the best soda producer in the world , both(prenominal) the companies have a similar taste in the investment portfolio.both the companies share equal powerful brand names and global franchises , but when it comes to profit, revenue EPS dididend yield and othe terms realeted to investment in their stock both different in different ways.But during the period of recession both the companies had problems making the stock prices and the revenue incomes , the management of pepsico was far break-dance as we get to see in the critical analysi of the assignment , Pepsico has a larger revenue , due to diversifation of its product lines.LiquidityIn the receivables area ,PepsiCo is forwards of coca cola. Coca-cola is burst off with the days sales in receivables, but substantially behind either per year and account receivable turnover, days.In the inventory area, Coco cola appears to be ahead of PepsiCo. They do have some what different Inventory methods, which could account for the diffe rence.Coca-Cola has a somewhat higher(prenominal)(prenominal) operating cycle ,Which favors PepsiCoWorking capital cannot be compared .PepsiCo is physically repair that Coca colaPepsiCo current ratio is materially higher than Coca colas. This is necessarily bood because the Coca-cola current ratio is very strong and PepsiCo possibly has to many inventory.Coca cola and PepsiCo acid test ratio are both quite the same, which is good.Coca-Cola cash on hand is much bettor than PepsiCo.LeveragesPepsiCo did better in debt ratio ,debt/equity ratio, and tangible net worth ,Cocacola has good ration in these areas.Coca cola has a materially better operating cash flow/total debt .PepsiCo debt indicator appears to be materially better than Coca cola. The Coca-Cola indicators are good.ProfitabilityCoca-Cola has a number of profitability indicators that are materially better than PepsiCo. Included here are net profit margin, return on investment, return on equity.PepsiCo has a number of profi tability indicators that are better than coca cola.In general, PepsiCo s profitability appears to be materially better than coca cola.Investors AnalysisNeither company has a high degree of financial leverage ,but Coca-Cola is lower.price/earning ratio is slightly higher for coca cola .Take a note liquidity is better for PepsiCo ,long tern debt paying(a) ability was materially better for PepsiCo and the profitability was materially better for PepsiCo .The Investors Analysis appears to be better for PepsiCo that that of Coca-Cola .Considering the liquidity , long-term debt paying ability and the profitability we would expect PepsiCo price/earning ratio to be higher than Coca-Cola .Getting technical (Appendix B)The stock to see them how they have been performed I took a look at the chart of 4 years price of the stock , in the chart for the coca cola share we see that Coke has done remarkably very well in 2007 but in December 2008 we see that the stock proce has come dwn . even because of this , the stock boasts a total return, including dividends, of about 23% for the past year. But PepsiCo has held its ground betterIn terms of fundamentals, Pepsi seems to have the slight advantage. While Coca-Cola does have the higher figures, Pepsi has the better margins in terms of operating margins, revenue, and profit which is more important for growing companies.During the 2009 pepsi had a better EPS in their statements. The past year Coca-Cola has but remain in a five horse range, showing little fluctuation patterns for speculators or investors. While this seems to be bad in coca cola ,the value seems to have increased to its maximum, but we can also see a drop in the prices of shre of Coca cola when compared to 2007 and 2009.While pepsico has seen move growth throughout its tenure in a nice settle down growth pattern. The company is in its prime of its careerand this should be able to drip the stock to high numbers for at least a decade.By investing now in pepsi, th e investos have an opportunity to see pepsi rise to near 80-100 points by 2010.and possibility of more by 2015. such(prenominal) as a process is also favorable with its dividend payoff which allows for reinvestments to increase gains.Likewise, I give PepsiCo an edge on the product side. Both companies have done very well navigating a beverage market that is always evolving. PepsiCo owns the Gatorade brand, which is popular with the athletic set Coca-Cola purchased the trendy Vitamin Water line in 2007.Depending on the market situation in tha klast two years coke stock trades at 10.8 times the analyst earning while pepsico 11.3 times , which indicates that pepsico is doing better.My expectation is that coke profits would grow to 9 percent over the next five years ,but pepsico would grow at 11 percent ,which is behind the forcast. To me, thats an edge for PepsiCo, because the company has more room for overseas growth.This sort of competition keeps both companies innovative, aggressiv e and eager to please consumers and shareholders.Pepsi has the edge over Coke in price performance, with a total return, including dividends,Looking at longer-term patterns, PepsiCo has a decided edge. Over 10 years, PepsiCo has an even bigger advantage.EVALUATION OF FINANCIAL MARKETS2008 financial crisis Coca-ColaCoca cola is selling its products all over the world and it would be a safe investment for the people if they are buying the shares people as I realize that due to the economice crisis investors think twice before they actually buy the stock , the prices of the shaers are increasing and this indicates that the growth will be more as the days pass by.2009 results. Despite the economic downturn, the company increased its sales by 2 percent in the joined States and by 3 percent worldwide.In India, Coca-Colas business grew by 31 percent between January and March 2009. In 2008, sales revenue increased by 7 percent in BrazilIn the 2008 due to this crisi profit fell 3 percent to $5.81 billion, or $2.49 per share, from $5.98 billion, or $2.57 per share, in 2007.Commodity Cost Fluctuations Affect Margins. The varaiation in the prices of the raw materials would directly and indirectly affect the production coas which in turn would affect the profitability of Coca cola. Here Coca cola itself would be directly purchasing the raw materials which are used to make the concertes nad syrups.varation in the prices of these would affect the apostrophize of production of as wellas the profit marginsHere also the change in the production cost os the bottlers can also impact the coca cola profitability in and indirect way though. If the raw material becomes more that is necessary for bottling then ,the bottlers would be forced to increase the prices to compensate. Such a nature would hurt the profitabitity of the company , in such an agonistical nature of the non alcoholic beverage company.and would be possible incentive for the consumers to tag on over to other compan ies beverages. The prices of these commodities rose in 2007 and dramatically pressured margins. significant rise in Commodities represents a constant threat to profits.Dollar Affects International transaction The another factor for the decrease in the profit and revenue was the affect in the dollar performance. Although the company was based in north the States more that 76% of its revenues was derived from outside north America.Because of this the company is very responsive to the strength in Dollar price.As the prices of the other currencies weaken relative to dollar , goods that are sold outside the US are worth back in the US, lowering earmning. Thus, if the dollar strengthens (as it did in the second half of 2008 and 2009), it has a negative effect on Coca cola earnings. Coca-Cola expect bills fluctuations to adversely operating income by 10-12% .The Global Economic Recession Threatens boilersuit Demand http//cdn.wikinvest.com/i/px.gif In the 2008 -2009 the global economic recession , the credit crunch had a major impact on the sales and revenues of the COCA COLA company as because the consumers where not able to afford the price of coca cola during that period , the company had also increased the prices of their product because of the increase in the price of their commodity.Conclusion and recommendations