Final Project Two Files Word & Excel

Running Head: COCA-COLA COMPANY 1

MBA 7200 Financial Analysis Paper: Coca-Cola KO

Emmanuel Kpartor

Wilmington University

COCA-COLA COMPANY 2

The article focuses on the Coca-Cola Company. The company has been described a bit to

enable one to understand what it deals with and how it started. Also, the financial statement of

the company has been analyzed since the year 2016, which makes it easier to know the trends of

the business as well as the financial position that the company is. The statements of finance

enable one to understand where to make changes so that the company receives the targeted

revenue in the coming years.

The Coca-Cola organization is the largest nonalcoholic beverage company in the world.

They have more than 500 nonalcoholic brands, classified into clusters such as sparkling soft

drinks, enhanced water, water, and sporty juice, dairy, juice and plant beverages, coffee, tea, and

energy drinks. They possess and sell four of the global top five brands drinking with

nonalcoholic soft drink: Diet Coke, Fanta, Coca-Cola, and Sprite. Finished goods bear their

trademark and have been operating from 1886 in the United States, and it is being sold to more

than 199 countries (Zhang, 2017).

Their products are always available to consumers thanks to the independent network of

bottling distributors, partners, retailers, and wholesalers as well as distribution operations that the

company owns. The company produces a variety of products for its consumers globally. The

products serve their consumers worldwide every day. Also, it has many resources that they can

use to their advantage to become more competitive and ensure continuous growth in the market.

For instance, they have assets like financial strength, well-known brand, global reach, a unique

system of distribution, talent, and persuasive communication of their associates, and

management that helps them grow more.

The company was incorporated in the year 1919 under the Delaware State of Laws. Its

working structure is based on its internal report of finance. By Dec 2018, the operating

COCA-COLA COMPANY 3

framework included Latin America, Middle East, Europe, Africa, Asia Pacific, North America,

and Bottling Investments. At the start of 2019, the company established a new sector of

operation, a worldwide venture which included the outcome of Costa Limited (Cannon, 2019).

THE COCA-COLA ORGANIZATION

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED DEC 31ST

In millions except per share data 2018 2017 2016

NET OPERATING REVENUE $ 31,856 $35,410 $41,863

Cost of goods sold 11,770 13,255 16,465

GROSS PROFIT 20,086 22,155 25,398

selling, administrative and general expenses 10,307 12,654 15,370

Other charges of operation 1,079 1,902 1,371

OPERATING INCOME 8,700 7,599 8,657

Interest income 682 677 642

Interest expense 919 841 733

Equity Income(loss)-Net 1,008 1,071 835

Other Income(loss)-Net (1,121) (1,764) (1,265)

INCOME FROM CONTINUOUS OPERATIONS 8,350 6,742 8,136

COCA-COLA COMPANY 4

BEFORE TAX OF INCOME

Income taxes from uninterrupted working 1,623 5,560 1,586

NET INCOME FROM CONTINUING OPERATIONS 6,727 1,182 6,550

Income(loss) from discontinued operations (net income of

taxes of $ 126, 47 and $0, respectively) (251) 101 _

CONSOLIDATED NET INCOME 6,476 1,283 6,550

Less: Net Income attributable to non-managing income 42 35 23

NET INCOME ATTRIBUTABLE TO SHAREOWNERS

OF THE COCA-COLA ORGANIZATION $6,434 $1,283 $6,527

Basic Net income per share from uninterrupted working $1.58 $0.28 $1.51

Basic net income(loss) per share from discontinued operations (0.07) 0.02 -

BASIC NET INCOME PER SHARE $1.51 $0.29 $1.51

Diluted net income per share from uninterrupted working $1.57 $0.27 $1.49

Diluted net income(loss) per share from discontinuous working (0.07) 0.02 -

DILUTED NET INCOME PER SHARE $1.51 $0.29 $1.49

AVERAGE SHARES OUTSTANDING-BASIC 4,259 4,272 4,317

Effect of dilutive securities 40 52 50

COCA-COLA COMPANY 5

AVERAGE SHARES OUTSTANDING-DILUTED 4,299 4,324 4,367

COCA-COLA ORGANIZATION AND SUBSIDIARIES

BALANCE SHEETS

FOR DEC 31ST

In millions except per value 2018 2017

ASSETS

CURRENT ASSETS

Cash and its equivalent $8,926 $6,006

Short-term ventures 2,025 9,352

TOTALS 10,951 15,358

Marketable securities 5,013 5,317

Trade accounts receivable, less allowance of $489 and $477 3,396 3,667

Inventories 2,766 2,655

Prepaid expenses and other assets 1,962 2,000

Assets held for sale - 219

COCA-COLA COMPANY 6

Assets held for sale-discontinuous working 6,546 7,329

TOTAL CURRENT ASSETS 30,634 36,545

EQUITY VENTURE WAYS 19,407 20,856

OTHER VENTURES 867 1,096

OTHER RESOURCES 4,139 4,230

DEFERRED INCOME TAX ASSETS 2,667 330

PLANT, EQUIPMENT AND PROPERTY-Net 8,232 8,203

TRADEMARKS WITH UNKNOWN LIVES 6,682 6,729

BOTTLER’S FRANCHISE RIGHTS WITH INDEFINITE LIVES 51 138

GOODWILL 10,263 9,401

OTHER INTANGIBLE ASSETS 274 368

TOTAL ASSETS $83,216 $87,896

EQUITY AND LIABILITIES

CURRENT LIABILITIES

Account payable and arising cost $8,932 $8,746

Notes and loans payable 13,194 13,205

Existing maturities of long-term debt 4,997 3,298

Arising tax of income 378 410

COCA-COLA COMPANY 7

Liabilities held for sale - 37

Liabilities held for sale-discontinued workings 1,722 1,496

TOTAL EXISTING LIABILITIES 29,223 27,194

LONG-TERM DEBTS 25,364 31,182

OTHER ACCOUNTABILITIES 7,638 8,021

ADJOURNED INCOME TAX ACCOUNTABILITIES 1,933 2,522

THE COCA-COLA ORGANIZATION SHAREOWNERS’ EQUITY

Common stock, $0.25per value; authorized-11,200 shares 1,760 1,760

Issued-7,040 and 7,040 shares

Capital surplus 16,520 15,864

Reinvested earnings 63,234 60,430

Accumulated other inclusive income(loss) (12,814) (10,305)

Treasury stock, at cost-2,772 and 2,781 shares (51,719) (50,677)

EQUITY ASCRIBABLE TO COCA-COLA SHAWEHOLDERS 16,981 17,072

EQUITY ASCRIBABLE TO NONMANAGING INTERESTS 2,077 1,905

TOTAL EQUITY 19,058 18,977

TOTAL EQUITY AND LIABILITIES $83,216 $87,896

COCA-COLA COMPANY 8

Descriptive analysis of the Coca-Cola financial and ratio analysis

The

year

2018

%change The

year

2017

%change The

year

2016

%change

Debt Ratio 1

Ratio 2

Ratio 3

1.33 -3% 1.64 28% 1.28

ROI Ratio 1

Ratio 2

Ratio 3

17.8 4.8 14.54 0.9 15.81

ROE Ratio 1

Ratio 2

Ratio 3

13.9 3.4 5.79 0.22 25.74

ROA Ratio 1

Ratio 2

Ratio 3

7.29

3.14

2.63

13.1 1.38

5.05

4.57

0.18 7.48

Current Ratio 1

Ratio 2

Ratio 3

0.9x -35.5 1.3x 4.8 1.3x 3.4

Asset

Turnover

Ratio 1

Ratio 2

Ratio 3

0.4x -3% 0.4x -12.5% 0.5x -3%

COCA-COLA COMPANY 9

Cash

coverage

Ratio 1 0.6x -26.4 0.8x -9.1 0.8x 13.1

Income Statement analysis

Growth of revenue: In 2016, net income was around $41,863M. Over the years, the receipt of

Coca-Cola declined to $31,856. The statistics clearly show that the company is losing consumers

to its competitors. The revenue reduction might also be an indication of the community's urge for

sugary drinks. The company needs to start venturing into products that society wants.

Cost of goods sold: In 2016, the cost was $16,465m. The value dropped to $11,770m in 2018.

The statistic shows that the Coca-Cola company is delivering an excellent service of making the

prices and cost of goods to be in line. It shows that the company is acquiring raw materials at a

lower cost, or the organization is passing on maximized raw material prices to its consumers.

Balance sheet analysis

Cash: The company finished 2017 with position cash of $6,006m. The money grew to $8,926 in

the year 2018. This shows that the company is doing great work in making more cash for itself.

Short-term venture: The organization finished 2017 with roughly $9,352m, which felled to

$2,025m in 2018. The statistics show that the company is using short term ventures towards

getting competitor business or operations.

Summary of Financial ratio

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The company's current ratio was in 2016 was 1.3. This indicates that the organization had more

than the required existing assets to cover its dues over the years. The rate reduced from 2018 to

0.9. This suggests that the organization could be having issues of liquidity in the coming years.

The company should sell off some of its inadequate assets that will help them get cash; thus,

solving the problem.

Total asset turnover

In 2016, the asset turnover of Coca Cola was 0.5. After some years, the ratio reduced to 0.4 in

the year 2018. The statistics show that the organization is steadily using its assets less over the

years. The company should strive to increase sales in their business.

Return on Equity

This ratio was at 15.81 in 2016. The rate reduced in 2017 but increased to 17.8 in 2018. This

clearly shows that the company managed to substantially enhance its reliance on dues for growth

and operation contrast to Equity.

Debt Ratio

The ratio was 1.28 in 2016. The ratio increased in 2017 but declined in 2018. The fluctuation is

due to a powerful increase in the sum liabilities and the slowed development in its working cash

flow.

Evaluation of Coca-Cola stock price history, dividend, and earnings policy for the last three

years

3- year analysis of Coca-Cola stock price and the ratio of P/E

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2018 2017 2016

Stock

price

Q1

Q2

Q3

Q4

$0.32

0.54

0.44

0.2

$0.28

0.32

0.34

(0.65)

$0.32

0.54

0.44

0.2

P.E Ratio 1

Ratio 2

Ratio 3

Ratio 4

31.57

69.95

79.27

131.29

162.93

40.77

44.08

27.78

25.64

23.77

25.3

23.11

EPS Q1

Q2

Q3

Q4

$0.2

0.44

0.54

0.32

-0.63

0.33

0.32

0.27

0.12

0.24

0.79

0.34

The Earnings per share= (net income of the organization- dividends to shareholder preferred)

mean outstanding company shares

Coca-Cola's ratio debt to Equity

In 2016, the company had a debt to equity ratio of 1.28. In 2017, Coca-Cola had 1.64, while in

2018, the organization had a ratio of 1.33. The statistics show a rise in 2017, while a decrease ij

2018.

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Coca-Cola recent Weighted Average Cost of Capital using examples of capital cost

WACC is the rate of discount used to determine the current value an organization’s future flow

of cash that is used in different Cash flow being discounted.

Weighted Average Cost of Capital= (equity/ sum capital)  Equity cost + (debt/capital total) 

Debt cost  (1- Rate of Tax)

Coca-Cola's organization's selling capitalization is $195245. 77M

Debt value is used because it's hard to calculate the debt value of a market. The debt value is

broken down by summing the current two years mean lease capital obligation and short term

debt and lease capital policy and long term dues together. The result is $17042.5M and

$26446M, respectively. The sum debt value in the book is $43488.5M (McKee, 2018).

Equity weight= E/ (E+D)= 195245.77 (195245.77+ 43488.5)= 0.82

debt weight= D (D+E)= 43488.5(43488.5+ 195245.77)= 0.18

Equity Cost= risk- exempt return rate + Asset Beta  ( hoped market return- risk-

exempt return rate)

new risk-exempt rate is 0.66%. The Beta of Coca-Cola is 0.58

Hoped market return-risk- exempt return rate is 6%

Equity Cost= 0.66%+0.58 6%= 4.14%

Debt Cost=946 43488.5= 2.18%

mean rate of tax= 18.98%

COCA-COLA COMPANY 13

WACC= 0.82 4.14= 3.71%

The Company’s WACC currently is at 3.71

THE COCA-COLA ORGANIZATION

CASH FLOW STATEMENT

Ended Dec 31st in millions 2018

OPERATING WORK

net income $6,476

loss from stopped work 251

net income from going work 6,727

amortization and depreciation 1,086

The stock-based expense of compensation 225

Income taxes that were deferred (450)

loss of Equity- dividend nets (457)

outside currency changes (38)

significant(losses) gains on asset sales-net 189

COCA-COLA COMPANY 14

other charges of operation 558

other stuff 682

Net adjustment in operating liabilities and assets (1,202)

the net fund provided by activities being operated 7,320

ACTIVITIES OF INVESTMENT

Purchase of ventures (7,789)

proceeds from investment disposal 14,977

acquisition of equity way investment, business, and other securities (1,040)

proceeds from business, equity way ventures and other security disposals 1,362

purchase of plant, equipment, and property (1,347)

Proceeds from plant, equipment and property disposal 245

other activities of investment (60)

ACTIVITIES OF FINANCE

Debt Issuance 27,339

Debt payments (30,568)

Stock Issuance 1,476

stock purchase for treasury (1,912)

COCA-COLA COMPANY 15

dividends (6,644)

other activities of finance (243)

The net fund given by financing work (10,552)

FLOW OF CASH FROM DISCONTINUED ACTIVITIES

Net fund given (used in) operating discontinued activities 307

Net fund given (used in) investing discontinued activities (421)

Net fund given (used in) financing discontinued activities 205

Net fund given by discontinued activities 91

OUTCOMES OF RATE OF EXCHANGE DIFFERENCE

ON CASH AND STUFFS RELATED TO IT (262)

Net decrease (increase) in cash and its equivalents

during the year 2,945

cash and its equivalents at the start of the year 6,373

cash and its equivalents at the end of the year 9,318

Less: Restricted cash and its equivalents at the end of the year 392

Cash and it's equivalent at the end of the year $8,926

COCA-COLA COMPANY 16

Comparative analysis of the income statement and the balance sheet of Coca-Cola has been

done. The period was between 2016-2018. The company basically deals mostly in beverages.

Important financial ratios of the organization have been determined for the specific sector of the

industry. The data was mainly received from the financial statements provided by the company

over the years. It can determine the financial position quality of the organization from the

calculations that have been recorded. The financial performance and health of the organization

are worse compared to other industries selling beverages. The company is continually reducing

net revenue over the years. For instance, in 2018, the revenue decreased to $ 31,856. In 2017, the

income was $35,410. In 2016, the income was $41,863The assumption is supported by the

outcomes of the firm's finance ratios with mean ratios of the U.S. The Coca-Cola financial

position is poor than most highlighted organizations that issue financial statements to the security

of the U.S and Commission of Exchange.

The economy has gone down, and the company is performing poorly. This poses a high risk in

the finance of the company if the economy does not return back to normal. The company should

come up with ways that will help it increase its revenue over the coming years.

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Reference

Le, A., Jiang, J., Sandor, M., Stashick, M., & Zhang, L. (2017). Business Ethics: The Coca-Cola

Company. Simon Fraser University Undergraduate Journal of Philosophy, 1(1), 35-45.

Monteiro, C. A., Gomes, F. S., & Cannon, G. (2019). Weaning Africans off Coca-Cola.

Stuckler, D., Ruskin, G., & McKee, M. (2018). Complexity and conflicts of interest statements: a

case-study of emails exchanged between Coca-Cola and the principal investigators of the

International Study of Childhood Obesity, Lifestyle and the Environment (ISCOLE). Journal of

public health policy, 39(1), 49-56.