WELC0ME TO
OUR
PRESENTATION
Topic: Financial Ratios Analysis of
Coca-Cola
Group Members
Syed Waqas
Qazi
L4F15ASOC0023
Samir Faizan
L4F15ASOC0082
Presented To
: Prof. Saniya Ahmed
2
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.
3
Financial Analysis
Assessment of the firms past,
present and future financial
conditions
Done to find firms financial
strengths and weaknesses
Primary Tools:
Financial Statements
Comparison of financial ratios to past,
industry, sector and all firms
4
Objectives of Ratio Analysis
Standardize financial information
for comparisons
Evaluate current operations
Compare performance with past
performance
Compare performance against
other firms or industry standards
Study the efficiency of operations
Study the risk of operations
5
Types of Ratios
Financial Ratios:
Liquidity Ratios
Assess ability to cover current obligations
Leverage Ratios
Assess ability to cover long term debt obligations
Operational Ratios:
Activity (Turnover) Ratios
Assess amount of activity relative to amount of
resources used
Profitability Ratios
Assess profits relative to amount of resources
used
Valuation Ratios:
Assess market price relative to assets or earnings
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THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2012
(In millions except par value)
2011
As Adjusted
ASSETS
CURRENT ASSETS
Cash and cash equivalents
8,442
$ 12,803
5,017
1,088
13,459
13,891
Marketable securities
3,092
144
Trade accounts receivable, less allowances of $53 and $83, respectively
4,759
4,920
Inventories
3,264
3,092
Prepaid expenses and other assets
2,781
3,450
Assets held for sale
2,973
Short-term investments
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
BALANCE SHEETS Contd
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses
8,680
$ 9,009
16,297
12,871
1,577
2,041
Accrued income taxes
471
362
Liabilities held for sale
796
TOTAL CURRENT LIABILITIES
27,821
24,283
LONG-TERM DEBT
14,736
13,656
OTHER LIABILITIES
5,468
5,420
DEFERRED INCOME TAXES
4,981
4,694
1,760
1,760
Capital surplus
11,379
10,332
Reinvested earnings
58,045
Accumulated other comprehensive income (loss)
(3,385)
53,621
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(2,774)
Loans and notes payable
Current maturities of long-term debt
THE COCA-COLA COMPANY SHAREOWNERS EQUITY
Common stock, $0.25 par value; Authorized 11,200 shares;
Issued 7,040 and 7,040 shares, respectively
THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2012
As
Adjuste
d
(In millions except per share data)
NET OPERATING REVENUES
2011
48,017 $
46,542
Cost of goods sold
19,053
18,215
GROSS PROFIT
28,964
28,327
Selling, general and administrative expenses
17,738
17,422
447
732
10,779
10,173
Interest income
471
483
Interest expense
397
417
Equity income (loss) net
819
690
Other income (loss) net
137
529
Other operating charges
OPERATING INCOME
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INCOME BEFORE INCOME TAXES
11,809
11,458
Liquidity Ratios
Current
Ratio:
Current Assets
$30,328
Current Ratio :
1.09
Current Liabilitie s $27,821
Years
2011
2012
Current
Ratio
1.05
1.09
In 2011, the firms 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 CocaCola is improving their liquidity and efficiency, because their
current ratio is improving.
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Quick/Acid Test Ratio:
Current Assets - Inventory $27,064
Quick Ratio :
0.97
Current Liabilitie s
$27,821
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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Activity (Turnover) Ratios
Total Asset Turnover
Ratio:
Sales
$48,017
Total Asset Turnover :
0.55
Total Assets $86,174
Years
2011
2012
Assets
Turnover
0.58
0.55
The ratio is supposed to be high. Here we can see that the
coca-cola companys total asset turn over ratio in 2011 was
0.58, which means that the company generated more revenue
per dollar of asset investment. The ratio then comes slightly
down in 2012.
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Inventory Turnover Ratio:
Cost of goods sold $19,053
Inventory Turnover :
5.8
Inventory
$3,264
Years
201
1
2012
Inventory
5.90 5.80
Turnover
The Coca-Colas Inventory
turnover ratios deteriorated from 2011 to
2012, which means that its ability to sell inventory has relatively
come down. In 2011 Coca-Cola had a ratio of 5.90 and in 2012 has a
ratio of 5.80. These ratios are not what we expected; we assumed
that the ratios would be much higher because Coca-Cola sell its
syrup to bottling partners around the world so it does not need to
deal with the storing of the bottled product.
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Average Collection
Period:
365
365
Avg. Collection Period :
36.17 days
Receivable s Turnover 10.09
Years
2011 2012
Avg. Collection Period
38.6
0
36.1
7
The ability of the firm of collecting the receivables in the specific
time. Here in the year 2011 the turnover in days was almost 39,
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.
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Average Payment
Period:
365
365
Avg. Payment Period :
14.96 days
Payable Turnover 24.39
Years
Avg. Payment Period
(days)
2011
2012
17
15
Coca-Colas average period for payment has reduce to 15 days in
2012 which was 17 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.
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Debt Ratios
Debt
Ratio:
Total Liabilitie s $53,006
Debt Ratio :
61.51%
Total Assets
$86,174
Years
2011
2012
Debt Ratio
%
60.09
61.51
The ratio shows the companys ability to cover its debts through
its total assets. The ratio was 60.09% 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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Coverage Ratios
Times Interest Earned Ratio:
EBIT
$11,809
Times Interest Earned Ratio :
25.07
Interest
$471
Years
2011
2012
T.I.E Ratio
23.72
25.07
In 2012 Coca-Cola has a ratio of 25.07 which is a large increase
from 2011 when their ratio was 23.72. This means that they
have a comfortable coverage of interest, and that the coverage
has increased from the previous year.
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Profitability Ratios
Gross Profit
Margin:
Gross Profits $28,964
Gross Profit Margin :
60.32%
Sales
$48,017
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 firms 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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Operating Profit
Margin:
EBIT $11,809
Operating Profit Margin :
24.59%
Sales $48,017
Years
201
1
2012
Operating Profit
21.8 24.5
Margin %
0
9
Coca-Colas 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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Net Profit
Margin:
Net Income
$9,019
Net Profit Margin :
18.78%
Sales
$48,017
Years
2011
2012
Net Profit Margin
%
18.40 18.78
According to the definition, higher the ratio, higher will be the
firms ability to pay its taxes. In the year 2011, the margin was
little low but in 2012 the margin increases by 0.4%. For the
company, roughly 0.38 cents out of every sales dollar consists of
After Tax Profit'. Coca-Cola is more efficient at converting sales
into actual profit and its cost control is good.
20
Return on Assets
(ROA):
Net Income
$9,019
ROA
10.46%
Total Assets $86,174
Years
2011
2012
ROA %
10.70
10.46
The decrease in Return on Assets indicates that the company is
generating
less 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-Colas ratio is
indicating that the company is not that much prospering.
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Return on Equity
(ROE):
Net Income
$9,019
ROE
27.51%
Total Common Equity $32,790
Years
2011
2012
ROE %
27.10
27.51
The ratio should be higher. Here starting from 2011, the ratio was
27.10% and goes up in 2012 to 27.51%. This increase in Return
on Equity is a good thing for stockholders and indicates that Coca
Cola is using the equity provided by stockholders during this
specific year effectively and using it to generate more equity for
the owners.
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Market Ratios
Price/Earning
Ratio:
Market price/shar e of C.S $36.25
P/E Ratio
18.40times
Earning Per share
$1.97
Years
2011
2012
P/E
Ratio
19.00
18.40
Coca-Colas price-earnings ratio has decreased 0.6 times in
2012, because in 2011 the ratio was 19.00 times but in 2012 it
become 18.40 times which suggests that investors may be
looking less favorably at the Coca-Cola. This ratio should be high,
because the higher the P/E ratio, the higher will be the investors
confidence in company.
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Market/Book
Ratio:
Market price/shar e of C.S
$36.25
M/B Ratio :
4.93
Book value /per share of C.S $7.34
Years
2011
2012
M/B
Ratio
5.00
4.93
We can say that Coca-Colas future prospects are being viewed
favorably by investors. Because still, investors are willing to pay
more for stocks than their accounting book value as M/B ratios
fluctuation is negligible in 2012 against 2011.
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Conclusion
After 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!
Presented By:
Syed Waqas
Qazi
L4F15ASOC002
3
Samir Faizan
L4F15ASOC008
2
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