Coca Cola - Team Orange

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May 22, 2024

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Coca-Cola Company Analysis Franklin University ACCT320-U1WW Financial Accounting Theory Team Orange – Krystal Rogols, John Motil, Yohanath Chavarria Barahona, Amanda Rupert 10/31/23
History On May 8, 1886, Dr. John Pemberton brought his perfected syrup to Jacobs’ Pharmacy in downtown Atlanta where the first glass of Coca-Cola was poured” ( History ). As a result of that fateful day, Coca-Cola has become a thriving company, with a purpose of “refreshing the world and making a difference” and a vision to “craft the brands and choice of drinks that people love, to refresh them in body and spirit” ( Purpose-and-Vision). They have over 200 brands that vary widely in types such as soda, sports drinks, coffee and tea, juice, alcohol, and much more that are served worldwide ( About Us) . One of Coca-Cola’s claims as a business is that they prioritize sustainability. “We do business the right way, not just the easy way” is the claim on their website ( About Us ). Doing business “the right way” is a subjective statement that can vary widely depending on the audience viewing the business, but there are several areas of business that most outside individuals review when considering if a business is solid. These areas are Profitability and Revenues, Liquidity and Flexibility, Debts and Investments, and Pension/Compensation Plans and Growth Plans. In the following paragraphs we will create a high-level review of each of these topics to determine help support the decision on whether Coca-Cola is truly doing business “the right way”. Revenues, Accounts Receivable trends, and Profitability Coca-Cola posts all financial statements publicly on their website, under the investors tab ( Financial information ). All revenue comparisons, accounts receivable trends, and profitability discussion in the following section are based on information published in this section. Revenues, at their core, are sales and monies that come into a company based on their typical course of operation. Because Coca-Cola is a production based organization, operating revenue for them
would relate to the sales and distribution of their beverages that they produce. The Income Statement published on their website gives a side by side comparison of their six months ending 6/30/23 and 7/1/22 with all numbers listed in millions. For net operating revenue, the company has $22,952 for 2023 versus $21,816 for 2022, giving a increase of $1,136 million in revenue increase. Because these revenues are based on operations, it’s not sufficient to only look at increased revenues and not look to see if there is an offsetting increase in cost of goods sold. In Coca-Cola’s case there is an increase in this line as well. Cost of Goods Sold for 2023 are $9,229 vs $8,921 for 2022. When those are considered, it leaves a gross profit of $13,723 for 2023 versus $12,895. This $828 million in increase is a more accurate view of how Coca-Cola’s revenues are trending. As a historical view, Gross Profits for 7/2/21 were $11,857 and for 6/26/20 were $9,367. When analyzing revenue, Coca-Cola has had a sound and steady increase even when considered against Cost of Goods Sold. Account receivables are revenues that have been added to the operating revenue but have not yet been collected. This is an important number to review because a company can look very profitable but have no money if none of the sales have been paid. Account receivables can be found on the balance sheet and there are two things to consider when looking at them. The first is the Total outstanding receivables and the second is the allowance of doubtful accounts. Allowance for doubtful accounts is an offsetting contra account that reflects the portion of the accounts receivable that are deemed potentially uncollectable. In Coca-Cola’s case, accounts receivable net of allowance for doubtful accounts (gross receivables less doubtful) are as follows (in millions, all Q2 related): 2023- $3970, 2022-$3487, 2021-$4036, 2022-$3144. The 2021 spike in accounts receivable is potentially due to COVID and the resulting turmoil on markets. There has been an increase from 2022 to 2023 of approximately 500 million, but that is less than the growth in revenue, so while it is a trend to monitor, it’s not necessarily something to be alarmed by.
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