Essay on BSA555 Struense Richard WK 5 Financial Ratios Coca Cola

1312 WordsMay 7, 20156 Pages
Week 5 – Financial Ratios – Analysis: Coca-Cola Richard Brent Struense Averett University Strategic Management – BSA555-M703-SP15 Instructor: Dr. Philip R. Sturm April 9, 2015 Executive Summary The purpose of this analysis is to identify the financial strategy and performance of the Coca-Cola Company, Pepsi, and Monster. Financial ratios are correlations established from a firm’s financial information and used for comparison purposes. Generalized financial ratios include Liquidity Ratios, Profitability Ratios, Debt Ratios, Activity Ratios, and Market Ratios. These ratios are understood by dividing one account balance or financial amount with another. The measurements use are drawn from a company's financial…show more content…
(YCharts, 2015). (YCharts, 2015) Net Profit Margin – Net profit margin is the proportion of proceeds remaining after operating expenses, interest, taxes and preferred stock dividends (not including common stock) have been removed from the total revenue of a company. This is considered a ratio of profitability and often referred to as the company’s “bottom line.” (Investopedia, 2015). The net profit margin ratio is defined as: Net Profit Total Revenue Narrow profit margins can point to increased unstable earnings. Companies with considerable fixed costs, a wide profit margin minimizes the risk a down-turn in sales will cause a net profit loss. The trend in Coca-Cola’s net profit margin the past five years has significantly deteriorated from 2010. Analysts believe this is due to multiple factors: Coke is primarily a North/South American and Western Europe company; there has been significant uncertainty within the economy of Western Europe; and, the Coke brand has not truly taken hold in Asia. (Zacks Equity Research, 2015). Pepsi’s net margin has seen nominal up-down ticks during this same five year stretch. Both soft drink companies have seen a reduction in 2014. However, Monster made a bold statement finishing with a positive 20.70% in net profit margin; a year-to-year increase of almost 32% in 2014. (YCharts, 2015) Coke and Monster remained above the industry benchmark line while Pepsi fell just below. (YCharts, 2015)

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