[pic] Andrea R. Hart GB550: Financial Management August 24, 2011 The Abstract The topic of this research paper will be about the capital structure of Coca Cola, This paper serves as a comparison of debt and equity. It will help determine the true value of the company while also determining what their free cash flow is and the risk level for the organization. The question that this research will try to answer is if the 125 year old company is financially ready for another 125 years. The company needs to remain liquid and keep its operating costs low during times of inflation. The methodology that will be used will be multiple financial ratios to determine how the organization …show more content…
The company itself, affiliates, subsidiaries, licensed distributers and bottlers are a risk factor to Coca Cola. Bottlers generate a significant portion of Coke’s net operating revenues by selling concentrates and syrups to independent bottling partners. In 2009, approximately 79 percent of our worldwide unit case volume was produced and distributed by bottling partners in which the Company did not have a controlling interest (ITEM 1A. RISK FACTORS, 2010). The company also operates internationally which is additional business and financial risk to the company. International economies and political environments become a risk to an American investor when considering purchasing securities. Some business risk of the company includes the availability in Coca Cola’s special ingredient of extracted coca leaf, the sustainment of a network that spans 200 countries, health concerns that cause a reduction in market demands. For the company to ensure that it has enough cash flows must be able to have the infrastructure to handle the large amount of demands. Being that Coca Cola is an international company it has opened its doors to many more financial risks. Risks with their international counterparts include fluctuations in foreign currency and exchange rates effecting financial results (ITEM 1A. RISK FACTORS, 2010). If interest rates rise or new tax laws are set it would negatively impact net income. Increase in costs due to shortages of supplies or materials to produce
Based upon my knowledge learned on financial reporting, I had compared to companies reporting statistics. The two companies in comparison are PepsiCo Incorperated and The Coca-Cola Company in which both have reported annual statistics for 2004 and 2005. During my comparison of net incomes, gross expenses, stock statistics, and assets accumulations, I have suggested some strategies for each business to take into consideration for better future results. As an accountant in training, I will be giving specific details of my analysis and recommendations, as these are my opinions for financial success.
Any and all corporations operating within the US market must deal with their regulations of the monetary policy set forth by the United States Federal Reserve Bank, and the Coca-Cola Bottling Company is no exception. The Coca-Cola corporation is affected by all aspects of the Federal Reserve and therefore as a corporation conducting business in the US, we must pay particular attention to the discount rate, the reserve ratio requirement, and the open market operations. Therefor Coca-Cola marketing and operation leadership focuses particularly on the production volatility by maintaining low prices, controlling logistics cost and maintaining inventory levels (2014-2015 Sustainability Report. 2015).
An eyeball assessment of the changes in Coke’s financial statements between 1996 and 2010 show that mainly all accounts are up. The total assets are up from 1996 to 2010 with an increase from $16,161 to $72,921. Also current assets increased 3.6% from 1996 to 2010 with total non-current assets increasing 5%. Revenue nearly doubled from 1996 having only $18,546 to increasing in 2010 to $35,119. The total current liabilities increased over the years from $7,406 to $18,508. The total long term liabilities also show an increase from 1996 having $2,599 to $23,410 in 2010. Also the
The Coca-Cola company has been in business since its inventor began selling it in drug stores in 1886 (The Coca-Cola Company, 2009). Pepsi-Cola was invented a short time later in 1898, but at the time it was called “Brad’s drink.” It was later renamed Pepsi-Cola in 1902 (Butler, 2006). Since those early days when the sodas were invented, Coca-Cola and Pepsi have been in competition with each other for the domination of the world’s soda market. Over the course of more than a century, sales have continued to rise for both companies, and they both consistently earn a profit. Both companies
Essentially, all risk in price fluctuations in the raw materials market is transferred and paid for by the bottling business. Supplier power of the concentrate business is also exerted over the bottling business by the threat of acquisition and vertical integration – the concentrate business supports its bottling business through providing suggestions for operational improvement. While this support can be viewed positively, both Coca-Cola and Pepsi have acquired its bottling franchises due to their dissatisfaction over the operational effectiveness of its bottling business. Through the last few decades, Coca-Cola and Pepsi have oscillated between acquiring and re-franchising its partner bottling businesses.
In this paper, you will find financial comparisons on both PepsiCo and the Coca-Cola Corporation. Some increases in certain areas of one company and some decreases in areas of another company. There are vertical analysis, horizontal analysis, and ratios of both the industries. These are still the two leading soft drinks in the industry, and most like will remain the leaders in the upcoming years.
The purpose of this comparative analysis is to provide a summary of financial and accounting information to a potential investor who is looking to invest in either Coca-Cola or PepsiCo. This research will cover some facts from the financial statements of both companies for the year of 2004.
The Coca-Cola organization is thought to be the world number one non-mixed refreshments organization, driving in assembling, advertising and circulation of its item. However, the Global Financial Crisis (GFC), influences all parts of the change procedure in the Coca-Cola company. The financial environment affects the way the materials are handled as well, going down to affecting their prompting and deals contrasts (Reference). The Coca-Cola yearly report gives a significant decent outline of the Global Financial Crisis round the organisation, particularly the danger components ascending from changes in the business sector. The primary issues are spoken to by the danger of Coca-Cola being not able access credit markets on great terms as they are typically used to getting a lower FICO score, and this would negatively affect the general acquiring of the organisation.
1. My “eye-ball” assessment of Coke’s changes over the period from 1996 to 2010 is that they improved their finances in many ways indicating overall growth. Their revenue doubled along with their gross profit while at the same time their retained earnings tripled. They also paid out more dividends. The balance sheet indicates that Coke has added long term assets and some long term debt. They have a capital surplus which did not exist in 1996 and five times the amount of shareholder’s equity indicating they leveraged some of their investments with not just long term debt but shareholder’s equity also.
The political situation of a country affects its economic settings and economic environment affect the business performances. Coca-Cola sales are impacted by a set of economic factors that beyond are beyond the company’s control. These factors include the level of economic growth in the country and in the industry, tax rates and currency exchange rates, interest rates, labor costs and others. The global economic and financial crisis of 2007 – 2009 is a relevant example of an economic factor that greatly impacted the majority of businesses around the globe. However, the crisis has impacted Coca-Cola to a lesser extent compared to many other businesses. Its’ operating margin remained at industry-front 22% despite the crisis, although dividend yield was reduced to 2.6 % Quarts. (Timmons, H. (2014). Economic factors relate to goods, services, and money. Despite directly affecting businesses, these variables refer to financial state of the economy on a greater level –whether it be local or global, inflation increases cost of production. Consequently, Coca-Cola had to face the uncontrollable problem of increasing their pricing. With this increase they risk losing customers who cannot afford their products because it is a desired product not a necessity. Due to inflation in 11 years the price of an identical bottle of Coca Cola has doubled in price. Alternatively, Coca Cola could be forced to lower their prices to facilitate an increase in consumption
Coke is also pursuing a prospector strategy, expanding its international footprint with heavy investments in emerging markets and a series of bottler acquisitions and strategic alliances. The company reaps additional efficiencies through its network of independent bottlers, which allows Coke to focus on concentrate production and marketing without getting bogged down with the high-cost bottling business. The organization is concerned with external issues and structural stability, leading to a rational goal emphasis.
The Coca-Cola Company is a beverage company which owns more than 500 nonalcoholic brands. Its product is known by customers all over the world. The company has market capitalization of $185.88 billion (Google finance, Oct 2015). In addition to equity capital, the company also issues corporate bonds to finance its operation. Both stocks and bonds of the company is traded in The New York Stock Exchange (NYSE). To calculate WACC of The Coca-Cola Company, we need to obtain some information about its debt
As mention before, Coca-cola has 47.3 percent market share in the country’s cola market versus Pepsi which hold 44.5 percent. Coca-cola is also the brand known around the worlds, which are the largest producer and distributor of ark colas in the world. Even in the current monetary crisis, the company continues to expand and the financial position shows that Coca-cola has a strong cash position in compare to PepsiCo which the long term debt of PepsiCo is so high.
In this assignment, is to study Coca-Cola to evaluate the Coca-Cola with the Performance Management and Appraisal.
Coca Cola’s first main weakness is that it is highly susceptible to any kind of negative publicity. Every kind of negative publicity can hurt the brand badly. Some years ago after traces of pesticides were found in the products of Coca Cola, it had hurt the brand really hard. Sales had dipped in various corners of the world apart from the criticism that flowed. Any such thing can hurt the popularity and sales of coca cola. However, Coca cola can overcome this weakness by being more transparent regarding the ingredients it uses in the production of its brands.