Hedging And Analysis The Financial Statement Of Coca Cola

2981 Words Mar 30th, 2015 12 Pages
With the development of multinational companies, financial risk has played an increasingly remarkable role in financial market. In order to overmaster interest risk, currency and price risks, multinational corporates tend to hedge their exposure to financial risk. In practice, Coca-Cola Company has charged its business for a period of one century and made it as one of the principal players in the beverage industry. Coca-Cola Company markets have 500 non-alcoholic beverage brands in more than 200 countries. The essay discuss the pros and cons of hedging and analysis the financial statement of Coca-Cola. Eventually, hedging is a reasonable secession in risk management for multinational companies.
Hedging is a significant way in
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In the first place, the study about the value of foreign exchange derivatives premium found that hedging improve the company 's debt capacity, the company enjoyed tax shield benefits increasing by around 1.1% of the value of the company (Graham & Rogers 2002). Meanwhile, Householder (2000), Rogers (2002), Graham & Rogers (2002) found there is a positive linear relationship between the company 's debt levels, it is in accordance with the theory of reducing financial costs by hedging .In the second place, the value of the industries using foreign exchange derivatives was reduced by approximately 5% due to no hedging (Nain, 2004). Comparatively, Carter et al. (2006) found that the jet fuel company chose to hedge on jet fuel and its value increased by 5 % -10 % in United States. Furthermore, Allayannis & Weston (2001) found that companies, which used foreign exchange hedging, had higher average value (approximately 5 percent) among 720 multinational companies in the United States. Allayannis et al. (2009) studied the relationship between the value of foreign exchange derivatives premium and corporate governance and found that the value of foreign exchange derivatives using premium (9% -20 %) is more likely to appear in those well-governed companies. Moreover, Clark & Judge (2009) found that the use of foreign exchange derivatives can increase the company 's value by 11% -34 %, but the different types
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