Hedging And Analysis The Financial Statement Of Coca Cola

2981 Words Mar 30th, 2015 12 Pages
Introduction
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 risk management
Hedging is a significant measure of financial risk management. Since the 1970s, the increasing number of powerful companies started to control the risk of the exchange rate, the interest rate and commodity by using financial derivatives. ISDA (2013) based on the Global 500 Annual Report 2012 survey found that 88 percent of companies use foreign exchange derivatives. Modigliani & Miller (1958) believed that if the financial markets were under perfect conditions, for instance, there was no agency costs, asymmetric information, taxes and transaction costs, hedging would not increase the company 's value because investors can hedge by themselves. However, a large number of practical studies have shown that hedging is beneficial…
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