Ratio Analysis of Coca Cola Essay

2013 Words Dec 10th, 2013 9 Pages
| Ratios Analysis | Index Ratios Analysis 1 Index 2 Brief Introduction of the Coca-Cola Company 3 Liquidity Ratios 3 Current ratio 3 Quick Ratio 4 Asset Management Ratios 4 Inventory turnover ratio 4 Total Asset Turnover ratio 5 Debt Management Ratios 5 Debt-to-equity ratio 5 Times-interest-earned ratio 6 Profitability Ratios 6 Net profit margin 6 ROE 7 Market Value Ratios 7 Price/ Earnings (P/E) ratio 7 Market/ book Ratio 7 The Du Pont Equation 8 Summary 8 Appendix 9 Balance Sheet (2012) 9 Income Statement (2012) 10 Industry Average Ratios 11

Brief Introduction of the Coca-Cola Company
The Coca-Cola Company is the world’s largest beverage company, which in 2012 owns or licenses
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Or perhaps the inventory holdings are not that large, which is good for the shareholders because more of the company’s assets can be used for growing business. But it may not be good enough for the lenders who prefer a high current ratio since it reduce their risk. However, the current ratio is not far removed from the average for nonalcoholic industry. Also, we cannot get the comprehensive information about the company’s liquidity just from the current ratio.

Quick Ratio
Quick ratio = (current assets – inventories)/ current liabilities
= (30328-3264)/ 27821 = 0.97
Industry average = 0.58
The Coca-Cola Company has a higher quick ratio than the industry average quick ratio, indicating that Coca-Cola has high ability to pay off short-term obligations than the industry in average without relying on the sale of inventories, which is the least liquid of the company’s current assets. For example, juice or other drinks sometimes cannot be sold in a short term.

Asset Management Ratios
Inventory turnover ratio
Inventory turnover ratio = sales/ inventories
= 48017/ 3264 = 14.71
Industry average = 6.56
Approximately, each item of The Coca-Cola Company’s inventory is sold out and replaced 14.71 times per year, which is over twice larger than the industry average. It means the company can effectively manage its inventory thus reducing the storage cost. However, it may…