The Coca-Cola Company (KO) is a beverage company that manufacturer and distribute coke, diet coke and other soft drinks worldwide. The company primarily offers nonalcoholic beverages, including sparkling beverages and still beverages. Its sparkling beverages include nonalcoholic ready-to-drink beverages with carbonation, such as carbonated energy drinks, and carbonated waters and flavored waters. The company’s still beverages comprise nonalcoholic beverages without carbonation, including noncarbonated waters, flavored and enhanced waters, noncarbonated energy drinks, juices and juice drinks, ready-to-drink teas and coffees, and sports drinks. It also provides flavoring ingredients, sweeteners, beverage ingredients, and fountain syrups, as well as powders for purified water products. In addition, the company licenses its technologies to suppliers and third parties. The company is currently employing 130,600 full time employees and is considered being the world leader in the beverage industry. Financial Review of the company:
A. Market value of equity & Book value of equity – Market value of the equity of the company is the current market capitalization rate and it measured through by multiplying current market value of the share into the total number of shares outstanding and he market capitalization of the company as on 2nd October, 2014 is $187.10 billion (source: finance.yahoo=KO=key statistics).
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While the book value of the equity is the current book value of the company share and it is determined as under: Book value of equity = Total value of the equity / shares outstanding Book value = $7.77 (source: finance.yahoo=KO=key statistics).
It is important to note that the book value of the shares of the company has increased from $3.29 per share in 2004 to $7.77 per share uptill now (it was $7.54 per share in the year 2013) B. Market performance – Total Return
C. Financial performance review – The financial performance review of the company is as under: Gross profit margin – The gross profit margin of the company was 65.2% as at year 2004 but it has decreased to 60.7% in the year 2013 indicating a decline of 5.5% over this review period. The decrease in the gross profit is due to the increase in the cost of goods sold ratio as of revenue from 34.78% in the year 2004 to 39.32% in the year 2013. Operating profit margin – The same trend of the decrease in the profitability is noted in the operating profit margin of the company as it has decreased from 25.9% in the year 2004 to 21.8% in the year 2013. This decrease in profitability is an alarming sign for the company as despite the increase in the revenue, the company was not able to generate profitability in the same proportion as that of the increase in the revenue of the company.
Payout ratio – The dividend payout has increased from 50% in the year 2004 to 58.8% in the year 2013 indicating higher proportion of income is being paid out to the shareholders of the company Asset turnover – The relative increase in the assets of the company has resulted in decrease of asset turnover as it has decreased from 0.75 times in the year 2004 to 0.53 times in the year 2013 indicating the poor management of assets with respect to revenue generation Return on assets – ROA has also decreased from 16.52% in the year 2004 to 9.74% in the year 2013 due to the decrease in the profitability and increase in the asset base of the company Return on equity (ROE) – ROE of the company has also decreased from 32.29% in the year 2004 to 26.03% in the year 2013 due to the decrease in the profitability of the company Interest coverage ratio – The company first interest coverage ratio was determined in the year 2008 and it was 17.98 times.
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It has increased to 25.79 times in the year 2013 indicating an improvement in the overall interest coverage of the company. Liquidity of the company – The liquidity of the company as being measured through current and quick ratios is indicating a positive trend as current ratio was 1.10 in the year 2004 and it has increased to 1.13 in the year 2013. On the other hand, quick ratio has increased from 0.81 in the year 2004 to 0.90 in the year 2013. Efficiency of the company – Days Sales Outstanding of the company has increased from 35.42 days in the year 2004 to 37.52 days in the year 2013. Also, the Days Inventory has also increased from 63.84 days in the year 2004 to 64.8 days in the year 2013. Payables Period has decreased tremendously as it has decreased from 199.3 days in the year 2004 to 38.66 days in the year 2013. Cash Conversion Cycle of the company has improved as it has increased from -100.04 days in the year 2004 to 63.66 days in the year 2013. D.
References
finance.yahoo. (2nd October).
Key Statistics. Retrieved October 2, 2014, from http://finance.yahoo.com/q/ks?s=KO+Key+Statistics Morning Star. (2nd October).
Coca-Cola Co KO (Key Ratios & company performance).
Retrieved October 2, 2014, from http://financials.morningstar.com/ratios/r.html?t=KO®ion=usa&culture=en-US
