Analysing Financial Performance of Coca-Cola

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2. Analysing Financial Performance
Analyse the company’s financial performance, over two years, using the following ratios (you will need to present your results): * Current ratio
* Acid test ratio
* Gearing
* Asset turnover ratio
* Inventory turnover ratio (if appropriate)
* Receivables (debtors’) days
* Payables (creditors’) days
* Gross profit margin
* Net profit margin
* Return on capital employed (ROCE)
* Dividend per share (if information is available)
(40 marks)
Ratio| 2010| 2011|
Current Ratio=Current assetsCurrent liabilities| 2549724283=1.05| 2157918508=1.17| Acid Test=Liquid assetsCurrent liabilities| 25497-309224283=0.92| 21579-265018508=1.02| Gearing=Non-current liabilities × 100Total equity+non-current liabilities| 23770 × 10031921+23770=42.7%| 23096 × 10031317+23096=42.4%| Asset Turnover=RevenueNet assets| 4654218533=2.51| 3511918921=2.50| Inventory Turnover=Inventories × 365Cost of sales| 3092 × 36518216=62.0| 2650 × 36512693=76.2| Receivables Days= Debtors × 365Revenue| 4920 ×36546542=38.6| 4430 × 36535119=46.0| Payables Days=Creditors × 365Revenue| 9009 × 36546542=70.7| 8859 × 36535119=92.1| Gross Profit Margin=Gross profit × 100Revenue| 28326 × 10046542=60.9%| 22426 × 10035119=63.9%| Net Profit Margin=Net profit × 100Revenue| 11439 × 10046542=24.6%| 14243 × 10035119=40.6%| Return on Capital Employees ROCE=Operating profit ×100Total equity+non-current liabilities| 10154 × 10031921+23770=18.2%| 8449 × 10031317+23096=15.5%|

Current ratio measures the ability of Coca Cola to meet its liabilities or debts over the next year or so. Coca Cola have a current ratio of 1.17:1, which has increased from 2010’s 1.05:1. This shows that they are able to meet costs of current liabilities without needing to sell fixed assets or raising long-term finance. However, Coca Cola should aim to improve their current ratio to closer to 1.6:1. They could do this by...
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