Coca Cola Analysis (Accounting)

Topics: Income statement, Balance sheet, Pension Pages: 10 (4081 words) Published: November 13, 2012
Acct 3512 Coca-Cola Analysis 8/16/2012

The Coca Cola Company is the world’s leading owner and marketer of nonalcoholic beverage brands. In order to achieve long-term sustainable growth they look at their brands, financial strength, unrivaled distribution system, global reach, and a strong commitment by management and associates worldwide. The company focuses on inspiring their employees, satisfying customer desires, nurturing partners, making a global difference, maximizing returns to shareowners, and managing for overall effectiveness. The financial statement that the Coca Cola Company provides shows their strong leadership by the data they present. By discussions held in class it allows us to analyze the following detail: stockholders’ equity, dilutive securities and earnings per share, investments, revenue recognition, income taxes, pensions and postretirement benefits, leases, changes and error analysis, and cash flows. All numbers presented throughout this discussion are in millions. With respect to the Coca Cola statement, we have determined that through the owner’s equity the corporation had three categories: capital stock, additional paid in capital, and reinvested earnings. As we discussed in chapter 15, common stock can be issued par value, no-par, lump-sum sales, and noncash transactions. We have determined that the Coca Cola Company did not issue preferred stock. If Coca Cola were to issue preferred stock it would give features to the holders that differs from those who were issued common stock. Some things that are associated with preferred stockholders would be preference to dividends, assets if company is liquidating, convert their shares into common stock, have the callable option, and nonvoting. The Coca Cola Company had 3,250 shares of common stock issued at $.25 par value to employees related to stock compensation plans. Since stock was issued above par it has an increase to addition paid in capital, making up the difference in par. The capital surplus (additional paid-in capital) was due to increase in stock issued related to compensation, decrease to tax benefit from employees’ stock option, and increase stock-based compensation resulting in an amount of $8,537. The retained earnings stated had a beginning balance of $38,513 from 2008, with the addition of income made in 2009 at $6,824. During the year they declared $.41 dividends to the shareholders each quarter giving $3800 declared dividends at year-end. As discussed in class there are reasons why companies would not pay dividends equal to their legally available retained earnings. Some of the reasons we stated were maintaining agreements with creditors, to meet state corporation requirements, to retain assets that would be paid out as dividends to finance growth, to smooth out dividend payments from year to year, or to build a cushion against possible losses. With Coca Cola having a loss in 2008 due to carrying value it would be important for them to follow the reason to have a cushion incase another loss needs to be recorded in future periods. In chapter 16 in regards to 15, we have determined that the basic net income per share was $2.95 and diluted net income per share was $2.93 in 2009. We can see that this was calculated through the given consolidated net income and net income attributable to shareowners. As discussed in class the basic net income is calculated by net income per share divided by weighted shares outstanding. Shares outstanding were 2,324, 2,315, 2,312, and 2,303 for quarters one, two, three, and four providing us with the average weighted shares outstanding of 2,314 for 2009 (shown in the full consolidated statement of income). After finding the average number of shares outstanding we can compute the basic earnings per share by dividing $6,824 net income by 2,314 weighted shares outstanding giving us $2.95. A complex capital structure exists when a corporation has convertible securities, options, warrants, or...
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