Coca-Cola Financial Analysis

Topics: Balance sheet, Generally Accepted Accounting Principles, Asset Pages: 11 (2269 words) Published: March 8, 2014

The Coca-Cola recipe was originally founded and formulated by John Pemberton at the Pemberton’s Eagle Drug and Chemical House. By 1885, the product was registered as a French Wine Coca as a patent medicine. Pemberton claimed Coca-Cola cured morphine addiction, dyspepsia, neurasthenia, headaches and impotence. The carbonated drink began its first sales at Jacob’s Pharmacy in Atlanta, Georgia on May 8, 1886 for 5 cents a glass with its first advertisement in the Atlanta Journal on May 29, 1886. It wasn’t until 1955 when cans of Coke started to make its first appearance (Official Coca-Cola website). By the 21st century, Coca-Cola is proclaimed to be the world’s largest beverage company sold in more than 200 countries. The company owns and markets four out of the world’s top five beverage brands; Coca-Cola, Diet Coke, Fanta, and Sprite. Coca-Cola’s current business situation is obviously more expansive than the early years, with increased sales, maximized profit, and product expansion into new markets. According to Chief Executive Officer, Muhtar Kent, Coca-Cola’s net income rose six (6) percent to $2.45 billion, or 54 cents a share, from $2.31 billion, or 50 cents a share from a year earlier ( NY Times, 2013). Based on Coca-Cola’s quarterly profit, the company is right on track with their goal in doubling its 2010 revenue. The sales volume of noncarbonated drinks like juices, tea’s, fuze, and bottled water has had double digit percentage growth in comparison to Coke’s actual soda beverage. A SWOT analysis was conducted for Coca-Cola in 2013, the results were as follows; Strengths: (1) The best global brand in the world in terms of value ($77,839 billion), (2) Coca-Cola holds the largest beverage market share in the world (40%), (3) Coca-Cola’s advertising expenses accounted for more than $3 billion in 2012, increasing firm sales and brand recognition, (4) Coca-Cola serves more than 200 countries and more than 1.7 billion servings a day, (5) Coca-Cola has bargaining power over their suppliers to receive the lowest prices, and (6) Coca-Cola focuses on their Corporate Social Responsibility programs such as, recycling/packaging, energy conservation, active healthy living, which boosts the company’s image and resulting in a competitive advantage over their competitors. Weaknesses: (1) Coca-Cola is still focusing on selling carbonated drinks. This strategy only works in short term as the world is moving towards the importance of consuming healthier food and drinks to fight obesity, (2) Coca-Cola primary focus is still on selling beverages which places them at a disadvantage to other markets selling food or snacks, (3) Nearly $8 billion of debt acquired from CCE’s acquisition significantly increased Coca-Cola’s debt level, interest rates and borrowing costs, (4) Highly criticized through negative publicity for high water consumption in water scarce regions and using harmful ingredients to produce its drinks, (5) Coca-Cola sells more than 500 brands but only few of the brands bring in more than $1 billion sales and their success in introducing new drinks is weak. Ratio Analysis & Interpretation

Liquidity and Efficiency Ratios
As we learned in class, liquidity ratios measure a company’s ability to meet its short-term obligations. Coca-Cola’s current ratio for FY2011 and FY2012 were calculated by utilizing the company’s consolidated balance sheets. The assets for the company were added together to get the total current assets. The liabilities were added together to get the total current liabilities. The total current liabilities were subtracted from the total current assets. In order to get the current ratio’s each total current asset for FY2011 and FY2012 was divided by the less current liabilities.

Coca-Cola’s current ratio slightly improved from 2011 to 2012. The higher the current ratio, the more capable the company is of paying its obligations. If the ratios were under 1, that would mean...

References: Coca-Cola Co. (KO) | Profitability. (n.d.). Retrieved from
Coca-Cola’s Net Income Rises Despite a Drop in Revenue. (2013). The New York Times. Retrieved from
Hargreaves, R. (2013, March 6). Where to Invest; Coke, Pepsi, or Dr. Pepper? Retrieved from
The Coca-Cola Company: Heritage and History. Retrieved from
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