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Coca Cola Financial Evaluation

Coca Cola Financial Evaluation Krissi Ebbens University of Phoenix

Coca Cola Financial Evaluation

One of the most renowned manufacturer, supplier, and distributor of beverage, mainly nonalcoholic ones is The Coca Cola Company. It basically takes pride in its concentrates and syrups that has gained the approval of the taste bud of millions of people around the world. Coca Cola started marketing its products as early as 1886, while it was only in 1919 that the company was finally incorporated. From then on, Coca Cola products are distributed to more than 200 countries. Also, the company has also expanded is licensed products from soft drinks, to diet drinks, energy drinks, juice, coffee, water, and tea, among others. Out of all their products, there are four of these that have been recorded to be the most famous among its consumers and these are: Diet Coke, Sprite, and Fanta.

LIQUIDITY RATIOS COCA COLA Ratios 2008 2007 PepsiCo 2008 Current Assets Current Ratio = Current Liabilities 2007 Industry1

$12,176 $12,988

$12,105 $13,225

$10,806 $8,787

$10,151 $7,753

0.94

0.92

1.23

1.31

1.84

Coca Cola Financial Evaluation

Current Assets Less Inventories and Prepaid Expenses Quick Ratio = Current Liabilities

$8,069 $12,988

$7,625 $13,225

$8,883 $8,787

$6,870 $7,753

0.62

0.58

1.01

0.89

1.39

Based on the liquidation presented above, it can be seen that Coca Cola was actually not doing good, relative to its other competing industries. Moreover, the standard current ratios of the companies are also alarmingly low. One the other hand, the quick ration of Coca Cola also failed to meet the standards for two consecutive years. This is why; Coca Cola sees their liquidation to be an area that needs abrupt attention, especially seeing the performance of their other competitors.

PROFITABILITY RATIOS COCA COLA Ratios 2008 2007 PepsiCo 2008 Net Income Return on Assets = Total Assets 2007 Industry

$5,807 $40,519

$5,981 $43,269

$5,142 $35,994

$5,658 $34,628

Coca Cola Financial Evaluation

14.33%

13.82%

14.29%

16.34%

3.51%

Net Income Return on Equity = Total Shareholder's Equity

$5,807 $20,472

$5,981 $21,744

$5,142 $12,203

$5,658 $17,325

28.37%

27.51%

42.14%

32.66%

7.00%

Net Income Net Profit Margin = Total Sales

$5,807 $31,944

$5,981 $28,857

$5,142 $43,251

$5,658 $39,474

18.18%

20.73%

11.89%

14.33%

3.49%

On the average, the data shows that Coca Cola is doing better in the industry in terms of their profitability ratio. But if we compare this performance to that of their competitor, PepsiCo, the competitor is clearly ahead of Coca Cola in this aspect.

Coca Cola Financial Evaluation

There is no doubt that Coca Cola has grown to be the leading marketer of the various non-alcoholic beverages globally. There have been many factors that led the company to the success that it is enjoying now, and below are just some of them: Coca Cola has a huge market share because of the huge volume of beverages thy can manufacture and distribute in a year. The estimate beverages servings all over the world are 52 million, daily. Not only that, the beverages with license bring them about 1.4 billion. The diversity of their products has also contributed to its success because it reaches out to more and more consumers. Some of their extended products are water, tea, juices, and coffee. The company has also started manufacturing snack foods. Being a global company readily ensures total popularity and overwhelming income. Some of the countries where the Coca Cola trademark has reached are North America, Africa, Middle East, Europe, East and South Asia, and Latin America.

Coca Cola has also grown to be one of the most values brands all over the world. The strategy of the company to establish a strong and positive image has made the rest of the world recognize their name and products easily and rapidly. This was all accomplished in their hundred years of existence; Coca Cola has also partnered with other bottling companies in specific regions of a certain country, to help their in their manufacturing and distributing processes. In fact, recently, the direct distributor of Coca Cola products in certain countries is the bottling partners of Coca Cola. From all these factors presented, it is apparent that Coca Cola really has a huge advantage compare to the operations of their competitors.

Coca Cola Financial Evaluation

Nonalcoholic beverages as a business has already gained the interest of many businesses and thus creating a lot of competitors. This is why, aside from product development a company should also invest on various management strategies and develop the most advantageous policies to help it cope in the competition. Here some of the policies and strategies of Coca Cola that they implemented to achieve the status that they are enjoying now.

The Coca Cola management basically has four major strategies implemented in their operations and these are: continuous and rapid innovation, focusing on the neutral geographic traits of consumers, creating global beverage leadership, and constantly pushing the company for growth and development. All these strategies are long-term. In lieu with their aim for development and responsibility to the community, Coca Cola has also come up with policies to guide them in their operations. Basically, these policies are focused on environmental policies, work ethics, food safety policies, human right policies, and health and wellness policies.

For the past 8 months, it is a common knowledge that the global economy has been struggling with economic pressure. The economic status of United States to be specific has been very unstable since the beginning to the sub-prime crisis. The crisis became even worse due to the controversy and downfall that Wall Street experienced. After that, there was a successive close down of the largest banking institutions in the country such as Lehman Brothers, Freddie Mac, Bearn Stearns, and Fannie Mae. To

Coca Cola Financial Evaluation

determine the impact of this economic downfall to the performance of Coca Cola, we conducted a stock price comparison between Coca Cola and PepsiCo567.

Cocal Cola

Pepsi Co

S& P 500

Based on the chart, Coca Cola still managed to ace a better performance in the financial market compared to its competitor The graph below summarizes the comparative performance of the two competing companies given a certain period of time.

Coca Cola Financial Evaluation

Revenue Growth Coca Cola, 2007, 19.80%

PepsiCo, 2005, 11.28% PepsiCo, 2004, 8.49% Coca Cola, 2004, 4.24% PepsiCo, 2006, 7.91% Coca Cola, 2005, 6.26% Coca Cola, 2006, 4.26% Coca Cola

Coca Cola, 2008, 10.70% PepsiCo, 2007, 12.34% PepsiCo, 2008, 9.57%

PepsiCo

As seen in the graph, Coca Cola still had a better growth performance compared to Pepsi Co. Although it was observed that Coca Cola was gradually lagging behind PepsiCo specifically in year 2006, their extensive marketing strategies was still able to make up for it.

PepsiCo, 2006, Net Income Growth 38.35%

PepsiCo, 2004, 18.05% Coca Cola, 2006, 4.27% Coca Cola, 2007, 17.74% PepsiCo, Coca Cola, 2008, 2007, -2.91% 0.28% PepsiCo, 2008, 9.12% PepsiCo

Coca Cola, 2004, Coca Cola, 2005, 0.52% 11.50%

PepsiCo, 2005, 3.18% Coca Cola

Based on the chart, Coca Cola has still managed to compensate their net loss and excel better than their major competitors. But it has not been an easy struggle for the company since there has been a lot of pressure along the profit margins; even if it was consistently have increase in their sales.

Coca Cola Financial Evaluation References

(2006).Coca Cola. The Coca Cole Company. Retrieved from http://ir.thecocacolacompany.com/phoenix.zhtml?c=94566&p=irol-sec

(2011). Reuters. Retrieved from http://www.reuters.com/finance/stocks/financialHighlights?symbol=COKE.O

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