Coca-Cola is an enterprise that has gained prominence in the manufacture of beverages across the globe. It was established in 1886 and has managed to maintain the top position in the industry. Coca-Cola Company is recognized for its multinational brand and the excellent financial and capital structures. This paper will analyze the current financial structure of the company and possibly predict the future of the company in terms of business.
Debt to Ratio
The company was able to report a shareholder’s equity of more than $26.05 billion in total. This was during the fiscal quarter that ended in the year 2016. The shareholder’s equity was $33.43 billion in the previous year. It is important to note that the beverage company recorded a debt to the ratio of around 188 percent in the third quarter of the year 2017. The debt to ratio increased to 257 percent in 2017’s third quarter. The statistics show that the leverage of Coca-Cola Company has risen and may continue to increase with time. The high debt to ratio brings about an indication that the creditors have more money compared to the equity holders.
Delegate your assignment to our experts and they will do the rest.
Current Ratio
Coca-Cola Company has a current ratio of 1:1. The ratio has been constant in the last four years. Many other companies tend to maintain the quick ratio of 1:1 in order to meet financial obligations that are short-term. The cash ratio of the company was 0.44:1 in 2008, 0.32:1 in 2007, and 0.23:1 in 2006. The balances of cash equivalents increased to around 6.1 billion dollars in 2009 from 3.36 billion dollars in the previous year. The years 2007 and 2006 had cash equivalent balances of 2.13 billion dollars and 1.88 billion dollars respectively. The company has managed to maintain brilliant current ration ever since, and this has enabled it to stay at the top of the table throughout the years.
Return on Equity
The analysis of the ROE of the enterprise shows that it has been able to return very positive net income to the shareholders. However, the return on equity ratios and the net income of Coca-Cola Company have decreased fairly . The years 2014, 2015, and 2016 had ROE ratios of around 28 percent, 26 percent, and 22 percent respectively. The total net income decreased gradually in the subsequent years. 2014 has a net income of 9 billion dollars, 2015 had 8.6 billion dollars, while 2016 reported a net income of 7.1 billion dollars.
Sales Growth Rate
The growth of revenue at the company has been stagnant for the past two years. A decline in the quarterly revenue has been experienced in most of the quarters during this period. The growth rate of Coca-Cola Company in the last five years is about 8 percent. This is lower compared to that of Pepsi Company as well as the average of the industry. Coca-Cola Company has tried to expand drinks that are intended to compete with the ones that are offered by their competitors but this has not been fruitful to them at all. The drinks have, however, played a role in brightening the image of the company in terms of producing drinks that are healthy and recommended.
Quick Ratio
Statistics have shown that the company is supposed to be in a position to use its liquid assets to pay its liabilities. The firm had a quick ratio of 0.92 in the year 2015. There was an improvement in the following year. The ratio brings out a clear idea that the company is not able to pay the debts that it ha without relying on its inventory. This is what makes many financial analysts conclude that Coca-Cola Company is a very risky kind of business despite the fact that it is the leading enterprise in the industry.
Working Capital Ratio
The current liabilities of Coca-Cola Company decreased at a faster rate than its current asset. This resulted in the improvement of the enterprise’s working capital ratio to 1.39. the ratio has managed to remain below Coca-Cola’s average in the industry. Around eight competitor firms have been able to achieve higher working capital ratio compared to Coca-Cola Company during the 3rd quarter of 2017.
Price Earning Ratio
Coca-Cola Company has a Price Earning Ratio of 9.6. This is usually used to determine the actual value of a stock with regards to the earning growth of the company. this is what brings out the picture of Price Earning Ratio. Earning Per Share
The earnings per share were at 37 cents during the 4th quarter of 2017. The previous year had the earning per share of 38 cents in the previous year. The revenue happened to drop to around 9.41 billion dollars compared to that in the same quarter in 2016 which was 10.01 billion dollars.
Conclusion
Coca-Cola Company has managed to maintain its top position despite the financial challenges that have been experienced in management. The company needs to hire more competent managers in order for them to continue making profits. They also ought to work on their financial status and make improvements in situations where they experience problems.
