This particular project is based on ratio analysis of Coca-Cola International. I have analyzed two years financial performance of Coke i.e. from 2011 to 2012. I hope my this effort will help other interested students.

1. Topic: Financial Ratios Analysis of
Coca-Cola
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2. Group Members
Wajid Ali
3335
Haris Riaz
3382
Presented To : Prof. Tahir Mahmood
2

3. Coca Cola International
The Coca-Cola Company is the world's largest
company.
beverage
It is no.1 brand according to fortune 2009 survey.
The company operates a franchised distribution system dating
from 1889.
The Coca-Cola Company is headquartered in Atlanta, Georgia.
With local operations in over 200 countries around the world.
Coca Cola has 150,900 employees worldwide.
3

4. • Assessment of the firm’s past, present
and future financial conditions
• Done to find firm’s financial strengths
and weaknesses
• Primary Tools:
– Financial Statements
– Comparison of financial ratios to past,
industry, sector and all firms
4

5. Objectives of Ratio Analysis
• Standardize financial information for
comparisons
• Evaluate current operations
• Compare performance with past
performance
• Compare performance against other
firms or industry standards
• Study the efficiency of operations
• Study the risk of operations
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6. Types of Ratios
• Financial Ratios:
– Liquidity Ratios
• Assess ability to cover current obligations
– Leverage Ratios
• Assess ability to cover long term debt obligations
• Operational Ratios:
– Activity (Turnover) Ratios
• Assess amount of activity relative to amount of
resources used
– Profitability Ratios
• Assess profits relative to amount of resources used
• Valuation Ratios:
• Assess market price relative to assets or earnings
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7. THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2012
(In millions except par value)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Short-term investments
2011
As Adjusted
8,442
5,017
$ 12,803
1,088
13,459
13,891
3,092
4,759
3,264
2,781
2,973
144
4,920
3,092
3,450
—
TOTAL CURRENT ASSETS
30,328
25,497
EQUITY METHOD INVESTMENTS
OTHER INVESTMENTS, PRINCIPALLY BOTTLING COMPANIES
OTHER ASSETS
PROPERTY, PLANT AND EQUIPMENT — net
TRADEMARKS WITH INDEFINITE LIVES
BOTTLERS’ FRANCHISE RIGHTS WITH INDEFINITE LIVES
GOODWILL
OTHER INTANGIBLE ASSETS
9,216
1,232
3,585
14,476
6,527
7,405
12,255
1,150
7,233
1,141
3,495
14,939
6,430
7,770
12,219
1,250
$ 86,174
7
$ 79,974
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Marketable securities
Trade accounts receivable, less allowances of $53 and $83, respectively
Inventories
Prepaid expenses and other assets
Assets held for sale
TOTAL ASSETS
$

8. BALANCE SHEETS Cont’d
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses
8,680
$ 9,009
16,297
12,871
1,577
2,041
Accrued income taxes
471
362
Liabilities held for sale
796
—
TOTAL CURRENT LIABILITIES
27,821
24,283
LONG-TERM DEBT
14,736
13,656
OTHER LIABILITIES
5,468
5,420
DEFERRED INCOME TAXES
4,981
4,694
1,760
1,760
Capital surplus
11,379
10,332
Reinvested earnings
58,045
53,621
Accumulated other comprehensive income (loss)
(3,385)
(35,009)
(2,774)
(31,304
)
32,790
31,635
378
286
33,168
31,921
Loans and notes payable
Current maturities of long-term debt
$
THE COCA-COLA COMPANY SHAREOWNERS’ EQUITY
Common stock, $0.25 par value; Authorized — 11,200 shares;
Issued — 7,040 and 7,040 shares, respectively
Treasury stock, at cost — 2,571 and 2,514 shares, respectively
EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
$ 86,174
$ 79,9748

9. THE COCA-COLA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31,
2012
As
Adjuste
d
(In millions except per share data)
NET OPERATING REVENUES
Cost of goods sold
2011
$
48,017 $
19,053
46,542
18,215
GROSS PROFIT
Selling, general and administrative expenses
Other operating charges
28,964
17,738
447
28,327
17,422
732
OPERATING INCOME
Interest income
Interest expense
Equity income (loss) — net
10,779
471
397
819
10,173
483
417
690
137
529
11,809
2,723
11,458
2,812
9,086
67
8,646
62
Other income (loss) — net
INCOME BEFORE INCOME TAXES
Income taxes
CONSOLIDATED NET INCOME
Less: Net income attributable to noncontrolling interests
NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY
$
9,019 $
8,584
BASIC NET INCOME PER SHARE1
$
2.00 $
1.88
DILUTED NET INCOME PER SHARE1
$
1.97 $
1.85
AVERAGE SHARES OUTSTANDING
Effect of dilutive securities
AVERAGE SHARES OUTSTANDING ASSUMING DILUTION
4,504
4,568
80
78
4,584
9
4,646

10. Liquidity Ratios
Current Ratio:
Current Ratio :
Current Assets
Current Liabilitie s
$30,328
$27,821
Years
2011
2012
Current Ratio
1.05
1.09
1.09
In 2011, the firm’s ability to cover its current liabilities with its current assets
was 1.05. In 2012, the ratio goes up to 1.09 as compared to 2011, which means
that the company has the ability to pay its liabilities, as the definition says that
higher the ratio, greater the ability of the firm to pay its bills. This tells that
Coca-Cola is improving their liquidity and efficiency, because their current ratio
is improving.
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11. Quick/Acid Test Ratio:
Current Assets- Inventory
Quick Ratio :
Current Liabilitie s
$27,064
$27,821
Years
2011
2012
Quick Ratio
0.92
0.97
0.97
According to the definition of Acid Test Ratio, the company should have the ability
to pay its liabilities through its most liquid assets. The table shows that in 2011, the
firm has the ratio 0.92 cents. Then we observe a slight improvement in 2012. So we
can figure out from the ratios that Coca-Cola still cannot pay its debts without its
inventory. This leads us to believe that Coca-Cola is a somewhat risky business,
even though it is the largest in the nonalcoholic beverage industry.
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12. Activity (Turnover) Ratios
Total Asset Turnover Ratio:
Sales
$48,017
Total Asset Turnover :
Total Assets $86,174
Years
2011
2012
Assets Turnover
0.58
0.55
0.55
The ratio is supposed to be high. Here we can see that the coca-cola
company’s total asset turn over ratio in 2011 was 0.58, which means that
the company generated more revenue per dollar of asset investment. The
ratio then comes slightly down in 2012.
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13. Inventory Turnover Ratio:
Cost of goods sold
Inventory Turnover :
Inventory
Years
2011
5.90
5.8
2012
Inventory Turnover
$19,053
$3,264
5.80
The Coca-Cola’s Inventory turnover ratios deteriorated from 2011 to 2012,
which means that its ability to sell inventory has relatively come down. In 2011
Coca-Cola had a ratio of 5.90 and in 2012 has a ratio of 5.80. These ratios are not
what we expected; we assumed that the ratios would be much higher because
Coca-Cola sell its syrup to bottling partners around the world so it does not need
to deal with the storing of the bottled product.
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14. Average Collection Period:
365
365
Avg. Collection Period :
Receivables Turnover 10.09
Years
2011
2012
Avg. Collection Period
38.60
36.17days
36.17
The ability of the firm of collecting the receivables in the specific time. Here
in the year 2011 the turnover in days was almost 39, but the collection days
decrease in the year 2012 and the collection period of approximately 36 days
is well within the 60 days allowed in the credit terms. This shows that the
collection is faster as compared to the previous year.
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15. Average Payment Period:
365
Avg. Payment Period :
Payable Turnover
Years
Avg. Payment Period (days)
365
24 .39
2011
2012
17
14.96 days
15
Coca-Cola’s average period for payment has reduce to 15 days in 2012 which
was 17 days in 2011. This reduction in average payment period shows that how
efficiently company is paying back their creditors and also assuring that
payments are being made in a prompt manner by Coke to its creditors. This
period should remain low as much as possible.
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16. Debt Ratios
Debt Ratio:
Total Liabilitie s
Debt Ratio :
Total Assets
$53,006
$86 ,174
Years
2011
2012
Debt Ratio %
60.09
61 .51 %
61.51
The ratio shows the company’s ability to cover its debts through its total
assets. The ratio was 60.09% in 2011, then goes up in 2012. The ratio has to be
low. So we can interpret that in the year 2012, the risk of the firm is getting
higher as the ratio goes up.
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17. Times Interest Earned Ratio:
EBIT
$11,809
Times Interest Earned Ratio :
Interest
$471
Years
2011
2012
T.I.E Ratio
23.72
25.07
25.07
In 2012 Coca-Cola has a ratio of 25.07 which is a large increase from 2011
when their ratio was 23.72. This means that they have a comfortable
coverage of interest, and that the coverage has increased from the previous
year.
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18. Profitability Ratios
Gross Profit Margin:
Gross Profits
Gross Profit Margin :
Sales
$28,964
$48,017
Years
2011
2012
Gross Profit Margin %
60.90
60 .32 %
60.32
The ratio should be high according to the definition. Because higher the ratio,
higher will be the firm’s ability to produce goods and services at low cost with
high sales. Here in this table there is small difference between the ratios in two
years, but its still high, which means it is favorable.
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19. Operating Profit Margin:
EBIT
Operating Profit Margin :
Sales
Years
2011
$11,809
$48,017
24.59%
2012
Operating Profit Margin % 21.80 24.59
Coca-Cola’s operating profit margin has increased in 2012 than the margin in
2011 by approximately 3%. This increase in Operating Profit Marin is mainly due
to growth of net revenue, good cost control and strong productivity in company in
2012. This higher margin reflects that the Coca-Cola is more efficient cost
management or the more profitable business.
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20. Net Profit Margin:
Net Profit Margin :
Years
Net Income
Sales
$9, 019
$48,017
2011
2012
Net Profit Margin % 18.40
18.78%
18.78
According to the definition, higher the ratio, higher will be the firm’s ability to
pay its taxes. In the year 2011, the margin was little low but in 2012 the margin
increases by 0.4%. For the company, roughly 0.38 cents out of every sales dollar
consists of ‘After Tax Profit'. Coca-Cola is more efficient at converting sales into
actual profit and its cost control is good.
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21. Return on Assets (ROA):
ROA
Net Income
Total Assets
$9,019
$86,174
Years
2011
2012
ROA %
10.70
10.46%
10.46
The decrease in Return on Assets indicates that the company is generating
less profits from all of its resources in the year 2012 as compared to the year
2011. The higher of this ratio is, the better for the company. Therefore this
decrease in Coca-Cola’s ratio is indicating that the company is not that much
prospering.
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22. Return on Equity (ROE):
ROE
Net Income
Total Common Equity
$9,019
$32,790
Years
2011
2012
ROE %
27.10
27.51 %
27.51
The ratio should be higher. Here starting from 2011, the ratio was 27.10% and
goes up in 2012 to 27.51%. This increase in Return on Equity is a good thing
for stockholders and indicates that Coca Cola is using the equity provided by
stockholders during this specific year effectively and using it to generate more
equity for the owners.
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23. Market Ratios
Price/Earning Ratio:
P/E Ratio
Market price/share of C.S
Earning Per share
Years
2011
19.00
18 .40 times
2012
P/E Ratio
$36 .25
$1.97
18.40
Coca-Cola’s price-earnings ratio has decreased 0.6 times in 2012, because in
2011 the ratio was 19.00 times but in 2012 it become 18.40 times which
suggests that investors may be looking less favorably at the Coca-Cola. This
ratio should be high, because the higher the P/E ratio, the higher will be the
investors confidence in company.
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24. Market/Book Ratio:
Market price/share of C.S
M/B Ratio :
Book value /per share of C.S
Years
2011
5.00
4.93
2012
M/B Ratio
$36 .25
$7.34
4.93
We can say that Coca-Cola’s future prospects are being viewed favorably by
investors. Because still, investors are willing to pay more for stocks than
their accounting book value as M/B ratio’s fluctuation is negligible in 2012
against 2011.
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25. Conclusion
After applying all the ratios we got an idea that
the Coca Cola Company is a profitable firm.
Because through out the analysis of two years, we
found that the company is getting profitable
return on short term and long term investment,
their profit margin has been increased as well
and they are in the position to pay their debts
with in their resources.
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26. Thank you!
Presented By :
Wajid Ali
3335
Haris Riaz
3382
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