Coca-Cola Analysis

Below you will find financial data for Coca-Cola for the years 2006 and 2016. This data includes the following:

1. Raw numbers for the balance sheet and income statements

2. Common-size balance sheets (all entries expressed as a percent of Total Assets)

3. Common-size income statement (all entries expressed as a percent of Total Sales)

4. Ratios—including liquidity, profitability, leverage, asset management, and market ratios

5. DuPont equations 

6. Working Capital

7. Cash Conversion Cycle

Your assignment is to analyze this data. Your analysis should include the following:

1. An ‘eye-ball’ assessment of the changes in Coke’s financial statements between 2006and 2016—e.g., overall growth in assets, revenues, equity, debt, etc.

2. Analysis of the Common-size statements—i.e., what changed and why. That is, describe the changes in these statements and analyze the cause of the changes. Include: a) mix of assets, b) split between current assets and fixed assets, c) mix of debt, d) split between current liabilities and LT liabilities, capital structure (i.e., debt and equity), e) profitability at all levels, f) changes in expenses, etc. This section must include evidence of research indicating what events had substantive effects on Coke’s financial profile during the 10 year period. In other words, profitability may have increased due to introduction of new product lines, leverage may have increased due to the issuance of bonds, and assets may have increased due to acquisitions. These are offered as examples, and your research should indicate what occurred and how it affected Coke from a financial perspective.

3. Analysis of the ratios by category—include in this an explanation of the cause of the change—e.g., liquidity increased due to the increase in CAs and decrease in CLs. In addition to discussing each of the individual ratios, this section must include an overall conclusion regarding the direction of the four major categories of ratios. In other words, you must draw conclusions regarding the overall trends in 1) liquidity, 2) efficiency, profitability, and 4) leverage over the 10 year period. You must also provide industry averages where available so that you can compare Coke’s ratios to those of its industry competitors.

4. Analysis of the DuPont equation and discussion of the underlying reasons for the changes in ROI (ROA) and ROE.

5. Analysis of working capital and discussion of the implication of a positive or negative WC level. Is Coke’s WC policy conservative, moderate, aggressive? Why?

6. Analysis of the Cash Conversion Cycle and discussion of its implications.

7. Summary and conclusion concerning the major changes in Coke’s financial situation.