11 the worldwide market of coca cola product had

This preview shows page 11 - 16 out of 30 pages.

11
The worldwide market of Coca-Cola product had provided large profit to the company, but this also bring another weakness, the foreign currency fluctuation. The Coca-Cola companies outside the United States will use currencies of other countries instead of the U.S. dollar to own assets and pay for the liabilities, but the financial statement should be presented in U.S. dollars, the main company has to translate all the accounts, and the inconstant exchange rate may bring trouble and potential losses to the company. Also, this situation will also bring some other problems, such as the pricing problem, the change of the cost in different parts of the world, and also will be influenced by any of the international political issues. Financial Statement Analysis Liquidity Ratio Chart A Liquidity ratios are significant ways to evaluate the risk of a firm’s securities. From the chart A, we can see that the current ratio was always greater than 1, which means Coca-Cola company can exactly met its current debt obligations. And the current ratio has been rising since 2014, when it was only 1.02, compared to 1.34 in 2017. It indicated that Coca-Cola has more 12
confidence to avoid insolvency in the short run. By looking at the quick ratio, we can find that it decreased in 2014 and 2017, but increased in 2015 and 2016. Besides, by comparing with Nonalcoholic Beverages Industry, we can find that Nonalcoholic Beverages Industry has grown rapidly around 2016, but Coca-Cola changed slowly. In the past, the quick ratio of Coca-Cola was much higher than the industry, but in recent years, the gap became smaller, in 2016, the ratio was even lower than the industry. The cash ratio has the same denominator as the quick ratio. Chart B In a word, Coca-Cola’s current ratio kept rising in recent five years, which indicated the company was in good operation. However, in 2017, with the increasing of current ratio, the quick ratio and cash ratio decreased, which reflected that the company had less cash on hand and relied more on inventory. Efficiency ratio Chart C Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Total asset 0.4043022 0.4723184 0.4866964 0.505256 13
turnover Fixed asset turnover 3.7594224 3.6079462 3.2564329 3.107973 Inventory turnover 4.5013133 5.2637619 5.1689437 4.990748 Average collection period 38.772875 33.990696 34.638495 37.05307 8 Chart D Coca-Cola company’s asset turnover reduced in the past four years, especially in 2017. And it was always below the industry average, which indicated that Coca-Cola was underperformed. However, for its fixed asset turnover, it had the opposite tendency which increased in the past four years. It expressed the good operation of the company that for every dollar of fixed assets, the sales increased. Besides, its inventory turnover rate has increased from 2014 to 2016, but dropped significantly in 2017. It indicated that Coca-Cola had a higher level of inventories per dollar of sales than the industry. In addition, its average collection period decreased from 2014 to 14
2016, but increased a lot in 2017. In other words, the company needed more time to collect the cash from sales, which implied a higher investment in working capital and a lower ROA.

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture