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Financial Analysis of Coca Cola from 1986-1996

Financial Analysis and Forecasting
A. Examination of Balance Sheet & Income Statement
B. Common Size Statements
C. Growth Rates
D. Ratio Analysis
E. DuPont Analysis
F. Strategic Financing Model

Coca-Cola Income Statement for December 1986 and 1996 (in millions)
1986 1996
Net Revenues $8,668 $18,546
Total Revenue $8,668 $18,546
Cost and Expenses
Cost of Sales $4,644 $6,738
S, G, and A $2,699 $7,893
Interest Charges $186 $286
Interest/ Other Income (net) ($372) ($967)
Total Cost and Expenses $7,157 $13,950

Income before Income Taxes $1,511 $4,596
Provision for Income Taxes $577 $1,104

Net Income $934 $3,492
Dividends ($402) ($1,247)
Adjustments to Retained Earnings $0 $0
Retained Earnings, Beginning Balance $3,092 $12,882
Retained Earnings, End Balance $3,624 $15,127

Coca-Cola Balance Sheets for December 1986 and 1996- amount in millions
1986 1996
Assets
Current Assets
Cash and Equivalents $888 $1,658
Receivables $1,081 $1,641
Inventory $933 $952
Other $837 $1,659
Total Current Assets $3,739 $5,910
Productive Assets
Property, Plant, and Equipment $2,790 $5,581
Accumulated Depreciation ($1,026) ($2,031)
Net Productive Assets $1,764 $3,550
Other Assets $2,870 $6,701
Total Assets $8,373 $16,161
Liabilities And Shareholders Equity
Liabilities
Current Liabilities
Accounts Payable $1,333 $2,972
Current Debt Due $725 $3,397
Other $697 $1,037
Total Current Liabilities $2,755 $7,406
Long-Term Liabilities
LT Debt $1,011 $1,116
Other LT Liabilities $711 $1,182
Deferred Income Taxes $381 $301
Total LT Liabilities $2,103 $2,599

Total Liabilities $4,858 $10,005
Shareholders' Equity
Common Stock $714 $1,916
Treasury Stock ($705) ($10,320)
Retained Earnings $3,624 $15,127
Equity Adjustments ($118) ($567)
Total Shareholders' Equity $3,515 $6,156

Total Equity $8,373 $16,161

Common Size Balance Sheets
Coca-Cola Balance Sheets for December 1986 and 1996
1986 % 1996 %
Assets
Current Assets
Cash and Equivalents $888 11% $1,658 10%
Receivables $1,081 13% $1,641 10%
Inventory $933 11% $952 6%
Other $837 10% $1,659 10%
Total Current Assets $3,739 45% $5,910 36%
Productive Assets
Property, Plant, and Equipment $2,790 $5,581
Accumulated Depreciation ($1,026) ($2,031)
Net Productive Assets $1,764 21% $3,550 22%
Other Assets $2,870 34% $6,701 41%
Total Assets $8,373 $16,161
Liabilities And Shareholders Equity
Liabilities
Current Liabilities
Accounts Payable $1,333 16% $2,972 18%
Current Debt Due $725 9% $3,397 21%
Other $697 8% $1,037 6%
Total Current Liabilities $2,755 33% $7,406 46%
Long-Term Liabilities
LT Debt $1,011 12% $1,116 7%
Other LT Liabilities $711 8% $1,182 7%
Deferred Income Taxes $381 5% $301 2%
Total LT Liabilities $2,103 25% $2,599 16%

Total Liabilities $4,858 55% $10,005 62%
Shareholders' Equity
Common Stock $714 4% $1,916 12%
Treasury Stock ($705) (8%) ($10,320) (64%)
Retained Earnings $3,624 43% $15,127 94%
Equity Adjustments ($118) (1%) ($567) (4%)
Total Shareholders' Equity $3,515 42% $6,156 38%

Total Equity $8,373 $16,161

Coca-Cola Common-Size Statements of Income and Retained Earnings for December 1986 and 1996

1986 % 1996 %
Net Revenues $8,668 $18,546
Total Revenue $8,668 $15,546
Cost and Expenses
Cost of Sales $4,644 54% $6,738 36%
S, G, and A $2,699 31% $7,893 43%
Interest Charges $186 2% $286 2%
Interest/ Other Income (net) ($372) (4%) ($967) (5%)
Total Cost and Expenses $7,157 83% $13,950 75%
Income before Income Taxes $1,511 17.4% $4,596 25%
Provision of Income Taxes $577 6.7% $1,104 6%
Net Income $934 10.8% $3,492 18.8%
Dividends (% of NI) ($402) 43% ($1,247) 36%
Adjustments to Retained Earnings $0 $0
Retained Earnings, Beginning Balance $3,092 $12,882
Retained Earnings, Ending Balance $3,624 $15,127

Ratio Analysis for Coco-Cola: 1986 and 1996

Coca-Cola
Ratio Definition 1986 (in %) 1996 (in %)
Liquidity
1. Current ratio current assets
current liabilities 1.36 0.8

2. Quick ratio (acid test) current assets - inventories
current liabilities 1.02 0.67

Asset Management
3. Average collection period accounts receivables
credits sales/ 365 45.5 32.3
Total Rev. = Cr. Sales
4. Inventory turnover cost of sales
average inventory 5 7.1
INO = AVE INV
5. Fixed asset turnover sales
fixed assets 4.9 5.2
FIXED ASSETS = NET
6. Total asset turnover sales
total assets 1.04 1.15

Financial Leverage Management
7. Debt Ratio total debt
total assets 0.58 0.62
ST+LT= Total Debt
8, Debt-to-equity total debt
total equity 1.4 1.63
ST+LT
9. Times interest earned earnings before interest and taxes (EBIT)
interest charges

10. Times fixed charges earned EBIT + lease payment
interest +lease payments + before tax
sinking fund + Preferred stock dividends before tax

Profitability
11. Gross profit margin sales - cost of sales
sales 46.4 63.7

12. Net profit margin earnings after taxes (EAT)
sales 10.8 18.8

13. Return on investment earnings after taxes (EAT)
total assets 11.1 21.6

14. Return on Stockholders' equity earnings after taxes (EAT)
stockholders' equity 26.6 56.7

Market Based
15. Price-to-earnings ratio market price per share
current earnings per share

16. Market-to-book ratio market price per share
book value per share

Dividend Policy
17. Payout ratio dividend per share
earnings per share 43 36

18. Dividend yield expected dividend per share
stock price

DU PONT ANALYSIS

Profit Margin Asset Turnover ROA

Net Profit X Net Sales = ROA
Net Sales Total Assets

1986 10.8% X 1.04 = ROA of 1986

1996 18.8% X 1.15 = ROA of 1996

Profit Margin X Asset Turnover X Leverage = ROE

Net Profit X Net Sales X Leverage = ROE
Net Sales Total Assets

1986 10.8 X 1.04 X 2.4 = ROE of 1986
1996 18.8 X 1.15 X 2.6 = ROE of 1996

Attachments

Solution Preview

Financial Analysis and Forecasting
A. Examination of Balance Sheet & Income Statement
B. Common Size Statements
C. Growth Rates
D. Ratio Analysis
E. DuPont Analysis
F. Strategic Financing Model

Coca-Cola Income Statement for December 1986 and 1996 (in millions)
1986 1996
Net Revenues $8,668 $18,546
Total Revenue $8,668 $18,546
Cost and Expenses
Cost of Sales $4,644 $6,738
S, G, and A $2,699 $7,893
Interest Charges $186 $286
Interest/ Other Income (net) ($372) ($967)
Total Cost and Expenses $7,157 $13,950

Income before Income Taxes $1,511 $4,596
Provision for Income Taxes $577 $1,104

Net Income $934 $3,492
Dividends ($402) ($1,247)
Adjustments to Retained Earnings $0 $0
Retained Earnings, Beginning Balance $3,092 $12,882
Retained Earnings, End Balance $3,624 $15,127

Coca-Cola Balance Sheets for December 1986 and 1996- amount in millions
1986 1996
Assets
Current Assets
Cash and Equivalents $888 $1,658
Receivables $1,081 $1,641
Inventory $933 $952
Other $837 $1,659
Total Current Assets $3,739 $5,910
Productive Assets
Property, Plant, and Equipment $2,790 $5,581
Accumulated Depreciation ($1,026) ($2,031)
Net Productive Assets $1,764 $3,550
Other Assets $2,870 $6,701
Total Assets $8,373 $16,161
Liabilities And Shareholders Equity
Liabilities
Current Liabilities
Accounts Payable $1,333 $2,972
Current Debt Due $725 $3,397
Other $697 $1,037
Total Current Liabilities $2,755 $7,406
Long-Term Liabilities
LT Debt $1,011 $1,116
Other LT Liabilities $711 $1,182
Deferred Income Taxes $381 $301
Total LT Liabilities $2,103 $2,599

Total Liabilities $4,858 $10,005
Shareholders' Equity
Common Stock $714 $1,916
Treasury Stock ($705) ($10,320)
Retained Earnings $3,624 $15,127
Equity Adjustments ($118) ($567)
Total Shareholders' Equity $3,515 $6,156

Total Equity $8,373 $16,161

Common Size Balance Sheets
Coca-Cola Balance Sheets for December 1986 and 1996
1986 % 1996 %
Assets
Current Assets
Cash and Equivalents $888 11% $1,658 10%
Receivables $1,081 13% $1,641 10%
Inventory $933 11% $952 6%
Other $837 10% $1,659 10%
Total Current Assets $3,739 45% $5,910 36%
Productive Assets
Property, Plant, and Equipment $2,790 $5,581
Accumulated Depreciation ($1,026) ($2,031)
Net Productive ...

Solution Summary

The solution analyzes the financial performance of Coke in terms of liquidity, leverage, profitability, and efficiency for the period 1986 - 1996 in an attached Word document.

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