Explore BrainMass

Corporate Growth- Coca Cola Case Study

Based on the company Coca Cola, forecast company sales, earnings, and cash flows each year for the next five years.

Justify your results and explain which models you used to make the forecasts.

© BrainMass Inc. brainmass.com July 16, 2018, 8:26 pm ad1c9bdddf

Solution Preview

Estimate Coke sales, earnings, and cash flows each year for the next five years.
First, collect some background information on Coke. Start with the most recent annual report (SEC form 10-K), as well as whatever quarterly data is available after the annual report was published. (See attached). Coke's investor information is available here, (http://ir.thecoca-colacompany.com/phoenix.zhtml?c=94566&p=irol-sec). Check the SEC Filings tab on the left, then Annual Filings (use the 10-K), and Quarterly Filings (use the last few 10-Q).

Next, calculate a sustainable growth rate. Find Coke's return on equity (ROE) and the percentage of its earnings are paid in dividends. The inverse of the dividend-payout ratio is called the "plowback ratio." (Which is equal to 1 minus the dividend-payout-ratio). So:
Sustainable Growth Rate= ROE x (1 - dividend-payout-ratio)
So the two variables that require definition are ROE and dividend-payout-ratio. Both are calculated with data from the above reports.
Return on Equity= Net Income/Shareholder Equity
Coke's ...

Solution Summary

Forecasts Coca Cola sales, earning, cash flows over the next five years. Focus is on application of sustainable growth rate, and identifying limits to Coke's growth-- be they financial or market based. Finally, price elasticity is introduced in relation to competition with Pepsi. APA format with references.