Ratio Analysis of Coca Cola Essay

1990 Words Sep 24th, 2013 8 Pages
| Ratios Analysis | Index Ratios Analysis 1 Index 2 Brief Introduction of the Coca-Cola Company 3 Liquidity Ratios 3 Current ratio 3 Quick Ratio 4 Asset Management Ratios 4 Inventory turnover ratio 4 Total Asset Turnover ratio 5 Debt Management Ratios 5 Debt-to-equity ratio 5 Times-interest-earned ratio 6 Profitability Ratios 6 Net profit margin 6 ROE 7 Market Value Ratios 7 Price/ Earnings (P/E) ratio 7 Market/ book Ratio 7 The Du Pont Equation 8 Summary 8 Appendix 9 Balance Sheet (2012) 9 Income Statement (2012) 10 Industry Average Ratios 11

Brief Introduction of the Coca-Cola Company
The Coca-Cola Company is the world’s largest beverage company, which in 2012 owns or licenses
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Total Asset Turnover ratio
Total asset turnover ratio = sales / total asset
= 48017 / 3264 = 0.56
Industry average = 0.6
Coca-Cola’s ratio is somewhat below the industry average, indicating that the company is not generating a sufficient volume of business given its total asset investment. We can guess maybe Coca-Cola is expanding its facilities which will drive future growth but hurt on the short-term. According to the annual report, there are new investments in Aujan, one of the largest independent beverage companies in the Middle East, and Mikuni, a bottling partner located in Japan. The increase was also due to the impact of the merger of Andina and Polar, foreign currency translation adjustments and additional equity income recorded during 2012. Anyway, it is suggested that sales should be increased, some assets should be sold, or a combination of this step should be taken.
Debt Management Ratios
Debt-to-equity ratio
Debt-to-equity ratio = total liabilities / (total asset – total liabilities)
=53006 / (86174-53006) = 1.60
Industry average = 1.01
The data shows Coca-Cola has $1.6 of debt for every dollar of equity, which is higher than the industry average. It is generally not considered good, because the company has a high amount of debt, and we are reasonably worried about its ability to service its debt. In order to address this concern, let’s look at the times-interest-earned ratio.

Times-interest-earned ratio
Times-interest-earned ratio =

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