IJRIME Volume2,Issue1 ISSN22491619

International Journal of Research in IT, Management and Engineering

www.gjmr.org
70
FINANCIAL ANALYSIS OF COCA-COLA
Mr. Ashish Kumar*
Madhu Arora**
Dr. Chanchal Vashishtha***

ABSTRACT
Present study is about Analysis of Financial Statements of Coca-Cola which was first introduced
by John Syth Pemberton, A pharmacist, in the year 1886 in Atlanta, Georgia. Study relates to
period financial year 2009 and 2010.its findings include that company income increases by
73.48%. In 2009 company total income of 6.82 billion and in 2010 it increases and reaches to
11.8 billion. Gross profit, operating income, net income before tax is increases 22.1% from
previous year. Main suggestions are it should work on originate more new technology products
in the market which attract the customers and increases the growth of financial position of
company. it needs to increasing its investing activities by spend more in assets, cash dividend
which lead to strong capitalizing activities.











*Student,FIMT,Delhi
**Assistant Professor and Programme Co-ordinator,FIMT,Delhi
***Principal,FIMT,Delhi
IJRIME Volume2,Issue1 ISSN22491619
International Journal of Research in IT, Management and Engineering
www.gjmr.org
71
INTRODUCTION:
The Coca-Cola Company turn back into India through its wholly owned subsidiary, Coca-Cola
India Private Limited and re-launched Coca-Cola in 1993 after the opening up of the Indian
economy to foreign investments in 1991. Since then its setups have grown rapidly through a
model that supports bottling operations, both company owned as well as locally owned and
includes over 7,000 Indian distributors and more than 1.3 million retailers. In India, the Coca-
Cola system involves of a wholly owned subsidiary of The Coca-Cola Company namely Coca-
Cola India Pvt Ltd which manufactures and sells distillate and beverage bases and powdered
beverage mixes, a Company-owned bottling entity, namely, Hindustan Coca-Cola Beverages Pvt
Ltd; thirteen approved bottling partners of The Coca-Cola Company, who are authorized to
prepare, package, sell and distribute beverages under certain specified trademarks of The Coca-
Cola Company; and an extensive distribution system comprising of our customers, distributors
and retailers. Coca-Cola India Private Limited sells concentrate and beverage bases to authorized
bottlers who are authorized to use these to produce portfolio of beverages.. The Coca-Cola
Company has invested nearly USD 1.1 billion in its operations in India since its re-entry back
into India in 1992. The Coca-Cola system in India directly employs over 25,000 people including
those on contract.
financial analysis is the process of understanding the risk and profitability of a firm (business,
sub-business or project) through analysis of reported financial information, particularly annual
and quarterly reports.Financial statement analysis consists of 1) reformulating reported financial
statements, 2) analysis and adjustments of measurement errors, and 3) financial ratio analysis on
the basis of reformulated and adjusted financial statementsThere are two popular methods by
which we can analyze the financial statement by calculating percentage as taking a common
base.
Horizontal Analysis:When an analyst compares financial information for two or more years for
a single company, the process is referred to as horizontal analysis, since the analyst is reading
across the page to compare any single line item, such as sales revenues. In addition to comparing
dollar amounts, the analyst Computes percentage changes from year to year for all financial
IJRIME Volume2,Issue1 ISSN22491619
International Journal of Research in IT, Management and Engineering
www.gjmr.org
72
statement balances, such as cash and inventory. Alternatively, in comparing financial statements
for a number of years, the analyst may prefer to use a variation of horizontal analysis called
Trend analysis. Trend analysis involves calculating each year's financial statement balances as
percentages of the first year, also known as the base year. When expressed as percentages, the
base year figures are always 100 percent, and percentage changes from the base year can be
determined.If we want to calculate % change in sales then we apply the following
formula:Percentage=change in sales /Base Year Sales*100.
Vertical Analysis:When using vertical analysis, the analyst calculates each item on a single
financial statement as a percentage of a total. The term vertical analysis applies because each
year's figures are listed vertically on a financial statement. The total used by the analyst on the
income statement is net sales revenue, while on the balance sheet it is total assets. This approach
to financial statement analysis, also known as component percentages, produces common-size
financial statements. Common-size Balance sheets and Income statements can be more easily
compared, whether across the years for a single company or across different companies.If we
want to calculate % change of current assets then we apply the following formula:Percentage:
current assets/total assets*100.
RESEARCH METHODOLOGY:
Study is analytical in nature.
Study period relates to financial years 2009 and 2010
Objectives of the study:
To understand past performance and current financial position of the selected company
To analyze different financial ratios of coca cola company
To make predictions about the future performance of a company
To assess operating, investing and financing activities of coca-cola.
To provide suggessions, if any about improvement of financial position of the selected
company.


IJRIME



ANALY
Table 1:
Compa

Particula
Net sales

(cost of
sold)
Gross pr

(operatin
expenses
Net oper
profit
Profit be
interest a
tax
(interest

(tax paid

Profit af


E
Interna

YSIS OF D
INCOME S
arative Inc

ars 20

(
s 31
f goods 9.8
rofit 21
ng
s)
11
rating 9.2
efore
and
9.3

paid) 0.4
d) 2.0
fter tax 6.8
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DATA:
STATEMEN
come state

009
)
.0
85
.1
.9
26
30
437
04
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NTS ANAL
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2010

( )
35.1
11.2
23.9
14.1
9.79
15.0
0.783
2.38
11.837
me2,Issu
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gjmr.org
LYSIS
09 to 2010

A
ch

4
1
2
2
0
5
0
0
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4.1
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2.8
2.2
0.53
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0.346
0.34
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ISSN
and Engineer
(I
Percen
change
(%)
13.2%
13.7%
13.2%
18.48%
5.7%
61.2%
79.1%
16.6%
73.48%
224916
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IJRIME


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IJRIME


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IJRIME


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IJRIME


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IJRIME


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CAL YEAR
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ISSN
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11.8B
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0
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370M
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9.53B
-2.21B
134M
-1.54B
-4.82B
1.82B
-4.41B
-4.07B
-1.29B
1.85B
50.0M
-3.46B
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IJRIME



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IJRIME Volume2,Issue1 ISSN22491619
International Journal of Research in IT, Management and Engineering
www.gjmr.org
80
Financing activities is again fall in 2010 is more than previous year 2009.sales/purchase
of stock, net borrowing; dividend paid all goes to negative side of above figure and more
in 2010.

RATIO ANALYSIS
CURRENT RATIO:
Current Ratio= Current Assets/Current Liabilities
In 2009:
Current Assets=17.6 billion
Current Liabilities=13.7
Current Ratio=17.6/13.7=1. 2:1
In 2010:
Current Assets=21.6 billion
Current Liabilities=18.5
Current Ratio=21.6/18.5=1.1:1

QUICK RATIO:
Quick Ratio=Quick Assets/Current Liabilities
In 2009:
Quick Assets=17.6-(2.35+2.23) (current assets-(stock + prepaid expenses) =13.02 billion
Current Liabilities= 13.7
Quick Ratio=13.02/13.7=0.95:1
In 2010:
Quick Assets=21.6-(2.65+3.16) (current assets-(stock + prepaid expenses) =15.79 billion
Current Liabilities=18.5 billion
Quick Ratio=15.79/18.5=0.85:1
RETURN ON AVERAGE ASSETS:
Return on average assets= Net income/average assets*100
Average assets= total assets at the beginning + total assets at the end/2
In 2009:
IJRIME Volume2,Issue1 ISSN22491619
International Journal of Research in IT, Management and Engineering
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81
Net income=6.82 billion
Average assets= (40.5+ 48.7)/2= 44.6
Return on average assets= 6.82/44.6*100 = 15.2%
In 2010:
Net income= 11.8 billion
Average assets= (48.7+ 72.9)/2= 60.5
Return on average assets= 11.8/60.5*100=19.5%

RETURN ON AVERAGE EQUITY:
Return on average equity = Net income/average equity*100
Average equity= total equity at the beginning + total equity at the end/2
In 2009:
Net income=6.82 billion
Average equity= (20.4+24.7)/2= 22.5
Return on average equity= 6.8/22.5*100 = 30.2%
In 2010:
Net income= 11.8 billion
Average equity= (24.8+31.0)/2= 27.9
Return on average equity = 11.8/27.9*100=42.2%
PROPRIETARY RATIO
Proprietary ratio=shareholders fund/total assets
In 2009:
Shareholder fund=24.8 billion
Total assets= 48.7 billion
Proprietary ratio=24.8/48.7=50%
In 2010:
Shareholder fund= 31.0 billion
Total assets= 72.9 billion
Proprietary ratio=31.0/72.9=42%

IJRIME Volume2,Issue1 ISSN22491619
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82
DEBT-EQUITY RATIO
Debt-equity ratio =debt (long-term) /equity (shareholder fund)
In 2009:
Debt= 5.06 billion
Equity=24.8
Debt-equity ratio=5.06/24.8=0.20:1
In 2010:
Debt=14.0 billion
Equity=31.0 billion
Debt-equity ratio= 14.0/31.0=0.45:1
Table 4 : KEY RATIOs
(Approximately)
RATIOS IN 2009 IN 2010
Current Ratio 1.2:1 1.1:1
Quick Ratio 0.94:1 0.85:1
Return on Assets 15.2% 19.2%
Return on Equity 30.2% 42.2%
Proprietary ratio 50% 42%
Debt-equity ratio 0.20:1 0.45:1
The above table shows that: - Both current ratio and quick ratio is liquidity ratio. The ideal ratio
for current ratio is 2:1 and ideal ratio for quick ratio is 1:1. In this table current ratio of both
years is lower than the ideal ratio which shows that the company may have problems meeting its
short-term obligations and quick ratio is lower than the ideal ratio which shows that company
have not enough liquid assets to pay their current liabilities. Therefore company should keep
some assets in the form of liquid assets such as cash, marketable securities etc.
Return on equity and return on assets are profitability ratio. The higher the profitability ratio of
any organization is show the better position of that organization. The profitability ratio of coca-
cola is very moderate. It is increasing from the previous year.
IJRIME


Proprieta
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SUGGE
Some of

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position. It
LUSION:
Net profit inc
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Balance sheet
oint of time.
ear 2009 is
18 billion m
Cash flow sho
ctivities is in
egative.
Current ratio
ncreases 19.
rom previou
ESTIONS
the suggesti
The attention
To increase t
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afety for cre
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computed to
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. In 2010 tot
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s year.
S:
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.45:1 which
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coca-cola are
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ISSN
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619
83
ratio
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IJRIME Volume2,Issue1 ISSN22491619
International Journal of Research in IT, Management and Engineering
www.gjmr.org
84
Make manager competitive and introduce spirit of market-orientation and culture of
working for customer satisfaction. By increasing quality of soft-drink.
There is need to build the knowledge and skill base among the employees in the context
of technology.
Performance measure should not only cover financial aspects i.e. quantitatively aspects
but also the qualitative aspects.
Company invention more new technology products in the market which attract the
customers and increases the growth of financial position of company.
Company need to increasing its investing activities by invest more in assets, cash
dividend. Which lead to strong investing activites.
REFERENCES

Grewal .T.S. Analysis of financial statements Sultan Chand & Sons Edition 2009
. Maheshwari. S. N Principles Of Accounting Sultan Chand & Sons Edition 2010
Goel D.K. An Introductory of accountancy Arya Publications Edition 2010
Prasad Atul Management accounting Pearson Edition 2010
http://en.wikipedia.org/wiki/Coca-Cola
http://www.coca-colaindia.com/ourcompany/company_history.html
http://en.wikipedia.org/wiki/Analysis_of_Financial_Statements
http://www.wikinvest.com/stock/Coca-Cola_Company_(KO)/Data/Income_Statement
http://www.coca-cola.com/en/index.html
http://www.investopedia.com/terms/m/minorityinterest.asp#axzz1ecazd8ly
http://www.google.co.in/url?sa=t&rct=j&q=ideal%20ratio%20return%20on%20assets&s
ource=web&cd=5&ved=0CDsQFjAE&url=http%3A%2F%2Fen.wikipedia.org%2Fwiki
%2FReturn_on_assets&ei=2JzPTteNBMrlrAe85pjYDA&usg=AFQjCNHiFCYdAHASS
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