CAPITAL STRUCTURE OF COCA COLA

YEAR 2016 2015 2014 2013 2012

EQUITY 32,790 33,173 30,320 25,554 23,062

DEBT 32,610 37,079 41,745 44,213 45,709

% of EQUITY 0.50 0.47 0.42 0.37 0.34

% Of DEBT 0.50 0.53 0.58 0.63 0.66

Percentage of Equity = Market Value of Equity/

(Market Value of Equity + Market Value of Debt)
Percentage of Debt = Market Value of Debt/
(Market Value of Equity + Market Value of Debt)

The ratio of debt is always on a higher side as compared to equity. In the year 2012, the equity
is almost half of the debt. In the year 2013, the equity has increased by .03% and the debt has
decreased by .03%. In the subsequent years i.e. 2014 & 2015 the debt has decreased, and the
equity has increased subsequently. In the year 2016 again, the equity and debt has increased
and decreased by .03% respectively. 2016 is the year in which the company has raised equal
amount in terms of percentage both from the equity and the debt. In the previous year the
company has raised more capital from debt and less from equity.
 LEVERAGES

Year ending 31 December 2016

2016 2015 2014
Net Sales 41863 44294 45998
NS/COGS 2.54 2.53 2.57
COGS 16465 17482 17889
Gross Profit 25398 26812 28109
GP/exp 1.51 1.48 1.53
Expenses 16772 18084 18401
Operating Income 8626 8728 9708
Interest income 642 613 594
Interest expense 733 856 483
Equity income 835 489 769
other income -1234 631 -1263
Income before taxes 8136 9605 9325
EBT/Tax 5.13 4.29 4.24
Tax 1586 2239 2201
Net Income 6550 7366 7124

2016 2015 % change

EBIT 8626 8728 -1.17
Sales 41863 44294 -5.49
EPS = NI/Shares 1.53 1.70 -10.33
No. of Shares 4293.46 4329.50

Financial Leverage = EBIT/EBIT-

Int 1.09

Operating Leverage 0.21

The above calculations reveal a financial leverage of 1.09 which means that its incomes will
be relatively stable and will not fluctuate much. The operational leverage of 0.21 reveals that
the firm can cover its fixed costs quite well.

(all values in Million $)

 COST OF CAPITAL FOR COCA-COLA

WACC = E/(E+D) * Cost of Equity + D/(E+D) * Cost of Debt * (1-Tax Rate)

E = Mkt Cap = Value of Equity 195777.66

D = Value of Debt 29684

E/(E+D) 0.87 D/(E+D) 0.13

Cost of Equity 6.1%

Cost of Debt 2.47%

1-Tax Rate 76.55%

WACC 5.55%

The above calculations show that the cost of capital for Coca-Cola stand at 5.55% which
means that for every $1 raised by Coca-Cola from investors, it will have to pay-back $0.05 in
return to its investors.

DIVIDENDS

As on year ending 31 December 2016

2016 2015 2014 2013 2012
Total Dividend for the Period 6043 5741 5350 4969 4795
Net Income Available to Shareholders 6527 7351 7098 8584 9019
Pay-out Ratio 0.925846 0.780982 0.753733 0.578868 0.531655
Net Income/Share 1.51 1.69 1.62 1.94 2
DPS 1.63094 2.163942 2.149301 3.35137 3.761835
% increase -24.6311 0.681193 -35.868 -10.9113

Dividends for past 5 years

Looking at the above calculated data, we can observe that Net Income/ Share is decreasing
every year. And this is impacting the DPS. DPS has only increased in 2015 by 68.11% otherwise
it has only kept decreasing. Company is paying a significant amount of its Net Income as its
Pay-out Ratio is above average and in some cases significantly higher (in 2016).

(all values in Million $)

 As on year ending 31 December 2016
2017 2016 2015 2014 2013 2012
Net Sales 43956 41863 44294 45998 46854 48017
NS/COGS 2.54 2.54 2.53 2.57 2.54 2.52
COGS 17306 16465 17482 17889 18421 19053
Gross Profit 26651 25398 26812 28109 28433 28964
GP/exp 1.54 1.51 1.48 1.53 1.56 1.59
Expenses 17353 16772 18084 18401 18205 18185
Operating Income 9298 8626 8728 9708 10228 10779
Interest income 570.8 642 613 594 534 471
Interest expense 586.4 733 856 483 463 397
Equity income 702.8 835 489 769 602 819
other income -230.6 -1234 631 -1263 576 137
Income before taxes 9754 8136 9605 9325 11477 11809
EBT/Tax 4.40 5.13 4.29 4.24 4.03 4.34
Tax 2215 1586 2239 2201 2851 2723
Net Income 7539 6550 7366 7124 8626 9086

Projected Income Statement

As on year ending 31 December 2016

2017 2017/2016 2016 2016/2015 2015
Cash & Equivalents 10013 1.17 8555 1.17 7309
Short-term Investments 11063 1.15 9595 1.15 8322
Marketable Securities 3844 0.95 4051 0.95 4269
Current Trade Receivables 3773 0.98 3856 0.98 3941
Assets Inventories 2466 0.92 2675 0.92 2902
Prepaid Expenses 2237 0.90 2481 0.90 2752
Assets for Sale 2006 0.72 2797 0.72 3900
Total Current Assets 35401 1.02 34010 1.02 33395
ASSETS

Equity Investments 21464 1.32 16260 1.32 12318

Other Investments 282 0.29 989 0.29 3470
Other Assets 4391 1.03 4248 1.03 4110
Fixed Property, Land, Equipment 8997 0.85 10635 0.85 12571
Assets Trademarks 6207 1.02 6097 1.02 5989
Bottlers Rights 2252 0.61 3676 0.61 6000
Goodwill 10008 0.94 10629 0.94 11289
Other Intangible Assets 617 0.85 726 0.85 854
Total Assets 89619 0.97 87270 0.97 89996

Projected Balance Sheet-1

(all values in Million $)

 As on year ending 31 December 2016
2017 2017/2016 2016 2016/2015 2015
Accounts Payable 9323 0.98 9490 0.98 9660
Loans & Notes Payable 11897 0.95 12498 0.95 13129
Current Current Maturities of LT Debt 4649 1.32 3527 1.32 2676
Liabilities Accrued Income Taxes 285 0.93 307 0.93 331
Liabilities Held for Sale 445 0.63 710 0.63 1133
LIABILITIES & EQUITY

Total Current Liabilities 26599 0.99 26532 0.99 26929

LT Debt 31124 1.05 29684 1.05 28311
Other Liabilities 3872 0.95 4081 0.95 4301
Deferred Income Taxes 3003 0.80 3753 0.80 4691
Non- Common Stock 1760 1.00 1760 1.00 1760
Current Capital Surplus 16136 1.07 15151 1.07 14226
Liabilities Reinvested Earnings 65990 1.01 65502 1.01 65018
Other Accumulated Income -12340 1.10 -11205 1.10 -10174
Treasury Stock -51099 1.06 -47988 1.06 -45066
Total Equity 58444 0.96 60738 0.96 63067
Total Liabilities & Equity 85043 0.97 87270 0.97 89996

Projected Balance Sheet – 2

2017 2016
COGS per day = COGS/365 47.41 45.11

DIO = INV/COGS per day 52 59

Revenue per day = Sales/365 120.43 114.69

DSO = Accounts receivables/Revenue per day 31 34

DPO = Accounts payable/COGS per day 197 210

Operating Cycle = DPO - DIO + DSO 176 185

Calculation of Operating Cycle

The operating cycle of 176 days shows that it takes 176 days for the firm to convert its cash
into products and realize the money again by selling the product to the customer.

Here, DIO (Days Inventory Outstanding) represents the number of days taken to turn
inventory into sales. DSO (Days Sales Outstanding) represents the number of days it takes to
collect cash from sales. DPO (Days Payable Outstanding) represents the number of days it
takes the firm to pay its suppliers for the inventory.

(all values in Million $)

 2017 2016
Working Capital = CA-CL 8803 7478

Current Ratio = CA/CL 1.33 1.28

Quick Ratio = (Cash +Mkt sec + acc rec)/CL 0.662831 0.620458

Estimation of Working Capital

The Current Ratio represents a firm’s ability to meet its short-term as well as long-term
liabilities while Quick Ratio value represents a firm’s ability to meet its short-term liabilities.
Here, Coca-Cola’s Current ratio of 1.33 shows a healthy state of the firm and its capability to
meet its liabilities but the Quick ratio is on the lower side at 0.66 which means that the firm’s
liquidable sources are not enough to meet the short-term liabilities.

(all values in Million $)