EVALUATING Financial Business Plan
EVALUATING Financial Business Plan
EVALUATING Financial Business Plan
Student's Name
Supervisor’s Name
Course Name
Due Date
Table of contents
I. Executive summary
II. Introduction
b) Interpretations
c) Financial projection for the next five years using excel spreadsheet
d) Breakeven analysis
f) Appropriate source of finance for the chosen organisation, the advantages and
disadvantages
V. Appendices
leader in the non-alcoholic beverage industry. More than two hundred nations around the
world stock its wares. It sells over 400 different beverage brands, including sodas, energy
drinks, bottled water, and fruit juices. Coca-Cola is the company's flagship soft drink. Coca-
Cola has become one of the most well-known brands in the world thanks to its long history of
beverage market in 2019. Coca-sales have been on the decline over the past decade, likely as
a result of rising awareness of the negative effects of sugary drinks on health and weight.
Coca-stated purpose is "to refresh the world, to spark moments of optimism and happiness, to
generate value and make a difference." Coke wants to be an excellent place to work where
employees are encouraged to give their all in-order to fulfil the company's and its customers'
demands and wants, and where the company itself is efficient, effective, and nimble.
Since March 2020, Coca-performance Cola's has been steadily deteriorating due to Covid.
Sales have dropped by 25% in the US division between March and April, and are down by
varied percentages in the rest of the divisions as well. The potential of a subsequent pandemic
rampage makes it all the more critical for management accountants and company CEOs to
From a financial accounting perspective, companies may use tools like SWOT and Porter's
Five Forces (P5F) in conjunction with ratio analysis, or from a management accounting
perspective, they may use the Balanced Scorecard (BSC) tool proposed by (Norton & Kaplan
Investors, creditors, and management utilize financial evaluation to assess the past, present,
and future financial performance of a business. Upon completion of the review, the
information is communicated to the relevant stakeholders, both inside and outside the
The financial analysis and evaluation are two crucial elements in the process of conducting
sustainable and contribute to the company's broad goals of poverty reduction, inclusive
Company has a fiduciary duty to guarantee that all investment projects it supports are
subjected to the highest standards of financial due diligence, so that their implementation
meets the requirements for economy and efficiency. All Coca-Cola-supported investment
proposals for sovereign projects must be evaluated for financial and economic viability. The
financial analysis focuses on the adequacy of financial returns to project owners and
operators to ensure the firm's continued viability throughout its economic life.
corporation. Evaluation of many financial measurements might be more effective for guiding
the management to ask the proper questions than for delivering solutions towards the
business's financial difficulties (Merchant& Van der Stede 2007). The total performance and
standing of the company should be examined using a set of criteria including liquidity,
Reflects a company's capacity to satisfy its financial commitments when they become
due. The business is liquid if its obligations, including principal and interest on debt, are paid
on time without interfering with its usual operations. Current ratio, quick ratio and cash ratio
improved from 2019 to 2020 but then slightly deteriorated from 2020 to 2021
Solvency Ratio
Assesses a company's capacity to pay all of its debts if its assets were sold. In general,
a business is solvent if the market value of its entire assets is more than its existing debt
obligations. Debt to equity ratio, debt to capital ratio and debt to asset ratio improved from
2019 to 2020 and from 2020 to 2021. Financial leverage ratio decreased from 2019 to 2020
Profitability Ratio
Indicates the degree of income generated by the firm business and is quantified in
terms of the rates of return generated by labor, management, and capital. GPM deteriorated
from 2019 t0 2020 but then improved from 2020 to 2021 not reaching 2019 level. Th OPM
improved from 2019 to 2020 but then deteriorated significantly from 2010 to 2021. NPM,
ROA and ROE deteriorated from 2019 to 2020 but then improved exceeding 2019 level
Efficiency Ratio
Assesses the degree to which labor, management, and capital are utilized efficiently
within a corporation. Measures how a company can efficiently perform its day-to-day task.
Efficiency measures the link between inputs and outputs and can be quantified in physical or
monetary terms. We assess long-term ratios and short-term ratios. Net fixed assets turnover
ratios and total asset turnover deteriorated from 2019 to 2020 but then improved from 2020 to
2021. Equity turnover ratio deteriorated from 2019 to 2020 and 2020 to 2021.
Interpretations
A. Capital expenditures – All expenses incurred for fixed assets, including construction-
related interest.
B. Cash from internal sources - The difference between: The sum of cash flows from all
sources associated with operations, including cash generated from consumer deposits and
consumer advances of any form, sale of assets, cash yield on investments, and net
The total of all operating expenses, including administration, adequate maintenance, taxes
and payments in lieu of taxes (excluding provision for depreciation and other noncash
operating charges), debt service requirements, all cash dividends paid and other cash
distributions of surplus, increase in working capital other than cash, and other cash outflows
C. Current assets excluding cash - All assets other than cash that can be converted into cash
within a year, such as accounts receivable, marketable securities, inventory, and prepaid
Current obligations include accounts payable, client advances, debt service requirements,
D. Debt - Any obligation of the borrower that matures more than one year after the date it
(i). pursuant to a loan contract or agreement or other instrument providing for such debt or
the adjustment of its terms of payment as of the date of such contract or agreement; and
(ii) pursuant to a guarantee arrangement, on the date that the guarantee agreement has been
E. Equity — The amount of the borrower's total unimpaired paid-up capital, retained
earnings, and reserves that are not allocated to pay certain liabilities.
F. Financial analysis - The process of examining businesses, initiatives, and businesses to
G. Financial evaluation — The process of evaluating the project cash flows to determine the
cost-effectiveness of the project in meeting its objectives, and to assess whether the cash
flows are sufficient to fund the operating and maintenance costs of the project, meet its debt
service obligations, and pay back the project costs to stakeholders after satisfying any tax
obligations.
Also known as the statement of financial position, this summarizes an entity’s assets,
liabilities, and shareholders’ equity, and shows the financial status of an entity at a specific
point in time. Assets are reported on one side and liabilities and equity on the other.
Also known as the statement of comprehensive income, this statement provides a summary of
the entity’s financial operating performance over a specific period (usually one accounting
year). Financial performance is measured by revenue generated by the entity less the costs of
doing business.
Financial projection for the next five years using excel spreadsheet
12 months ended: Dec 31, 2026 Dec 31, 2025 Dec 31, 2024 Dec 31, 2023 Dec 31, 2022
This is an analysis to determine the point at which revenue received equals the cost
associated with the receiving revenue. It calculated the margin of safety, the amount that
revenues exceed the breakeven point. This is the amount that revenues can fall while still
staying above the breakeven point. Break even analysis looks at costs such as direct material,
direct labour, indirect material, indirect labour, fixed cost, manufacturing cost, sales and
promotion.
Equity Financing
This is either personal or capital from equity investors who provide financing in exchange for
part ownership. New ventures may be funded entirely by the owner’s funds or may have
finances provided externally in return for ownership in the venture. This is a source of capital
raised from the company's owners by issuing stocks to the public, existing shareholders, or
new shareholders who wish to subscribe to become owners (IvyPanda 2021).
Debt Financing
This is when a company borrows money in order to meet its financial requirements and pays
Appropriate source of finance for the chosen organisation, the advantages and
disadvantages
The Coca-Cola Company has leveraged both internal and external funding sources.
These sources of capital for multinational corporations are equity capital, long-term and
short-term debt, and medium-term and short-term debt (Fan et.al.,2022 pp. 985-99). Each
Equity Financing
investment they will make. If the company wants to make a substantial investment and has a
The absence of a dividend payment provision throughout the capital-raising process has no
Disadvantages
Once these shares have been issued, they diminish the company's control, which may impact
its performance.
It is a pricey source of funding because advertising for the issuance of shares is costly.
Not all businesses have access to this source of funding, as some are not listed on the stock
exchange.
It is dangerous to issue a high number of these shares because they'll increase the return rate
Advantages
Flexibility - they can be utilized as needed, for example, bank overdrafts can be utilized as
long as the business does not exceed the required limit. Also, loan terms might be extended
This facility is simply accessible to any business that fits the standards.
In most cases, interest rates exceed the base rate and are tax-deductible.
Disadvantages
Due to their legal obligation to be repaid on demand or within a specified time frame, these
Typically, floating levies on assets or, in the case of private enterprises, personal guarantees
Advantages
Debenture holders might accept a lower rate of return because the investment carries less
risk.
Since no right to vote are granted when debt is offered, there is no loss of control.
Disadvantages
Interest is a mandatory default that will result in the sale of company securities or in the
It is constrained because shareholders are afraid that a geared company would not be able to
reviews. Quantitative analysis begins with period changes. Ratios show growth, profitability,
situation, strengths, and weaknesses. Management accounting and strategic management can
support the firm in unanticipated hazards through efficient operations and strategy changes.
Management accounting results and quantitative analysis should be used to adapt company
plans when the external environment gets riskier. Risk-averse companies should check
awareness of healthier products, Coca-Cola Kenya should intensify marketing of its juices as
much as it does for its core brands like Coke, Fanta and Sprite. It should have more juice
advertisements so that consumers out there are aware of its juices and also carry out winning
promotions of its juices. Over the years, consumers have known Coca- Cola to produce only
carbonated soft drinks but with more adverts and other marketing campaigns, they will also
US$ in millions
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Current ratio 1.13 1.32 0.76 1.05 1.34
Quick ratio 0.81 0.96 0.56 0.66 0.90
Cash ratio 0.63 0.75 0.41 0.55 0.76
Liquidity ratio
1.6
1.4
1.2
0.8
0.6
0.4
0.2
0
Dec 31, 2017 Dec 31, 2018 Dec 31, 2019 Dec 31, 2020 Dec 31, 2021
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Return on Sales
Gross profit margin 60.27% 59.31% 60.77% 63.05% 62.56%
Operating profit 26.67% 27.25% 27.06% 27.31% 21.18%
margin
Net profit margin 25.28% 23.47% 23.94% 20.20% 3.52%
Return on Investment
Return on equity 42.48% 40.14% 46.99% 37.89% 7.31%
(ROE)
Return on assets 10.36% 8.87% 10.33% 7.73% 1.42%
(ROA)
Profitability Ratio
70.00%
60.00%
50.00%
Gross profit margin
40.00% Operating profit margin
Net profit margin
30.00% Return on equity (ROE)
Return on assets (ROA)
20.00%
10.00%
0.00%
Dec 31, Dec 31, Dec 31, Dec 31, Dec 31,
2017 2018 2019 2020 2021
Coca-Cola Co., solvency ratios
Dec 31,
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 2018 Dec 31, 2017
Debt Ratios
Debt to equity 1.86 2.22 2.25 2.56 2.79
Debt to equity 1.92 2.30 2.33 2.56 2.79
(including operating
lease liability)
Debt to capital 0.65 0.69 0.69 0.72 0.74
Debt to capital 0.66 0.70 0.70 0.72 0.74
(including operating
lease liability)
Debt to assets 0.45 0.49 0.50 0.52 0.54
Debt to assets 0.47 0.51 0.51 0.52 0.54
(including operating
lease liability)
Financial leverage 4.10 4.52 4.55 4.90 5.15
Coverage Ratios
Interest coverage 8.78 7.78 12.40 10.09 9.02
Fixed charge coverage 7.41 6.45 9.47 10.09 9.02
Solvency ratio
6.00
5.00
—
17 18 19 20 21
, 20 , 20 , 20 , 20 , 20
1 1 1 1 1
c3 c3 c3 c3 c3
De De De De De
Coca-Cola Co., short-term (operating) activity ratios
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Turnover Ratios
Inventory 4.50 4.11 4.33 4.26 4.99
turnover
Receivables 11.01 10.50 9.38 9.38 9.66
turnover
Payables turnover 3.34 3.82 3.84 4.71 5.79
Working capital 14.90 7.12 - 22.58 3.79
turnover
Average No. Days
Average 81 89 84 86 73
inventory
processing period
Add: Average 33 35 39 39 38
receivable
collection period
Operating 114 124 123 125 111
cycle
Less: Average 109 96 95 77 63
payables payment
period
Cash conversion 5 28 28 48 48
cycle
Short term operating actvity, turnover ratio
25
20
15
10
0
Dec 31, 2017 Dec 31, 2018 Dec 31,2019 Dec 31,2020 Dec 31,2021
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net fixed asset turnover 3.90 3.06 3.44 3.84 4.32
A. Profitability Ratio
B. Debt Ratio
Interest coverage ratio = Earnings before interest but after tax/interest expences
Debt service coverage ratio = Free cash flow from operations/ Debt service requirement
Self financing ration = Free cash flow from operations after debt services/average capital
expenditure
Merchant, K. A., & Van der Stede, W. A. (2007). Management control systems: performance
Walsh, H., & Dowding, T. J. (2012). Sustainability and The Coca-Cola Company: The
Global Water Crisis and Coca-Cola's Business Case for Water Stewardship. International
Capital. https://ivypanda.com/essays/the-coca-cola-company-and-its-sources-of-capital/