Team 4

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Financial Analysis for The Coca-Cola Company

Team # 4 Accounting 500 Yeping Huang Paul Kazlauskas Jeon Tae-Yeog
Highlights
The Coca Cola Company is the largest soft drink beverage company in the world. This presentation provides an overview of Cokes financial performance for the years 1997 thru 2000.
Revenue Expenses Assets Liabilities Owners Equity Cash Flow Stock Performance
So sit down, relax, open a frosty cold bottle of CocaCola and enjoy our presentation.
Income Statement
(in millions)
1997 $18,868 $6,015 $12,853 $7,852 $1,054 $1,926 $4,129
1998 $18,813 $5,562 $13,251 $8,284 $231 $1,665 $3,533
1999 $19,805 $6,009 $13,796 $9,814 $(163) $1,388 $2,431
2000 $20,458 $6,204 $14,254 $10,563 $(292) $1,222 $2,177
Net Sales Cost of Goods Sold Gross Margin Operating Expenses Other Income and Expenses Income Tax Net Income
Earnings Analysis
Net Revenues
(in millions)
Net Income
Earnings /Share
$20,458
$4,129 $3,533
$1.67 $1.43
$19,805
$2,431
$18,868
$0.99
$2,177
$0.88
$18,813
'97
'98
'99
'00
'97
'98
'99
'00
'97
'98
'99
'00
Revenue Analysis
1997 Revenues
Operations 20%
1998 Revenues
Operations 21%
Other 4% Sales 76%
Other 1%
Sales 78%
1999 Revenues
2000 Revenues
Operations 17% Other 0% Sales 83% Sales 85%
Operations 15% Other 0%
Income Trend Analysis

120%
100%
80%
60%
40%
20%
0%
Net Sales
Income from Operations 1997 1998
Other Income
Net Income
1999
2000
Income As % of Sales
100%
80%
60%
40%
20%
0%
-20%
1997 Net Sales
1998 Income from Operations
1999 Other Income
2000 Net Income
Expense Analysis
Income tax expense 12% Cost of goods sold 38%
Operating expenses 50%
1997
1998
Other expenses 1%
Income tax expense 7% Other expenses 2%
Cost of goods sold 34%
1999
2000
Expense Trend Analysis

140%
120%
100%
80%
60%
40%
20%
0%
Cost of Goods Sold 1997
Operating Expenses 1998 1999 2000
Income Tax
Expenses As % of Sales
100%
80%
60%
40%
20%
0%
-20%
1997 Net Sales Cost of Goods Sold
1998
1999 Other Expenses
2000 Income Tax
Operating Expenses
Income Statement Summary

During the Last 4 Years
Net Sales have increased by 8%
Cost of Goods Sold has increased by 3% Operating Expenses have increased by 35% Net Income has decreased by 47%
Based on these trends it appears that the Coca-Cola Company needs to do a better job of controlling its cost of operations
Balance Sheet Analysis
Trend Analysis Common-size Statement Analysis Current Ratio Debt Ratio Acid-Test Ratio
Trend Analysis
Definition: Compares amounts from a more recent year to a base year. The analysis measures the percentage of change from the base year.
Trend Analysis: Assets

160% 140% 120% 100% 80% 60% 40% 20% 0%
Current assets
Property, plant and equipment, net
Other assets
TOTAL Assets
12/31/1997
12/31/1998
12/31/1999
12/31/2000
Trend Analysis: Liabilities

140% 120% 100% 80% 60% 40% 20% 0%
Current
12/31/1997 12/31/1998 12/31/1999
Long-term
12/31/2000
Trend Analysis: SE
180% 160% 140% 120% 100% 80% 60% 40% 20% 0% Contributed capital Retained earnings Treasury stock and other SE Total Liabilities & Stockholders' Equity 12/31/1997 12/31/1998 12/31/1999 12/31/2000
Trend Analysis Conclusion
Coca Cola Company is growing, since both total assets & retained earnings are increasing from 12/31/97 to 12/31/00. For Coca Cola, assets increased at a greater rate - 23% from 12/31/97-12/31/00. The company is relying less on debt to finance assets. Retained earnings is increasing 19% from 12/31/97 - 12/31/00. The company is earning more net income.
Common-Size Statement Analysis
Definition: The common-size balance sheet compares all the amounts to total assets. The analysis measures each item as a percentage of total assets.
Common-size Balance Sheet: Assets

12/31/97
Current 35%
Current 33%
12/31/98
Other 48%
Other 43% P/P, equipment & net 22%
P/P, equipment & net 19%
12/31/99
Current 30% Other 48%
12/31/00
Current 32%
Other 50%
Common-size Balance Sheet: Liabilities & SE

12/31/97
Current liabilities 44%
Stockholders' Equity 44% Current liabilities 45%
12/31/98
Stockholders' Equity 43% Long-term liabilities 13%

Long-term liabilities 11%
12/31/99
12/31/00
Stockholders' Equity 44%
Stockholders' Equity 45%
Common-Size Statement Analysis Conclusion
Coca Cola is making profit. Coca Colas assets are most heavily financed with current liabilities.
Current Ratio Analysis

Current Ratio = Current Assets / Current Liabilities It measures a companys ability to pay current debt. The company is not able to pay all current debts at this time.
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1997 1998 1999 2000 Current Ratio
Debt Ratio Analysis

Debt Ratio = Total Liabilities / Total Assets It measures the portion of assets financed by debt. Over 50% assets are financed by debts.
65% 55% 45% 35% 25% 15% 5% 1997 1998 1999 2000 Debt Ratio
Acid-Test Ratio Analysis

Acid-Test Ratio = Quick Assets / Current Liabilities It compares assets that can be quickly liquidated to current liabilities. Coca-Colas Quick Assets is not desirable.
50% 40% 30% 20% 10% 0% 1997 1998 1999 2000 Acid-Test Ratio
Stock Performance
Liabilities & Stockholders Equity Stockholders Equity
$4,450
Liabilities 17%
$3,242
$2,193
Stockhold er's Equity 83%
'93
'94
'95
Statement Of Cash Flow

(In millions)
1997 4,129
1998 3,533
1999 2,431
2000 2,177
Net Income
Net cash provided by operations

Net cash used in investing activities Issuances of stock Dividends Net cash used in financing activities Net change in cash equivalents Balance at end of year
4,033
(500) 150 (1,387) (3,095) 304 $1,737
3,433
(2,161) 302 (1,480) (1,333) (89) $1,648
3,883
(3,421) 168 (1,580) (471) (37) $1,611
3,585
(1,165) 331 (1,685) (2,072) 208 $1,819
Trends Of Cash Flow

4,500
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500

0 1997 1998 1999 2000
OPERATING ACTIVITY INVESTING ACTIVITY FINANCING ACTIVITY
This diagram indicates that operating activity is always high. That means high profitability
Activities Ratio
(Recent Year)
CENTESIMAL SCALE OPERATING ACTIVITY FINANCING ACTIVITY 30% 53% INVESTING ACTIVITY
17%
GOOD SIGN ! GOOD SMELL !
Ratio Analysis
1998
Inventory Turnover Days Sales in Receivable Times-InterestEarned Ratio 6.02 31.62
.
1999
6.11 31.48
2000
5.79 31.28
Industry Average
7.07 31.86
19.77
12.33
8.60
14.15
Price/Earnings Ratio Dividend Yield
47 59 69 32 0.88% 1.09% 1.11%
Comparison
Coca Cola Income from Operation
2000 1999 1998 1997 $3,691 3,982 4,967 5,001 $17,641
Pepsi Co
6,000
Income from operation
$3,225 2,818 2,584 2,662 $11,289
5,000
4,000 3,000 2,000
Total Stock Price

2000 1999 1998 1997
1,000
$60.94 58.25 67.00 66.69 $63.22
$49.56 35.25 40.88 36.25 $40.49
'97
'98
'99
'00
Coca Cola Pepsi Co Coca Cola is always ahead of Pepsi Co ,but decreasing.
Average
Stock Performance
KO (blue) COCA COLA PEP (red) PEPSI CO DJI (green) DOW JONES INDEX
Conclusion
The Good
Net Sales have increased by 8% Dividend Yield has increased by .32 %
Book Value per share has increased by $0.45
Conclusion
The Bad
Operating Expenses have increased by 35%
Net Income has decreased by 47%
Earnings Per Share has decreased by $0.81

ROR on Net Sales has decreased by 8%
ROR on Total Assets has decrease by 8%

P/E Ratio has increased by about 50%
Conclusion
The Decision
The Coca-Cola Companys financial performance has been poor for the past 4 years. Sales remains very strong, however the rate of sales growth has been unspectacular.
With a poor operating performance and a stock that is trading at 69 times earnings we feel that it would be unwise to purchase the stock at this time. If you own the stock it would be worth keeping since the dividend yield has increased while the stock price has remained fairly constant.

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Financial Analysis for The Coca-Cola Company

1997 $18,868 $6,015 $12,853 $7,852 $1,054 $1,926 $4,129

1998 $18,813 $5,562 $13,251 $8,284 $231 $1,665 $3,533

1999 $19,805 $6,009 $13,796 $9,814 $(163) $1,388 $2,431

2000 $20,458 $6,204 $14,254 $10,563 $(292) $1,222 $2,177

Other 4% Sales 76%

Operations 17% Other 0% Sales 83% Sales 85%

Operations 15% Other 0%

Income Trend Analysis

Income from Operations 1997 1998

1997 Net Sales

1998 Income from Operations

1999 Other Income

2000 Net Income

Income tax expense 11% Cost of goods sold 37%

Operating expenses 50%

Operating expenses 52%

Income tax expense 8% Cost of goods sold 35%

Income tax expense 7% Other expenses 2%

Cost of goods sold 34%

Operating expenses 56%

Operating expenses 57%

Expense Trend Analysis

Cost of Goods Sold 1997

Operating Expenses 1998 1999 2000

1997 Net Sales Cost of Goods Sold

1999 Other Expenses

2000 Income Tax

Income Statement Summary

Balance Sheet Analysis

Trend Analysis: Assets

Property, plant and equipment, net

Trend Analysis: Liabilities

Trend Analysis Conclusion

Common-Size Statement Analysis

Common-size Balance Sheet: Assets

Other 43% P/P, equipment & net 22%

P/P, equipment & net 19%

P/P, equipment & net 20%

P/P, equipment & net 20%

Common-size Balance Sheet: Liabilities & SE

Stockholders' Equity 43% Long-term liabilities 13%

Stockholders' Equity 44%

Current liabilities 46%

Stockholders' Equity 45%

Current liabilities 44%

Long-term liabilities 10%

Long-term liabilities 11%

Common-Size Statement Analysis Conclusion

Current Ratio Analysis

Debt Ratio Analysis

Acid-Test Ratio Analysis

Stockhold er's Equity 83%

Statement Of Cash Flow

Net cash provided by operations

Trends Of Cash Flow

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500

OPERATING ACTIVITY INVESTING ACTIVITY FINANCING ACTIVITY