RUNNING HEAD: COCA-COLA COMPANY FINANCIAL PERFOMANCE 1

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 COCA-COLA COMPANY FINANCIAL PERFOMANCE 2

Abstract

        Coca-Cola is among the largest beverage selling firm in globally. The company

performance analysis represents its financial standings. The performance can be explained by

calculating a variety of financial ratios which tell whether a company is doing well or not. The

paper analyzes the company’s financial ratio from 2016 to 2019. The essential financial ratio

would be discussed and interpreted to tell the financial performance of the company over the

four financial years. The data for analysis is obtained from Yahoo finance.

Introduction.

Coca-Cola Company was established in 1886, in the United States of America. The

Company headquarter is located in Atlanta, Georgia. Coca Cola Company is the world largest

manufacturer and distributor of non- alcoholic beverages. Coca-cola brands are known globally,

and most consumers prefer to take the Company’s product as opposed to others. It on first selling

brands like Fanta, Sprite and coke. Coca-cola brand is sold in all parts of the world, being the

most preferred soft drink manufacturer. The Company operate in an oligopolistic market

structure which is dominated by a few large distinct firms with a similar but differentiated

product. The major competitor of the Company is PepsiCo. To beat it, competitor, it applies the

competitive advantage strategy it has gained since its incorporation. Coca-cola allies ensure that

the utility level derived by it royal customer does not reduce. It also ensures it uses unique
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 3

distribution techniques of is bland to ensure the demand for their commodity remains high

throughout the year.

Coca Cola Company operates its business in all parts of the world. Coca-cola is the biggest soft

drink company in the world. The Company has the largest market share in the beverage

industry. 

It has a market capitalization of $ 102 billion. In the beverage industry, the Company control an

operating income of $75, which is 43.7% of the total market share.

Importance of financial ratios.

  The decision-making process is a vital way of ensuring the success of a business. The most

important decision should concentrate on the financial management of the company. A company

that has proper financial management is likely to make more profit. Financial ratio analysis

provides information to business owners and investors to predict if the business is a going

concern or not. Financial ratios help to interpret a financial statement. It tells how the business is

growing. A decrease in the financial ratio shows that the business is making a loss( Suhailand &

Nobonee,2020) . A declining trend would enable the top management to take appropriate action

to ensure the profitability trend rise again. 

The financial ratio helps investors to study the company’s financial performance before investing

with it. The confidence of the investor to trade with the company increases when the financial

ratio shows positive trends in financial management. 

The financial statement shows the firm’s revenue and expenses during a certain period. . It can

forecast the position of the company in today and in the future. The company debenture holders
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 4

want to know the company’s willingness to pay the debt. The investor is interested in the

company’s profitability trend to provide an insight into whether their initial investment would

yield a significant return. Lastly, the top management is interested in cost minimization method

applied by a company to realize profit maximization( Mariam et al ,2019). Without proper

financial ratio analysis, stakeholders of a company will lack important investment decision.

Coca-cola company financial ratio analysis

Table 1: Financial Data of Coca Cola Company

Item/Year 2019 2018 2017 2016

Current Assets 20,411,000 30,634,000 36,545,000 34,010,000

Current Liabilities 26,973,000 29,223,000 27,194,000 26,532,000

Inventories 3,379,000 2,766,000 2,655,000 2,675,000

Cash 11,175,000 15,964,000 20,675,000 22,201,000

Receivables 3,971,000 3,396,000 3,667,000 3,856,000

Total Assets 86,381,000 83,216,000 87,896,000 87,270,000

Total Liabilities 65,283,000 64,158,000 68,919,000 64,050,000

Total Equity 18,981,000 16,981,000 17,072,000 23,062,000

Sales 37,266,000 31,856,000 35,410,000 41,863,000

Cost of Goods Sold 14,619,000 11,770,000 13,256,000 16,465,000

EBIT 10,533,000 9,781,000 9,427,000 8,626,000

Interest 946,000 919,000 841,000 733,000

 COCA-COLA COMPANY FINANCIAL PERFOMANCE 5

Net Income 8,920,000 6,434,000 1,248,000 6,527,000

All figures in thousand US Dollar, removed from: Yahoo Finance.

1. Liquidity ratios of Coca Cola Company

Liquidity communicate the business trend in paying little borrowed money. A company is said

to be able to pay its short term debt if it can convert an asset to cash. 

Important coca-cola company liquidity ratios

Current ratio- It is also called working capital ratio. It is calculated by dividing the current

asset by current liabilities.

current asset 34010000

Current ratio = coca cola company 2016 current ratio =
current liabilites 26532000

1.28

36545000
The company’s 2017 current ratio = 1.34
27194000

30634000
2018 current ratio = 1.05
29223000

20411000
2019 current ratio = 0.76
26973000

2016 coca cola company quick ratio

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Liquid asset = current asset – inventories of the year. 34,010,000- 2675OOO= 31335000

Liquid liabilities = 26532000 since there is no bank overdraft

31335000
= 1.18
26532000

2017 quick ratio liquid asset is given by 36,545,000- 2,655,000 = 36,279,500, liquid asset is

36279500
27, 194,000 = 1.33
271940 oo

2018 coca cola company liquid ratio, liquid asset = 30,634,000- 2,766,000= 27868 000

27868000
Liquid liabilities =29,223,000 = 0.95
29223000

2019 coca cola liquid ratio. Liquid asset = 20,411,000 - 3,379,000 = 17032000

17032000
Liquid liabilities = 26,973,000 = 0.63
26973000

Quick ratio aims at using current assets to settle any due. Likewise, the quick ratio has raised

from 1.18 to 1.25 from 2016 to 2017. The ratios afterward decreased to 0.95 in 2018 and 0.63 in

2019 as a result of decline in liquid assets. Our company was able to pay its debt better in the

year 2016 and 2017. The ratio was more than one; however, in the year 2018 and 2019, the ratio

reduced to less than one. The company started experiencing a liquidity problem, and its going

concern was questionable.

Cash ratio -it indicates the ability of the firm to pay the current liabilities using the available

cash. It is calculated by diving cash available by the current liabilities. 

 COCA-COLA COMPANY FINANCIAL PERFOMANCE 7

Cash
2016 cash ratio, cash= 22,201,000, current liabilities = 26,532,000 cash ratio =
current liabilities

22201000
= 0.84
26532000

20675000
2017 cash ratio. = 0.76
27194000

15964000
2018 cash ratio. = 0.55
29223000

11175000
2019 coca cola cash ratio. = 0.41
26973000

Cash ratio require an investor to use the cash money to settle short loans. The data shows that firm

cash ratio has been decreasing from 0.84 to 0.4 1 in a four year period. Cash ratio is diminishing as

other ratios.

The company’s cash is declining within three years. It is an indication that the company in not able to

control its available inventory properly.

 COCA-COLA COMPANY FINANCIAL PERFOMANCE 8

Activity Ratios of coca-cola company .They  are also called operation ratios. They measure the

duration of time in which several accounts are converted to liquid cash. There is three primary

operation ratio that coca-cola can use to convert some account to liquidity. 

Inventory turnover – The ratio exposes the real-time used to manufacture, store and sell account

receivable. It is calculated by dividing, cost of sales by the average inventory. 

16465000
2016 inventory turnover, cost of goods sold = 16,465,000. Average stock =
2675000

2,675,000

6.16

Using the same formula, the inventory turnover of 2017, 2018 and 2019 would be 4.99, 4.26 and 4.33,

respectively.

The company inventory turnover in 2016 was 6.16 times. It declined later in the following years to

become 4.99 in 2017 and 4.26 in 2018. There was a small improvement to 4.33 times in 2019. The

reduction in the inventory turnover ratio shows that the Company commodities demand reduced

(Wilkinson, 2013). The company soft drink take long to expire. However, the company experienced lo

sales in its last three years.

 COCA-COLA COMPANY FINANCIAL PERFOMANCE 9

Account receivable turn over  

It is a financial ratio used to indicate the company’s ability to collect the debt from its

clients. It is calculated by dividing the net credit sales receivable by average receivable. 

net credit sales 41863000

Coca cola company 2016 account receivable = = = 10.86
average receivable 3856000

Using the same formula, the account receivable turnover of Coca-Cola Company of the year 2017, 2018

and 2019 would be 9.66, 9.38 and 9.38 respectively.

Debtors turnover is the duration of time required to demand the debt from the clients. The company

trade turnover was 9.38 in 2019 while in 2018 it was 10.86; the ratio decreased slightly. It has an

excellent receivable turnover ratio that is ranging from 9 to 10(Allnuaimi et al. 2020) from the analysis,

the firm is doing well, which shows good cash management.

Total asset turnover-It measure the ability of the firm to get revenue from the usage and sales of assets.

It shows how a firm utilizes the assets to get income. The higher the ratio, the better the situation. A

higher ratio shows that the firm can invest in a more risky asset which has a higher return. It is

calculated by diving total net sales by total asset available.

net sales 41863000

Coca cola company 2016 total asset turnover. = = 0.48
total asset 87270000

By using the same formulas, the total asset turnover of the coca-cola company in the next three

years would be 0.40, 0.38 and 0.43, respectively. The total asset turnover of Coca Cola

Company started at a higher level in 2016. In this year, the company was able to invest in asset
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 10

sales. The following year, the ratio decreased to o.40 and a further decrease in 2018 to 0.38. A

decrease indicates that the company is unable to utilize its asset to get enough sales from the

asset. The decrease can also be linked to a decrease in inventory turnover. However, the

company improved its asset turn over in the year 2019. The company was able to invest in its

asset.

The debt ratio of Coca Cola Company

It is a forecast of the financial stability of a firm. It is used to show the amount of asset that was

purchased by credit. A lower debt ratio is better for a firm because it shows it has less debenture

to settle down.

total liabilties
Debt ratio is calculated by dividing total liabilities by total asset. X 100%
totol assets

64050000
2016 debt ratio X 100% = 73%
87270000

The debt ratio of the coca cola company in 2017 to 2018 is 78%, 77%, and 76% respectively.

There is an increase in the debt ratio from 73% to 78% between 2016 and 2017. The increase

indicates that the company is using more debentures to acquire the asset. If the trend continues,

the company would have gone to receivership. However, the company recovered from the trend

because the ratio falls to 77% in 2019 and finally 76% in the year 2019( Savevych 2019). The

company used the debt finance ratio to increase its cash reserve. Credit purchase of the asset

reduced, enabling the company to make more profit. 

Times interest earned ratios - It is calculated to show if the firm can pay the interest on

debenture. It is used by creditors and debtors to predict the capacity of the firm to pay the long
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 11

term loans interest(Jacob ,2015). If the company is not able to pay debenture interest, it is likely

to be facing severe financial problems. It is calculated by dividing Debit finance of the entity by

the interest rate. 

erning before interest ∧taxes

Time interest earned ratio = = the 2016 ratio would be
interest

8626000
= 11.7. Using the same formula, time interest earned ratio for 2017 to 2019 would be
733000

11.21, 10.64 and 11.13 respectively.

Times interest coverage ratio capable of predicting a business that can pay debenture interest.

The company witnessed a decline in coverage ratio from 11.7 in 2016 to 10.64 in 2018, which means

they had problems in settling interest due to decreased in sales (Chanar, 2018). However, in 2019 they

were luckier, as the coverage ratio increased to 11.43. The debt ratio analysis of our Company shows

that the company uses debt to finance its operation, leading to a financial crisis.

Profitability ratios of Coca Cola Company

They tell whether a business can make revenue . An entity can make more revenue by increasing its sale

at a particular time. If more sales are made, more profit is made.

Return on equity ratio- a ratio that explains how a company top management utilizes shareholders'

funds to expand the business. It is calculated by

The return on equity ratio is arrived at by dividing overall revenue by total capital Coca -cola

6527000
company2016 return on capital ratio would be x 100% to get 28%.
23062000
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 12

The company’s 2017-2019 return on equity ratio calculated using the formula would be 7%,

38%, and 47%, respectively.

2016 return on capital percentage is large, which means that the company invested well-using

capital provided to become more profitable. In 2017, the ratio dropped to 7%, indicating the

company was misusing shareholders’ funds. However, there was a massive increase in the ratio

between 2018 and 2019. The increment trend is consistent, and the company is a good investor.

Return on Asset ratio        

It determines the final way of the firm to generate income using the available assets.it is

obtained by dividing overall income by the total assets

net income 6527000

Coca cola company return on capital can be calculated as follows.
total assets 87270000

X100 =7%

Using the same formula, the return on asset of the Coca-Cola company in 2017-2019 is 1%, 8%,

and 10%.

Analysis of the company 2016 return on asset indicates that the firm had a relatively higher

return on capital ratio.  

The company was able to generate more income by using its asset. However, the ratio decreased

to 1% in 2017, showing that the company could not generate income using the available

resources (Ukessays, 2018). The company recorded an increase in the year 2018, and in 2019

Coca-Cola realized its mistake and corrected it to increase income coming from the asset.
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 13

Profit margin ratios show the profit made from the sale of each commodity sold. The gross

profit ratio is given by dividing net income with sales revenues. 

6527000
Coca cola company 2016 gross profit is calculated as follow. X100% = 16%
41863000

From the company gross profit data, it is clear that the company profit margin in 2016 was

higher than the other years. The company made a good profit in the year 2016. In 2017 the

margin dropped to 4%. There was a decrease in demand for the Coca-Cola

product( Dexem,2020) .Later the demand increased, and in the year 2018 and 2019, the company

made a significant number of sales. 

Conclusion

Coca Cola Company is one of the largest beverage selling company in the world. The company

sales are higher in America, where the firm was established. The company makes a significant

amount of profit because it has already penetrated all the world markets. Analysis of its financial

performance indicates that it is doing well in the market. The company exists in an oligopoly

market where there are few competitors. Its main competitor is Pepsi, although it has been able

to outperform its competitors. Being the market leader, it has established fair prices for its

product. The products are readily available in the market. Selling its product at a lower price is

made possible by analyzing different financial ratios that provide information on its profitability.

The company's financial analysis for the four years shows that it is performing well. The

company is a going concern with a high number of customers in all parts of the world. 
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 14

Reference

(Suhail & Nobanee, 2020)

Al Dhaheri, Ahmed and Nobanee, Haitham, Financial Stability and Sustainable Finance: A Mini-

Review (2020). Available at SSRN: https://ssrn.com/abstract=3538328 or

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Al Muhairi, Mariam and Al Muhairi, Haitham, Sustainable Financial Management (2019).

Available at SSRN: https://ssrn.com/abstract=3472417 or

http://dx.doi.org/10.2139/ssrn.3472417
 COCA-COLA COMPANY FINANCIAL PERFOMANCE 15

Alnuaimi, Suhail and Nobanee, Haitham, Working Capital Management and Sustainability: A

Mini-Review (2020). Available at SSRN: https://ssrn.com/abstract=3539427 or

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Data collected From Yahoo Finance

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https://www.slideshare.net/AustinJacobs1/cocacola-financial-analysis-49481815

Ramakrishnan, S. (2017). Coca-Cola forecasts drop in 2017 profit amid refranchising. Retrieved

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