Running head: COKE ANALYSIS
Introduction
The purpose of this analysis is to identify the financial performance of The Coca-Cola
Company from 2001 to 2003 using common-size statements as well as ratios calculation and
interpretation. Financial ratios offer business owners and executives a measurement to evaluate
their progress against fixed internal goals, a sector of competition, or the overall industry. These
ratios are also a precursor to recognize early trends. Externally of a firm, the ratios are used by
bankers, investors, and business analysts to evaluate a company’s financial strength.
Analysis
Common-Size Statements
A helpful starting point for a financial analysis is a set of common-size financial
statements. A common-size income statement (Table 1) expresses all income statement items as
a percentage of sales, whereas a common-size balance sheet (Table 2) expresses all balance sheet
items as a percentage of total assets. These statements allow us to develop a preliminary
understanding of trends in revenue mix, cost structure, and asset holdings, along with how a
business is funded (Kieso, Weygandt, and Warfield, 2013).
Table 1.
Common-Size Income Statement
($ in millions)
12/2001
%
12/2002
%
12/2003
%
Net operating revenues
$17,545
100.00%
$19,564
100.00%
$21,044
100.00%
Cost of goods sold
$6,044
34.45%
$7,105
36.32%
$7,762
36.88%
Gross profit
$11,501
65.55%
$12,459
63.68%
$13,282
63.12%
Selling, general and
administrative expenses
$6,149
35.05%
$7,001
35.79%
$7,488
35.58%
Other operating charges
$ –
0.00%
$ –
0.00%
$573
2.72%
Operating Income
$5,352
30.50%
$5,458
27.90%
$5,221
24.81%
COKE ANALYSIS
Interest income
$325
1.85%
$209
1.07%
$176
0.84%
Interest expense
$289
1.65%
$199
1.02%
$178
0.85%
Equity income
$152
0.87%
$384
1.96%
$406
1.93%
Other income
$39
0.22%
$(353)
-1.80%
$(138)
-0.66%
Gains on issuances of stock
$91
0.52%
$ –
0.00%
$8
0.04%
Income before income
taxes and effect of
accounting change
$5,670
32.32%
$5,499
28.11%
$5,495
26.11%
Income taxes
$1,691
9.64%
$1,523
7.78%
$1,148
5.46%
Cumulative effect of
accounting change
$10
0.06%
$926
4.73%
$ –
0.00%
Net income
$3,969
22.62%
$3,050
15.59%
$4,347
20.66%
Table 2.
Common-Size Balance Sheet
($ in millions)
12/2002
%
12/2003
%
ASSETS
Current assets
Cash and cash equivalents
$2,260
9.26%
$3,362
12.30%
Marketable securities
$85
0.35%
$120
0.44%
Trade accounts receivable
$2,097
8.59%
$2,091
7.65%
Inventories
$1,294
5.30%
$1,252
Prepaid expenses and other assets
$1,616
6.62%
$1,571
Total current assets
$7,352
$8,396
Equity method investments
$4,737
$5,224
19.11%
Cost method investments
1.04%
$314
1.15%
Other assets
$2,694
$3,322
Total investments and other assets
$7,685
$8,860
32.40%
Gross property, plant and equipment
$9,001
$9,622
Net property, plant and equipment
$5,911
$6,097
22.30%
Trademarks and indefinite lives
$1,724
7.06%
$1,979
Goodwill
3.59%
$1,029
3.76%
Other intangible assets
3.52%
$981
3.59%
69.29%
LIABILITIES
Accounts payable and accrued expenses
$3,692
$4,058
14.84%
