Question

analyze the coca cola company. talk about the ratios and explain if each is good, bad or ugly. would you invest or not and why?

Answer 1

The Coca-Cola Company, American corporation founded in 1892 .The Coca-Cola Company is a beverage retailer, manufacturer and marketer of non-alcoholic beverage concentrates and syrups.

Now, we analyze the ratios of coca cola company.

Annual Data                          31-12-2018                  31-12-2017                  31-12-2016

Current Ratio                              1.0483                       1.343                           1.2818         

Long term Debt/ Capital                0.571                      0.6217                          0.5611         

Debt/Equity Ratio                         2.2854                      2.51                            1.9685           

Net Profit Margin                      20.1971                     3.5244                           15.5913       

Asset Turnover                           0.3828                     0.4029                            0.4797        

Inventory Turnover Ratio             4.2552                    4.9925                              6.1551       

Receivable Turnover                  9.3804                   9.6564                             10.8566      

Return on Equity                         35.2975                   6.2286                              28.2084     

Return on asset                            8.0838                    1.3448                             7.5054        

Return on Investment                 15.1434                   2.3565                         12.3809          

Book Value per Share    4.4653                   4.4557                         5.4151

Current Ratio: Current Ratio = Current assets/ Current Liabilities

Generally, current ratio shows the ability of the business to generate cash to meet its short-term obligations. A decline in this ratio can be attributable to an increase in short-term debt, a decrease in current assets, or a combination of both.

In the above table, Company’s Current ratio is 1.048 in 2018 as compared to 1.343 in 2017, which represents that it is not good for Company’s Financial Position.

Long term Debt/ Capital: This ratio is calculated by dividing the long term debt with the total capital available of a company.

In the above table, Company’s Long term Debt/ Capital is 0.571 in 2018 as compared to 0.621 in 2017, which represents that it is good for Company’s Financial Position, because company had paid its debt.

Debt/Equity Ratio: The debt-to-equity (D/E) ratio is calculated by dividing a company's total liabilities by its shareholder equity.

In the above table, Company’s Debt/ Equity Ratio is 2.281 in 2018 as compared to 2.51 in 2017, which represents that it is good for Company’s Financial Position, because company had paid its debt or liabilities which increases the equity.

Net Profit Margin: The net profit margin is equal to how much net income or profit is generated as a percentage of revenue.

In the above table, Net Profit Margin Ratio is 20.197 in 2018 as compared to 3.524 in 2017. There is a huge increase in Profit margin, which represents that it is good for Company’s Financial Position.

Asset Turnover: The asset turnover ratio is an efficiency ratio that measures a company's ability to generate sales from its assets by comparing net sales with average total assets.

In the above table, Asset turnover Ratio is 0.3828 in 2018 as compared to 0.4029 in 2017, which represents that it is not good for Company’s Financial Position as it decreases the company’s ability to generate sale from its assets.

Return on Equity (ROE): The return on equity (ROE) is a measure of the profitability of a business in relation to the equity, also known as net assets or assets minus liabilities. ROE is a measure of how well a company uses investments to generate earnings growth.

In the above table, Return on Equity is 35.297 in 2018 as compared to 6.228 in 2017, which represents that it is good for Company as higher the ROE higher the profit for the company.

From the above Ratio analysis it seems that coca cola company is doing very well in its industry and there is also huge returns for stakeholders, so we should invest in it .