Question

Identify two methods of financing that Coca-Cola currently uses. How does Coca-Cola manageits capital and cash flow? Do you think Coca-Cola's methods of financing and of managing working capital and cash flow are appropriate, taking into consideration its organizational structure, exposure to varying tax laws and access to major multinational credit agencies?

Answer 1

Coca‑Cola HBC’s funding strategy is built around four key principles.

The Group’s funding strategy in the debt capital markets is built around the following principles:

• To raise financing via our wholly owned Dutch financing subsidiary Coca‑Cola HBC Finance B.V., except in the case of subsidiaries with joint control, or countries where certain legal or tax restrictions or advantages apply, in which case financing at lower levels in the organisation may be considered
• To maintain our presence and profile in the international capital markets and where possible to broaden our investor base
• To maintain a well-balanced redemption profile
• To use our European Medium Term Note programme as well as our Global Commercial Paper programme as the main basis for our financing

Financial risk management

The Group activities expose it to a variety of financial risks including currency risk, interest rate risk, credit risk and liquidity risk. The overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance.

We regularly use derivative products like forwards, options and futures but these are solely used for the purpose of hedging underlying exposures to foreign currency exchange rate risk, interest rate risk and commodities’ pricing volatility. None of these financial instruments are leveraged, used for trading purposes or taken as speculative positions.

Period Ending:	2019 31/12	2019 27/09	2019 28/06	2019 29/03
Period Length:	12 Months	9 Months	6 Months	3 Months
Net Income/Starting Line	8985	6920	4331	1703
Cash From Operating Activities	10471	7771	4501	788
Depreciation/Depletion 1365 965 602 275 Amortization - - - - Deferred Taxes -280 -326 -163 110 Non-Cash Items 35 91 391 178 Cash Receipts - - - - Cash Payments - - - - Cash Taxes Paid 2126 - - - Cash Interest Paid 921 - - - Changes in Working Capital 366 121 -660 -1478
Cash From Investing Activities	-3976	-3901	-5362	-4179
Capital Expenditures -2054 -1206 -767 -364 Other Investing Cash Flow Items, Total -1922 -2695 -4595 -3815
Cash From Financing Activities	-9004	-5337	-1432	141
Financing Cash Flow Items -227 -33 124 -115 Total Cash Dividends Paid -6845 -3419 -1709 - Issuance (Retirement) of Stock, Net -91 233 -87 -207 Issuance (Retirement) of Debt, Net -1841 -2118 240 463
Foreign Exchange Effects	-72	-75	2	56
Net Change in Cash	-2581	-1542	-2291	-3194