Financial Analysis of Coca-Cola Corporation for Using Internet Data Downloads in a Hyperlinked Power Point Presentation

Transcription

1 Financial Analysis of Coca-Cola Corporation for Using Internet Data Downloads in a Hyperlinked Power Point Presentation John C. Gardner, KPMG Chair in Accounting, University of New Orleans Carl B. McGowan, Jr., Faculty Distinguished Professor, Norfolk State University Susan E. Moeller, Professor of Finance, Eastern Michigan University The objective of this workshop is to demonstrate a hyperlinked power point presentation that can be used in the classroom to implement the entire process of collecting and analyzing the data for financial ratio analysis for KO. In terms of AACSB course and learning objectives, this project demonstrates how to collect data, enter data into a spreadsheet, analyze the data, write a paper about the process, and create and present a power point presentation. The workshop will provide access to an electronic copy of a paper of the financial analysis of Coca-Cola titled Financial Ratio of Coca- Cola and an electronic copy of the Power Point presentation. Computer files of both the paper, the Excel spreadsheets, and the Power Point presentation will be made available to attendees. Recent history of stock market crises are exacerbated by investors not understanding what has been happening to companies from a lack of understanding of financial ratio analysis. Stock markets are efficient in that they incorporate, and even anticipate, information about companies based on financial accounting data provided by companies. However, market efficiency results from extensive analysis performed by financial analysts. Much of this financial analysis is based on the analysis of financial information provided by companies and analyzed using financial ratio analysis. The goal of this workshop is to provide a step-by-step, hyperlinked demonstration of how to download data from EDGAR and other Internet sources, transfer the data into a spreadsheet, and conduct a financial ratio analysis of Coca-Cola for presentation in the classroom. The presentation shows how to find the ticker symbol for Coca-Cola (KO) and use the ticker symbol to access Form 10-K data from EDGAR. EDGAR stands for Electronic Data Gathering, Analysis, and Retrieval System which is the data base system provided by the SEC (Securities and Exchange Commission) for the disclosure of financial information required by US law. The use of the micro-computer and the internet has increased dramatically over the past thirty years. The use of micro-computers for pedagogical purposes has expanded from spreadsheet analysis and transparency master creation to the use of real time internet access that can be used to find data on the internet, download the data into spread sheets, and analyze the data. Instead of transparency masters, instructors can use micro-computer generated Power Point presentation slides for projection in the class room. Real time access to the internet which can be projected in the classroom now exists and can be used to demonstrate the data collection process. The steps needed to perform a financial ratio analysis are: Collect ticker data from Yahoo Finance, Collect financial data from the EDGAR Online Database, Download financial statements to spreadsheet(s), Consolidate the input data into a single spreadsheet, Collect stock prices from Yahoo! Finance, and Compute financial ratios. The five categories of financial ratios that will be used in the financial analysis of Coca-Cola are: Liquidity ratios,

2 Asset management ratios, Financial leverage ratios, Profitability ratios, and Market based ratios. The financial statements to be retrieved from EDGAR are the Consolidated Statement of Income, Consolidated Balance Sheets, and Consolidated Statement of Cash Flows. The ticker symbol for Coca-Cola is retrieved from Yahoo Finance, by entering the URL of Yahoo! Finance: which takes the analyst to the Yahoo! Finance homepage. URL stands for Uniform Resource Locator and is the unique location for every web site. Enter the name Coca-Cola in the Get Quotes box to retrieve the ticker symbols. The ticker symbol for Coca-Cola is KO. The URL for EDGAR is which takes the analyst to the EDGAR homepage. Click on Search for Company Filings to begin the download process. Click on Company or fund name, ticker symbol, CIK (Central Index Key), file number, state, country, or SIC (Standard Industrial Classification) next. On the next page, enter the ticker symbol for the company, such as KO for Coca-Cola. This provides all forms filed with the SEC by the company. In the Filter Results text box, enter 10-K to limit the list to annual reports Form 10-K. To collect data for ten years of analysis, ten years of data must be downloaded. The analyst can obtain three years of data for the Consolidate Income Statement and the Consolidate Statement of Cash Flow and two years of data for the Consolidated Balance Sheet from each Form 10-K so alternating years must be downloaded. Click on the appropriate year for the Form 10-K to download the annual filing for that year. This will download the entire Form 10-K document. Click on the Table of Contents key. Click on Item 8 Consolidate Financial Statements and Supplementary Data. The analysts will download the Consolidated Statement of Income, the Consolidated Balance Sheet, and the Consolidated Statement of Cash Flows for every other year. The data retrieved from the Consolidated Statement of Income is Sales, Costs of Goods Sold, Operating Expenses, EBIT, Interest Expense, and Net Income. The data retrieved from the Consolidated Balance Sheet is Accounts Receivable, Inventory, Current Assets, Depreciation, Net Fixed Assets, Accounts Payable, Current Liabilities, Long Term Debt, Retained Earnings, Total Owners Equity, Total Liabilities and Owners Equity and Shares Outstanding. The data retrieved from the Consolidated Statement of Cash Flows is Depreciation and Dividends. The data retrieved is copied to a single spreadsheet and placed in rows for each of the ten years. Stock price at the end of each year is retrieved from Yahoo! Finance. The analyst goes to Yahoo! Finance homepage and enters the ticker symbol, e. g. KO. The Yahoo! Finance page for KO will come up and the analyst clicks on Historical Prices. Enter the Start Date: and the End Date: for the ten year time period for monthly data. Click Get Prices. At the bottom of the screen, click on Download to Spreadsheet. Select the last trading day for each year and delete the remaining data. The working spreadsheet has the data entered for the Income Statement, the Balance Sheet and the Statement of Cash Flows from top to bottom. Enter formulas for each ratio in Column B and drag and click the formula across the spreadsheet. Repeat the process for each financial ratio. At this point, the analyst can use the ratios for trend analysis.

3 Financial Analysis of Coca-Cola Corporation for Using Internet Data Downloads in a Hyperlinked Power Point Presentation Financial Statements There are two constructed financial statements and two derived financial statements. The Balance Sheet and Income Statement are constructed from financial information. The Balance Sheet is a cross sectional representation of the company at a point in time and is a stock concept. That is, the Balance Sheet represents the total of all the transactions that have occurred in the company over time. The Income Statement reports what happened to the company in the latest reporting period. It is a flow concept. The Statement of Retained Earnings and the Statement of Cash Flows are derived from the Balance Sheet and Income Statement. The Statement of Retained Earnings links the Income Statement and the Balance Sheet and shows the increase in retained earnings each reporting period. The Statement of Cash Flows reports how the company allocated resources and how the company financed resources. Accounting information is classified according to the uses of the information. The broadest set of accounting information is Managerial Accounting Information. Managerial Accounting Information is comprised of all the accounting information available within the corporation that is used by corporate decision-makers. Financial Accounting Information is a subset of Managerial Accounting Information and is used for reporting purposes to outside fund providers: banks, debt holders, and stock investors. Tax Accounting Information is used to construct tax returns for governments. Benchmarking Benchmarking can be done for the corporation over time or within an industry. A financial decision maker within the corporation can view financial ratios over time to determine a trend. Generally, financial ratios deteriorate over time prior to a collapse of the firm. Industry group analysis is done to determine how the firm is performing relative to other similar firms. Industry groups are determined by the Standard Industrial Classification (SIC). There are ten available one digit SIC and SIC has as many as four digits. Sidebar A contains ten SIC and definitions. Financial ratios are compared to the industry median. Companies within an industry (SIC) are ranked on a ratio from high to low. As an industry matures, many firms go out of existence. In 1900, there were over 500 automobile manufacturing companies in America alone. Now, six car companies make 95% of cars worldwide. All of the other car companies were acquired or merged or went bankrupt. Firms that continue to exist tend to have similar optimal financial structures because they have similar operating environments. Thus, average can be interpreted as optimal. Firms with ROI ratios that are too high are copied until their advantage is reduced to zero by competition. Firms with ROI ratios that are too low are acquired or go bankrupt. Thus, survivor firms have similar financial structures. Financial Ratio Analysis This chapter will conduct a financial ratio analysis to assess the historical performance of Coca-Cola. There are five categories of financial ratios: liquidity ratios, asset management ratios, financial leverage ratios, profitability ratios, and market based ratios. Additionally, the ratio analysis allows us to look at a company and assess how the company is performing in terms of continued profitability. Using data from financial statements, we compare the companies 1

4 performance. The power point slides that are attached show in detail how to locate the information needed to conduct this analysis. Liquidity ratios measure the firm s ability to meet short term obligations. These ratios measure the firm s ability to continue to stay in business and to ensure that the firm has enough cash and short term assets, such as accounts receivables and inventories, to meet short term financial obligations, such as accounts payables and notes payables. The current ratio is a liquidity ratio that shows the relationship between short term financial assets and short term financial liabilities. The current ratio is a going concern measure and shows how many dollars of short-term assets a company has for each dollar of short term obligations, assuming that the company continues to operate normally. That is, the company continues to convert labor, raw materials, and fixed assets to inventory, which is sold for accounts receivable, and later converted to cash after which the process begins again. The quick ratio measures the firm s liquidity assuming that the inventory will not be included. The quick ratio is a distress ratio and measures the number of dollars of short term monetary assets (denominated in a fixed number of currency units) held by the firm for each dollar of short term obligations owed by the company. Both formulas for each ratio are shown below. In examining both companies it is noted that in 2009 Coca Cola had the highest current ratio and quick ratio at and 1.108, respectively; the averages for the two ratios are and Current Assets Current Ratio = Figure 1 Current Liabilities Current Assets Inventories Quick Ratio = Figure 2 Current Liabilities 2

5 Table 1 Coca-Cola Liquidity Ratios AVERAGE Current Ratio Quick Ratio

6 4

7 Asset management ratios measure the efficiency of the firm in the use of assets. Excess assets increase the cost of funds which reduces profitability. If asset levels are too low, sales opportunities may be lost which reduces profitability. Asset management ratios are days sales outstanding, inventory turnover, net fixed assets turnover, and total assets turnover. The days sale outstanding ratio is the average number of days needed to collect accounts receivable. Inventory turnover shows how many dollars of sales the company generates for each dollar of inventory which measures sales efficiency. Net fixed assets turnover is the number of sales dollars for each dollar of inventory. Total asset turnover is the number of dollars of sales generated for each dollar of total assets and measures. The highest value for days sales outstanding is 2010 at and he average is The highest level for inventory turnover is 2003 at and the average is The highest value for net fixed asset turnover is 3.84 in 2008 and the average is The highest value for total asset turnover is 0.80 in both 2002 and 2006 and the average is Receivables Days Sales Outstanding = Figure 3 Annual Sales/365 Sales Inventory Turnover = Figure 4 Inventory Sales Net Fixed Assets Turnover = Figure 5 (NFA) Fixed Assets Sales Total Assets Turnover = Figure 6 (NFA) Total Assets 5

8 Table 2 Coca-Cola Asset Management Ratios AVERAGE Days Sales Outstanding Inventory Turnover Fixed Asset Turnover Total Asset Turnover

9 7

10 8

11 Financial leverage ratios or debt management ratios indicate the extent of the use of debt financing by Coca-Cola. The use of debt will increase a firm s return on equity if the firm earns more on its assets than the interest rate on debt and, at the same time, increase the variability of net income. The ratios in this category include the total debt ratio, the debt to equity ratio, the equity multiplier and the times-interest earned ratio. The total debt ratio measures the proportion of funds provided by creditors and debt holders. Total debt includes both current liabilities and long term debt. Creditors and bond holders prefer a lower debt ratio. The debt to equity ratio measures the ratio of total debt to total equity. A higher debt ratio indicates more financial leverage and more risk. The equity multiplier is total assets divided by total equity. This ratio shows how many additional dollars of assets the company can buy for each additional dollar of equity. Times interest earned is the ratio of EBIT to interest expense and measures dollars of EBIT the company has for each dollar of interest expense. The time interest earned ratio measures how much EBIT can drop before EBIT is less than interest expense. Failure to make interest payments is an act of bankruptcy. The highest total debt ratio is 0.57 in 2010 and indicates that Coca-Cola finances 57% of assets with debt. Average total debt ratio is The highest debt to equity ratio is 1.33 in 2010 and averages The highest equity multiplier is 2.33 in 2010 and averages The highest times interest earned is in 2003 and averages Total Debt Total Debt Ratio = Figure 7 Total Assets Total Debt Debt to Equity = Figure 8 Owner s Equity Total Assets Equity Multiplier = Figure 9 Owner s Equity EBIT Times Interest Earned = Figure 10 Interest 9

12 Table 3 Coca-Cola Financial Leverage Ratios AVERAGE Total Debt Ratio Debt to Equity Ratio Equity Multiplier Times Earned Interest

13 11

14 12

15 Profitability ratios measure a company s overall efficiency and analyze the relationship between sales and expenses. Profitability ratios are operating margin, basic earning power, net profit margin, return on assets, and return on equity. Operating margin is the ratio of operating income and sales and shows operating profit per dollar of sales. Net profit margin is the ratio of net income to sales and measures the overall operating efficiency of the company. Net profit margin is the proportion of revenue earned by the company. Return on assets is net income divided by total assets. Return on equity is the ratio of net income to owner s equity. ROE is the proportion of profit generated for each dollar of equity. The highest operating margin is in 2010 and the average is The highest level of net profit margin is in 2010 and the average is The highest level of return on assets 1.77 in 2001 and the average is The highest level of return on equity is in 2010 and the average is EBIT Operating Margin = Figure 11 Sales Net Income Net Profit Margin = Figure 12 Sales Net Income Return on Assets = Figure 13 Total Assets Net Income Return on Equity = Figure 14 Owner s Equity 13

16 Table 4 Coca-Cola Profitability Ratios AVERAGE Operating Margin Net Profit Margin Return on Assets Return on Equity

17 15

18 16

19 Market based ratios show the value placed on the company by shareholders. The value of the firm is equal to the market capitalization of the firm. The market capitalization of the firm is equal to the number of shares outstanding times the price per share. There are seven market based ratios: earnings per share, the price to earnings ratio, the book value ratio, the market value ratio, the payout ratio, the dividends per share ratio, and dividend yield. The earnings per share ratio measures net income earned for each share. The price to earnings ratio is the dollars shareholders will pay for each dollar of earnings of the company. The book value ratio is the stock price based on accounting value of the firm. The market value ratio shows the number of dollars that shareholders pay for each dollar of book value. The payout ratio is the proportion of net income paid in dividends. Dividends per share are dividends divided by shares. Dividend yield is dividends per share divided by the stock price. Earnings per share are highest in 2010 at $5.08 per share and averages $2.39 per share. The price/earnings ratio is highest in 2002 at and averages Book value per share is highest in 2010 at and averages The market value ratio is highest in 2001 at 8.24 and averages The payout ratio is highest in 2002 at 0.65 and averages The retention ratio is highest in 2010 at 0.66 and averages Dividends per share are highest in 2010 at 2.70 and averages Dividend yield is highest in 2008 at 3.8% and averages 2.7%. Net Income Earnings per share = Figure 15 # of Shares outstanding Market Price per Share Price to Earnings = Figure 16 Earnings per Share Owner's Equity Book Value Per Share = Figure 17 # of Shares Outstanding Stock Price per Share Market Value = Figure 18 Book Value per Share Dividend per Share Payout Ratio = Figure 19 Earnings per Share Dividends Retention Ratio = Figure 20 Net Income 17

20 Dividends Dividend Per Share = Figure 21 # of Shares Dividend per Share Dividend Yield= Figure 22 Stock Prices 18

21 Table 5 Coca-Cola Market Ratios AVERAGE Earnings Per Share Price Earnings Book Value Market Value Payout Ratio Earnings Retention Ratio Dividends Per Share Dividend Yield

22 20

23 21

24 ` 22

25 23

26 Table 2-1 Coca-Cola Co. (KO) Financial Statement Input Balance Sheet AVERAGE Cash , Accounts Receivable Inventory Current Assets Net Fixed Assets Total Assets Accounts Payable Current Liabilities Long Term Debt Total Debt Retained Earnings Total Owners' Equity Total Liabilities & OE Income Statement AVERAGE Sales Cost of Goods Sold Operating Expenses EBIT Interest Expense Net Income Statement of Cash Flows AVERAGE Dividends (-)

27 Stock Price Shares Depreciation Table 2-2 Coca-Cola Financial Ratios Liquidity Ratios AVERAGE Current Ratio Quick Ratio Asset Management Ratios AVERAGE Days Sales Outstanding Inventory Turnover Fixed Asset Turnover Total Asset Turnover Financial Leverage Ratios AVERAGE Total Debt Ratio Debt to Equity Ratio Equity Multiplier Times Earned Interest Profitability Ratios AVERAGE Operating Margin Basic Earning Power Net Profit Margin Return on Assets Return on Equity

28 Market Ratios AVERAGE Earnings Per Share Price Earnings Book Value Market Value Payout Ratio Earnings Retention Ratio Dividends Per Share Dividend Yield

29 Summary and Conclusions This paper provides a model for the financial analysis of the Coca-Cola Company. Using financial ratio analysis and the DuPont system of financial analysis, one can identify historical discrepancies between the business strategies of the two competitors. Through DuPont Analysis, one can determine which of the three elements is most responsible for a comparatively higher, or lower, return on equity. The paper also demonstrates the calculation of sustainable growth for Coke. REFERENCES Brigham, Eugene F. and Joel F. Houston. Fundamentals of Financial Management, Concise, Seventh Edition, Harcourt College Publishers, Mason, OH, Coca-Cola Company SEC Annual Reports, Collier, Henry W., Timothy Grai, Steve Haslitt, and Carl B. McGowan, Jr. Using Actual Financial Accounting Information to Conduct Financial Ratio Analysis: The Case of Motorola, Journal of Business Case Studies, Volume 6, Number 4, July/August 2010, pp Saunders, Anthony. Management of Financial Institutions, Third Edition, McGraw Hill,

30 Financial Ratio Analysis of Coca-Cola for Using Internet Data Downloads in a Hyperlinked Power Point Presentation John C. Gardner Carl B. McGowan, Jr. Susan E. Moeller Prepared for Presentation at the Southwest Finance Associaton Annual Meeting, Dallas, TX March 2014.

31 Employer Criticisms Lack of practical, real world experience Lack of communication skills

32 Course Outcomes (AACSB) Find and collect data Yahoo! Finance EDGAR Process data Excel Present (communicate) data Word Power Point

33 Financial Statement Analysis Collect ticker symbol from Yahoo! Finance Collect stock prices from Yahoo! Finance Collect financial data from the EDGAR (SEC) Online Database Download financial statements to spreadsheet(s) Consolidate the input data into a single spreadsheet Compute financial ratios

34 Consolidated Statement of Income Sales Operating Income EBIT Interest Expense Net Income Shares Outstanding

35 Consolidated Balance Sheets Accounts Receivable Inventory Current Assets Net Fixed Assets Accounts Payable Current Liabilities Long Term Debt Long-term Liabilities Retained Earnings Total Owners Equity Total Liabilities and Owners Equity

36 Consolidated Statement of Cash Flows Depreciation Dividends

37 Financial Ratios Liquidity ratios Asset management ratios Financial leverage ratios Profitability ratios Market based ratios

38 Liquidity Ratios Current ratio Quick ratio

39 Asset Management Ratios Days sales outstanding Inventory turnover Net fixed assets turnover Total asset turnover

40 Financial Leverage Ratios Total debt ratio Debt to equity ratio Equity multiplier Times interest earned

41 Profitability Ratios Operating margin Basic earning power Net profit margin Return on assets Return on equity

42 Market Based Ratios Earnings per share Price to earnings ratio Book value per share Market value to book value Dividend per share Dividend yield Payout ratio Retention ratio

43 Logon to Yahoo! Finance

44 Enter Coca-Cola in Get Quotes

45 Click on KO

46 Click on Historical Prices

47 Enter Historical Price Range

48 Scroll to Bottom of Page

49 Download to Spreadsheet

50 Save

51 Open

52 Spreadsheet with Prices

53 EDGAR SEC

54 Company or fund name, ticker symbol,

55 Enter ticker symbol (KO)

56 Filter Results for 10-K s

57 List of Form 10-K s

58 Click on the Form 10-K for a Year

59 Move to Table of Contents

60 Click of Item 8 Financial Statements

61 Click on Consolidated Statement of Income

62 Copy and Paste Income Statement

63 Copy of Income Statement THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, (In millions except per share data) NET OPERATING REVENUES 46,542 $ 35,119 30,990 Cost of goods sold 18,216 12,693 11,088 GROSS PROFIT 28,326 22,426 19,902 Selling, general and administrative expenses 17,440 13,158 11,358 Other operating charges OPERATING INCOME 10,154 8,449 8,231 Interest income Interest expense Equity income (loss) net 690 1, Other income (loss) net 529 5, INCOME BEFORE INCOME TAXES 11,439 14,243 8,946 Income taxes 2,805 2,384 2,040 CONSOLIDATED NET INCOME 8,634 11,859 6,906 Less: Net income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF 8,572 $ 11,809 6,824 THE COCA-COLA COMPANY BASIC NET INCOME PER SHARE $ DILUTED NET INCOME PER SHARE $ AVERAGE SHARES OUTSTANDING 2,284 2,308 2,314 Effect of dilutive securities AVERAGE SHARES OUTSTANDING ASSUMING DILUTION 2,323 2,333 2,329

64 Copy and Paste Balance Sheet

65 Copy of Balance Sheet THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, (In millions except par value) ASSETS CURRENT ASSETS Cash and cash equivalents $ 12,803 8,517 Short-term investments 1,088 2,682 TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 13,891 11,199 Marketable securities Trade accounts receivable, less allowances of $83 and $48, respectively 4,920 4,430 Inventories 3,092 2,650 Prepaid expenses and other assets 3,450 3,162 TOTAL CURRENT ASSETS 25,497 21,579 EQUITY METHOD INVESTMENTS 7,233 6,954 OTHER INVESTMENTS, PRINCIPALLY BOTTLING COMPANIES 1, OTHER ASSETS 3,495 2,121 PROPERTY, PLANT AND EQUIPMENT net 14,939 14,727 TRADEMARKS WITH INDEFINITE LIVES 6,430 6,356 BOTTLERS' FRANCHISE RIGHTS WITH INDEFINITE LIVES 7,770 7,511 GOODWILL 12,219 11,665 OTHER INTANGIBLE ASSETS 1,250 1,377 TOTAL ASSETS $ 79,974 72,921

66 Copy of Balance Sheet LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 9,009 8,859 Loans and notes payable 12,871 8,100 Current maturities of long-term debt 2,041 1,276 Accrued income taxes TOTAL CURRENT LIABILITIES 24,283 18,508 LONG-TERM DEBT 13,656 14,041 OTHER LIABILITIES 5,420 4,794 DEFERRED INCOME TAXES 4,694 4,261 THE COCA-COLA COMPANY SHAREOWNERS' EQUITY Common stock, $0.25 par value; Authorized 5,600 shares; Issued 3,520 and 3,520 shares, respectively Capital surplus 11,212 10,057 Reinvested earnings 53,550 49,278 Accumulated other comprehensive income (loss) (2,703 (1,450 Treasury stock, at cost 1,257 and 1,228 shares, respectively (31,304 (27,762 EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY 31,635 31,003 EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS TOTAL EQUITY 31,921 31,317 TOTAL LIABILITIES AND EQUITY $ 79,974 72,921 Refer to Notes to Consolidated Financial Statements.

67 Copy and Paste Statement of Cash Flows

68 Copy of Statement of Cash Flows THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, (In millions) OPERATING ACTIVITIES Consolidated net income 8,634 11,859 $ 6,906 Depreciation and amortization 1,954 1,443 1,236 Stock-based compensation expense Deferred income taxes 1, Equity (income) loss net of dividends (269 (671 (359 Foreign currency adjustments Significant (gains) losses on sales of assets net (220 (645 (43 Other significant (gains) losses net (4,713 Other operating charges Other items ( Net change in operating assets and liabilities (1, (564 Net cash provided by operating activities 9,474 9,532 8,186 INVESTING ACTIVITIES Purchases of short-term investments (4,057 (4,579 ) (2,130 Proceeds from disposals of short-term investments 5,647 4,032 Acquisitions and investments (977 (2,511 ) (300 Purchases of other investments (787 (132 ) (22 Proceeds from disposals of bottling companies and other investments Purchases of property, plant and equipment (2,920 (2,215 ) (1,993 Proceeds from disposals of property, plant and equipment Other investing activities (93 (106 ) (48 Net cash provided by (used in) investing activities (2,524 (4,405 ) (4,149

69 Copy of Statement of Cash Flows FINANCING ACTIVITIES Issuances of debt 27,495 15,251 14,689 Payments of debt (22,530 (13,403 ) (12,326 Issuances of stock 1,569 1, Purchases of stock for treasury (4,513 (2,961 ) (1,518 Dividends (4,300 (4,068 ) (3,800 Other financing activities (2 Net cash provided by (used in) financing activities (2,234 (3,465 ) (2,293 EFFECT OF EXCHANGE RATE CHANGES ON CASH AND (430 (166 ) 576 CASH EQUIVALENTS CASH AND CASH EQUIVALENTS Net increase (decrease) during the year 4,286 1,496 2,320 Balance at beginning of year 8,517 7,021 4,701 Balance at end of year 12,803 8,517 $ 7,021

70 Hyperlink to Spreadsheet Right Click Hyperlink KO 2012A.xlsx Right Click Hyperlink FMA_2012X.xlsx

71 Coca-Cola Income Statement AVERAGE Sales Cost of Goods Sold Operating Expenses EBIT Interest Expense Net Income

72 Coca-Cola Balance Sheet AVERAGE Cash , Accounts Receivable Inventory Current Assets Depreciation Net Fixed Assets Total Assets Accounts Payable Current Liabilities Long Term Debt Total Debt Retained Earnings Total Owners' Equity Total Liabilities & OE

73 Coca-Cola Statement of Cash Flows AVERAGE Dividends (-) Stock Price Shares

74 Liquidity Ratios Current Assets Current Ratio = [1] Current Liabilities The current ratio is a going concern ratio that indicates how many short-term assets the company has for each dollar of short-term liabilities.

75 Liquidity Ratios Current Assets Inventories Quick Ratio = [2] Current Liabilities The quick ratio is a distress ratio that measures the company s ability to meet short-term financial obligations when inventory is not being converted to accounts receivable and cash.

76 Liquidity Ratios Table 1 Coca-Cola Liquidity Ratios AVERAGE Current Ratio Quick Ratio

77 1.40 Figure 1 Current Ratio (Red) and Quick Ratio (Blue)

78 Asset Management Ratios Receivables Days Sales Outstanding = [3] Annual Sales/365 The days sales outstanding ratio is the average number of days to collect accounts receivable.

79 Sales Inventory Turnover = [4] Inventory Inventory turnover is the number of dollars of sales generated each year for each dollar of inventory and measures the number of times a year that inventory is sold.

80 Sales Net Fixed Assets = [5] Fixed Assets Net fixed assets ratio is the number of dollars of sales generated each year for each dollar of net fixed assets.

81 Sales Total Assets Turnover = [6] Total Assets Total asset turnover is the number of dollars of sales generated each year for each dollar of total assets.

82 Asset Management Ratios Table 2 Coca-Cola Asset Management Ratios AVERAGE Days Sales Outstanding Inventory Turnover Fixed Asset Turnover Total Asset Turnover

83 50 Figure 2 Days Sales Outstanding

84 18 Figure 3 Inventory Turnover

85 4.50 Figure 4 Fixed Asset Turnover

86 0.90 Figure 5 Total Asset Turnover

87 Total Debt Total Debt Ratio = [7] Total Assets The total debt ratio indicates the proportion of assets financed with fixed costs financing debt.

88 Total Debt Debt to Equity = [8] Owner s Equity The debt to equity ratio is total debt divided by total equity and the equity multiplier is total assets divided by owners equity.

89 Total Assets Equity Multiplier = [9] Owner s Equity The equity multiplier

90 EBIT Times Interest Earned = [10] Interest Times interest earned is interest expense divided by EBIT and indicates the extent that EBIT can drop before the company does not have sufficient earnings to cover interest expense.

91 Financial Leverage Ratios Table 3 Coca-Cola Financial Leverage Ratios AVERAGE Total Debt Ratio Debt to Equity Ratio Equity Multiplier Times Earned Interest

92 0.70 Figure 6 Total Debt Ratio

93 1.80 Figure 7 Debt to Equity Ratio

94 3.00 Figure 8 Equity Multiplier

95 35 Figure 9 Times Earned Interest

96 EBIT Operating Margin = [11] Sales Operating margin measures ratio of the difference between revenues and operating costs and sales.

97 EBIT Basic Earning Power = [12] Total Assets Basic earning power is the difference between revenues and operating costs and total assets.

98 Net Income Net Profit Margin = [12] Sales Net profit margin is the ratio of revenue minus all costs divided by sales.

99 Net Income Return on Assets = [13] Total Assets Return on assets is net income divided by total assets.

100 Net Income Return on Equity = [14] Owner s Equity Return on equity is the ratio of net income to owner s equity.

101 Profitability Ratios Table 4 Coca-Cola Profitability Ratios AVERAGE Operating Margin Basic Earning Power Net Profit Margin Return on Assets Return on Equity

102 0.07 Figure 10 Operating Margin

103 0.25 Figure 11 Basic Earning Power

104 0.40 Figure 12 Net Profit Margin

105 0.18 Figure 13 Return on Assets

106 Figure 14 Return on Equity

107 Net Income Earnings per share = [15] # of Shares outstanding Earnings per share is net income divided by the number of shares outstanding.

108 Market Price per Share Price to Earnings = [16] Earnings per Share The price to earnings ratio, P/E is the market price per share of the stock divided by earnings per share and represents the number of dollars investors are willing to pay for each dollar of earnings.

109 Owner's Equity Book Value per Share = [17] # of Shares Out Book value per share is owners equity divided by the number of shares outstanding.

110 Stock Price per Share Market to Book Value = [18] Book Value per Share The market value to book value ratios is the market price per share divided by the book value per share an is the number of dollars that investors are willing to pay for each dollar of assets in the company.

111 Dividends Dividends per Share = [19] # of Shares Dividends per share is the dividends paid by the company divided by the number of shares outstanding.

112 Dividend per Share Dividend Yield= [20] Stock Prices Dividend yield is the dividend per share divided by the market price per share.

113 Dividend per Share Payout Ratio = [21] Earnings per Share The payout ratio is dividend per share divided by the market price per share.

114 Retention Ratio = (1-Payout ratio) [22] The retention rate is one minus the payout ratio.

115 Market Based Ratios Table 5 Coca-Cola Market Ratios AVERAGE Earnings Per Share Price Earnings Book Value Market Value Payout Ratio Earnings Retention Ratio Dividends Per Share Dividend Yield

116 6.00 Figure 15 Earnings Per Share

117 35 Figure 16 Price Earnings

118 16.00 Figure 17 Book Value

119 8.00 Figure 18 Market Value

120 0.70 Figure 19 Payout Ratio

121 0.70 Figure 20 Retention Ratio

122 2.00 Figure 21 Dividends Per Share

123 0.040 Figure 22 Dividend Yield

124

125