WELCOME TO OUR PRESENTATION

PROJECT
FINANCIAL MANAGMENT
 HORIZONTAL, VERTICAL, RATIO ANALYSIS
INTERPRETATION OF COCA COLA COMPANY
SUBMITTED TO:
Ms. Nadia Noor
SUBMITTED BY:
Um E Kalsoom Mahmood (91651057)
Iqra Khalid (91651022)
Sonia Mukhtar (91651048)
Anika (91651003)
COCA COLA INTERNATIONAL
• The Coca Cola Company is the World’s largest beverage
company.
• It is No.1 brand according to fortune 2009 survey.
• The Company operates a Franchised distribution system
dating from 1889.
• The Coca Cola Company is headquarter in Atlanta, Georgia.
• With local operations in over 200 countries around the world.
• Coca Cola has 150,900 employees worldwide.
FINANCIAL RATIOS ANALYSIS OF
COCA COLA COMPANY
• Assessment of the firm past, present and future financial
conditions.
• Done to find firm’s financial strength’s and weakness.
• Primary tools:
i. Financial statements
COCA COLA COMPANY INCOME STATEMENT
2016 2017 2018
Sales 41,863,000 35,410,000 31,856,000

Less: Cost of Good Sales 16,465,000 13,255,000 11,770,000

Gross profit 25,398,000 22,155,000 20,086,000

Less: Research And Development 0 0 0

Selling , General and Administrative 16,741,000 14,556,000 11,386,000

Expense
Other Operating items 0 0 0

Operating income 8,657,000 7,599,000 8,700,000

Add: Income/expense items (623,000) (1,087,000) (439,000)

 CONT’D ….
2016 2017 2018
Earning Before Interest and tax 8,869,000 7,583,000 9,269,000

Less: Interest Expense 733,000 841,000 919,000

Income before Taxes 8,136,000 6,742,000 8,350,000

Less: Tax Expense 1,586,000 5,560,000 1,623,000

Monitory Interest (Loss) (23000) (35000) (42000)

Equity Earnings/Loss unconsolidated 0 0 0

Subsidiary
Net Income-Cont. Operations 6,550,000 1,182,000 6,727,000

NET INCOME 6,527,000 1,248,000 6,434,000

Net Income Applicable to Common 6,527,000 1,248,000 6,434,000
Shareholders
COCA COLA COMPANY BALANCE SHEET
ASSET 2018 2017 2016
Current Asset:
Cash And Cash Equivalents 8,926,000 6,006,000 8,555,000
Short-Term Investments 7,038,000 14,669,000 13,646,000
Account Receivables 3,396,000 3,667,000 3,856,000
Inventory 2,766,000 2,655,000 2,675,000
Other Current Assets 8,508,000 9,548,000 5,278,000

Total Current Assets 30,634,000 36,545,000 34,010,000

Long Term Assets:

Long Term Investment 20,274,000 21,952,000 17,249,000
Fixed Assets 8,232,000 8,203,000 10,635,000
Goodwill 10,263,000 9,401,000 10,629,000
Intangible Assets 7,007,000 7,235,000 10,499,000
CONT’D ….
2018 2017 2016
Other Assets 4,139,000 4,230,000 4,248,000
Deferred Asset Changes 2,667,000 330,000 0
Total Long Term Assets 52,582,000 51,351,000 53,260,000
Total Assets 83,216,000 87,896,000 87,270,000
LIABILITIES AND EQUITY:
Account Payable 9,310,000 9,158,000 9,797,000
Short-Term Debt 18,191,000 16,503,000 16,025,000
Other Current Liabilities 1,722,000 1,533,000 710,000
Total Current Liabilities 29,223,000 27,194,000 26,532,000
Long-Term Debt 25,364,000 31,182,000 29,684,000
Other Liabilities 7,638,000 8,021,000 4,081,000
Deferred Liability charges 1,933,000 2,522,000 3,753,000
Misc. Stocks 0 0 0
CONT’D…

2018 2017 2016

Minority Interest 2,077,000 1,905,000 158,000
Total Liabilities 66,235,000 70,824,000 64,208,000
Stockholders Equity:
Common Stocks 1,760,000 1,760,000 1,760,000
Capital Surplus 16,520,000 15,864,000 14,993,000
Retained Earnings 63,234,000 60,430,000 65,502,000
Treasury Stock (51,719,000) (50,677,000) (47,988,000)
Other Equity (12,814,000) (10,305,000) (11,205,000)
Total Equity 16,981,000 17,072,000 23,062,000

Total Liabilities and 83,216,000 87,896,000 87,270,000

Equity
LIQUIDITY RATIO
• CURRENT RATIO:
= Current Assets / Current Liabilities

Years 2018 2017 2016

Current Ratio 1.04 1.34 1.28
In 2016 & 2018, the firm’s ability to cover its current liabilities with its
current assets was 1.28 & 1.04. In 2017, the ratio goes on 1.34 as
compared to 2016 & 2018 , which means that the company has the ability
to pay its liabilities, as the definition says that higher the ratio, greater the
ability of the firm to pay its bills. This tells that coca cola company is
improving their liquidity and efficiency, because their current ratio is
improving in 2017.
QUICK/ACID RATIO
• QUICK RATIO:
= Current Asset – Inventory / Current Liabilities

Years 2018 2017 2016

Quick Ratio 0.95 1.24 1.18
According to the definition, the company should have the ability to pay
its liabilities through its most liquid assets. The table shows that in
2018, the firm has the ratio 0.95 cents. Then we observe a slight
improvement in 2017. so we can figure out from the ratios that coca
cola pay its debts .
TOTAL ASSET TURNOVER RATIO
• Total Asset Turnover Ratio:
= Sales / Total Asset
Years 2018 2017 2016
Asset Turnover Ratio 1.04 0.96 1.23

Asset turnover can be defined as the amount of sales or revenues

generated per dollar of assets. The asset turnover ratio is an indicator of
the efficiency with which a company is deploying its assets.
The coca cola company total asset turnover ratio is 1.23 as high
compared to 1.04 and 0.96. which mean that the company generated
more revenue per dollar of asset investment.
INVENTORY TURNOVER RATIO
• Inventory Turnover Ratio:
= Cost Of Good Sold / Inventory

Years 2018 2017 2016

Inventory Turnover Ratio 4.25 4.10 6.15

Inventory turnover ratio can be defined as a ratio showing how many

times a company's inventory is sold and replaced over a period. The
coca cola inventory turnover ratios 2016 was 6.15 is high as compared
to 2018 and 2017, which mean that its ability to sell inventory has
relatively come down.
AVERAGE COLLECTION PERIOD
• Average Collection Period:
= 365 / Receivables Turnover

Years 2018 2017 2016

Average Collection Periods 38.91 37.82 33.79

Receivable turnover can be defined as an accounting measure used to

quantify a firm's effectiveness in extending credit as well as collecting
debts.
Days sales in receivables can be defined as the average number of days
it takes to collect outstanding receivable amounts from customers. In
2018, the average collection period is higher as compared to 2017 and
2016.
AVERAGE PAYMENT PERIOD
• Average Payment Period:
= 365 / Payable Turnover

Years 2018 2017 2016

Average payment periods 17 15 8

Payable turnover can be defined as an accounting measure used to

quantify a firm's effectiveness in extending pay his debts.
Days sales in payable can be defined as the average number of days it
takes to pay its outstanding payable amounts. In 2018, the average
payment period is higher as compared to 2017 and 2016
DEBT RATIO
• Debt Ratio:
= Total Liabilities/ Total Assets

Years 2018 2017 2016

Debt ratio 79.59 80.57 73.57

The debt/equity ratio can be defined as a measure of a company's

financial leverage calculated by dividing its long-term debt by
stockholders' equity. In 2017, the debt ratio is higher then 2018 and
2016.
TIME INTEREST EARNED RATIO
• Time Interest Earned Ratio:
= EBIT / Interest

Years 2018 2017 2016

Time Interest Earned Ratio 10.08 9.01 12.09

Interest coverage ratio measure the firm’s ability to make contractual

interest payment. The higher its value, the better able the firm is to
fulfill its interest obligations. In 2016, the time interest ration is higher
than 2017 and 2018.
PROBABILITY RATIOS
• Gross Profit Margin:
= Gross Profit / Sales

Years 2018 2017 2016

Gross Profit Margin 63.05 62.56 60.66

Gross profit margin is used to measure the percentage of gross profit a

company earns per unit of sales after deducting the cost of goods sold.
It shows the amount of money left up to pay for other expenses. The
gross profit margin should be consistent over a period of time but might
suffer due to increased competition. In 2018,the gross profit was high
as compared to 2017 and 2016.
OPERATING PROFIT MARGIN
• Operating Profit Margin:
= EBIT / Sales

Years 2018 2017 2016

Operating profit margin 29.09 21.41 21.18

The operating profit margin shoes the firm’s profit after deducting cost
of good sold and operating expenses but before interest expenses and
taxes. It reflects the true probability of firm’s business in that it is
calculated before deducting interest costs, which are a result from
financing decision, and taxes, which are outside the control of the firm.
In 2018, the coca cola company has higher operating profit margin as
compared to 2017 and 2016.
NET PROFIT MARGIN
• Net Profit Margin:
= Net Income / Sales

Years 2018 2017 2016

Net profit margin 20.19 35.24 15.59

Net profit margin can be defined as net Income as a portion of total

sales revenue. In 2017, the net profit margin is higher than 2018 and
2016.
EARNING PER SHARE (EPS)
• Earning Per Share:
= Net Income / No. of Shares of Common Stock Outstanding

Years 2018 2017 2016

EPS 1.50 0.29 1.53

In 2016, the EPS has higher as compared to 2017 and 2018. EPS
represent number of dollars earned during periods on behalf of each
outstanding share of common stocks.
RETURN ON ASSET (ROA)
• Return on Asset:
= Net Income / Total Assets

Years 2018 2017 2016

ROA % 7.7 1.4 7.4

Return on assets can be defined as an indicator of how profitable a

company is relative to its total assets. In 2018, the ROA is higher than as
compared to 2017 and 2016.
RETURN ON EQUITY (ROE)
• Return on Equity:
= Net Income / Total Common Equity

Years 2018 2017 2016

ROE % 3.6 0.7 3.7

Return on equity can be defined as the amount of net income returned

as a percentage of shareholders equity. Return on equity measures a
corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested. In 2016, the ROE
is higher than 2017 and 2018.
MARKET RATIOS
• Price / Earning Ratio:
= Market Price( Share of C.S) / Earning Per Share
Years 2018 2017 2016
P / E Ratio 24.1 12.5 23.6

Coca cola price/earning ratio has decreased 11.6 times in 2017, because
in 2018 the ratio was 24.1 times and P/E ratio also decreased 0.5 times
in 2016, because in 2018 the ratio was 24.1 but in 2017 and 2016 the
ratio was 12.5 and 23.6 times which suggest that investor may be
looking less Favorably at the coca cola. This ratio should be high,
because the higher ratio, the higher will be the investors confidence in
company.
MARKET / BOOK RATIO
• Market / Book Ratio:
= Market Price( Share of C.S) / Book Value Per Share
of Common Stock

Years 2018 2017 2016

M/B Ratio 88.41 88.41 86.30

We can say that coco cola future prospects are being viewed favorably
by investor. Because still, investor are willing to pay more for stocks
than their accounting book value as M/B ratio fluctuation is negligible in
2016 against 2017 and 2018.
VERTICAL ANALYSIS
• Vertical analysis is the proportional analysis of a financial statement,
where each line item on a financial statement is listed as a
percentage of another item. Typically, this means that every line
item on an income statement is stated as a percentage of gross
sales, while every line item on a balance sheet is stated as a
percentage of total assets. The most common use of vertical analysis
is within a financial statement for a single time, so that one can see
the relative proportions of account balances.
• Formula in Balance sheet
Individual item*100/Total Assets
• Formula in Profit and Loss statement
Individual item *100/Total sales
VERTICAL ANALYSIS OF INCOME
STATEMENT OF COCA COLA COMPANY
2016 2017 2018

Sales 100.00% 100.00% 100.00%

Less: Cost of Good Sales 39.33% 37.43% 36.95%

Gross profit 60.67% 62.57% 63.05%

Less: Research And Development 0.00% 0.00% 0.00%

Selling , General and Administrative
Expense 39.99% 41.11% 35.74%

Other Operating items 0.00% 0.00% 0.00%

Operating income 20.68% 21.46% 27.31%

CONTD…
2016 2017 2018

Add: Income/expense items -1.49% -3.07% -1.38%

Earning Before Interest and tax 21.19% 21.41% 29.10%

Less: Interest Expense 1.75% 2.38% 2.88%

Income before Taxes 19.43% 19.04% 26.21%

Less: Tax Expense 3.79% 15.70% 5.09%

Monitory Interest (Loss) -0.05% -0.10% -0.13%

Equity Earnings/Loss unconsolidated
Subsidiary 0.00% 0.00% 0.00%

Net Income-Cont. Operations 15.65% 3.34% 21.12%

NET INCOME 15.59% 3.52% 20.20%

Net Income Applicable to Common
Shareholders 15.59% 3.25% 20.20%
INTERPRETATION
• To conduct vertical analyses of income statement, sales figure is
generally used as the base and all other components of income
statement like cost of sales, gross profit, operating expenses, income
tax and net income and income etc. . In the income statement the
percentage of Revenue are same 100% in 2018, 2017 $2016. After
Less cost of good sold, the percentage of Gross Profit decreases in
2017 & 2018 and increase in 2016 by 2%. Percentage of Operating
income increase in 2018 by 7% due to decreases in administrative
and selling expense. Finally Profit before interest and tax percentage
increases in 2018 by 9% and decreases in 2017 & 2016. The common
equity percentage is also decrease in 2017 and increase in
2016,2018 by 17%,12%,17%. We can say that over all the position of
coca cola decrease and low in 2017 as compare to 2018,2016.
VERTICAL ANALYSIS OF BALANCE
SHEET OF COCA COLA COMPANY
2018 2017 2016
ASSET
Current Asset:
Cash And Cash Equivalents 10.73% 6.83% 9.80%
Short-Term Investments 8.46% 16.69% 15.64%
Account Receivables 4.08% 4.17% 4.42%
Inventory 3.32% 3.02% 3.07%
Other Current Assets 10.22% 10.86% 6.05%
Total Current Assets 36.81% 41.58% 38.97%
Long Term Assets
Long Term Investment 24.36% 24.97% 19.77%
Fixed Assets 9.89% 9.33% 12.19%
Goodwill 12.33% 10.70% 12.18%
CONT’D….
2018 2017 2016
Intangible Assets 8.42% 8.23% 12.03%
Other Assets 4.97% 4.81% 4.87%
Deferred Asset Changes 3.20% 0.38% 0.00%
Total Non-current Assets 63.19% 58.42% 61.03%
TOTAL ASSETS 100.00% 100.00% 100.00%
LIABILITIES AND EQUITY: 0.00% 0.00% 0.00%
Account Payable 11.19% 10.42% 11.23%
Short-Term Debt 21.86% 18.78% 18.36%
Other Current Liabilities 2.07% 1.74% 0.81%
Total Current Liabilities 35.12% 30.94% 30.40%
Long-Term Debt 30.48% 35.48% 34.01%
Other Liabilities 9.18% 9.13% 4.68%
Deferred Liability charges 2.32% 2.87% 4.30%
CONT’D….
2018 2017 2016
Misc. Stocks 0.00% 0.00% 0.00%
Minority Interest 2.50% 2.17% 0.18%
Total Liabilities 79.59% 80.58% 73.57%
Stockholders Equity:
Common Stocks 2.11% 2.00% 2.02%
Capital Surplus 19.85% 18.05% 17.18%
Retained Earnings 75.99% 68.75% 75.06%
Treasury Stock -6.22% -57.66% -54.99%
Other Equity -15.40% -11.72% -12.84%
Total Equity 20.41% 19.42% 26.43%
TOTAL LIABILITIES AND
EQUITY 100.00% 100.00% 100.00%
INTERPRETATION
• As shown in each element of coca cola company associated to assets is
expressed as a percentage of total assets and each item associated to
Liabilities and equity is expressed as a percentage of total Liabilities and
equity. Current assets are taking major portion of total assets. In the
coca cola company good percentage of Total Assets throughout the 3
years. In the long term Assets, the Percentage of Long –Term Investment
are highly increasing in throughout the years that’s why the Percentage
of Total Long Term Assets is increase in 2018 by 6% and decrease in
2017,2016 by 5% 2%. In Current Assets slightly increase in short term
investment of 7% and 6% during the year of 2017 and 2016 and
Percentage of Account receivables are same increase throughout the 3
years but payments other Receivable are slightly increase in the year
2018, 2017 by 4% respectively. The percentage of Goodwill in the term
of total assets is decrease in the year of 2017 by 2% but slightly increase
in 2018 & 2016. So, we can say that overall the percentage of Total
Current assets increase in 2017 or 2016 by 6% and decrease in 2018. In
Current Liability Percentage increase in 2018 by 5% and in 2017 and
2016 is same here. In Total Liability increase in 2017 by 6% , 7%. The
percentage of Share capital in 2017,2018,2016 increases same. Finally,
the Shareholder equity increases in 2018 or 2016.
 HORIZONTAL ANAYLSIS OF COCA COLA
COMPANY
Horizontal analysis is the comparison of historical financial information
over a series of reporting periods, or of the ratios derived from this
financial information. The intent is to see if any numbers are unusually
high or low in comparison to the information for bracketing periods, which
may then trigger a detailed investigation of the reason for the difference.
The analysis is most commonly a simple grouping of information that is
sorted by period, but the numbers in each succeeding period can also be
expressed as a percentage of the amount in the baseline year, with the
baseline amount being listed as 100%.When conducting a horizontal
analysis, it is useful to conduct the analysis for all of the financial
statements at the same time, so that you can see the complete impact of
operational results on a company's financial condition over the review
period.
• FORMULA IN BALANCE SHEET
Current year- Base year*100/Base year
• FORMULA IN PROFIT AND LOSS STATEMENT
Current year (sale) – Base year (Sale)*100/Base year (Sale)
decrease and low in 2017 as compare to 2015,2016.
HORIZONTAL ANALYSIS OF INCOME
STATEMENT
2016 2017 2018

Sales -15.41% -23.90%

Less: Cost of Good Sales -19.50% -28.52%

Gross profit -12.77% -20.92%

Less: research and development 0.00% 0.00%

Selling , General and
Administrative Expense -13.05% -31.99%

Other Operating items 0.00% 0.00%

Operating income -12.22% 0.50%

Add: Income/expense items 74.48% -29.53%

CONT’D….
20116 2017 2018

Earning Before Interest and tax -14.50% 4.51%

Less: Interest Expense 14.73% 25.38%

Income before Taxes -17.13% 2.63%

Less: Tax Expense 250.57% 2.33%

Monitory Interest (Loss) 52.17% 82.61%

Equity Earnings/Loss unconsolidated
Subsidiary 0.00% 0.00%

Net Income-Cont. Operations -81.95% 2.70%

NET INCOME -80.88% -1.42%

Net Income Applicable to Common
Shareholders -80.88% -1.42%
INTERPRETATION
• In the Horizontal analyses of Income statement when we less
the previous year sale or conduct the division by sale so that
Percentage there is huge amount decrease in Revenue during
the both year . Gross Profit percentage decrease in both years.
The Percentage of Operating Profit highly decrease in 2017. In
the term of Profit before tax in 2018 percentage increase and
decrease in the year of 2016. The amount of common stock
equity decrease in both years. So we can say that company
performance are not good.
 HORIZONTAL ANALYSIS OF BALANCE
SHEET
2018 2017 2016
ASSET
Current Asset:
Cash And Cash Equivalents 4.34% -29.80%
Short-Term Investments -48.42% 7.50%
Account Receivables -11.93% -4.90%
Inventory 3.40% -0.75%
Other Current Assets 61.20% 80.90%
Total Current Assets -9.93% 7.45%
Long Term Assets
Long Term Investment 17.54% 27.27%
Fixed Assets -22.60% -22.87%
Goodwill -3.44% -11.55%
CONT’D…
2018 2017 2016
Intangible Assets -33.26% -31.09%
Other Assets -2.57% -0.42%
Deferred Asset Changes 0.00% 0.00%
Total Long Term Assets -1.27% -3.58%
TOTAL ASSETS -4.65% 0.72%
LIABILITIES AND EQUITY:
Account Payable -4.97% -6.52%
Short-Term Debt 13.52% 2.98%
Other Current Liabilities 142.54% 115.92%
Total Current Liabilities 10.14% 2.50%
Long-Term Debt -14.55% 5.05%
Other Liabilities 87.16% 96.54%
Deferred Liability charges -48.49% -32.80%
 CONT’D…
2018 2017 2016
Misc. Stocks 0.00% 0.00%
Minority Interest 1214.56% 1105.70%
Total Liabilities 3.16% 10.30%
Stockholders Equity:
Common Stocks 0.00% 0.00%
Capital Surplus 10.18% 5.81%
Retained Earnings -3.46% -7.74%
Treasury Stock 7.77% 5.60%
Other Equity 14.36% -8.03%
Total Equity -26.37% -25.97%
Total Liabilities and
Equity -4.65% 0.72%
INTERPRETATION
• In long term assets, the computed value of long term
Investment under increase in 2017 by 10%. Finally, the Total
Long term Assets decrease in both years. In Current Assets the
Percentage of Short Term Investment highly increases in 2017
and decreases in 2018, and other Current Assets increase in
2017 or decrease in 2018. So, we can say the over all
percentage of Total Current Assets decreases in 2018 and
increases in 2017. The Percentage of Total Assets highly
increase in 2017 and decrease in 2018. The Current Liabilities
slightly increase in 2018 and slightly decrease in 2017. The
percentage of Total Liability. The amount of Share capital is
same in 2015,2016,2017. In the term of share increase in
2017. Stockholder equity there is highly decrease in both year.
Total liabilities and equity are increase in 2017.