The Coca Cola Company Financial Statement Analysis
Introduction
The Coca Cola Company produces a variety of soft drinks (nonalcoholic beverages) that are sold
worldwide. It is a part of the Soft Drink Manufacturing industry, which has NAICS code 312111. The
company sells its products directly to other companies such as grocery stores and restaurants, who then in
turn sell Coca Cola products to customers. The Coca Cola headquarters are located in Atlanta, GA, but it
is located in the worldwide market. For further information, the Coca Cola Company’s website is
www.cocacola.com. The company’s two major competitors are Pepsico, Inc. and Nestle, which also sell
nonalcoholic beverages directly to other businesses. For the most current year (2011), Coca Cola’s total
sales equaled $47,600,000,000, their total assets equaled $79,974,000,000, and their net income equaled
$7,084,000,000. The Coca Cola Company’s stock is traded in the New York Stock Exchange with ticker
symbol KO, and it is currently sold at $37.46 per share. Coca Cola has been in business since 1892 and
continues to be one of the most popular soft drink manufacturers in the world.
Analysis of the Balance Sheet
The balance sheet tells us the company’s greatest sources and uses of funds for each year. For
each year, Coca Cola’s greatest sources of funds were Reinvested (Retained) Earnings at 85.34%,
67.58%, and 66.96% of total assets for 2009 through 2011, respectively. Coca Cola’s most significant
use of funds was in Plant, Property, and Equipment for 2009, 2010, and 2011 at 19.64%, 20.20%, and
18.68% of total assets, respectively (See Exhibit #1). The next most significant use of funds was cash in
2009 and 2011 at 18.80% and 17.37% of total assets, respectively (See Exhibit #1). This distribution of
funds makes sense for Coca Cola because the company has been in business for a long time, so it would
have accumulated a lot of retained earnings. Coca Cola must also own factories and equipment for
making and bottling its soft drinks, which would result in a high percentage of its assets going to Plant,
Property, and Equipment. Finally, it does not hold a lot of inventory because it sells off its soft drinks
relatively quickly, resulting in a high percentage of liquid cash.
Analysis of the Income Statement
The income statement tells us whether the company is profitable or not (whether it has a net
income or net loss) and what its significant expenses are. For 2009 through 2011, Coca Cola’s most
significant expense was the Cost of Goods Sold at 35.78%, 36.14%, and 39.14% of net revenue,
respectively (see Exhibit #2). This makes sense because Coca Cola manufactures a product (soft drinks),
so therefore their largest expense each year should be the cost of making that product. The company is
profitable each year from 2009-2011 because the net income is positive each year at 18.83%, 29.56%, and
15.22% of net revenue, respectively (see Exhibit #2).
Trend Analysis
Trend analysis tells us how a company’s financial statements have changed from one year to the
next, which allows us to see whether the company is improving or worsening over time. Coca Cola’s
assets increased by 49.82% from 2009 to 2010 and by 9.67% from 2010 to 2011 (see Trend section in
Exhibit #1). The company’s revenue also increased by 13.32% from 2009 to 2010 and by 32.53% from
2010 to 2011 (see Trend section in Exhibit #2). Coca Cola’s net income increased by 77.88% from 2009
to 2010, but decreased by 31.76% from 2010 to 2011 (see Trend section in Exhibit #2). Based on these
trends, Coca Cola is growing and expanding because its assets and revenue continue to grow from year to
year. Its net income increased from 2009 to 2010, but decreased between 2010 and 2011, which indicates
that its expenses increased in 2011. To find net income, expenses are subtracted from revenues, and since
their revenues increased from 2011, Coca Cola’s expenses must have increased more than their revenues
to result in a net loss.
Analysis of the Cash Flow Statement
The Cash Flow Statement shows the inflow and outflow of cash for each year, as well as what
portions of cash come from operating, investing, or financing activity. Coca Cola’s most significant
source of cash from 2009 to 2011 is from operating activity at $8,186, $9,532, and $9,474, respectively,
with dollars in millions (see Exhibit #3). The company’s most significant use of cash from 2009 to 2011
is from investing activity at $4,149, $4,405, and $2,524, respectively, with dollars in millions (see Exhibit
#3). Coca Cola does generate enough cash from operating activities to cover its investing activity
because its $8,186 is greater than $4,149 in 2009, $9,532 is greater than $4,405 in 2010, and $9,474 is
greater than $2,524 in 2011 (see Exhibit #3).
Efficiency Ratio Analysis
Efficiency ratios tell us how well the company is generating income. The Return on
Shareholder’s Equity (ROE) for 2009 through 2011 are 25.26%, 36.64%, and 22.40%, respectively.
Compared to the soft drink industry, Coca Cola has a higher ROE than the soft drink industry each year
from 2009 to 2011 because its ROEs are higher than the ratio’s ROEs, which are 19.50%, 16.00%, and
16.20%, respectively (see Exhibit #4). Over time, Coca Cola’s ROE increases from 25.26% to 36.64%
from 2009 to 2010, but decrease from 36.64% to 22.40% from 2010 to 2011 (see Exhibit #5). Coca
Cola’s Return on Assets (ROA) for 2009 through 2011 are 13.09%, 17.08%, and 9.27%, respectively.
The company has an overall higher ROA than the industry ROA each year from 2009 through 2011,
which are 6.70%, 5.00%, and 4.90%, respectively (see Exhibit #4). Over time, Coca Cola’s ROA
increases from 13.09% to 17.08% between 2009 and 2010, but decreases from 17.08% to 9.27% from
2010 to 2011 (see Exhibit #5). Overall, Coca Cola’s ROE and ROA indicate that that Coca Cola has
overall better efficiency than the soft drink industry because its ROE and ROA values are higher than the
industry’s ROE and ROA each year from 2009 to 2011. Over time, however, Coca Cola has worsening
efficiency over time because the ROE and ROA values in 2011 are lower than the values in 2009.
Profitability Ratio Analysis
Profitability ratios measure the company’s overall operating success. Coca Cola’s Profit Margins
for 2009 through 2011 are 18.83%, 29.56%, and 15.22%, respectively (see Exhibit #4). Compared to the
soft drink industry, Coca Cola has higher Profit Margins than the industry average Profit Margin each
year which are 4.40%, 5.30%, and 4.80%, respectively. Over time, Coca Cola’s Profit Margin increases
from 18.83% to 29.56% from 2009 to 2010, but decreases from 29.56% to 15.22% from 2010 to 2011
(see Exhibit #6). Coca Cola’s Gross Profit Margins for 2009 to 2011 are 64.22%, 63.86%, and 60.86%,
respectively (see Exhibit #4). Coca Cola has higher Gross Profit Margins than the soft drink industry
each year because the industry averages are 29.40%, 32.50%, and 32.40% for 2009 to 2011, respectively.
Over time, Coca Cola’s Gross Profit Margin decreases from 64.22% to 63.86% from 2009 to 2010, and
decreases again from 63.86% to 60.86% from 2010 to 2011 (see Exhibit #6). Coca Cola’s Operating
Expenses to Sales Ratios for 2009 to 2011 are 37.66%, 39.80%, and 39.04%, respectively. Coca Cola’s
ratios are higher than the industry average ratios for each year, which are 24.30%, 26.40%, and 26.50%,
respectively. Over time, Coca Cola’s Operating Expenses to Sales Ratios increase from 37.66% to
39.80% from 2009 to 2010, but stay relatively stable at 39.80% and 39.06% from 2010 to 2011. Overall,
Coca Cola has better profitability than the soft drink industry, even though it’s Operating Expense to
Sales Ratios are higher than the industry averages, because both its Profit Margin and Gross Profit Margin
are all much higher than the industry average. Coca Cola’s profitability is worsening over time because
the values for both Profit Margin and Gross Profit Margin decrease over time from 2009 to 2011, and the
Operating Expense to Sales Ratio stays about the same.
Liquidity Ratio Analysis
Liquidity ratios evaluate a company’s ability to meet its short-term obligations. Coca Cola’s
Current Ratios for 2009 to 2011 are 1.28, 1.17, and 1.05, respectively. The company’s Current Ratios are
lower than the industry average each year, which are 1.50, 1.60, and 1.50 for 2009 to 2011, respectively
(see Exhibit #4). Over time, Coca Cola’s Current Ratio decreases from 1.28 to 1.17 between 2009 and
2010 and decreases again from 1.17 to 1.05 between 2010 and 2011 (see Exhibit #7). Coca Cola’s Quick
Ratios for 2009 to 2011 are .94, .84, and .77, respectively. The company’s Quick Ratios are lower than
the industry averages each year, which are 1.00, .9, and .8 from 2009 to 2011, respectively (see Exhibit
#4). Over time, Coca Cola’s Quick Ratios decrease from .94 to .84 between 2009 and 2010 and decrease
again from .84 to .77 between 2010 and 2011 (see Exhibit #7). Coca Cola has lower liquidity ratios than
the industry averages each year, which means that Coca Cola has overall worse liquidity than the
industry. Overall, Coca Cola has decreasing ratios from year to year, which means that their liquidity is
worsening over time.
Solvency Ratio Analysis
Solvency ratios evaluate a company’s ability to meet its long-term obligations. Coca Cola’s Debt
to Total Assets ratios for 2009 to 2011 are 47.92%, 57.05%, and 60.09%, respectively. The company’s
Debt to Total Assets ratios are higher than the industry average each year, which are 15.60%, 14.30%,
and 18.20% for 2009 to 2011, respectively (see Exhibit #4). Over time, Coca Cola’s Debt to Total Assets
increases from 47.92% to 57.05% from 2009 to 2010, and increases again from 57.05% to 60.09% from
2010 to 2011 (see Exhibit #8). Coca Cola’s Long Term Debt to Total Assets for 2009 to 2011 are
19.73%, 31.67%, and 29.72%, respectively. The company’s values for 2009 and 2011 are lower than the
industry averages, but the 2010 value is higher than the industry average. The industry averages for Long
Term Debt to Total Assets are 25.20%, 22.00%, and 34.10% for 2009 to 2011, respectively (see Exhibit
#4). Over time, Coca Cola’s Long Term Debt to Total Assets increase from 19.73% to 31.67% from
2009 to 2010, but decrease from 31.67% to 29.72% from 2010 to 2011 (see Exhibit #8). Coca Cola’s
Times Interest Earned for 2009 to 2011 are 23.19, 11.53, and 24.35, respectively. The company’s Times
Interest Earned for 2009 to 2012 are higher than the industry averages, which are 5.10, 5.80, and 3.70,
respectively (see Exhibit #4). Over time, Coca Cola’s Times Interest Earned decreases from 23.19 to
11.53 between 2009 and 2010, but increases from 11.53 to 24.35 between 2010 and 2011 (See Exhibit
#8). Coca Cola has overall better solvency than the industry because its Times Interest Earned are higher
than the industry average each year and its Long Term Debt to Assets are lower than the industry average
almost every year. Overall, Coca Cola has worsening solvency over time because the values from Debt to
Total Assets and Long Term Debt to Assets in 2011 are higher than the values in 2009, reflecting
worsening solvency.
Conclusion
The financial statements for a company allow us to determine whether the company is improving
or worsening over time, and whether it is doing better or worse than other companies in its industry. The
Coca Cola Company’s trend analysis shows that the company’s assets and revenue have increased from
year to year between 2009 and 2011, but their net income decreased from 2010 to 2011, which indicates
that the company is growing and expanding, but their expenses increased from 2010 to 2011. The
efficiency ratios for Coca Cola display that the company has overall better efficiency than the soft drink
manufacturing industry, but has worsening efficiency over time. Coca Cola’s profitability ratios show
that the company has better profitability than the soft drink industry, but has worsening profitability over
time. The liquidity ratios for Coca Cola show that the company has overall worse liquidity than other
companies in the soft drink industry, and its liquidity is worsening over time. Coca Cola’s solvency ratios
display that the company has better solvency than the soft drink industry, and has worsening solvency
over time. As a whole, Coca Cola is doing better than the industry, but is worsening over time.