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EssayBizLabCompany AnalysisThe Coca-Cola Company: Industry and Company Overview

The Coca-Cola Company: Industry and Company Overview

Subject: Company Analysis
Pages: 6
Words: 381
Reading time:
2 min
Study level: Bachelor
Table of Contents
  1. Liquidity Analysis
  2. Solvency Analysis
  3. Profitability Analysis
  4. Importance of Ratios in the Budgeting Process
  5. Variance and Balanced Scorecard
  6. Ratios and Capital Budgeting
  7. Summary
  8. References

The report is based on the Coca-Cola Company, which operates in the beverage industry. The overall sector contributes over 5% to the GDP with an overall sales revenue of over $1.4 trillion. The industry is composed of over 27,000 firms that employer over 1.5 million people.

Coca-Cola is one of the leading companies in the beverage industry. The company produces both alcoholic and nonalcoholic beverages, with over 500 different brands. Coca-Cola operates in over 200 countries. It derives over 70 percent of the revenue from out of the USA (“The Coca-Cola Company”, n.d.).

Liquidity Analysis

  • Coca-Cola has stronger liquidity than the competitor (PepsiCo).
  • The company’s liquidity measures, as indicated by the current ratio and the quick ratio, beat the industry average.

Solvency Analysis

  • Coca-Cola reported better long-term liquidity compared to the competitor (PepsiCo).
  • The company performed poorly compared to the industry.

Profitability Analysis

  • Coca-Cola reported higher profitability than the competitor (PepsiCo).
  • The company also reported higher margins (gross margin and net margin) compared to the industry average.
  • The company also had a higher return on capital employed.

Importance of Ratios in the Budgeting Process

Budgeting in an important function of Coca-Cola Company. according to Ryan (2017), the role of budgeting includes:

  • It provides a framework for company expenditure.
  • The process has to be aligned to the company’s financial resources.
  • Financial ratios help to compare the performance of a company overtime.
  • The ratios indicate the trends in the company’s performance.
  • The ratios are therefore important in forecasting that is critical for accurate budgeting.

Variance and Balanced Scorecard

  • Variance compares the budgeted figures to the actual results or for general comparison.
  • Variance can be favorable or unfavorable.
  • The Balanced Scorecard exemplifies a cause and effect relationship from the overall strategy to the company’s targets.
  • The target can be the industry performance.

Ratios and Capital Budgeting

  • Capital budgeting involves an evaluation of new projects or new investment opportunities (Bazley and Hancock, 2018).
  • The internal rate of return (IRR) and the payback period are the main capital budgeting ratios
  • The ratios help to determine whether a project should be accepted or not

Summary

  • Financial statement analysis is vital in decision making.
  • Coca-Cola posted impressive performance than PepsiCo.
  • The company also performed well compared to the industry average.
  • Coca-Cola had a stronger liquidity, solvency, and profitability.

References

Bazley, M. and Hancock, P. (2018). Contemporary Accounting. 7th ed. Cengage Learning.

Ryan, R. (2017). Corporate Finance and Valuation. Thomson Learning, London.

THE COCA-COLA COMPANY. (n.d.). Msn.Com.