The Coca-Cola Company: Industry and Company Overview

Subject: Company Analysis
Pages: 6
Words: 381
Reading time:
2 min
Study level: Bachelor

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.).

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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.