Financial Statements
The Coca-Cola Company's fiscal year begins on 1st January every calendar year and ends on 31st December every calendar year. Since the 2016 fiscal year is not yet over or even half way through, this assignment assumes the 2015 fiscal year as the current one and uses data for the fiscal year ended 2015.
The net income from the 2015 fiscal year is $7,351 billion. This is up from 2014’s net income of $7,098 billion. The net income, therefore, increased by $253 million which represents a 3.56% increase in net income ("The Coca-Cola Company", 2016). Net income represents a return on the investors’ investment into the company. An increase in net income is a positive change for investors as it increases either their equity in the company, dividends distributed to them, or both. A decrease would be unwelcome since investors’ main goal is to earn from their investment and the more they earn, the better (Elliott & Elliott, 2008).
The ending balance in shareholders’ equity for 2015 is $25.554 billion ("The Coca-Cola Company", 2016). Organizations such as labor unions would be interested in the ending balance of shareholders’ equity because it indicates the strength of Coca-Cola Company and its ability to offer continuous employment to the labor union members. Companies also have to pay expenses that relate to employees such as pension and provident funds. The Coca-Cola Company can only pay such expenses if there is enough equity balance on its books and a healthy retained earnings (Elliott & Elliott, 2008). As such, labor unions whose basic responsibility is to advocate for the welfare of employees would be interested in shareholder’s equity ending balance.
The total value of assets for Coca-Cola Company reported for the fiscal year 2015 is $90.093 billion ("The Coca-Cola Company," 2016). Potential creditors to Coca-Cola Company include banks and suppliers. The total value of assets of the company is important to such creditors since when they extend credit to the company through either loan in the case of banks and credit supplies in the case of suppliers, the assets of the company act as security for the credits. Creditors would want to ensure that the assets of the company would be enough to cover the credits extended to the company if the company is declared bankrupt or insolvent (Elliott & Elliott, 2008). The assets would be sold to settle the creditors.
The total cash flow from operation for Coca-Cola Company reported for the fiscal year 2015 is $10.528 billion ("The Coca-Cola Company," 2016). This information is important for most of the financial statements users who include investors, shareholders, and creditors. Cash flow from operations is important to all these stakeholders as it tells them how the company generates cash flow from its operating activities. Shareholders will be paid dividends if the company can generate enough cash flow from its operating activities. Creditors, on the other hand, will have their money paid to them fast if the company can generate enough cash flows from operating activities. They will, therefore, be interested to know how the company generates cash flow from operations before they extend credit to the company (Elliott & Elliott, 2008). The government through its tax collection agency/institution is also an important user of this financial statement and will be interested in cash flows from operating activities since the company will pay its taxes on time if it earns profits.
Financial statements are very important decision-making tools at different levels of management. Finance managers in organizations use the different financial statements to advice their companies on strategies that can be used to improve cash flows. They analyze the balance sheet and advice the company on the best ways of obtaining extra financing for the company if it is needed. He can either advice the company to borrow or to raise funds through equity financing. Other managerial decisions such as cost management and production decisions are also made by analyzing different financial statements (Elliott & Elliott, 2008).
References
Elliott, B. & Elliott, J. (2008). Financial accounting and reporting. Harlow: Financial Times Prentice Hall.
The Coca-Cola Company. (2016). Yahoo! Finance. Retrieved 15 May 2016, from http://finance.yahoo.com/q?s=KO&ql=1
