Introduction
In this course, Coca Cola Company operating in Beverage industry was chosen because it is listed in Dow Jones list of top 100. Its major competitor to be analyzed in this course is PepsiCo. In order to make a wiser investment decision regarding Coca Cola Company there is need for considering the financial analysis tools that will help in determining the overall financial health of the company. This will involve looking at the annual financial reporting data to calculate the ratios including liquidity ratios, solvency ratio and profitability ratio (Wahlen et al, 2015).
Profitability ratios
As can be shown from the above results the company had a worth noting trend in terms of liquidity ratio. All the three, cash ratio, current and quick increased from 2012 to 2013 followed by deterioration from 2013 to 2014. This is an indication that the ability of the company to use its assets to cover the liabilities decreased from 2013 to 2014.
Profitability ratio
This involves looking at the implication of return on equity (ROE) and return on assets (ROA) in the company’s operation.
The company’s return on equity and return on investment decreased from 2012 to 2014. This shows that the amount of net income arising from the company’s equity and assets had reduced during this particular period. This makes us to believe that the company management of assets had slightly deteriorated besides reducing their dependence on equity (Schniederjans et al, 2010).
Solvency
Solvency of the company is analyzed in terms of its debt-to-equity ratio, debt to capital and interest coverage.
The values got shows that the company’s debt to equity increased from 2012 to 2014; the same scenario is depicted by debt to capital ratio. This is indicative of the fact that the company increased its reliance on debt and shareholder’s equity as a form of financing the operation of its assets (Cobbaut & Lenoble, 2015). The company interest coverage also significantly reduced from 2012 to 214 thereby showing that it has witnessed reduction in the number of times that it can settle it’s interests.
Comparison to PepsiCo
Management
In terms of efficiency ratios, PepsiCo shows more productivity because it has more resources to cover it obligations than when compared to Coca Cola. This indicates that PepsiCo promises as an investment avenue because the probability of witnessing bankruptcy is less as compared to Coca Cola
Recommendation
Based on the above analysis, I would not choose Coca Cola Inc as an investment option because of the deterioration in its operation as shown by the financial analysis. In addition, comparing to PepsiCo., which is its major competitor indicates that the Pespsi is best placed as a potential for investment.
Non-financial analysis
Role of Coca Cola to environment
Coca-Cola Company is one of the largest companies in the world with very great worldwide reach. When it comes to taking care of the environment and even bring impact to the community around the company has always been in the fore front. As one of the company with worldwide reach, Coca –Cola Company has put in place very effective strategies in order to preserve the environment and taking part in environmental activities (Marsh, 2012). The first study the Company did to examine the environmental effects was conducted in 1969. From this time the Coca-Cola Company has regularly and continuously practices the most cost –effective and efficient ways to reduce its environmental consequences and improve the communities around them. The Coca-Cola Company has improved the environment they are working in and the community around them in several ways including the following.
Water is the main in the manufacturing process. Since water is very important. the company has several ways of water conservation starting with bottling plants. The company treats the water that they have used and take back almost 100 percent of its manufacturing water back to the source. This is to ensure that the community does not get contaminated water (Götze et al, 2015). The company always is working to reduce the amount of water used to produce 1-liter beverage. This will help reduce the amount of water used and even misuse.
In terms of packaging, the Company also tries to improve the material it uses in the process.. Most of its packaging materials that include the plastic bottles and cans are recyclable. They have also changed the bottles design to be lighter, stronger and even less expensive.
Corporate governance
Coca-Cola Company is always have a very good corporate governance, this has promoted long –term interests of the shareholders and also has promoted and strengthen Board and even management accountability. All this has help to build the public trust in Coca-Cola Company hence leading to the growth of the company. Always it’s a company rule in this company that the board is elected by the shareholders and the core work is to see the success and the financial strength of the company. They also work as the final decision maker of the Company. The board of directors has put in place Corporate Governance guidelines to be followed; this provides guidelines on how the company should be governed effectively (Avis, 2008).
References
Wahlen, J. M., Baginski, S. P., & Bradshaw, M. (2015). Financial reporting, financial statement analysis and valuation. (8th ed.). Cengage
Marsh, C. (2012). Financial management for non-financial managers. London: Kogan Page.
Götze, U., Northcott, D., & Schuster, P. (2015). Investment appraisal: Methods and models.
Cobbaut, R., & Lenoble, J. (2003). Corporate governance: An institutionalist approach. The Hague: Kluwer Law International.
Schniederjans, M. J., Hamaker, J. L., & Schniederjans, A. M. (2010). Information technology investment: Decision-making methodology. Singapore: World Scientific.
Avis, J., & Chartered Institute of Management Accountants. (2008). Management accounting decision management. Oxford: Butterworth-Heinemann.
