Coca Cola Case Analysis

Introduction

Coca-Cola or Coke for short has been a staple in American households for years. Some may wonder how a company that’s been around for 125 years is performing since times are different now days.  Financial statements hold the answer to the question: “how is a company performing?”.  While there are many numbers that may be confusing to the naked eye business professionals can interpret the numbers.  Through this paper, it will discuss and answer the question: “how is Coke performing?”.  To answer this question, a balance sheet, income statement, and various ratios will be used.

Balance Sheet

        A balance sheet is a company’s financial position as of a specific date, based on measurements made in accordance with generally accepted principles (GAAP) or some other reporting basis (Bruns, 2017, pg. 3).  Coke’s balance sheet is made up of assets, liabilities, and shareowner’s equity.  For a balance sheet to be correct, assets must be equal to liabilities plus shareowner’s equity which, is what Coke’s exemplifies (see exhibit 1).  

        When looking at Exhibit 1, almost all the data is more in 2003 than in 2002.  There are only a couple of sections where the data didn’t increase but one is most interesting: accrued income taxes.  The decrease means that the amount of unpaid taxes decrease which, is a positive for the company.  However, in another section it shows that current liabilities increased by around $540.  This could be a red flag to the naked eye but after calculating the percentage, of liabilities to assets 2003 is at 28% while 2002 was at 30%, meaning that even though it looks like an increase it really isn’t.  Overall, the balance sheet lets one take a step forward is saying that coke is performing well.

Income Statement

        An income statement is a financial statement that reports a company’s financial performance over a specific accounting period (Investopedia, 2017).    In exhibit 2, it shows the breakdown of each respective category and the percentage of each in relation to net sales.  In most of the components there is a slight increase from 2001-2003.  While the dollar amount can tell one side of the story the percentages tell a better one.  For example, gross profit margin increases each year however, when one looks at the percentages it’s decreasing.  This is one of the ways that numbers from a company can be deceiving.

        There are multiple categories that exemplify the trend listed above.  Although, only one has been identified if one looks it should stand out. These increases show that overall everything seems to be growing but it also pinpoints areas where it stays the same or decreases.  There are many factors that can account for the decreases in certain areas but it is hard to know what exactly changed in those years by just looking at the income statement.  By just looking at the income statement it seems that if the trend stays the same, the company will continue its success.