Management’s Achievement Claims PerspectiveIt is to no one’s surprise that Coca-Cola is one of the world’s largestcompanies.
Fourteen years ago, Coca-Cola began building credibility to itsinvestors by never over-promising, just consistently hitting long-term growthtargets. In Great Britain, Coca-Cola surpassed two leading teas of consumptionper capita. People said it would not be possible, but Coke did it. That isjust one example.
Coca-Cola’s management believes in the theory that people need 64 ouncesof liquid everyday to survive. Right now, Coke only accounts for an average ofless than two of those ounces. They believe that by adding strength to theworld’s strongest brand, it will help people make Coke a more frequent choicefor those 64 ounces. The part of this Annual Report that I personally wanted to attack wasthe lack of sales in Canada and Coca-Cola’s goals in improving them. Beingnative of Canada and a big Coke fan, I know that Coke has struggled in myhomeland for several years.
M. Douglas Ivester answered my concern by statingthat Coke allowed the retail prices of their products to out pace their value inthe eyes of our consumers. Since 1994-1995, Canada’s unit per case volumeincreased 4%. Coke is expecting an even greater increase in 1996 because theirCanadian bottler signed with two major grocery retailers. Coca-Cola used Canadaas a lesson they can use as a guide worldwide never repeat. CEO, Robert Goizueta believes that there is no limit to your growth.
Hewill not allow boundaries to be set. It is evident to me that Coke is notsetting boundaries considering that they have a bottler in almost every cornerof the world. Coke is focused on strengthening world wide markets and creatingnew ones. In this report, they state how the will improve sales in Nigeria,China, South Africa, and Canada. Of all the Financial Reports I have read (Anderson Consulting, HomeDepot, Green Park, etc.
), Coca-Cola is a company in which I believe what themanagement claims. Coke has a great responsibility of making investors,employees, and consumers happy all over the world. Why would they blow it??Coke realigned their management team at the beginning 1996 to more accuratelyreflect the global nature of their business. That says growth all over it.
Comparison to Industry StandardsCoca-ColaIndustryStandard 1. )Quick Ratio. 2. 7This states that Coke through these calculations is not asliquid as the industry standard. 2.
)Current Ratio1. 0%1. 4%3. )Profit Margin11%9%4. )Return on Equity55%9. 5%This is very good percentage, above industry standard.
5. )Asset Turnover1. 2%3. 6%6. )Return on Assets20%8.
5%7. )Debt to Equity75. 3%66. 5%A little high compared to industry, but still has not peaked at 100%. The present value of Coca-Cola’s discounted cash flow compared with themarket value shows that Coca-Cola is greatly undervalued. This makes Coca-Colaa good investment for the future.
ConclusionAfter doing several ratios and comparing them to the industry average, Isee nothing but a solid investment for 1997. Coca-Cola has not yet peaked inits profit increase and return on equity. This company is so big that if thecompany burned down to the ground, they would have no trouble borrowing themoney to rebuild, just based on the strength of their Trademarks alone. Coca-Cola’s trademark is worth $1 for accounting purposes, but in the neighborhood of$40 billion in actuality.
Coke has an unbelievable cash flow because their capital requirementsare low for a company of their size. They only have 32,000 employees worldwide. Unlike wine, Coke products can go from production to consumption in a matter ofhours. As far as their advertising goes, they now use many different agenciesinstead of just one.
This will add more creativity and ideas. When we finally have our meeting with the investment club, Coke will beone of the stocks I invest in because of the sense of security it gives you. Business
