Introduction
Coca-Cola is among the largest and most successful public companies traded on the New York Stock Exchange. The organization is famous worldwide for its iconic soda. Since the company is publicly traded, it publishes its financial data, and every person can view and analyze it. In particular, one can visit the organization’s official website to find and download its annual reports. This document allows for analyzing Coca-Cola’s balance sheet, income statement, and statement of cash flows, as well as calculating and interpreting key performance ratios.
Financial Statements Analysis
For this assignment, the 2023 and 2022 annual reports were included. The first comprises the income statements for 2020–2022 and the cash flow statements for the corresponding years (The Coca-Cola Company, 2023). Since this resource included only the 2022 and 2021 balance sheets, the 2022 annual report was downloaded and used. All these financial statements are analyzed to identify any significant year-over-year movements in accounts. It is worth mentioning that all the percentage changes are calculated according to the given formula:
While the company did not witness significant changes in its balance sheet in 2022, the situation was different in 2021. Compared with 2020 data, Total Assets increased by 8.10% ($94,354 million in 2021 vs. $87,296 million in 2020) (The Coca-Cola Company, 2022). A more dramatic movement was observed in Total Current Liabilities. There was a 36.63% increase from $19,950 million in 2021 to $14,601 million in 2020 (The Coca-Cola Company, 2022). As for Total Equity, it grew, with the increase accounting for 16.80% ($24,860 million in 2021 vs. $21,284 million in 2020) (The Coca-Cola Company, 2022). This information shows that the organization was more active in 2021 than in 2020.
The income statement supports the conclusion above by showing a significant increase in the organization’s net income from 2020 to 2021. In particular, the difference was 26.21% because the Consolidated Net Income was $9,804 million in 2021 and $7,768 million in 2020 (The Coca-Cola Company, 2023). As for the statement of cash flows, the impressive 262.39% increase affected the Net Cash Provided by Investing Activities (-$763 million in 2022 vs. -$2,765 million in 2021) (The Coca-Cola Company, 2023). However, the Cash and Cash Equivalents at the End of the Year remained almost unchanged because they were $9,519 million in 2022 and $9,684 million in 2021 (The Coca-Cola Company, 2023).
Key Performance Ratio Analysis
2022 The Debt-to-Equity Ratio = $36,377 / $25,826 = 1.41.
2021 The Debt-to-Equity Ratio = $38,116 / $24,860 = 1.53.
This metric shows the proportion of debt in the company’s equity. If the ratio is above 1, it means debt represents a significant share, but a declining trend may indicate that Coca-Cola reduced its financial leverage in 2022.
2022 Current Ratio = $22,591 / $19,724 = 1.15.
2021 Current Ratio = $22,545 / $19,950 = 1.13.
The Current Ratio shows that Coca-Cola can cover its short-term liabilities with short-term assets, and 2022 saw a slightly better situation.
2022 Quick Ratio = ($22,591 – $4,233) / $19,724 = 0.93.
2021 Quick Ratio = ($22,545 – $3,414) / $19,950 = 0.96.
This metric excludes inventory, and the results obtained demonstrate a worse picture. Furthermore, the lower ratio in 2022 indicates that the organization experienced a decrease in liquidity.
2022 Return on Equity = ($9,571 / $25,826) * 100% = 37.06%.
2021 Return on Equity = ($9,804 / $24,860) * 100% = 39.43%.
This performance indicator demonstrates that Coca-Cola rather effectively uses its equity to generate profits. One should note that this metric was better in 2021, but that does not mean the 2022 outcome is not satisfactory.
2022 Net Profit Margin = ($9,571 / $43,004) * 100% = 22.26%.
2021 Net Profit Margin = ($9,804 / $38,655) * 100% = 25.36%.
These figures reveal that the company turned more than 20% of its revenue into net profit, compared with 2021.
Conclusion
The research paper has demonstrated that Coca-Cola experienced significant changes in its accounts between 2020 and 2021. In the latter year, the organization was more active because its leading accounts received more funds. The analysis of the key performance metrics for 2021 and 2022 revealed that the business was booming and profitable during the period. It is challenging to select the year that was better for Coca-Cola because some ratios were higher in 2021, while others were more attractive in 2022.
References
The Coca-Cola Company. (2022). Annual report.
The Coca-Cola Company. (2023). Annual report.