Profitability Analysis for Coca-Cola Essay Example | Topics and Well Written Essays - 2750 words - 1

Profitability Analysis for Coca-Cola - Essay Example Coca-Cola has been established for a long time and has a strong value and internal performance management system. This study focuses on the financial values of the company by carrying out a ratio analysis for the company and comparing the results with industry averages. Financial ratio analysis provides an instant way to evaluate the performance of a company by comparing its financial ratios with its own past performance and the industry average in the domain in which the company operates. Hence, it is necessary to perform a comprehensive financial analysis of Coca-Cola for us to make an opinion about the company’s value and performance management systems. A brief analysis of Coca-Cola with regard to its performance in terms of financial ratios is provided below. The financial conditions ratios are used to develop an understanding of the company’s financial health. These include ratios to analyze the liquidity position of the company which represents the ease with which a company can change its current assets into cash to meet its short-term liabilities. In addition, the liquidity ratios can be used to find out if the company is vulnerable to short-term insolvency which might lead to the company getting bankrupted in the long run. Many ratios can be calculated to find out the liquidity position of the company and hence its financial conditions, but some important ones have been discussed below to provide an insight about Coca Cola’s financial conditions since the last ten years or so. Coca Cola’s quick ratio for the year 1996 remained at 0.67 which is much smaller than industry’s average of 0.9. This shows that the company was not able to meet its short-term obligations using its liquid assets. As per the recent results, the company has improved its performance with its quick ratio now being 0.8 exactly equal to the industry average. This shows a healthier sign than what the company used to be 10 years ago.