Week 5 – Financial Ratios – Analysis: Coca-Cola
Richard Brent Struense
Averett University
Strategic Management – BSA555-M703-SP15
Instructor: Dr. Philip R. Sturm
April 9, 2015
Executive Summary The purpose of this analysis is to identify the financial strategy and performance of the Coca-Cola Company, Pepsi, and Monster. Financial ratios are correlations established from a firm’s financial information and used for comparison purposes. Generalized financial ratios include Liquidity Ratios, Profitability Ratios, Debt Ratios, Activity Ratios, and Market Ratios. These ratios are understood by dividing one account balance or financial amount with another. The measurements use are drawn from a company's financial…show more content… In other words, it is to show how many times a company's inventory is sold and replaced over a period of time. What is the impact of this ratio? A lower turnover is usually thought as bad sign because perishable products tend to deteriorate while they remain in the warehouse. Companies selling perishable items want to have very high turnover on their inventory. This ratio is also used to consider any seasonal affects on inventory. There are two common equations to determine inventory turnover:
Sales or Cost of Goods Sold
Inventory Average Inventory
Coca-cola and Monster outperform the industry benchmark over the last five years. Pepsi considerably under delivered in this ratio. (Analysis on the Net, 2015). One attribution to Pepsi could imply there snack foods (which are not broken out in this ratio) may have sat on store shelves longer than the drink products.
(Analysis on the Net, 2015)
Conclusion The three financial rations (Current Ratio, Net Profit Ratio, & Inventory Turnover Ratio) allow inventors and company management to obtain a snap-shot of performance from different perspectives. Thirsty, yet? This essay shows that Coca-Cola, the soft drink industry icon, has struggled and is trending to do so in 2015 in two of the three ratios noted; only Inventory Turnover exceeds the industry benchmark. Soft drink competitor, Pepsi, is even less favorable in all three
