¶ … company chosen for this report is Coca-Cola, and the industry is "Beverages- Soft Drinks," as this is almost the entirety of Coca-Cola's business. The company operates worldwide, runs a lot of its own distribution and it has a diversified portfolio of non-alcoholic beverages. The company's business is mature in most of the world, as evidenced by shrinking revenues. Coca-Cola recorded $48 billion in revenue in FY 2013, and this has declined in each of the past two years to $45.998 billion in FY2015. Net income has dropped $2 billion in this time as well, though the company is still hugely popular. The following is the trend analysis on the income statement and balance sheet over this period:
Coca Cola
Income Statement
2013
2014
2015
Total Revenue
48.017
46.584
45.998
CoGS
19.053
18.421
17.889
Gross Profit
28.964
28.163
28.109
Operating Exp
18.185
18.205
18.401
Operating Income
10.779
10.228
9.708
Net Income
9.019
8.584
7.098
EPS
2
1.94
1.62
Balance Sheet
2013
2014
2015
Cash
16.551
20.268
21.675
A/R
4.579
4.873
4.466
Inventories
3.264
3.277
3.1
Total Current A
30.328
31.304
32.986
Total Non-Current
55.864
58.751
59.037
Total Assets
86.174
90.055
92.023
Current Liabilities
27.821
27.811
32.374
Non-Current L
25.185
28.804
29.088
Total Liabilities
53.384
56.882
61.703
Total Equity
32.79
33.173
30.32
Total L&E
86.174
90.055
92.023
From this, the ratios can be derived;
The five-year view shows that 2013 was the peak in the past five years for Coca-Cola. The eye test shows that one of the issues is that while revenues have declined $2 billion in the past two years, the operating expenses have not experienced a similar decline. They have held relatively steady, and the result is that the net income has declined around $2 billion over this period, a direct translation of top line to bottom line. This hints that either Coca-Cola management is insane, or that they believe the current slump is temporary and will be reversed, so there is no need to scale down the organization. Obviously, the latter is the correct answer and the first was hyperbolic comedy.
Lastly, there is the Dupont, which seeks to identify where the returns are coming from. Coca-Cola's profits are declining and it is already been identified why that it, but here goes:
ROE = Profit margin (this means net margin) * Total asset turnover * equity multiplier (Investopedia, 2015).
ROE = 15.43 * .5 * 3.03 = 23.37%
This is vs. A listed ROE of 23.41%, so basically the same. What this shows that that the ROE for Coca-Cola is fairly evenly distributed. The company has a decent margin, and reasonable turnover on its considerable asset base. It is not highly leveraged, which is something that can distort the ROE. To improve performance, Coca-Cola could conduct share…
