abundant leeway in controlling price, which makes it an unusually strong operator and competitor. Return on Equity A direct measure of a firm's profitability, and more specifically of its ability to use shareholder investments in a profitable manner, the return on equity measurement tells investors (and analysts, would-be investors, and anyone else who's interested) what value they can expect to derive from their investment. A highly liquid firm with significant
¶ … Ratios at Coca Cola
Current Ratio
Operating Margin
Net Profit margin
Return on Equity
Current Ratio
The current ratio provides a quick yet accurate assessment of a company's ability to meet its short-term obligations and determines the degree of liquidity the company has. This gives a quick snapshot of the basic financial health of the company and its value at a given point in time (that is, not counting the value of operations), with the higher the ratio the healthier/more liquid the company is. Coca-Cola's incredibly high current ratios are an important feature of the company, and once can see that even during the leanest year of the financial collapse, 2008, Coca-Cola remained quite strong in this area. The current ratio was included as a measure because it demonstrates the extreme degree of liquidity the company has long enjoyed, which gives it a great deal of flexibility in the expansion or changing of operations and which continues to make the company very attractive to investors, as well.
Operating Margin
In some ways another measure of the ability to pay certain obligations, the operating margin is a measure of the revenue remaining after variable costs of operation are paid for. Labor, materials (such as sugar, water, and more), and certain parts of the distribution chain are all highly variable, and the complexity of Coca-Cola's overall business structure -- which includes some direct involvement and bottling and wholesaling, some partnerships/subsidiaries in distribution, and other bottling or serving licenses -- all contribute to increased chance for volatility for this measure within the company. Company's operating margin is not especially high, either, though at the same time it is certainly not so low that the company need worry. The relative stability of this ratio also demonstrates the power that Coca Cola has on the supply chain, which is another important aspect of the company's operation and its competitive advantage in the global beverage industry.
Net Profit Margin
The net profit margin of an organization can be thought of as a measure of efficiency, showing how much of a company's revenues are left after all expenses. While a simple measure of profits is directly and significantly impacted by the size of an organization, the profit margin corrects for size and makes it clear how cost effectively a company can produce revenues from sales. Coca Cola's net profit margin is quite high even in 2008, and the climb it takes through 2010 is quite impressive. This margin represents a substantial creation of value for shareholders and also bodes quite well for the company's future, again making it a darling for investors both now and in years to come. The net profit margin also means that Coca Cola has an aggressive pricing strategy and an abundant leeway in controlling price, which makes it an unusually strong operator and competitor.
Return on Equity
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