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Accounting Terminology Coca Cola's

Essay by   •  November 8, 2012  •  Essay  •  381 Words (2 Pages)  •  815 Views

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Coca Cola's liquidity increased from .94 in 2008 to 1.28 in 2009. This increase showed that Coca Cola was getting better in their ability to pay short-term obligations and meeting unexpected needs for cash.

Coca Cola's receivable turnover ratio declined by roughly 10% from 2008 to 2009. This decline suggests that Coca Cola could not collect from its customers rapidly in 2009, as it was able to in 2008. Their inventory ratio in 2009 is lower than 2008 may indicate that Coca Cola had more sales opportunities in 2009. This may also suggest that Coca Cola was less efficient in its inventory management in 2009. The 2 asset turnover ratios tell us that for each dollar invested in assets, Coca Cola generated less sales in 2009 than they did in 2008. Their asset turnover ratio had decreased from .76 times to .69 times in 2009.

Coca Cola's profit margin increased from 18% in 2008 to 22% in 2009. This means that in 2009 the company generated more money on each dollar of sales, which suggests that Coca Cola was better in controlling its costs. Return on assets ratio can also be computed from the profit margin ratio and the asset turnover ratio. Coca Cola has better control of its costs in 2009 than in 2008, so even though its asset turnover ratio declined in 2009, they were still able to increase its return on assets from 14% in 2008 to 15% in 2009 by increasing the margin it generated from each dollar of goods its sold. Coca Cola's rate of return on common stock equity increased by 2% from 2008 to 2009. They were also able to increase their earnings per share from $2.51 in 2008 to $2.95 in 2009.

In 2008, of every dollar Coca Cola invested in its assets, creditors provided $.49. Debt financing is more risky than equity financing. In 2009, debt financing declined by 1%. This suggests that Coca Cola has a little more favorable solvency in 2009 than 2008. Coca Cola's net income increased and debt to total assets declined in 2009 show an ability that the company would have more income available to cover its interest payments when they became due. Coca Cola's times interest earned increased from 18.14 times in 2008 to 26.20 times in 2009.

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