Business Case Analysis

Introduction

The objective is aimed at establishing whether a company is more fiscally sound and can create more revenues. This can be achieved by subjecting the company up to analysis, and evaluate its competitors, so as to be able to make a knowledgeable decision to ensure that investments have worth and value. In the past few years, and particularly subsequent to the latest stock market crash, it has been increasingly imperative for people to realize the actual value of corporations.

A lot of people secure their whole reserves and retirement at the stock market hoards, and underestimate the existing value and possible worth of the corporations. Such kind of investments can have overwhelming effects on not just private assets, but also on the wellbeing of the financial system in total. That is why it is so significant to base one’s verdict of a firm on many dissimilar dynamics, such as study of the corporation’s balance sheets in current, past, and forecasted future; and by examining the company’s merit in relation to its aptitude to create revenues.

A good business case has several players, concrete metrics, is continuously updated and evaluated, and is employed as a criterion for decision-making in relation to things such as financial statement, benefits, outlays and key drivers. A strong and properly-documented business case presents comprehensive analyses of overheads, hypothesis, implication and benefits. It uses actual data and metrics that can be calculated in assessing the business which helps in making an informed business decision. Business case analysis can authenticate that your company has a niche in the market. It will define whether the market is sturdy enough to be meaningful for your business. Business case analysis will as well determine the best variant of how to build up a rapid and lucrative marketing business model.

Summary of findings

This finding examines Coca Cola financial performance for the duration of 2008 to 2011 through the company’s financial analysis. The whole business is under pressure due to currency variations and elevated fuel costs. This is a company that has equal amounts of both current liability and current asset. Based on its financial statement it shows a turn down in liabilities and the same inclination for current assets. This is due to the correlations between these two matters. The financial statement shows also that the company is liquid, so if they went bankrupt they would be in a position of paying all their debts and still have some funds left over.

On the other hand, the company’s debt finance comparative to equity has reduced from 2008 to 2009, but it has improved its debt finance in 2010 and kept on increasing to 2011.The gearing ratio in the year 2007 and 2008 is 0.5755 and 0.7357 respectively, the cost of debt has augmented relatively in year 2008 and year 2009 from 3.72% to 4.84% respectively.

In regards to the year 2008, it declined to 4.68% and the trend is seen through to the year 2010. The increase of the cost of debt in year 2008 implies that the debt is higher in year 2008, so the company opts to fund its business by borrowing a smaller amount of debt and additional equity in order to lessen its one-sided standard outlay of capital. In 2010, the company announced a raise in revenues in contrast to the preceding year. The earnings grew closer to $6.48 billion. The cost of investment for Coca Cola Company is projected to be 8.7% and the capital summed to $72.929 billion.

Description of the firm and its management

Coca Cola started in 1886. At the present day it is the leading worldwide producer, distributor and dealer of non-alcoholic drinks. Its strategy is to develop into a more aggressive via its enormous resources—trademark, monetary strength, unrivalled supply system and the strong dedication by management and workforce globally.

At present, Coca Cola has routes in other 200 nations; it is universal and sells more than 400 kinds of products. It is the international leader in its products grouping with a projected market control of 45% market allocation. The Coca Cola Company’s strongest force lies in its capability to accomplish business on a worldwide range while sustaining a local approach. The Coca Cola is an illustration of a business with a continued spirited improvement, innovation, widespread business representation, and an intelligent and extensive distribution system. The business stocks are sought after all over the world with an aggressive advantage which has demonstrated its existence.

It offers more than 500 varieties of beverages to the marketplace. These entire products have approved the company to demand a large market share hence defeating its opponents such as the Pepsi Company. The achievements of this company can be accredited to the enthusiastic staff, business marketing tactics, its aims and objectives, and also its operations and visualization. Just like any outstanding company, the company’s based policy is that of sustainable development. The management endeavors to convene their short term obligations as they work out investment techniques of realizing their long term aspirations.

Based on a study of the Coca Cola Company’s internal assessment, the resource based view provided understanding information on the company’s management customs with a view to the policy advance formulation by means of the internal and external setting approach. The management ardently observes the areas of both internal and external surroundings, as this is where, to a large extent, the strategy formulation begins. The company will persist to be an international leader in supply of non-alcoholic drinks because it has effectively utilized the application of its both analyses to put together the successful tactic. These resources and potentials of the Coca Cola Company will prolong in giving a safe foundation for formulation of a long term strategy and guarantee that it preserves a strong status.

Discussion of the competitive environment

In the business cycle a business can either be in the market beginning, development or at the established stage. The soft beverages trade can presently be seen to be in the development stage, mainly owing to the introduction of new products with focal points on fitness.

It is hard to survive in a competitive environment. Even though a company like Coca Cola has a competitive advantage, it does not mean that it can automatically sustain in such an environment. An opposing firm can penetrate the market with a reserve that it has the capability to overthrow the preceding firm’s advantage. To a certain extent, a competitive advantage is only valid when the efforts by challengers aimed to give the competitive advantage surplus have stopped.

Political Factors

The Coca Cola has benefitted from diminutive political wavering sound effects for several years in its time. For a company that runs in 200 different countries the political instability poses a significant threat to its sound management strategy. Until recently, there were hardly any main political reserves; an example is the introduction of the beverages in the Arab nations, Mecca Cola, was initiated in the Arab marketplace with the endeavor of challenging other products.

Economic Factors

In the past, global financial crisis has been seen to affect the economic solidity of the Coca Cola Company in the region, like Latin America and Africa. This is owing to decreasing retail power of the consumers as well as advanced duty rates that lead to augmented operational expenses of the firm.

Governmental Regulations and Legal Factors

Every single product made by the Coca Cola is patented basing on the set procedures. In the worldwide market the viewpoint and the company’s legal status is not susceptible. The company adheres to all laid down government regulations in its markets.

Social Factors

The present progressing tendency for giving an advantage to healthy beverages and food in the most markets is affecting negatively numerous beverages companies like the Coca Cola and many other beverage companies. Many individuals find it essential to use bottled water as compared to the typically fizzy and strong beverages. It is for that reason it is significant for the company to invest further in diet and healthier drinks as a product approach.

Technological Factors

With the advancing technology, the Coca Cola has started to generate new products to adapt to the new promotion approach and make complete use of forthcoming technologies. By now, its products are marketed online, with a profound presence in social site. Additionally, Coca Cola has introduced plastic containers as a way of cost cutting and product manageability.

Environmental Factors

The company’s environment is extremely vibrant owing to the nature of their raw resources. The annual report shows that some of their most valuable raw materials are reliant on particular atmosphere and weather. Climate variations may impact the cost of the resources they and, in turn, influence the rate of manufacturing.

Evaluation of Financial Statements

A-Overview

The company has developed into a massive producer of the soft drink and has the biggest share of market capitalization of US$102bn. It also has 35 billion dollars in returns and 73 billion dollars in full assets. Their outstanding development has been owed on their capability to handle their assets. Based on the business evaluation conducted all over the company that the result is that the Coca Cola has its valuable resources spread extensively all the way through the company’s diverse bases. The company has 4.7 million dollars in cash and possessions, which puts up together 11.4 percent of their whole current assets. This indicates that their monetary stability is good, because a company that is capable of maintaining that much money has a lot more litheness than non-liquid opponents. The financial statements also show that the Coca Cola has realized remarkable income proceedings and ROCE is greater than the industry models. It sustains low liquidity percentage due to its capability to turn over the reserves in a small time, usually around 39 days and benefits from longer credit period with its brokers, while giving adequate reassurance to meet its financial responsibility. This means that the Coca Cola has tough negotiating influence. In the past, the Coca Cola’s dividend payments have been over 50% of the net proceedings of any set time. This clearly shows that the Coca Cola’s debt-financing policy validates the reasons for sustaining elevated debt-to-assets and equity ratios.

The Coca Cola’s income has progressively grown over the industry’s standards and its operational competency is remarkable, as shown by its proceedings which are two folds as high as its most influential opponents and the business. The Coca Cola has a sound threat management strategy that has allowed it to continue to be the firm given the elevated foreign exchange variation, and political instability linked with the broad operations in more than 200 nations.

B-Short-term liquidity

Liquidity is the degree to which an asset can be purchased or put up for sale devoid of altering the asset’s worth. It measures the business’ capability to recompense the short-term responsibility. It can be measured by four ways. The net working capital of the Coca Cola is more in the up, particularly in the year 2010 and 2011 and this implies that the Coca Cola has more monetary stability to meet its short-term responsibility hence the company is effective and its fiscal wellbeing is viable in the short-run.

C-Operating efficiency

All over the world no other product is instantaneously identifiable as the Coca Cola’s; with its businesses in more than 200 nations, a varied workforce consisting of over 200 diverse races, conversing in more than 100 dissimilar lingos. It functions as both an international and a local business partner, offering excellence in the market, enhancing work placements, safeguarding the surroundings and strengthening the society. So as to manage the massive capacity of its dealings, the Coca Cola Corporation has six segments of working units with the Head Quarters positioned in the U.S.

D-Capital structure

The Coca Cola has been able to capitalize on the business worth, and at the same time manage with the monetary risk in all firms. It strains to realize bigger or similar return, as it is required. The firm is backed up by the debt because the cost of debt is inexpensive as compared to equity, and the lenders need a return to reimburse their opportunity overheads which makes their assets accessible. The company borrows money to boost the companies’ assets worth. In regards to the long term solvency, the Coca Cola also has more funds fixed up in the long-term savings, summing up to 14.3 percent of their entire assets. Due to this the firms’ long term success will most probably be high because of their dedication to long term savings.

E-profitability

The Coca Cola strives to better appreciate the impact of its products and its worth for the consumer. In the long run, the firms’ profitability will most probably be higher for the reason that it is committed to long term ventures and consumer interests. There exists a new and present competitor, such as the Pepsi Company, which has affected the productivity of the firm in some distinguished areas. As an outcome of a reduced hurdle of entrance, the number of companies advertising beverage products has considerably amplified. These firms vend alike products as those of the Coca Cola Company. As a result, these firms decrease the sales revenue of the Coca Cola Company, hence reduced the productivity levels in some distinguished marketplaces.

F-Market measures

The Coca Cola applies 5-forces analysis to achieve its target market. It includes new entrants, alternative products, buyer negotiating power, supplier negotiating power and opposition. It also uses the demography aspect to reach its target market. For instance, it advertises the drink in such a way that it is inclined to be bought by the youth. In order to achieve its target it puts its mission into the view, the organization carries out its marketing in an exceptional manner, distinguished from its opponents. Instead of going through express promotion plans and conventional channels to the customers, the Coca Cola makes use of different bottling associates so as to concentrate more on beverage making and selling.

The company works in the stark global chain of dealers and other kind of business to form common benefits. By doing this it improves sales and lowers the cost of the product in order to offer an improved quality for different groups of customers. For example, the Coca Cola diet targets the buyers ranging between the ages of 25 to 39, who account to about 40 percent of the entire population whereas the PowerAde targets athletics who account to about 20 percent. The Coca Cola Company primary market ranges from 24 to 30 years while the secondary market is between 10 and 39 years.

G-Quality of financial reporting

Financial reporting’s hugely significant to present how sound a company finances are handled. It deals with the observation of financial account, levy and duties, inventories, and a range of other areas of finances to demonstrate how well a company is performing presently, in the past, and the prospects of progressions in the future. The Financial Statements communicates the monetary effects of the company’s activities and outside dealings of the company. This reporting method incorporates communicating monetary information through yearly financial reports. They are the main source of monetary information communicated to party outside the company. The management of the Coca Cola Company forecasted data on the company’s performance in the future. This is significant to the management, shareholders, and creditors, as they can see if there are sections that call for upgrading, and work on them, so that they did not develop into a problem and hampered the expansion of the business. This ensures that the quality of financial reporting supersedes that of other companies to achieve their target market.

A-Outlook for performance, earnings projection (optional)

The Company has grown its returns from $46.5B to $48.0B USD. Recently, the cost of investment for the Coca Cola Company was projected to be 8.7% and the capital summed to comprise $72.929 billion. The business has been capable of reducing the percentage of sales dedicated to advertising, wide-ranging and organizational expenditures from 37.43% to 36.94%.

B-Investment potential

From an investment viewpoint, the company incorporates evaluating key ratios of the firms’ fiscal performance and its current reserve performance to judge the kind of investors that would consider the business as a striking prospect. In contrast to other dominant American brands that have considered global unifications or sell-offs which continue to exist, the Coca Cola continues to be an American corporation even as it has long-drawn-out all over the world.

C-Credit assessment

With the sturdy expansion of the Coca Cola as the world’s chief producer, marketer and dispenser of beverages, the credit analysts, financial viewpoint for the company give the impression of an outstanding and promising venture. The monetary feasibility of the Coca Cola is owed to its demonstration as a company with unrelenting spirited developments, innovation, a far-reaching business representation and a sharp and significant distribution system.

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