The Coca-Cola Company

Financial Analysis

2006 2005 2004

Liquidity Ratios

Liquidity refers to a company's ability to meet its muturing short-term obligations.

Liquidity is essential to conducting business activity, particularly in times of adversity, such as
when business operations losses due to economic recession or steep rise in the price of raw
material or part or other factors.

1. Net Working Capital: = Current Assets - Current Liabilities

= (449,000.00) 414,000.00 1,123,000.00

Net working capital of any organization is consider as safety cushion for creditors for their
investment. Organization must have to maintain a large balance , when they have difficulty to borrow
on short notice.
In Coca-Cola Company case, the Company's Net Working Capital continuously decreasing
over the period. In 2005, the Company's working capital decreased $ 709,000 (Thousands) but in 2006
it decrease more then the last year to $ 863,000 (Thousand) which turns the Company's working capital
into negetive, which is very alarming condition for the Company as well as for the inverstors.

Current Assets
2. Current Ratio: =
Current Liabilities

= 0.95 1.04 1.10

Current ratio is used to measure the ability of organization to meet/cover it current liabilities
out of its current assets. Just like net working capital , organization have to maintain high current ratio is
required in case of any borrowing on short notice period.
In Coca-Cola Company, the Company's Current ratio also continuously decreasing as Net
Working Capital decreased. This shows that the Company's ability to meet it current liabilities out of its
current assets decreased. In 2004, it was 1.10 which reduced 0.06 in 2005 to 1.04. But in current Financial
year 2006, it further reduces with 0.09 form 1.04 to 0.95 rapidly as compared to 2005.

Liquidity Ratios (Con't)

Current Assets - Inventroy

3. Quick (Acid Test) Ratio: =
Current Liabilities

= 0.76 0.90 0.97

Quick (Acid Test) ratio is used to measure the value of organization most current assets to
meet/cover its current liabilities. Inventroy & Prepaid expenses are not included because they not easily
 The Coca-Cola Company
Financial Analysis

2006 2005 2004

convertible into cash or cash equivlent and are not capable of covering current liabilities.
Coca-cola Company's Quick (Acid Test) ratio also on decreasing trend. And this decreased
increased with the passage of time. In 2004, it was actually at 0.97 and came down at 0.90 in 2005. In
2006, this down ward trend continue and it further decreased and reached at 0.76 with a decrease of 0.12.
In Short, the Coca-Cola Company's liquidity ratio results show that the company is in
a weak position against its current liabilites and this trend is continue. If Company not take pay
attention to this situation, it creates serious problem for the company in future.

Activity (Asset Utilization) Ratios

Activity ratio are used to determine how quickly various accounts are converted into
sales or cash. It is necessary to evaluate the activity or liquidity of specific current accounts. For
this purpose, various ratios exist to measure the activity of receiveables, inventory & Total Assets.

Net Credit Sale

1. Account Receiveable Turnover =
Avg. Account Receivable

*Avg. Account R/A = 2,492,500.00 2,226,000.00

= 9.66 times 10.38 times

The Account Receiveable Turnover ratio gives the number of times the account receiveables
are collected during the year. The higher account receiveable turnover, the better company in collecting
revenue from customers. Moreover, an excessively high ratio show that company follows stringent credit
policy.
In 2005, Company's account receiveable turnover ratio was 10.38. The drop in this ratio shows
a problem in collecting the revenues from the creditors/customers. The company needs to re-evaluate its
credit policy.

365 Days
2. Collection Period: =
Account Receiveable Turnover

= 37.77 days 35.17 days

Collection period is the number of days it takes to convert/collect a sale(credit sale) into cash.

In 2005, Company's collection period was 35.17 days (almost 35 days) that now increased to
37.77 days (almost 38 days). Now company's problems increased as the Company's account receiveable
time perioed reduced and Secondly, the company's collection period efficiency decreased.
 The Coca-Cola Company
Financial Analysis

2006 2005 2004

Activity (Asset Utilization) Ratios (Con't)

Cost of Good Sold

3. Inventory Turnover Ratio: =
Average Inventory

* Avg. Inventroy = 1,532,500.00 1,422,000.00

= (5.33) times (5.76) times

Inventory turnover ratio describes that how many times the inventory (Finished goods ) are
moved/sold. Holding of excess inventory show that Company funds tied up in inventory, high inventory
carrying cost and as well as risk of obsolescence.
In 2005, Company's Inventory turnover ratio was 5.76 that now reduce slight to 5.33 times.
This shows that there is stocking of goods that may be due the introduction of new product line or due
obsolete goods that have actually no worth.

365 Days
4. Inventory Age: =
Inventory Turnover

= (68.52) days (63.33) days

Inventory age is the ratio of calcuating the time period for inventory/finished goods to be
hold with the company.

In 2005, Company's Inventory age was 63.33 days (almost 63 days) which in 2006 increased
to 68.52 days (almost 69 days) with a difference of 6 days that is not good for the company. As much
lengthening the holding period show potentially greater the risk of obsolencence.

Activity (Asset Utilization) Ratios (Con't)

5. Operating Cycle = Avg. Collection Period + Inventory Age

= (30.75) days (28.17) days

The Operating cycle of an organization is the number of days it take to convert inventory
and account receiveables to cash. For every business entity, the minimum/short operating cycle is
desireable.
 The Coca-Cola Company
Financial Analysis

2006 2005 2004

The Coca-cola Company's operating cycle in 2006 is 106.28 days (almost 106 days) that are
more then the operating cycle of last year 2005. In 2005, the operating cycle was 98.50 days (almost 99
days) which now length by 7 days. This is an unfavorable trend to tied up amount of money with the
non-cash assets or any investment.

Sale
6. Total Asset Turnover Ratio: =
Avg. Total Assets

* Avg. Total Assets = 29,695,000.00 30,377,000.00

= 0.81 0.76

The Operating cycle of an organization is the number of days it take to convert inventory
and account receiveables to cash. For every business entity, the minimum/short operating cycle is
desireable.
The Coca-cola Company's operating cycle in 2006 is 106.28 days (almost 106 days) that are
more then the operating cycle of last year 2005. In 2005, the operating cycle was 98.50 days (almost 99
days) which now length by 7 days. This is an unfavorable trend to tied up amount of money with the

Activity (Asset Utilization) Ratios (Con't)

Sale
7. Fixed Asset Turnover Ratio: =
Avg. Fixed Assets
* Avg. Fixed Assets = 6,344,500.00 5,938,500.00

= 3.80 3.89
 The Coca-Cola Company
Financial Analysis

2006 2005 2004

Leverage (Solvency, Long-Term Debt) Ratios

Leverage (Solvency) is the company's ability to meet its long-term obligations as they
become due in future. Solvency analysis concentrated on the long-term finanacial and operating
structure of the business.Further more the solvency is dependent long-run profitability, unless the
organization is not profitable the organization will not be able to meet its long-term debts.

Total Liabilities
1. Debt Ratio: =
Total Assets

= 0.4353 0.4442 0.4913

The debt ratio compares the total liabilites (total debt) to total assets. It shows the percentage
of total funds obtained from the creditors for business operations.

The Coca-cola Company's debt ratio show that in 2005 the company make improvement in its
debt ratio and reduce it from 0.4913 to 0.4442 . But in 2006, the company slightly improve its debt ratio
from 0.4442 of 2005 to 0.4353 in 2006. This shows that the degree of debt decreased to total assets.

Total Liabilities
2. Debt Equity Ratio: =
Total Equity

= 0.77 0.80 0.97

The debt equity ratio is the significant measure of solvency ratio. In high debt result, it will
less fexibility for company in obtaioning more funds in tight money market. High debt equity ratio also
make it difficult fro the company to meet interest charges and principal payments at muturity.
The Coca-cola Company's debt equity ratio show that the company’s debt equity ratio slightly
 The Coca-Cola Company
Financial Analysis

2006 2005 2004

improved as compared to 2005 & 2004.

Leverage (Solvency, Long-Term Debt) Ratios

Earning Before Interest & Taxes (EBIT)

3. Interest Coverage Ratio: =
Interest Expense

= 30.90 28.88

The interest coverage ratio shows the number of times before tax earnings cover interest
expense. We can say that it is a safety margin indicator that tells how much decline in earnings an orga-
nization can bear/control.
The Coca-cola Company's Interest coverage in 2006 is 30.44 that shows a positive indicator
and show that more earnings are available for interest charges payments as compared to last year 2005.

Long Term Debt

4. L-T Debt to Equity Ratio: =
Total Shareholder Equity

= 0.0777 0.0706 0.0726

The long-term debt to equity ratio is balance between the firms long term debts and its owner
equity.

The Coca-cola Company's long-term debt of equity ratio slightly increase in 2006 at 0.0777
from 0.0706 in 2005. This shows that the company's long-term debts increased over the year while these
were decreased in 2005 as compared to 2004 from 0.0726 to 0.0706.

Profitability Ratios

Profitability ratios reflects the company positions as per their operations and the return
of the organization
 The Coca-Cola Company
Financial Analysis

2006 2005 2004

structure of the business.Further more the solvency is dependent long-run profitability, unless the
organization is not profitable the organization will not be able to meet its long-term debts.

Gross Profit
1. Gross Profit Mangin Ratio: =
Net Sale

= 0.6611 0.6453 0.6522

Earning Before Interest & Taxes (EBIT)

2. Operating Profit Ratio: =
Net Sale

= 0.2822 0.2999 0.2922

Net Profit
3. Profit Margin Ratio: =
Net Sale

= 0.2109 0.2109 0.2207

Net income
4. Return on Investment(Assets): =
Avg. Total Assets

* Avg. Total Assets = 29,695,000 30,377,000

= 0.1711 0.1604
Net income
5. Return on Equity: =
Avg. Shareholders

* Avg. Shareholders = 16,637,500 16,145,000

= 0.3053 0.3018