5UEFM Level 5 Effective Financial Management Of Coca-Cola Questions Answers
Organization Summary (200 words)
Coca-Cola is one of the famous and most loved beverage company; successfully running their business around the globe. The main aim of the company is to support and serve the local community and create a more sustainable business. This is the most popular beverage manufacturer and marketer of non-alcoholic syrups. The main flagship product of the company is indeed Coca-Cola. Still, they offer more than 400 brands in more than 200 countries in the world (Business Report, 2019). From the initial stage, the company is highly committed towards innovation and integrate the same in its production process. It is to be noted in this context that Coca-cola is following a multi-layered system for the sake of driving brand stewardship. Coca-cola is operating their business in most emerging markets around the world such as Europe, Middle-East, Africa, Latin America, and North America and Asia Pacific nations. Main products of the company include Coca-Cola, Diet Coke, Coca-Cola Zero Sugar, Minute Maid, Fanta, Sprite, Powerade, Gold Peak, Dasani, Simply and GlacéauSmartwater. Such global reach and variety of products are playing a pivotal role for Coca-Cola to attain competitive advantage. However, there are some of the major competitors of Coca-Cola such as Pepsi-Co, Nestle and Dr Pepper Snapple (Trefis Team, 2019). The primary customer segments are restaurants and food chain and coffee houses, who are the regular purchaser of soft drinks.
|Question 1||20 Marks|
|Financial management is mainly concerned with generation, allocation and appropriate management of financial resources, which is the key to cost-effectively running the business. Financial management comprises of both corporate finance and personal finance, and the financial market solely facilitates the economic activity of an organization. Ethics is one of the critical aspects of running a business transparently (CFA Institute. 2020). Hence, the primary ethical considerations need to be maintained in every aspect of the business. Inclusion of ethics in financial management comprises of moral norms, which need to be managed in terms of exploring the opportunity of more significant financial gain. |
There are multiple areas such as financial market, trading practice, financial contracting, fair work and agents, which are most prone towards ethical issues in financial management. So, it is the prime responsibility of financial managers of corporate entities to explore the ethical issues in financial management and take action accordingly to address the same (Atrill & Lindley, 2019). Corporate governance and following the code of ethics in a business is essential since they define the relationship of the stakeholders, management and a committee of directors with a set of rules, company policies and practices in managing the risks and strategic compliance towards the company.
The ethical issues, which are needed to be considered in financial management, are as follows:
|Question 2||20 Marks|
|The financial condition of an organization plays a significant role in determining the overall performance of an organization along with its potential to sustain in the highly competitive business environment. So, it is a matter of utmost importance to assess the financial statement and calculate the core financial ratios. This is the way, through which it would be easy to evaluate the financial health of an organization. To assess the overall financial condition of an organization, it is imperative to assess balance sheet, income statement and cash flow statement individually (Arkan, 2016). As per the perception of Kotane (2015), in-depth analysis of these factors is highly beneficial to get a significant insight about profitability and internal proficiency of an organization. It is to be noted in this context that understanding the core relationship between variables is much more helpful for the sake of assessing the financial condition and performance of an organization. |
The role of the financial statement is very much important factor in the way of providing a comprehensive snapshot of the overall health of an organization. For instance, from the financial statement of Coca-Cola, the overall performance of the company can be assessed. Based on the financial information, it can be said that the net revenue of the company has been declined by 9% and the rate of operating income has been declined by 8% (The Coca-Cola Company. 2020). The sudden outbreak of COVID-19 has affected the operation of companies irrespective of the industries, from which they are belonging. This is so with the case of Coca-Cola. The sales rate of Coca-Cola has been positively shattered due to this COVID-19 pandemic. From the income statement of Coca-Cola, it is evident that prolonged down since June has resulted in the invulnerability of their potential base of customers and declined the rate of sales. In the era of extreme uncertainty due to COVID-19 pandemic, Coca-Cola is highly exposed to severe financial risk. The pandemic has led the company to face severe threat related to commodity, interest rate and commodity (Pollak & Shanker, 2020). Besides, the company is also facing significant current risk. So, from the financial statement of Coca-Cola, it can be said that the overall performance of the company is declining gradually due to the sudden outbreak of COVID-19. However, to sustain in the highly uncertain business environment, the company is putting extreme stress. As informed by Sozzi (2020), the company implemented a comprehensive risk management strategy to focus on the unpredictability of the financial market and take action accordingly in terms of lowering the adverse impact of COVID-19 from their business performance.
According to Myšková&Hájek (2017), the current ratio can be also be defined as the working capital ratio. By measuring this operating capital ratio, the rate of credit balance and long term debt can be measured. Measurement of the quick ratio is also a significant factor, which can help in evaluating the organization's ability to assess cash in terms of supporting immediate demand. Based on the financial ratio of Coca-Cola, it can be said that the rate of current ratio in the year 2019 was 0.7567, which is relatively low in comparison to other years (Macro Trends.net. 2020). So, from the analysis of the financial ratio of Coca-Cola, it can be said that the financial performance of Coca-Cola is lowering, which has highly affected their internal proficiency.
The business performance of the company can also be ascertained through gap analysis on the projected financial statement and financial ratios. The gap analysis in the present scenario helps in distinguishing the specific, measurable, attainable, realistic, and on-time goals to be achieved by the company. The historical data is collected by the finance department to understand the reasons why the objectives and deadlines could not be met (Asif, 2016). The gap in the desired levels is measured in the financial report to understand the final step of compiling an action report which needs to be implemented by the company to gain a desirable outcome in the financial year. As described by ANI New Report (2020), the economic gap analysis in Coca-Cola is determined with the drop in sales to 28% due to many job cuts and stalled operations in the bottling plant during the pandemic crisis.
|Question 3||20 Marks|
|Evaluation of potential areas of financial risk faced by Coca Cola Corporation and the appropriate financial management techniques:|
At present, the multinational company Coca Cola Corp is facing the following financial risks:
|Question 4||20 Marks|
|Business is all about producing and distributing goods and services for satisfying needs and requirements of customers and the community in which a company is continuing its internal functionality. To carry out on-going activities properly, businesses need monetary resources. Therefore, finance is considered as one of the most important factors of running the business with utmost efficiency (Ekpo et al. 2017). As stated by Anderson et al. (2018), business finance is referred to as the fund, which the businesses require for the sake of carrying out various activities. Lack of appropriate financing creates a significant obstruction for the companies to carry out the function smoothly. Different types of business financing are as follows: |
The advantages of different types of business finance help in replacement of the assets, loans from a bank can be easily accessible with the good reputation of the company and being least expensive can be provided against the asset. The stock financing can raise substantial amount where the capital is not required to be paid back (Hazam et al. 2017). The disadvantages of different types of finance are that in case of dissolution of the firm, the assets may also be sold off.
|Question 5||20 Marks|
|Investment appraisal is defined as the process, followed by an organization to assess the attractiveness of an investment. From the finance perspective, the findings from capital budgeting and different financing play a major role in measuring the accountability of investment. As mentioned by Donkor, (2016), the measurement is referred to as the form of fundamental analysis, which can serve organizations with the ability to figure out long term trend as well as perceived profitability. The main aim of investment appraisal is to maximize the profitability of an organization and thereby optimize return on investment. This is mainly meant for evaluating the durability of investment to satisfy long term financial commitment of an organization. This is the way of assessing whether the investment activity is viable by assessing it from a different perspective. (Mahmoud & Neale, 2016) When as a company is aiming to spend money, it is the matter of utmost importance to work out to see spending is on the right thing. This is the way of ensuring the fact that there is value in money, which they are spending.|
The growth and prosperity of an organization are entirely dependent on the continuous flow of idea related to capital investment. Besides, the ability of an organization to generate profitability also plays a major role in determining its prosperity. As stated by Chatzilakos (2018), exploring appropriate investment technique is the matter of utmost importance in the way of making the right investment decision. So, organizations like Coca-Cola must follow appropriate investment technique as it is the key to making the right investment decision. The techniques, which the business giants like Coca-Cola can follow to make the right investment decision are presented below: