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The Coca-Cola Company

The Coca-Cola Company is a worldwide icon in the beverage business, known for having
a wide range of products and a strong presence in many markets (Baah & Bohaker, 2015). Coca-
Cola's history, which spans more than one hundred years, is a great example of how to be
resilient, come up with new ideas, and strategically adapt to changing customer tastes. By
looking at the company's Return on Equity (ROE) and Earnings Per Share (EPS), you can get a
good idea of how well it is doing financially and strategically. These measures show how
profitable, efficient, and financially healthy Coca-Cola is overall. They show how well the
company can deliver value to its shareholders and keep growing even as market conditions
change (Puravankara, 2007). By breaking down ROE and EPS, analysts learn a lot about Coca-
Cola's ability to make money from the shareholders' equity that they have put in the company
and to give each outstanding share of common stock the most earnings possible. This complete
understanding not only helps us evaluate Coca-Cola's financial success in a more nuanced way,
but it also helps us make strategic decisions and understand how investors feel.
Return on Equity (ROE) becomes one of the most important ways to measure how well a
business is doing financially and how much value it is creating for its shareholders. Based on this
number, you can tell how well the company is using shareholders' equity to make future gains
(Townsend & Bick, 2011). ROE is a key indicator of a company's operational and financial
success because it shows how efficiently and effectively the company uses its resources to make
money. Earnings Per Share (EPS), on the other hand, gives investors a more detailed picture of
how profitable the business is per share, which helps them understand how earnings are
distributed among shareholders. EPS tells investors how well a company can offer value and
make money for its shareholders by figuring out how much of a company's profit is allocated to
each outstanding share of common stock (Chu, 2020). ROE and EPS are two important financial
measures that work together to show not only how well a company is doing but also how it
compares to its competitors, how fast it is growing, and how long it will be able to stay in
business. Let's look at the Coca-Cola Company's ROE and EPS calculations to judge its
financial stability.
Calculations
Return on Equity (ROE) Calculation:
ROE = Net Income / Shareholders' Equity
Assuming the Coca-Cola Company reported a net income of $10 billion and shareholders' equity
of $50 billion, the ROE calculation would be as follows:
ROE = $10 billion / $50 billion = 0.20 or 20%
This indicates that for every dollar of shareholders' equity invested in the company, Coca-Cola
generated a return of 20 cents.

Earnings Per Share (EPS) Calculation:

EPS = Net Income / Total Outstanding Shares

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Suppose Coca-Cola's net income stands at $10 billion, and the total outstanding shares amount to
4 billion. The EPS calculation would be:
EPS = $10 billion / 4 billion shares = $2.50 per share
Thus, Coca-Cola generated earnings of $2.50 for each outstanding share of common stock.
Interpretation and Analysis
The estimated ROE of 20% shows that Coca-Cola can give its shareholders a good return
on the money they put into the business (Chu, 2020). A 20% ROE means that the company is
making good use of its owners' money, making it profitable, and managing its assets well so that
it can make money.
Also, Coca-Cola's $2.50 EPS shows how profitable the company is per share. Since each
share is worth a good chunk of the company's earnings, buyers can be sure that the business is
solvent and can give them a return on their money.
These numbers show that the Coca-Cola Company is doing well financially and running
its business efficiently (Chu, 2020). But it's important to think about other things that might
affect these measures and give a more complete picture.
Factors influencing the company's ROE & EPS
The capital structure of Coca-Cola, which includes both debt and equity, is a key factor in
setting its ROE and EPS (Chu, 2020). A well-balanced capital structure makes sure that funds are
used efficiently and that financial danger is kept to a minimum. Coca-Cola can increase its ROE
and EPS and increase shareholder value by finding the right mix between debt and equity
financing.
Adopting uniform and clear accounting practices is essential for accurate financial
reporting, which has a direct effect on figuring out ROE and EPS (Townsend & Bick, 2011).
Coca-Cola makes sure that its financial records are accurate and reliable by following strict
accounting rules and standards. This builds trust among investors and makes it easier for people
to make smart decisions.
Tax laws and rates have a big effect on Coca-Cola's ability to make money, which in turn
has an effect on its ROE and EPS. If tax rates go up, net income might go down, which would
make ROE and EPS less important (Puravankara, 2007). So, Coca-Cola needs to know how to
deal with the complicated rules about taxes in order to improve its financial success and the
returns it gives to its shareholders.
Strategic investments in growth, new ideas, and market development can help Coca-Cola
make more money and grow its business, which will have a good effect on its ROE and EPS
(Chu, 2020). Coca-Cola can improve operating efficiency, increase shareholder value, and set
itself up for long-term growth in a competitive market by putting resources into projects that add
value.
Coca-Cola's reserved earnings and, by extension, its EPS are directly affected by how it
pays out dividends. In order to stay profitable and increase shareholder value over the long run,
companies must find a way to balance paying dividends with investing in business growth
(Townsend & Bick, 2011). Coco-Cola can make better decisions about where to put its money

and increase shareholder returns by implementing a smart reward policy that fits with its growth
goals.
Conclusion
Looking at Coca-Cola Company's ROE and EPS shows that it is doing very well
financially and making a lot of money. A 20% return on equity and a profits per share (EPS) of
$2.50 show that the company is making good use of its shareholders' money and making good
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23/5/24, 8:59 The Coca-Cola Company - Assessment 1 (docx) - CliffsNotes
$2.50 show that the company is making good use of its shareholders money and making good
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References
Townsend, S., & Bick, G. (2011). Coca-Cola's MDCs: Distribution effectiveness vs social
responsibility? https://doi.org/10.4135/9781473964136
Puravankara, D. (2007). Strategic analysis of the coca-cola company.
https://summit.sfu.ca/_flysystem/fedora/sfu_migrate/8182/etd3061.pdf
Baah, S., & Bohaker, L. (2015). The Coca-Cola Company. Culture, 16, 17.
https://www.academia.edu/download/44703116/strategic_analysis_of_coca-
cola_sandra_baah.pdf
Chu, B. (2020, November). Analysis on the Success of Coca-Cola Marketing Strategy. In 2020
2nd International Conference on Economic Management and Cultural Industry (ICEMCI
2020) (pp. 96-100). Atlantis Press.

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