Topic: Derivatives

Coca cola

Summary:
Coca-Cola represents a great possibility because of its fame as the world's biggest beverage
organization, with a 48 percent worldwide market percentage. The employer's iconic brand and
extensive product portfolio provide a stable basis for trading strategies, imparting each stability and
capacity for growth. Coca-Cola's massive international presence and diverse range of over 500
brands create an exceptionally stable environment for lengthy-term positions. Investors can also
discover the corporation's consistent sales growth and dividend payouts appealing, main to shop for-
and-preserve strategies for sustained returns. Additionally, the agency's strong emblem recognition
and enormous distribution community contribute to reduced volatility compared to lesser-
acknowledged groups, which is appealing to investors searching for greater predictable assets.
Opportunities for buying and selling arise from Coca-Cola's dedication to product innovation and
diversification. The agency's funding in studies and development can cause new products and
marketplace exhilaration, potentially riding stock charge appreciation. This creates openings for
speculative trading, in particular around most important bulletins, product launches, and strategic
shifts.

Contents
Introduction:..........................................................................................................................................1
Balance sheet:.......................................................................................................................................1
Income statement:.................................................................................................................................3
• Gross Profit.........................................................................................................................................4
• Operating Profit..................................................................................................................................4
• Net Income.........................................................................................................................................5
• Cost of Sales.......................................................................................................................................5
Strategy:................................................................................................................................................5
Speculative Trading Strategy................................................................................................................5
Strategy Type: Bull Call Spread............................................................................................................5
• Buy a Call Option...............................................................................................................................5
• Sell a Call Option:..............................................................................................................................5
• Expected Outcome..............................................................................................................................6
Risk Management.................................................................................................................................6
• Stop-Loss Orders................................................................................................................................6
•Diversification:....................................................................................................................................6
Section B:..............................................................................................................................................7
Scenario 1: February sixteen, $60 Strike Call Option:.........................................................................8
Scenario 2: August, $60 Strike Call Option..........................................................................................8
Risk Considerations..............................................................................................................................9
Part C:...................................................................................................................................................9
Strategy Overview.................................................................................................................................9
2. Implementation.................................................................................................................................9
Scenario 1:...........................................................................................................................................10
Scenario 2:...........................................................................................................................................10
Scenario 3:...........................................................................................................................................10
References:..........................................................................................................................................10

Introduction:
Founded in 1886 via pharmacist Dr. John Stith Pemberton, The Coca-Cola Company is a global
beverage titan based in Atlanta, Georgia. With a humble beginning as a medicinal tonic in a small
drugstore, Coca-Cola rapidly transcended its origins to end up one of the maximum recognizable
and ubiquitous brands global. The enterprise's iconic red-and-white emblem and distinctive
contoured bottle have emerge as symbols of refreshment and subculture, shooting the imagination of
generations. The Coca-Cola Company has constructed an extensive portfolio of liquids, offering
greater than 500 manufacturers across diverse categories, consisting of soft beverages, juices, teas,
coffees, and power beverages. Its flagship product, Coca-Cola, has turn out to be synonymous with
soda and represents an indispensable American beverage. However, the enterprise has confirmed
extraordinary adaptability, evolving to satisfy changing purchaser possibilities by way of making an
investment in low-calorie and non-carbonated beverages. Beyond its product innovation, The Coca-
Cola Company is a frontrunner in sustainability and corporate social duty. It actively engages in
environmental conservation, community improvement, and charitable endeavors, aiming to create a
fine effect on a global scale. With a presence in over 200 countries, Coca-Cola is still a cultural icon
and a dynamic force inside the beverage industry, always placing the usual for great and consumer
pleasure. (Panigrahi, V. 2020).
Balance sheet:
Income statement:

The common-length income statement for Coca-Cola provides an in depth view of the business
enterprise's economic shape. The following are extremely good observations:
• Gross Profit: While the gross profit as a percentage of revenue has barely declined over time, it
remains sturdy, indicating powerful price control.
• Operating Profit: Despite fluctuations, Coca-Cola has maintained constant working income,
suggesting operational performance.
• Net Income: Although internet income has seen a moderate decline, the organization keeps to
generate a great earnings.
• Cost of Sales: An boom inside the price of income would possibly advise growing material costs
or other production fees.

Strategy:

Speculative Trading Strategy

Considering the positive financial trends, here is a speculative trading strategy for investing
€100,000 in trading from March 1, 2024, to April 26, 2024:

Strategy Type: Bull Call Spread:

A Bull Call Spread is an options-based strategy that profits from a moderate upward trend in stock
price while limiting risk. Given Coca-Cola's revenue growth, strong operating income, and
increasing cash flow, this strategy aligns with the expectation of continued stock price growth.
Implementation:
• Buy a Call Option: Purchase a name alternative with a strike price slightly above the current
inventory fee. This affords the proper to buy Coca-Cola stock at a predetermined fee earlier than the
expiration date.
• Sell a Call Option: Sell a call option with a higher strike charge and the same expiration date. This
allows offset the fee of the primary option and creates a &outspread decreasing standard threat.
• Expected Outcome: The Bull Call Spread generates income if the inventory fee will increase,
with a most profit if the inventory rate reaches or exceeds the higher strike rate. The danger is
restrained to the internet value of the unfold.

Risk Management
Given that that is a speculative approach, dealing with chance is critical:
•Position Sizing: As a manager the a hundred thousand euro will be investing in special
stock/stocks, as it will help us in destiny trading, bigger the size of the portfolio maximum will be
the profit.
•Stop-Loss Orders: As a manager I can't forestall the loss however have a tendency to forestall the
loss or triumph over the loss in buying and selling due to precise control and strategies, so for that as
a speculator I will create a restriction when the loss turn out to be growth the forestall loss order will
alert and it's going to prevent the trading there. (Susilo, D. 2021).
•Diversification: it way I will invest in distinctive shares ( diversification) to conquer the employer
loss because as a speculator it's miles vital to put money into exceptional portfolio to maximize the
earnings and decrease the loss.
Section B:
Scenario 1: February sixteen, $60 Strike Call Option:
 Suppose you maintain a hundred stocks of Coca-Cola, with each percentage priced at $fifty
nine.50, for a complete investment of $5,950. Selling the February 16 name option with a
$60 strike fee for $0.85 according to share generates an $eighty five premium in step with
agreement (a hundred shares). Here's what happens:
 Premium Income: The choice top rate of $85 represents 1.Forty five% of the whole funding
over a 25-day duration. If annualized, this return equals approximately 21% ((1.Forty five
%×365)÷25(1.45%×365)÷25).
 If KO Stays Below $60: If Coca-Cola's inventory price remains beneath $60 by means of
February sixteen, the option expires worthless, allowing the trader to preserve the premium,
without a duty to sell the stocks. This is the suitable outcome for the included call vendor.
(Susilo, D. 2021).
 If KO Exceeds $60: If the stock fee closes above $60 on expiration, the shares will be
known as away, and the trader gets $60 in keeping with percentage, for a total of $6,000. The
benefit on stocks might be $50 (100×(60−59.50)100×(60−59.50)), plus the $85 top rate,
resulting in a total income of $one hundred thirty five. This represents a 2.30% return over
25 days, that is 33.Sixty one% on an annualized foundation
((2.30%×365)÷25(2.30%×365)÷25).

Scenario 2: August, $60 Strike Call Option

Next, let's don't forget selling the August call alternative with a $60 strike rate for $2.60 in
line with proportion, generating an profits of $260 per settlement (one hundred shares). This
alternative has a 207-day length.
Premium Income:
 The $260 top rate represents 4.Fifty seven% of the overall investment over 207 days. This
equates to about eight.06% on an annualized basis ((4.57%×365)÷207(4.57%×365)÷207).
If KO Stays Below $60: If the stock fee remains below $60, the option expires nugatory,
allowing the trader to maintain the $260 top rate.
If KO Exceeds $60: If the inventory charge exceeds $60, the shares will be called away,
providing a total of $6,000 for the 100 stocks. The benefit on shares is $50, plus the $260
premium, ensuing in a total income of $310. This represents a 5.45% return, or 9.61% on an
annualized basis ((5.45%×365)÷207(5.45%×365)÷207).

Risk Considerations
While included calls may be worthwhile, they bring about dangers:
 Stock Price Drop: If Coca-Cola's stock fee drops notably, any profits from the option
premium might be wiped out by using a loss in the percentage cost.
 Capping Potential Gains: Selling call options limits the ability for gains if the inventory
rate rises above the strike fee. Any appreciation above $60 in each situations is foregone,
because the shares will be referred to as away at that price.

Part C:

Strategy Overview:
The strategy which was chosen that were bullish call spread, that strategy was chosen for investment
in coca company stocks. The call option was bought with the strike price of 62 dollars and sell the
call option in 65 dollars. 3 dollars were company margin. So as a speculator of coca cola company it
was very grateful for speculator to make such a good strategy for company, (Susilo, D. 2021).

2. Implementation
Buy a Call Option: Let's say the decision alternative was purchased with a strike fee of $62.50.
Sell a Call Option: The call option become bought with a strike rate of $65.00.
Net Premium: The net top rate paid for the unfold, calculated because the cost of the lengthy call
minus the top class received for the fast call.
3. Expected Outcomes
Maximum Profit: If the stock fee at expiration reached or exceeded the short call's strike price
($65.00), the method might gain most income.
Break-Even Point: The factor at which the strategy neither makes an income nor incurs a loss,
calculated through adding the internet top class to the lengthy name's strike charge.
Maximum Loss: The maximum loss is limited to the net premium paid for the unfold.
4: Realized Performance To assess the found out performance, consider Coca-Cola's stock rate at
expiration on April 26, 2024, and the way it as compared to the expectations.

Scenario 1:
Stock Price Above or at $sixty five.00 If Coca-Cola's inventory rate reached or surpassed $sixty
five.00, the approach might generate maximum profit. This would align with the anticipated final
results, indicating that the stock fee moved as predicted.

Scenario 2:
Stock Price Between $62.50 and $65.00 If the stock price changed into inside this range, the
method would generate some income, however no longer the maximum. This might suggest a slight
upward fashion, slightly below expectancies.

Scenario 3:
Stock Price Below $62.50 If the inventory rate changed into underneath $62.50 at expiration, the
strategy could bring about a loss, equal to the net premium paid. This outcome could advise that the
predicted upward trend did now not materialize.

References:
1. Panigrahi, V. (2020). An Organization Study On The Coca-Cola Company (Doctoral
dissertation, CMR Institute of Technology, Bangalore).
2. Smith, G. E. Coca-Cola: Understanding the SWOT Analysis & Leading Change for Big
Beverage Company.
3. Susilo, D. (2021). Revealing how Coca-Cola successfully broke into the Indonesia market
with a Coke. Business Innovation and Entrepreneurship Journal, 3(2), 118-126.
4. Nair, R. K., Reddy, L. S., Verma, P., Pandey, R., Yuwono, S., Sin, L. G., ... & Yu, T. P.
(2021). The impact of COVID-19 towards international business strategy: A study of Coca-
Cola company. International Journal of Accounting & Finance in Asia Pacific (IJAFAP),
4(2), 73-92.
 5. Deshpande, A., Kee, D. M. H., Shankar, D., Segi, S., Charles, E. A., Parameswaran, K., &
Vellmurugan, M. (2020). Influence of strategic branding in soft drink market in Indian and
Malaysian context: Study on Coca-Cola to remain top-of-the-mind brand (TOMB). Asia
Pacific Journal of Management and Education (APJME), 3(1), 82-93.
6. Sultan, K., Akram, S., Abdulhaliq, S., Jamal, D., & Saleem, R. (2019). A strategic approach
to the consumer perception of brand on the basis of brand awareness and brand loyalty: A
comparative analysis of Coke & Pepsi brands in Erbil KRI. International Journal of
Research in Business and Social Science (2147-4478), 8(3), 33–44.
https://doi.org/10.20525/ijrbs.v8i3.259
7. Gardner, J. C., McGowan Jr, C. B., & Moeller, S. E. (2011). Using accounting information
for financial planning and forecasting: An application of the sustainable growth model using
Coca-Cola. Journal of Business Case Studies (JBCS), 7(5), 9-16.
Appendices:

Consolidated Dec. 31, Dec. 31,

Balance Sheets 2023 2022
(USD $ in
Millions)

Current Assets

Cash and Cash $9,366 $9,519

Equivalents

Short-term $2,997 $1,043

Investments
Total Cash, $12,363 $10,562
Cash
Equivalents,
and Short-term
Investments

Marketable $1,300 $1,069

Securities

Trade $3,410 $3,487

Accounts
Receivable,
Less
Allowances
Inventories $4,424 $4,233

Prepaid $5,235 $3,240

Expenses and
Other Current
Assets

Total Current $26,732 $22,591

Assets

Noncurrent
Assets

Equity Method $19,671 $18,264

Investments

Other $118 $501

Investments
Other $7,162 $6,189
Noncurrent
Assets
Deferred $1,561 $1,746
Income Tax
Assets
Property, $9,236 $9,841
Plant, and
Equipment —
Net

Trademarks $14,349 $14,214

with Indefinite
Lives
Goodwill $18,358 $18,782
Other $516 $635
Intangible
Assets
Total $70,971 $69,172
Noncurrent
Assets
Total Assets $97,703 $92,763

Current
Liabilities

Accounts $15,485 $15,749

Payable and
Accrued
Expenses
Loans and $4,557 $2,373
Notes Payable

Current $1,960 $399

Maturities of
Long-term
Debt
Accrued $1,569 $1,203
Income Taxes

Total Current $23,571 $19,724

Liabilities

Noncurrent
Liabilities

Long-term $35,547 $36,377

Debt

Other $8,466 $7,922

Noncurrent
Liabilities
Deferred $2,639 $2,914
Income Tax
Liabilities
Total $46,652 $47,213
Noncurrent
Liabilities

The Coca-Cola
Company
Shareowners'
Equity

Common $1,760 $1,760

Stock, $0.25
Par Value

Capital $19,209 $18,822

Surplus
Reinvested $73,782 $71,019
Earnings

Accumulated ####### #######

Other
Comprehensive
Income (Loss)

Treasury ####### #######

Stock, At Cost

Equity $25,941 $24,105

Attributable to
Shareowners

Equity $1,539 $1,721

Attributable to
Noncontrolling
Interests

Total Equity $27,480 $25,826

Total $97,703 $92,763

Liabilities and
Equity