Financial management is a study on the financial statement and the financial performance of an organization. This study is conducted by the companies and the financial manager, chief financial officer, investors, stakeholders and professionals to identify the performance of the company and the relevant changes into the company. This report of investigation over the Coca cola Amatil has been prepared to measure the investment position of the company and the total return from the company. This report has been conducted to offer a conclusion to the investors about the investment into the company.
In the report, financial statement and historical stock price of the company, Coca Cola Amatil has been evaluated to distinguish the performance of the company in the market and the changes into the financial presentation of the company in last 3 years. The analysis over the company explains that the company is a good option to make short term and long term investment.
Coca Cola Amatil Limited (CCA) is an Australian company which manufactures, sells and distributes ready to drink non alcoholic drinks in Australia and Asia pacific region. The main segment of the company includes Alcohol, coffee beverages, food and services, corporate, non alcoholic beverages etc. the different segment of the company deals in the different market and offers the great revenue to the company (Reuters, 2018). The annual report (2017) of the business briefs that the financial transaction and the activities of the company are quite competitive and offers a great base to the company. The annual report briefs that the company has made enough changes into the financial and marketing policies of the company to enhance the performance of the company in the market and enhance the market base of the company (Home, 2018).
Substantial stakeholders:
Structure of ownership governance explains about the total shareholders of the company and the strategy of the company to manage the ownership on the basis of stock distributions. The ownership governance structure of Coca Cola Amatil explains that the performance of the company is quite impressive. The top 20 shareholders of the company are as follows:
Figure 1: Top shareholders
(Annual report, 2017)
On the basis of the annual report, it has been found that there are only 2 companies which are having more than 20% stock ownership of the company. Coca cola Holdings limited is the parent comapny of coal coal Amatil and HSBC is a financial institutions. It explains that the directors do not have any substantial interest in the more than 20% holdings of the company. No family members of the directors have involved into the top stockholders of the company.
Further, there are only 4 stockholders who are having more than 5% stocks of the company. All the shareholders with more than 5% stocks are not related with the directors of the company in any manner (Annual report, 2018). It explains about the better ownership structure of the company and says that the company is not manipulated by the directors of the company for their personal interest.
Main people:
The main people of the company are chairman, board members, CEO and board of directors of the company. Ilana Atlas is the CEO of the company. Further, the board members of the company are Alison Watkins, John Borghetti, Julie Coaates, Catherine Brenner, Martin Jansen are the main members of the company. Alison Watkins is the chief executive officer (CEO) of the company (Annual report, 2018).
Further, it has been found that the no board of directors, CEO and chairman of the company has substantial interest in the stock of the company. The governance structure of the company has been prepared in such a way that the directors can’t manipulate the financial statements and the activities to make changes into the stock price of the company.
Ratio analysis is a process which explains about the position and performance of an organization on the basis of final financial statements. On the basis of the Morningstar (2018), final financial statement of coca cola Amatil has been measured to recognize the performance of the company in the market as well as make a decision about the investment into the company. Fundamental ratios of the company are as follows:
Short term solvency position of the company has been calculated on the basis of current ratio and quick ratio of the company. Current ratio calculates the total current assets in context with the current liabilities of an organization to measure the liquidity position of the business (Higgins, 2012). Current ratio of the business explains that the liquidity level of the company has been lowered. However, the current liquid position of the company is still strong.
|
Current Ratio |
2015 |
2016 |
2017 |
|
|
Current Assets / |
3,128 |
3,105 |
2,800 |
|
|
Current liabilities |
2,001 |
1,843 |
1,839 |
|
|
Answer: |
1.56 |
1.68 |
1.52 |
(Morningstar, 2018)
The quick ratio of the company has been calculated further and it has been identified that the quick place of the company has also been lesser but it is competitive in the market and the company could still manage the liquidity in the market.
|
Acid test ratio |
2,015 |
2,016 |
2,017 |
|
|
Current Assets – Inventory / |
2,394 |
2,429 |
2,130 |
|
|
Current Liabilities |
2,001 |
1,843 |
1,839 |
|
|
Answer: |
1.20 |
1.32 |
1.16 |
Long term solvency position of the company has been calculated on the basis of gearing ratio and interest coverage ratio of the company. Gearing ratio calculates the long term liabilities in context with the capital employed of an organization to measure the long term solvency position of the company. Gearing ratio of the company explains that the solvency position of the company has been better in 2017 from last 2 years. However, the company is still required to make few changes into make the optimal capital structure.
|
Gearing ratio |
2,015 |
2,016 |
2,017 |
|
|
Long term liabilities / |
2,256 |
2,211 |
2,338 |
|
|
Capital employed |
4,666 |
4,621 |
4,218 |
|
|
Answer: |
% |
0.483 |
0.478 |
0.554 |
The interest coverage ratio of the company has been calculated further and it has been found that the EBIT of the company has also been enhanced in context with the net finance cost of the company. It explains that the company could easily pay the interest amount to the debt holders of the company.
|
Interest Coverage Ratio |
2,015 |
2,016 |
2,017 |
|
|
EBIT / |
1,019 |
1,018 |
986 |
|
|
Net Finance Costs (used net interest expense) |
121 |
115 |
104 |
|
|
Answer: |
8.42 |
8.85 |
9.48 |
Asset utilization position of the company has been calculated on the basis of efficiency position and working capital management of the company. These ratios measure that how well the company could manage its resources to maintain the amount for daily objectives (Gibson, 2011). Trade payable payment period ratio of the company explains that the asset utilization position of the company has been improved in 2017 from last 2 years. It explains that the company could manage the daily operations from lesser working capital.
|
Trade payable payment period ratio |
2,015 |
2,016 |
2,017 |
|
|
Accounts payable/ |
1,240 |
581 |
587 |
|
|
Cost of sales |
2,953 |
3,012 |
2,840 |
|
|
Answer: (note the above needs to be x 365) |
153.27 |
70.41 |
75.44 |
(Morningstar, 2018)
Further, the inventory turnover and receivable turnover of the company has been evaluated and it has been recognized that the company has lowered the turnover days to maintain the working capital of the company. The current scenario explains that the less working capital is requisite to the company to operate the business.
|
Inventory Turnover (days) |
2,015 |
2,016 |
2,017 |
|
|
Average Inventory / |
734 |
676 |
670 |
|
|
Cost of Sales |
# days |
2,953 |
3,012 |
2,840 |
|
Answer: (note the above needs to be x 365) |
90.72 |
81.92 |
86.11 |
|
|
Receivables Turnover (days) |
2,015 |
2,016 |
2,017 |
|
|
Average trade debtors / |
1,031 |
871 |
922 |
|
|
Sales revenue (note used operating revenue) |
# days |
5,033 |
5,091 |
4,881 |
|
Answer: (note the above needs to be x 365) |
74.77 |
62.45 |
68.95 |
Profitability position of the company has been calculated on the basis of return on capital employed (ROCE), operating profit margin (OM) and gross profit margin (GM) of the company. These ratios measure that how well the company is capable to manage and enhance the profitability level of the company (Hogarth and Makridakis, 2011). ROCE ratio of the company explains that the operating profit in relation with the capital of the business has been improved in 2017 from last 2 years. It explains that the profitability level of the company has been enhanced.
|
Return on Capital employed |
2,015 |
2,016 |
2,017 |
|
|
Operating profit / |
1019 |
1018 |
986 |
|
|
Capital employed (total assets – current liabilities) |
4,666 |
4,621 |
4,218 |
|
|
Answer: |
% |
21.84% |
22.03% |
23.38% |
Further, the gross profit margin and operating profit margin of the company has been identified and it has been recognized that the profitability capability of the business is almost similar in last 3 years. The current scenario says that the business has managed the enough strong strategies to manage the profits of the company.
|
Gross Profit Margin |
2,015 |
2,016 |
2,017 |
|
|
Gross profit / |
2,080 |
2,079 |
2,042 |
|
|
Sales Revenue (note used operating revenue) |
5,033 |
5,091 |
4,881 |
|
|
Answer: |
41.3% |
40.8% |
41.8% |
|
|
Operating profit margin |
2,015 |
2,016 |
2,017 |
|
|
Operating profit / |
1,019 |
1,018 |
986 |
|
|
Sales Revenue |
% |
5,033 |
5,091 |
4,881 |
|
Answer: |
20.25% |
20.00% |
20.20% |
Lastly, the market position of the company has been calculated on the basis of Earnings per share and dividend coverage ratio of the company. These ratios measure that how well the company is performing in the market and what is the position of the company. Earnings per share ratio of the business explain that the net revenue of the company has been enhanced in context with the outstanding shares of the business. It explains that the market level of the business is quite impressive.
|
Earnings per share |
2,015 |
2,016 |
2,017 |
|
|
Net income |
393 |
246 |
445 |
|
|
Weighted average shares outstanding |
764 |
764 |
745 |
|
|
Answer: |
0.514 |
0.322 |
0.597 |
Further, the dividend coverage ratio of the company has been evaluated and it has been recognized that the company is offering higher dividends to the stockholders of the company. The current scenario explains that the company’s market position is quite competitive.
|
Dividend coverage ratio |
2,015 |
2,016 |
2,017 |
|
|
Net income / |
393 |
246 |
445 |
|
|
Dividend paid to shareholders |
321 |
340 |
346 |
|
|
Answer: |
1.224 |
0.724 |
1.286 |
Ratio analysis study explains that the financial performance of Coca cola Amatil is quite impressive. And the company is offering good dividend amount to its stakeholders.
Share price movements:
Figure 2: Stock price
(Yahoo Finance, 2018)
The above graph explains that the stock price of Coca Cola Amatil is quite volatile in context with the AORD prices. It explains about the relationship among the CCA and AORD.
Introduction:
This report has been prepared to evaluate the stock position of CCA in context with the index price, AORD. It measures about the volatility and correlation of the stocks.
On the basis of the historical data of CCA of last 2 years, it has been recognized that the stock price of the company has fluctuate a lot. The average return of last 2 years of the company is 0.01. Further, the market average return of AORD is 0.00 (FT, 2018). The graph explains that the stock price of CCA is more volatile in context with the AORD prices. The correlation of the company is 0.20 which explains that the changes into the stock price of CCA do not impact much on AORD prices (Yahoo finance, 2018).
Conclusion:
On the basis of the study, the position and the performance of the business is quite good and the return of the company is also positive which explains that the investment into the company would offer positive return.
Yahoo finance (2018) explains that the stock price of the company has been changed a lot in last 2 years. The changes have occurred due to various internal and external changes in the company. FT (2018) explains that the stock price of the company has been lowered on 30-9-216 due to some market issues as the index price has also been lowered. Further, on 28-2-2017, the stock price has been enhanced to 10.08 from 9.25. It has taken place due to announcement of new project of the company (AFR, 2018).
In addition, it has been found that volatility of CCA stock is higher than the AORD stock due to various internal issues of the company (ASX, 2018). The study on stock price of the company explains that there is no major competitor of the company and thus the stock price of the company is continuously increasing.
Calculated beta:
|
ANOVA |
|||||
|
Df |
SS |
MS |
F |
Significance F |
|
|
Regression |
1 |
0.002694 |
0.002694 |
0.918387 |
0.348803 |
|
Residual |
21 |
0.061611 |
0.002934 |
||
|
Total |
22 |
0.064306 |
|||
|
Coefficients |
Standard Error |
t Stat |
P-value |
Lower 95% |
|
|
Intercept |
0.005543 |
0.011503 |
0.481882 |
0.634874 |
-0.01838 |
|
X Variable 1 |
0.52417 |
0.546964 |
0.958325 |
0.348803 |
-0.6133 |
Reuters, 2018)
It explains that the beta of the company is 0.52.
CAPM:
The required rate of return of the company is 5.05%. It epxlains that the sharehodlers are expecting at leastt 5.05% return from the company.
|
Calculation of cost of equity (CAPM) |
|
|
Risk free rate |
4.00% |
|
RM |
6.00% |
|
Beta |
0.524 |
|
Required rate of return |
5.05% |
On the basis of the abve study, it has been found that the stock price of the company is gettign fluctuate at a higher rate and the beta of the stock of the company is 0.524. Further, the cost of equity of the company is 5.05%. It explains that the risk of the company is lwoer as well as the return of the company is higher. Thus, the company is a conservative option to invest.
WACC of the business has been calcualted further to measure the total associated cost of the business and the risk level of the organziation. On the basis of WACC measurments, it has been measured that the company’s total cost is 4.30%. the WACC calculations explain that the debt and equity of the company is 48.6% and 51.4% (Annual report, 2018). the cost of debt and cost of equity of the company is 3.5% and 5.05%. It leads that the total capital of the business is 4.30% which is quite lesser and says about better place of the company.
|
Calculation of WACC |
||||
|
Price |
Cost |
Weight |
WACC |
|
|
Debt |
1,972 |
3.50% |
48.60% |
0.01701 |
|
Equity |
2,086 |
5.05% |
51.40% |
0.02595 |
|
4,058 |
Kd |
4.30% |
The cost of debt calculation of the company is as follows:
|
Calculation of cost of debt |
|
|
Outstanding debt |
1,972 |
|
interest rate |
5.00% |
|
Tax rate |
30.0% |
|
Kd |
3.50% |
1.On the basis of the abve study, the optima caapital structure of the comany is 68.96%. It epxlains that the total liabilities of the coompany in context with the total assets of the company are 68.96% which has been enahnced from 62.72%. It says that the debt level of the company is not stable and the current chnages of the business explains that the current capital structure of the company is optimal (Halili, Saleh and Zeitun, 2015). But further changes would lead to company towards the loss.
|
|
2016 |
2017 |
|
Debt Ratio = |
Total Liabilities/ total assets |
Total Liabilities/ total assets |
|
4054/6464 |
4177/6057 |
|
|
62.72% |
68.96% |
2.Gearing ratio of the business has been calculated in addition and it has been measured that the borrowings of the business has been enhanced from last year and the total assets of the business has been lowered. Due to it, the gearing ratio of the company has been enhanced. It explains that the company has made the changes to manage the optimal capital structure and the performance of the company.
|
|
2016 |
2017 |
|
Gearing ratios = |
Total Liabilities/ Capital employed |
Total Liabilities/ Capital employed |
|
4054/(6464-1843) |
4177/(6057-1839) |
|
|
87.73% |
99.03% |
The dividend ratio and the performance of the company brief that the company is providing great amount as dividend to its stockholder. It explains that the company is following the relevant dividend policy which explains that the company should pay dividends to the stockholders of the business to manage the place, performance and enhance the attractive of the business (Titman et al, 2016). The annual report (2017) of the company also explains that the company is following the relevant policy to manage the performance and enhance the investment amount in the company.
To,
Client.
Subject: Investment recommendation letter
Dear client,
According to your query about the investment into the COCA COLA AMATIL LIMITED, a study has been performed on the financial statement and the stock price of the company and it has been found that the company is managing and performing all the activities in better manner in the country. The evaluation explains that the performance of the company is quite strong and investment into the company would offer short term and long term returns.
So, it is recommended to you to invest into the company for long term as you would be able to get higher return from the market in that case.
Regards,
Financial Analyst.
Company name
References
AFR, Viewed May 19 2018, https://www.afr.com/street-talk/last-drinks-for-cocacola-amatil-staff-20180219-h0wc5l
Annual report, Viewed May 19 2018, https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-Report-2017.ashx
ASX, Viewed May 19 2018, https://www.asx.com.au/asx/share-price-research/company/CCL
FT, Viewed May 19 2018, https://markets.ft.com/data/equities/tearsheet/summary?s=CCL:ASX
Gibson, C.H., 2011. Financial reporting and analysis. South-Western Cengage Learning.
Halili, E, Saleh, A and Zeitun, R. 2015. ‘Governance and Long-Term Operating Performance of Family and Non-Family Firms in Australia’, Studies in Economics and Finance, vol.32, no.4, pp.398-421.
Higgins, R.C., 2012. Analysis for financial management. McGraw-Hill/Irwin.
Hogarth, R.M. and Makridakis, S., 2011. Forecasting and planning: An evaluation. Management science, 27(2), pp.115-138.
Home, Viewed May 19 2018, https://www.ccamatil.com/
Morningstar, Viewed May 19 2018, https://financials.morningstar.com/income-statement/is.html?t=CCL®ion=aus
Reuters, Viewed May 19 2018, https://www.reuters.com/finance/stocks/overview/CCL.AX
Titman, S., Martin, T., Keown, A.J., Martin, J.D, Financial Management: principles and applications, 7th Edition, Pearson Education, Melbourne, 2016, Australia.
Yahoo finance, Viewed May 19 2018, https://finance.yahoo.com/quote/ccl.ax?ltr=1
Essay Writing Service Features
Our Experience
No matter how complex your assignment is, we can find the right professional for your specific task. Contact Essay is an essay writing company that hires only the smartest minds to help you with your projects. Our expertise allows us to provide students with high-quality academic writing, editing & proofreading services.
Free Features
Free revision policy
$10Free bibliography & reference
$8Free title page
$8Free formatting
$8How Our Essay Writing Service Works
First, you will need to complete an order form. It's not difficult but, in case there is anything you find not to be clear, you may always call us so that we can guide you through it. On the order form, you will need to include some basic information concerning your order: subject, topic, number of pages, etc. We also encourage our clients to upload any relevant information or sources that will help.
Complete the order form
Once we have all the information and instructions that we need, we select the most suitable writer for your assignment. While everything seems to be clear, the writer, who has complete knowledge of the subject, may need clarification from you. It is at that point that you would receive a call or email from us.
Writer’s assignment
As soon as the writer has finished, it will be delivered both to the website and to your email address so that you will not miss it. If your deadline is close at hand, we will place a call to you to make sure that you receive the paper on time.
Completing the order and download