cash conversion cycle improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022. number of days of payables outstanding increased from 2020 to 2021 but then slightly decreased from 2021 to 2022.Ī financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations equal to average inventory processing period plus average receivables collection period minus average payables payment period.Ĭoca-Cola Co. operating cycle improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022.Īn estimate of the average number of days it takes a company to pay its suppliers equal to the number of days in the period divided by payables turnover ratio for the period.Ĭoca-Cola Co. number of days of receivables outstanding improved from 2020 to 2021 and from 2021 to 2022.Įqual to average inventory processing period plus average receivables collection period.Ĭoca-Cola Co. number of days of inventory outstanding improved from 2020 to 2021 but then slightly deteriorated from 2021 to 2022 not reaching 2020 level.Īn activity ratio equal to the number of days in the period divided by receivables turnover.Ĭoca-Cola Co. This article first appeared on GuruFocus.An activity ratio equal to the number of days in the period divided by inventory turnover over the period.Ĭoca-Cola Co. Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here. It is highly important to understand this metric before investing, and to look at the trend over time.ĭisclosure: The author holds no positions in any stocks mentioned. In general, analysts consider ROE ratios in the range between 15% and 20% to be attractive. Please note that the leverage ratio is more than 2.Īs outlined previously, the ROE is a key ratio used to measure management efficiency. Thanks to GuruFocus, we can know that the ratio is ranked higher than 96% of the 93 companies in the nonalcoholic beverages industry.Ĭoca-Cola's net margin was 16.91% and the asset turnover was 0.09. Moreover, during the past 13 years, Coca-Cola's highest ROE was 49.61%, the lowest was 6.22% and the median was 27.13%. Therefore, Coca-Cola's annualized ROE for the quarter was 30.73%. If we have a low ROE, one of the following statements must be happening:Ĭoca-Cola's average total stockholders equity for the quarter that ended in December 2020 was $18.95 billion. The first term is what we called previously net profit margin, the second term is asset turnover and the third term is the financial leverage ratio. ROE = (Net profit margin)* (Asset Turnover) * (Leverage ratio) Now, ROE is broken into three widely used components: This analysis enables a deep understanding of Coca-Colas financial performance and efficiency. Each ratio is defined, and its corresponding formula for calculation is provided. ROE = (Net Income / Revenue) * (Revenue / Assets) * (Assets / Shareholder's Equity) Around 10 important financial ratios for Coca-Cola have been reviewed over the last five years. The inventory turnover generally favored Coca-Cola, as they recorded a higher inventory turnover in every year except 2010. Now we can multiply these terms by (assets/assets) and rearrange to end up with the three-step DuPont equation. The ROE was broken into two parts, the first is net profit margin and the second is the equity turnover ratio. ROE = (net income / revenue) * (revenue / shareholder's equity) In the initial equation, ROE equals net income divided by shareholder's equity and then multiplied ROE by (revenue/revenue) and rearranging terms to get: Let's consider the initial approach, which is called the original DuPont equation. ROE can be broken into a function of different ratios. But if book value decreases more rapidly than net income, the ratio will increase, which is not a good indicator. Most of the time, the higher the ROE, the better for a company's management. Warning! GuruFocus has detected 5 Warning Sign with KO. The reason for this is that the numerator and denominator are different variables in their nature, so analysts consider the mean when accounting for the equity. This is 46.91 higher than that of the Beverages sector and significantly. The ratio is calculated as net income applicable to common shares divided by the average book value of common equity.įor average book value, we often take the value at time t and t-1 and consider the mean. Based on the companys disclosures, The Coca Cola has a Working Capital of 2.87 B. A useful ratio for investors, which is arguably the best measure of performance for a company's management team, is the return on equity.
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