Project Report: Business Finance

This report evaluates the financial and stock performance of Coca Cola Amatil and offers a recommendation to foreign investors. The report includes a description of the company, calculation and analysis of performance ratios, graphs and comparison of share price movements, and share valuation. The liquidity position of the business has been lowered but still it is competitive. The long term solvency position of the business has been improved. The asset utilization position of the business is average and the profitability position of the business has been improved. The market value position of the business has been lowered but still it is better. On the basis of the overall evaluation, it is recommended to the foreign investors to invest into the Coca cola Amatil limited as the position of the business is better and the return from the investment could be higher.

Running Head: Business Finance
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Project Report: Business Finance

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Contents
Introduction.......................................................................................................................3
1.Description of the company...........................................................................................3
2.Calculation and analysis of performance ratios.............................................................3
Short term solvency position........................................................................................4
Long term solvency position........................................................................................5
Asset utilization ratio....................................................................................................6
Profitability ratios.........................................................................................................7
Market value ratios.......................................................................................................9
3.Graphs and comparison of share price movements.....................................................10
4.Share valuation............................................................................................................11
5.Conclusion...................................................................................................................12
6.Recommendation.........................................................................................................12
References.......................................................................................................................14
Appendix.........................................................................................................................16

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Introduction:
An investor is the one who invests the money into the business against the dividend
amount from the business. Investors always evaluates various factors while making decision
about the investment into a particular company. The evaluation on the stock price, intrinsic
value financial ratios, changes into the stock price etc are few of the methods to measure the
investment level of a business (Higgins, 2012). These financial and stock analysis tools make
it way easier for the investors to evaluate more than one company in the same industry and
make better decision about the position of the company.
In the report, an Australian company, Coca cola Amatil has been taken into the
concern to evaluate and apply the various financial and stock analysis tools in order to
measure the performance of the company. The main objectives behind the report are to offer
a recommendation to a foreign investors that whether the investment into the Coca cola
Amatil would be a good option or not.
1. Description of the company:
Coca Cola Amatil limited is operating its business in the Australian market. The core
activities of the business is to manufacture, distribute, marketing and sales the non alcoholic
drinks in the Australian market which is ready to drink. The company is among the largest
ready to drink beverages selling company in the Australian and Asia pacific region. The
company has been founded in the year of 1904. The main operational countries of the
company are Australia, New Zealand, Indonesia, Samoa etc (Home, 2018).
Main products of the company includes Coca cola, Direct coke, powerade, Kriks, Cola
Zero, Deep Spring etc. the main competitive advantages of the company includes its
diversification into different countries and the numerous products offered by the company for
different customer segment. The highest share of Coca cola Amatil is owned by Coca Cola
limited (Reuters, 2018). The revenue of the company is depicting continuous growth in the
position of the business.
2. Calculation and analysis of performance ratios:
Performance ratios are one of the financial evaluation tools and investment analysis
tool. This tool takes the concern of final financial statement of the business in order to
measure that how the company is performing in the industry and whether the investment into

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the company is a good option for the investors or not. In order to evaluate the performance of
Coca Cola Amatil limited, liquidity position, profitability position, asset utilization position,
capital structure position and market value position of the company has been evaluated of last
2 years. The performance ratio and calculations are as follows:
Short term solvency position:
Short term solvency position defines that whether the company could manage the
short term debts against the short term funds of the business. It basically measures the
liquidity risk associated with the business (Titman, Martin, Keown, Martin, 2016). If the
short term funds of the business are lowered than the short term debt of the business then the
liquidity risk of the business is higher. In case of coca cola limited, the below figures have
been calculated:
Liquidity Ratios 2016 2017
Current Ratio 2,016 2,017
Current Assets / 3,105 2,800
Current liabilities 1,843 1,839
Answer: 1.68 1.52
Quick ratio 2,016 2,017
Current Assets - Inventory / 2,429 2,130
Current Liabilities 1,843 1,839
Answer: 1.32 1.16
(Morningstar, 2018)
On the basis of above liquidity ratio calculations, it has been found that the current ratio
position and quick ratio position of the company has been lowered from 1.68 and 1.32 in
2016 to 1.52 and 1.16 in 2017. It explains about decrement in the liquidity position of the
business. However, the current position of the company is more competitive because of that
fact that at this level, the liquidity risk and the cost of the business is minimal.

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Figure 1: Liquidity ratios
(Morningstar, 2018)
Long term solvency position:
Long term solvency position defines that whether the company could manage the long
term debts against the long term funds of the business. It basically measures the capital
structure level of the business and identifies the financial gearing position of the business. If
the better level has not been maintained among the debt and share of the business then it
could hamper the financial gearing level of the business (Hogarth and Makridakis, 2011). In
case of coca cola limited, the below figures have been calculated:
Capital Structure Ratios 2016 2017
Debt ratio 2,016 2,017
Total liabilities / 4,054 4,177
Total assets 6,464 6,057
Answer: % 62.72% 68.96%
Interest Coverage Ratio 2,016 2,017
EBIT / -510 -272
Net Finance Costs (used net interest
expense)
115 104
Answer: -
4.43
-
2.62
(Morningstar, 2018)

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On the basis of above long term solvency ratio calculations, it has been found that the
debt ratio level and interest coverage ratio of the company has been improved from 62.72%
and -4.43 times in 2016 to 68.96% and -2.62 times in 2017. It explains about better long term
solvency position of the company than last year (Annual report, 2017). However, few
changes must also be done in the profitability position to make the interest coverage ratio
positive and reduce the financial gearing level of the business.
Figure 2: Long term solvency ratios
(Morningstar, 2018)
Asset utilization ratio:
Asset utilization position defines that whether a business could utilize the resources in
an efficient way to improve the revenue and other operations of the business. It basically
measures the total revenue of the business against the available assets (Gibson, 2011). If the
asset turnover ratio of the business is higher, it expresses better position of the company.
Asset Utilization Ratios 2016 2017
Total Asset turnover 2,016 2,017
Total sales / 5,091 4,881
Total assets 6,464 6,057
Answer: 0.79 0.81
Total fixed Asset turnover 2,016 2,017
Total sales / 5,091 4,881

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Total fixed assets 3,359 3,257
Answer: 1.52 1.50
(Morningstar, 2018)
On the basis of above asset utilization ratio calculations, it has been found that the
sales turnover of the company has been improved against the total assets of the company
from last year to 0.81. And in case of fixed asset turnover, it has been reduced from 1.52 to
1.50. It explains about average asset utilization position of the business (Halili, Saleh and
Zeitun, 2015). However, on the basis of the current position of the company, it is
recommended to improve the turnover level and maximum utilization of the available
resources of the business.
Figure 3: Asset utilization ratios
(Morningstar, 2018)
Profitability ratios:
Profitability ratio position defines that how much profits could be generated by the
company against the available turnover, resources, equity etc. It basically measures the
profitability level and profit generation capabilities associated with the business. If the
profitability position of the business has been improved, it expresses improved capabilities of
the business (Kaplan and Atkinson, 2015). In case of coca cola limited, the below figures
have been calculated:
Profitability Ratios: 2016 2017

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Return on Capital employed 2,016 2,017
Operating profit / -510 -272
Capital employed (total assets - current
liabilities)
4,62
1
4,21
8
Answer: % -11.04% -6.45%
Gross Profit Margin 2,016 2,017
Gross profit /
2,079 2,042
Sales Revenue (note used operating revenue)
5,091 4,881
Answer: 40.8% 41.8%
Operating profit margin 2,016 2,017
Operating profit / -510 -272
Sales Revenue % 5,091 4,881
Answer: -10.02% -5.57%
Return on assets
Net profit / 246 445
Total assets 6464 6057
Answer: 3.81% 7.35%
Return on equity
Net profit / 246 445
Total equity 2064 1549
Answer: 11.92% 28.73%
(Morningstar, 2018)
On the basis of above profitability ratio calculations, it has been found that the overall
profitability position of the company has been improved from the last year. The company has
made enough changes to improve the profitability level of the business. It explains about
better position of the business (Annual report, 2017). However, few changes are also required
to be done to make the operating profit margin positive through reducing the operating
expenses level of the business.

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Figure 4: Profitability Ratios
(Morningstar, 2018)
Market value ratios:
Market value ratios position defines that whether the company could manage the
position of the business in the market in an effective way. It basically measures the market
stock price, book value price, earnings per share of the shareholders etc. It identifies that
whether the company is able to pay enough return to the shareholders of the business (Kaplan
and Atkinson, 2015). In case of coca cola limited, the below figures have been calculated:
Market value Ratios 2016 2017
Price earnings ratio 2,016 2,017
Market price per share / 8.38 8.66
Earnings per share 0.32 0.59
Answer:
26.188 14.678
Market to book ratio 2,016 2,017
Market capitalization / 8.38 8.66
Total book value 2.50 2.50
Answer: 3.35
2
3.46
4
(Morningstar, 2018)

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On the basis of above market value ratio calculations, the price earnings ratio of the
company has been lowered at great level and the market to book ratio has also been lowered
but the decrement rate if quite lower. It explains about decrement in the market position of
the business. However, the current position is still better and the few changes into the overall
position of the company could improve the market level.
Figure 5: Market value ratios
(Morningstar, 2018)
3. Graphs and comparison of share price movements:
In order to evaluate the investment position of coca cola Amatil, further study has been
done on the stock price movement of the company in last 2 years. Yahoo Finance (2018)
explains that the various changes have occurred into the stock position of the company in last
2 years. Against the stock price of all ordinary shares, it has been found that the fluctuations
in the coca cola Amatil stock are higher. The average changes into the stock price of coca
cola Amatil are 0.67% whereas the total stock price changes into the AORD stocks are 0.93%
(Yahoo Finance, 2018). It explains that the return from the stock of CCL is lower than the
stock of AORD.
The volatility of both the stock has been measured further and it has been found that
the volatility in the stock price of coca cola Amatil us higher than the stock of AORD. The
highest stock price and lowest stock price of coca cola Amatil limited is $ 10.02 and $ 7.24
whereas the highest stock price and lowest stock price of AORD stock is $ 6167.30 and $

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4947.9. It explains that the stock price interval of Coca cola Amatil limited is higher (AFR,
2018).
Further, the beta coefficient of the business explains 1.34 beta factor of the company.
It explains that the fluctuations of coca cola Amatil are not fluctuated on the basis of the
stock price of AORD. Both the stocks are running individually in the stock exchange.
Further, the study has been done on the correlation among both the stocks and it has been
measured that the correlation among the CCL and AORD is 0.53 which explains that the
relation among the stocks are positive (Higgins, 2012). On the basis of the overall study on
the stock performance of CCL, it has been measured that the performance of stock position of
Coca cola limited is better.
Figure 6: Stock price movement
(Yahoo Finance, 2018)
4. Share valuation:
After the evaluation on the financial statement and the stock price of coca cola Amatil,
the share worth of the business has been studied further. The stock price of a business in the
market is always different than the actual worth of the business. CAPM, DGM, DCF, Net
assets value etc are the few methods to measure the actual worth of the stock of the business.
In case of coca cola Amatil, the constant dividend growth model has been applied on the
business to measure the intrinsic value of the business (Madura, 2014).
Constant dividend growth model method measures the present value of the stock price
on the basis of the dividend offered by the company, growth rate of the dividend and the

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required rate of return of the business (Kurth, 2013). In case of coca cola Amatil, it has been
found from yahoo finance (2018) that the expected dividend of the company is $ 0.49. The
growth rate and the required rate of return of the business is 4% and 9% respectively.
Dividend Growth rate Model
Dividend expected $ 0.49
Growth rate 4.00%
Discount rate 9.00%
Intrinsic Value 9.78
Share Price 9.89
Overvalued
(Yahoo finance, 2018)
It explains that the intrinsic value of the Coca cola Amatil is $ 9.78 whereas the
current share price of the company is $ 9.89. It explains that the stock price of the company is
higher than the actual worth of the business. It explains that the stock price of the company is
overvalued and the current position. Though the changes among both the stock price (the
intrinsic value and the market value) of the company, it has been found that the changes
among the stock price of the company are not higher. It represent that the current position is
better in terms of sell the stock in the market and get higher return. The foresting process
explains that the future performance of the stock price would be much better but the associate
risk is higher. Thus investors could make the decision on the basis of the nature and the
requirements.
5. Conclusion:
On the basis of the study on coca cola Amatil limited for the purpose of investment, it
has been found that there are various changes which have been occurred into the financial
position, stock price position and the stock value of the business. Some of the changes define
about better position whereas at some of the places, the performance of the business has been
decreased. The performance ratio analysis expresses about better position of the company and
few changes into some of the financial strategies would make it better for the business to
improve the overall position in the market.
In addition, on the basis of the changes into the stock price, it has been recognized
that the returns are positive from the business and the risk factors of the business could also
be managed. Further, the stock value analysis also explains that there is little difference

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among the actual price and the intrinsic value of the business. It concludes about better
performance of the business.
6. Recommendation:
In order to offer a recommendation about the investment into the Coca cola Amatil,
various financial tools have been applied on the business and it has been recognized that the
overall position of the business has been improved from the last year. The liquidity ratios,
profitability ratios, capitals structure ratios, market value and asset utilization position of the
company, as whole, explains that the investment into the company is a better choice for the
purpose of investment as it would offer higher return to the business and the future forecast
also explains about better performance of the company in future.
The stock price evaluation expresses that the returns from the stock of CCL are
positive and the risk factors of the business are average against the return from the business.
Further, the stock value analysis also explains that there is little difference among the actual
price and the intrinsic value of the business. It concludes about better performance of the
business. And thus, it is recommended to the investors to invest into the CCL stock to get
higher return.

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References:
AFR, 2018, COCA COLA AMATIL LIMIED. Viewed September 2018,
http://www.afr.com/street-talk/last-drinks-for-cocacola-amatil-staff-20180219-h0wc5l
Annual report, 2017, COCA COLA AMATIL LIMIED. Viewed September 2018,
https://www.ccamatil.com/-/media/Cca/Corporate/Files/Annual-Reports/2018/Annual-
Report-2017.ashx
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, 32 (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, 2018, COCA COLA AMATIL LIMIED. Viewed September 2018,
https://www.ccamatil.com/
Kaplan, R.S. and Atkinson, A.A., 2015. Advanced management accounting. PHI Learning.
Kurth, S. 2013. Critical Review about Implications of the Efficient Market Hypothesis. GRIN
Verlag.
Madura, J. 2014. Financial Markets and Institutions. Cengage Learning.
Morningstar, 2018, COCA COLA AMATIL LIMIED. Viewed September 2018,
http://financials.morningstar.com/income-statement/is.html?t=CCL&region=aus
Reuters, 2018, COCA COLA AMATIL LIMIED. Viewed September 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, 2018, COCA COLA AMATIL LIMIED. Viewed September 2018,
https://finance.yahoo.com/quote/CCL.AX/history?

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period1=1506507505&period2=1538043505&interval=div
%7Csplit&filter=div&frequency=1d
Yahoo Finance, 2018, COCA COLA AMATIL LIMIED. Viewed September 2018,
https://finance.yahoo.com/quote/ccl.ax?ltr=1

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Appendix:
COCA-COLA AMATIL LTD (CCL) CashFlowFlag INCOME STATEMENT
Fiscal year ends in December. AUD in millions except per share
data.
2016-
12
2017-
12
Revenue 5091 4881
Cost of revenue 3012 2840
Gross profit 2079 2042
Operating expenses
Sales, General and administrative 863 837
Restructuring, merger and acquisition
Other operating expenses 1726 1477
Total operating expenses 2590 2314
Operating income -510 -272
Interest Expense 115 104
Other income (expense) 1018 986
Income before taxes 393 610
Provision for income taxes 136 149
Net income from continuing operations 257 461
Other -11 -16
Net income 246 445
Net income available to common shareholders 246 445
Earnings per share
Basic 0.32 0.59
Diluted 0.32 0.56
Weighted average shares outstanding
Basic 764 745
Diluted 764 796
EBITDA 777 976
COCA-COLA AMATIL LTD (CCL) CashFlowFlag BALANCE SHEET
Fiscal year ends in December. AUD in millions except per share
data.
2016-
12
2017-
12
Assets
Current assets
Cash
Cash and cash equivalents 1378 1038
Total cash 1378 1038
Receivables 871 922
Inventories 676 670
Deferred income taxes 2 5
Prepaid expenses 37 67

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Other current assets 141 97
Total current assets 3105 2800
Non-current assets
Property, plant and equipment
Gross property, plant and equipment 4428 4332
Accumulated Depreciation -2479 -2467
Net property, plant and equipment 1949 1865
Equity and other investments 26 28
Goodwill 119 148
Intangible assets 1089 1060
Prepaid pension benefit 21 23
Other long-term assets 156 134
Total non-current assets 3359 3257
Total assets 6464 6057
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt 422 421
Capital leases
Accounts payable 581 587
Deferred income taxes 42 28
Other current liabilities 799 803
Total current liabilities 1843 1839
Non-current liabilities
Long-term debt 1960 1930
Capital leases
Deferred taxes liabilities 156 284
Pensions and other benefits 58 56
Minority interest 346 331
Other long-term liabilities -309 -263
Total non-current liabilities 2211 2338
Total liabilities 4054 4177
Stockholders' equity
Common stock 2256 1907
Other Equity 415 399
Retained earnings -585 -621
Accumulated other comprehensive income -22 -136
Total stockholders' equity 2064 1549
Total liabilities and stockholders' equity 6118 5726
COCA-COLA AMATIL LTD (CCL) Statement of CASH FLOW
Fiscal year ends in December. AUD in millions except per share 2016- 2017-

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data. 12 12
Cash Flows From Operating Activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment -284 -294
Property, plant, and equipment reductions 14 152
Acquisitions, net 9 -21
Purchases of investments -2
Sales/Maturities of investments
Purchases of intangibles -20 -18
Sales of intangibles
Other investing activities 90
Net cash used for investing activities -190 -183
Cash Flows From Financing Activities
Debt issued 590 473
Debt repayment -688 -461
Common stock issued
Common stock repurchased -351
Dividend paid -340 -346
Net cash provided by (used for) financing activities -438 -684
Effect of exchange rate changes -7 -63
Net change in cash -635 -930
Cash at beginning of period 1237 1377
Cash at end of period 602 447
Free Cash Flow
Capital expenditure -303 -312
Free cash flow 472 277
CCA AORD
Date
Adj
Close Return
Adj
Close Return
31/12/2015 7.24332 5056.6
31/01/2016 7.32944 1.19% 4947.9 -2.15%
29/02/2016 7.82379 6.74% 5151.8 4.12%
31/03/2016 7.61138 -2.71% 5316 3.19%
30/04/2016 7.85919 3.26% 5447.8 2.48%
31/05/2016 7.28391 -7.32% 5310.4 -2.52%
30/06/2016 8.16011 12.03% 5644 6.28%
31/07/2016 8.65573 6.07% 5529.4 -2.03%
31/08/2016 9.0717 4.81% 5525.2 -0.08%
30/09/2016 8.6286 -4.88% 5402.4 -2.22%
31/10/2016 8.67382 0.52% 5502.4 1.85%
30/11/2016 9.15318 5.53% 5719.1 3.94%

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31/12/2016 8.81853 -3.66% 5675 -0.77%
31/01/2017 9.27077 5.13% 5761 1.52%
28/02/2017 10.0218 8.10% 5903.8 2.48%
31/03/2017 8.67876
-
13.40% 5947.6 0.74%
30/04/2017 8.65097 -0.32% 5761.3 -3.13%
31/05/2017 8.54908 -1.18% 5764 0.05%
30/06/2017 7.63212
-
10.73% 5773.9 0.17%
31/07/2017 7.45613 -2.31% 5776.3 0.01
31/08/2017 7.34265 -1.52% 5744.9 -0.54%
30/09/2017 7.74161 5.43% 5976.4 4.03%
31/10/2017 7.54213 -2.58% 6023.5 0.79%
30/11/2017 8.08357 7.18% 6167.3 2.39%
Average Return 0.67% 0.93%
Beta 1.34
Correlation 0.53
Minium stock price 7.24 4947.90
Maximum stock
price 10.02 6167.30
Stock price interval 38.36% 24.64%