Structure of Ownership Governance

Running Head: Finance for business
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Project Report: Finance for business

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Contents
Introduction.......................................................................................................................3
1. Company description....................................................................................................3
2. Structure of ownership governance..............................................................................3
3. Fundamental Ratio analysis..........................................................................................5
4. Stock price evaluation...................................................................................................9
5. Share price influence factor........................................................................................10
6. Beta value and CAPM................................................................................................10
7. WACC........................................................................................................................11
8. Optimal capital structure.............................................................................................12
9. Dividend policy..........................................................................................................13
10. Recommendation letter.............................................................................................13
References.......................................................................................................................14
Appendix.........................................................................................................................15

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Introduction:
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.
1. Company description:
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).
2. Structure of ownership governance:
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

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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

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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.
3. Fundamental Ratio analysis:
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:
a. Short term solvency:
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

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b. Long term solvency:
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
c. Asset utilization:
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

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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 /
1,03
1
87
1
92
2
Sales revenue (note used operating
revenue)
#
days
5,03
3
5,09
1
4,88
1
Answer: (note the above needs to be x 365) 74.77 62.45 68.95
d. Profitability ratios:
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

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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%
e. Market value ratios:
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

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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.
4. Stock price evaluation:
Share price movements:

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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.
Business report:
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.
Analysis:
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.
5. Share price influence factor:

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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.
6. Beta value and CAPM:
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
Coefficient
s
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%

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Conservative:
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.
7. WACC:
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%
8. Optimal capital structure:
Optimal capital structure:

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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%
Gearing ratio:
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%
9. Dividend policy:
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.

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10.Recommendation letter:
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.

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References:
AFR, Viewed May 19 2018, http://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,
http://financials.morningstar.com/income-statement/is.html?t=CCL&region=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

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Appendix:
CCA AORD
Date
Adj
Close Return
Adj
Close Return
30-06-
2016 8.09 5644.00
31-07-
2016 8.58 6.07% 5529.40
-
2.03%
31-08-
2016 8.99 4.81% 5525.20
-
0.08%
30-09-
2016 8.61 -4.21% 5402.40
-
2.22%
31-10-
2016 8.66 0.52% 5502.40 1.85%
30-11-
2016 8.68 0.31% 5719.10 3.94%
31-12-
2016 8.80 1.35% 5675.00
-
0.77%
31-01-
2017 9.25 5.13% 5761.00 1.52%
28-02-
2017 10.08 8.94% 5903.80 2.48%
31-03-
2017 8.73
-
13.40% 5947.60 0.74%
30-04-
2017 8.70 -0.32% 5761.30
-
3.13%
31-05-
2017 8.60 -1.18% 5764.00 0.05%
30-06-
2017 7.68
-
10.73% 5773.90 0.17%
31-07-
2017 7.50 -2.31% 5776.30 0.04%
31-08-
2017 7.44 -0.76% 5744.90
-
0.54%
30-09-
2017 7.85 5.43% 5976.40 4.03%
31-10-
2017 7.64 -2.58% 6057.20 1.35%
30-11-
2017 8.19 7.18% 6167.30 1.82%
31-12-
2017 8.07 -1.53% 6146.50
-
0.34%
31-01-
2018 8.38 3.82% 6117.30
-
0.48%
28-02-
2018 8.67 3.52% 5868.90
-
4.06%