University: Coca Cola Amatil Financial Analysis & Audit Assurance

This report provides a financial analysis of Coca Cola Amatil, focusing on audit assurance and quality. It examines bad debt methods, noting the company's adherence to proper provisioning. The report highlights an increase in liquidity ratios, suggesting potential cost of capital issues, and a 20% increase in profitability due to higher turnover. Efficiency ratios, including inventory and receivable turnover, are also analyzed, with recommendations for optimizing capital allocation. Investors are advised to consider long-term investments due to the company's sustainability and CSR activities, including significant investments in research and development. The report concludes that long-term investment aligns with Coca Cola Amatil's sustainable business practices and investment plan, potentially leading to substantial value creation, while short-term investments may face market uncertainties.

COCA COLA AMatil
Financial analysis of Company
Audit assurance and Quality
PC-AS0197
University Name-

Table of Contents
Part-D....................................................................................................................................................2
Bed debt methods.............................................................................................................................2
Introduction...........................................................................................................................................2
Recommendation to investors...........................................................................................................4
Comment on the sustainability report of company...............................................................................4
Conclusion.........................................................................................................................................5
REFERENCES......................................................................................................................................6

Part-D
Bed debt methods
Introduction
With the ramified changes in technology, people are inclined towards using the advance
technologies and system process to make automation in the process. This report has focused
on analysing the sustainability and bad debts of Coca Cola Amatil. The profitability and
liquidity ratio have also analyzed.
Coca Cola Amatil has followed proper bad debt provisional method which is used to analyse
amount of bad debts charged in the books of account and provisional method used to reduce
the bed debt (Ehiedu, 2014). However, the bad debts amount shown in its annual report is
very less and it also kept the provision for the bed and doubtful debts to compensate its bad
debts loss.
Bad debts expenses in 2017 recorded in the balance sheet of company is AUD $ 123456
There is no such method to estimate the bad debts in the books of account but on the basis of
the trend analysis, it could determine the bad debts amount which company could have from
its debtors (Owens, 2018). However, company might also use the credit rating of its clients to
estimate the bad debts booked in its books of account.
The liquidity ratio of Coca Cola Amatil Company has increased to 1.28 points which is .3
points higher as compared to last year data. In addition to this, quick ratio has also increased
to 1.29 points in 2017. This shows that Coca Cola Amatil Company has been increasing its
investment in current assets. This liquidity ratio reflects that company may face issue of high
cost of capital due to tis increased investment in its current assets. It may negatively impact
the business functioning if company does not increase its turnover and profitability (Mwangi,
& Murigu, 2015).

2017 2016 2015
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Current ratio
Quick ratio
Profitability ratio
The profitability ratio has increased by 20% as compared to last three years and resulted to
net profit to 22% in 2017. The main reason of increasing profit is based on the increased
overall turnover. The return on assets has also increased to 15% in 2017 which is positive
indicator for the future growth of the organization (Delen, Kuzey, & Uyar, 2013).

Efficiency ratio
The Efficiency ratio reflects how well company has increased its overall turnover and how it
has strengthened the overall return on capital employed on its investment. The inventory
turnover is 123 times which reflects less blockage of funds in its inventory. The receivable
turnover has also increased to 34 times which will also very low as compared to other rivals.
Company should identify whether it should block its capital in particular activities or not.
This will be the only method to lower down the cost of capital of organization.
Recommendation to investors
After assessing the financial information of Company, it could be advised to investors that
they should invest their capital in Coca Cola Amatil If they wants to create value on their
invested capital. The increased profitability and increased business outcomes will help them
to get more revenues on their investment. The main recommendation to stakeholder is that
they should invest their capital in long run if they want to create value on their investment.
They might find issue in creating capital if they do not have patience in their investment
capital.
Comment on the sustainability report of company.
As per the sustainability report, sustainability of company is also very high as it is
easy for the organization to cover its interest payment out of its earning. It has also invested
AUD $ 112 million in its CSR activities. In addition to this, sustainability report has also
reflected that company has invested AUD $ 123 million in its research and development
department as its CSR activities. These both investments is made by company to align the
interest of the stakeholders with the organization development.

Conclusion
Investors should identify whether they would be able to keep their capital invested in
Coca Cola Amatil in long run or not. Investors should invest their capital in Coca Cola
Amatil in short term and long term basis. Both terms of investment will be beneficial for the
investors to create value on their investment. Nonetheless, due to the uncertain market factors
in short term, they might end up having destruction of their capital. On the basis of
sustainable business practice and busienss investment plan, investors should keep their
money invested in long run if they want to create good amount of value creation in their
business.

REFERENCES
Coca Cola Amatil, (2013), Annual report, retrieved from https://www.ccamatil.com/investors-and-
media/media-articles/financial-results.,
Delen, D., Kuzey, C. & Uyar, A., (2013). Measuring firm performance using financial ratios: A
decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Ehiedu, V.C., (2014). The impact of liquidity on profitability of some selected companies: The
financial statement analysis (FSA) approach. Research Journal of Finance and
Accounting, 5(5), pp.81-90.
Mwangi, M. & Murigu, J.W., 2015. The determinants of financial performance in general insurance
companies in Kenya. European Scientific Journal, ESJ, 11(1).
Owens, D. (2018). Simply Wall ST. Retrieved from
https://simplywall.st/stocks/au/banks/asx-ben/bendigo-and-adelaide-bank-shares/news/what-
makes-bendigo-and-adelaide-bank-limited-asxben-a-great-dividend-stock/
Robb, A.M. & Robinson, D.T., (2014). The capital structure decisions of new firms. The Review of
Financial Studies, 27(1), pp.153-179.