Coca Cola Essay, Research Paper
The wonderful idea of Coca-Cola started way back in 1886. Dr. John S. Pemberton invented this drink as a tonic for most common ailments. Composed of extracts from the coca leaf and the kola nut, this caused his drink to be sightly addictive. The name, Coca-Cola, fits well with the main ingredients, and was given to Mr. Pemberton by his bookkeeper, Mr. Frank Robinson. The drink was originally sold for 5 cents a glass at Jacob s Pharmacy in Atlanta. One summer, a man walked in with a horrible headache. To get instant relief, he asked the soda jerk if he would mix his drink right there with soda water, rather than walk to the end of the counter and mix it with regular tap water. Ever since then a Coca-Cola has been carbonated. Mr. Pemberton started getting sick and the next year he decided to sell his company. He sold it off in parts, but later a man named Asa Candler acquired total ownership of it. Pemberton died in 1888, and with Candler in charge sales rose from 9,000 gallons of syrup in 1890, to 370,877 gallons in 1900.
The Coca-Cola Company is the largest distributor and marketer of soft drink syrups in the world. Selling Coca-Cola, Coca-Cola Classic, caffeine free Coca-Cola, caffeine free Coca-Cola Classic, Diet Coke, caffeine free Diet coke, Cherry Coke, Fanta brand soft drinks, Sprite, Diet Sprite, Mr. Pibb, Mellow Yellow, TAB, Fresca, Barq s, Surge, Cirta, POWERaDE, Fruitopia, Minute Maid flavors, Saryusaisai, Aquarius, Bonaqua, Dasani, Lift, Thumbs Up, Hit, Schweppes, Canada Dry, Dr. Pepper, Crush, Five Alive, Hi-C, and Bacardi brand tropical fruit mixers. Out of the 48 billion servings of beverages served a day, Coke, or a Coca-Cola product accounts for more then 1 billion of them. Coca-Cola products are sold in nearly 200 different countries around the world. Coca-Cola is the world s largest bottler of company trademark beverages. And more then 15 Billion retailers around the world sell Coca-Cola products.
Recently, the Coca-Cola Company purchased a small company with the name P.J. Bean Company which is responsible for a line of ready-to-drink, bottled coffee called Java Planet. Currently only available in New York and New Jersey, Coke has plans to distribute this nation wide in competition with Pepsi Co. s Frappucchino and their deal with Starbucks. Also on the way, Coke wants to grasp a larger selection of the non-carbonated beverage consumers. Bottled milk products, such as strawberry flavored, are set to be tested in the beginning of 2002. Moms would much prefer that their kids drink milk than sodas. The key now is to figure out ways to make milk hip to kids. LouAnn Loften comments about the proposed idea by coke.
After reviewing the company s profile and ratio comparisons of the company compared to the industry, the Coca-Cola Company, New York Stock Exchange ticker symbol KO , reveals a fairly conservative stock investment. The price per earnings is the price of the stock divided by its earnings per share, The Coca-Cola Company has a P/E ratio of 74.61. This number is greater than the industry s average by 15.52 points, and is greater than the average of non-cyclical, consumer products (which are anything that could be bought) by 40.88. An annual dividend is the amount of money per share the company pays to its share holders from its profit. The Coca-Cola Company has an annual dividend of only $ .68 per share. Not that is not much, but think of the fact that many companies do not even have a dividend at all, and
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$ .68 is $ .68 more cents than you had before. The current ratio is measured by the company s current assets divided by the its current liabilities (what it owes). This number, according to investors, should range between zero and 2. The smaller, the better, as long as it is not negative. Coke s current ratio is currently .72, for the most recent quarter. Compared to the industry of .88, it is .16 less, and compared to the consumer/non-cyclical of 1.13, it is .41 less. When looking at the return on equity or ROE, Bigger is always better with this number. (Kelly. 34). The larger the number, the more money the company is making. Coca-Cola s ROE is currently at 20.13 %. This number is a few points lower than the non-alcoholic beverage industry s ROE, but it still is a 20.5 billion dollar company. Beta is a measurement of how volatile a stock has been compared to the market. The number is a measurement of how the company s stock is changing hands compared to everyone else. For someone looking at a conservative stock, the smaller the number, the less activity the stock has seen, and the less risky that stock is (generally speaking). The profit margin of a company is the percent of the company s earnings, subtracting the company s expenses. Coca-Cola s profit margin for the past year (total twelve months) is 9.22%. This is a higher profit then the industry and sector average. And compared to the five year average, Coke is roughly 4 points higher than the industry and 8 points higher than the sector, at 17.62. Price to sales ratio measures the company s price to sales revenue. To find this number, take the company s total market value divided by the most recent four quarters sales revenues. Coke s price to sales ratio over the total twelve months is 6.85. The industry s is 5.36 and the non-cyclical consumer s is only 2.93. The quick ratio is a similar to the current ratio, but only involves dividing the company s cash by it s current liabilities. This provides a look at a company s ability to deal with short term needs more accurately. Coca-Cola s quick ratio is .44. A quick ratio of at least .5 shows that the company has, at the least, enough cash to pay for one half of it s worth. Coke s quick ratio is low, but close to .5 which is a good number to be at. The higher the quick ratio, the more conservative the company tends to be. Price to book ratio compares a stock s price to how much it is worth. The ratio is found by dividing the price of the stock by how much the stock is worth. Coke s price to book ratio is now at 14.26, higher than both the industry and the sector.
Price to earnings ratio, dividend, current ratio, return on equity, beta, profit margin, price per sales ratio, quick ratio, and the price to book ratio, plus other factors, all helped aid my decision to liable the Coca-Cola Company a conservative stock investment. Coca-Cola is one of the major companies that Berkshire Hathaway has invested in, and it was the second most profitable company for them this past year. This also shows that Coke is a good money maker, yet conservative, because many people have the strategy of buying the same stock Berkshire Hathaway does.
The past history of this company shows the stock constantly rising, and in the past few years a continual up and down pattern. With the new products Coke plans to launch soon, the odds are the stock will keep rising. Even with this past summer s rage of non-carbonated beverages, such as SoBe juices, and Arizona ice teas, the soft drink companies stuck around. Soda-pop and other carbonated beverages will always be around. Everybody likes a coke says Jeremiah Johnson.
Berkshire Hathaway recently bought 1 billion dollars worth of Benjamin Moore stock. This is a huge company that owns a number of shares in a plethora of different companies. They have the highest price per share of stock, and are an incredibly successful company. The attached article states that Berkshire Hathaway has major holdings in the Coca-Cola Company.
The other three articles speak of the recent purchase of the P.J. Bean Co., to bottle Java Planet, and the current development of a milk-marketing strategy. P.J. Bean Co. seems to be a worth while investment for Coke, as many inside persons commented on. This is what many people crave (a bottled coffee drink) and for those fans of Coke already out there, they would buy Java Planet over Frappucchinos because of the Coca-Cola trademark. The milk division is working on appealing to the age range of 8 to 12 year olds. They are trying to make a healthy beverage seem hip to those who normally wouldn t want it. Also, it expands the company by adding a new age range to target.
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If I was looking for a stock to invest in for the long term, I would definitely buy Coca-Cola (KO). The Coca-Cola Company has continually climbed up and up for years and years. If the company keeps up with the past and continually purchases smaller companies, or comes out with new and improved products, then there is no way the the Coca-Cola Company will ever go under. The Coca-Cola Company is said to be the worlds leading soft drink distributor, and now that Coke is expanding to broaden the non-carbonated beverage horizon, it looks like it will stay that way.