Homework Help for GCU ACC 502 Topic 8 DQ 2

Looking for 100% Original and Plagiarism free Paper for your college assignment? Homeworklance.com provide global homework help 24/7 . Hire Our Tutor Now.

 

hire essay writers

 

Description

Homework Help for GCU ACC 502 Topic 8 DQ 2

 

COMMON SIZE ANALYSIS

 

Common-size ratios require the financial figures to be converted to a normalized form. The goal of this process is for all of the numbers in the set to have a standard comparative base. Common-size analysis allows managers and investors to compare companies with different size operations on an even playing field.

Using the financial statements specifically the statement of financial position as at 31st Dec 2021, we can do a common size analysis on the assets. Having a base of the total assets of the company, we can say that 24% of the total assets were contributed by the current assets. This means that total current assets contributed 24% of the total assets, (Amati 2019). In the same way, we can say that 66% of the total asset was contributed by non-current assets. This means that total non-current assets contributed 66% of the total asset.

We can conclude that Coca-Cola company is highly rely on their long-term assets. This shows that the company has a long investment horizon, and they are willing to reinvest in the business for longer term. Hence, they have high amount of non-current assets, (Monok, 2018). On the other hand, they also have high amount of total asset because of their large total asset base as well as their large capital expenditures. This shows that they have a high capital expenditure in order to expand their business.

We can use the analysis to compare companies within the same industry. Since Coca-Cola have high amount of total assets as well as high amount of non-current asset. Hence, it shows that they are focusing on long term investment and continuous expansion of their business through capital expenditure, (Soifer, 2016). This will make them to have higher level of equity relative to their total asset base which is a good indicator for a well funded and stable company.

 

The following  is a  common size analysis for Coca-Cola Balance and the Income statement

 

CONSOLIDATED STATEMENTS OF INCOME – USD ($) shares in Millions, $ in Millions 12 Months Ended
Dec. 31, 2020 Dec. 31, 2019 Common Size analysis
Revenues $ 33,014 $ 37,266 100% 100%
Cost of Goods and Services Sold 13,433 14,619 41% 39%
GROSS PROFIT 19,581 22,647 59% 61%
Selling, General and Administrative Expense 9,731 12,103 29% 32%
Other Cost and Expense, Operating 853 458 3% 1%
OPERATING INCOME 8,997 10,086 27% 27%
Interest income 370 563 1% 2%
Interest expense 1,437 946 4% 3%
Equity income (loss) – net 978 1,049 3% 3%
Other income (loss) – net 841 34 3% 0%
INCOME BEFORE INCOME TAXES 9,749 10,786 30% 29%

Common Size analysis on Income Statement

 

CONSOLIDATED BALANCE SHEETS – USD ($) $ in Millions Dec. 31, 2020 Dec. 31, 2019 Common Size analysis
CURRENT ASSETS
Cash and cash equivalents $ 6,795 $ 6,480 8% 8%
Short-term investments 1,771 1,467 2% 2%
TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 8,566 7,947 10% 9%
Marketable securities 2,348 3,228 3% 4%
Trade accounts receivable, less allowances of $526 and $524, respectively 3,144 3,971 4% 5%
Inventories 3,266 3,379 4% 4%
Prepaid expenses and other assets 1,916 1,886 2% 2%
TOTAL CURRENT ASSETS 19,240 20,411
0% 0%
EQUITY METHOD INVESTMENTS 19,273 19,025 22% 22%
OTHER INVESTMENTS 812 854 1% 1%
OTHER ASSETS 6,184 6,075 7% 7%
Deferred Income Tax Assets 2,460 2,412 3% 3%
PROPERTY, PLANT AND EQUIPMENT – net 10,777 10,838 12% 13%
TRADEMARKS WITH INDEFINITE LIVES 10,395 9,266 12% 11%
GOODWILL 17,506 16,764 20% 19%
OTHER INTANGIBLE ASSETS 649 736 1% 1%
TOTAL ASSETS 87,296 86,381 100% 100%
CURRENT LIABILITIES
Accounts payable and accrued expenses 11,145 11,312 17% 17%
Notes and Loans Payable, Current 2,183 10,994 3% 17%
Current maturities of long-term debt 485 4,253 1% 7%
Accrued income taxes 788 414 1% 1%
TOTAL CURRENT LIABILITIES 14,601 26,973
LONG-TERM DEBT 40,125 27,516 61% 42%
OTHER LIABILITIES 9,453 8,510 14% 13%
Deferred Income Tax Liabilities 1,833 2,284 3% 3%
66,012 65,283 100% 100%

Common Size Analysis Balance Sheet

 

References

 

Amati, J. (2019). Strategic performance analisys trough Financial Statement and Stock Market Data. The Coca-Cola case.

Monok, B., Montolalu, J., & Taroreh, H. S. (2018). Analisis Common Size Statement Pada PT. Asuransi Jiwasraya (Persero) Cabang Manado Kota. Jurnal Administrasi Bisnis (Jab)6(003).

Soifer, I., Robert, L., & Amir, A. (2016). Single-cell analysis of growth in budding yeast and bacteria reveals a common size regulation strategy. Current Biology26(3), 356-361.