Paper Topic:

Executive Summary for Coca Cola

Question 1

The long term debt that matures in 2007 amounts to 33 ,000 ,000

Question 2

The long term debt that matures in the next five year time frame is

Year Value of Long-Term Debt (millions

2007 33

2008 175

2009 436

2010 54

2011 522 Question 3

When a financial analysis is performed on the financial statements of an organization , the financial performance , position and stability of the firm will be considered . The financial analyst will not concentrate solely on the profitability and working

capital management of the firm He will also examine the company 's ability to meet its long-term obligations as they become due . This is important because if a firm cannot pay back its debts it can end up in bankruptcy . A positive profitability every year does not necessarily ensure that the firm possesses sufficient cash to pay back its debts . We ought to keep in mind that the income statement is prepared under the accruals basis of accounting , which states that revenue /expenditure incurred but not yet received /paid should be included in the profit and loss account in the period it arose (McKenzie W . 2003 ,

6-7 . In fact , in practice a number of accounting ratios like the gearing ratio , interest cover and more are adopted to assess the long-term solvency of the corporation due to the aforementioned features (McKenzie W . 2003 ,

208-217

The management of Coca Cola Company can either repay the loan commitments from the cash generated from the firm 's operations and /or utilize equity finance to settle such debts . They can also adopt some form of short-term debt finance if they expect difficulty in using the previous mentioned methods . For instance they can utilize or extend the overdraft facility

Question 4

Question 5

The calculation of the interest expense on long-term debts for 2007

Debt Working Interest Expense (millions

Due in 2009 (366 x 5 .75 ) 21 .045

Due in 2011 (499 x 5 .75 28 .6925

Due in 2093 (116 x 7 .375 ) 8 .555

Due through 2014 (333 x 6 ) 19 .98

Question 6

In practice a number of different debts can be issued . All possess different features and can also pose a differing effect on the interest charged . In the fourth question we calculated the interest rate by considering the firm 's debts cumulatively . However , if the corporation held debts like deep-discount bonds , our calculation would be incorrect Such bonds are debts issued at a price below the par value of the bond commonly known as deep-discount . These types of bonds carry no entitlement to interest as such and therefore the inclusion of them in the interest rate calculation would be incorrect (Pike R . et al 1999 ,

br 508

A bond issued at a premium also poses errors if the approach in question four is adopted . This is due to the fact that such bonds frequently entail a higher rate of interest than the normal bonds

Question 7

Organizations that hold a significant amount of...

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