As a leader of the non-alcoholic beverages industry, Coca-Cola Company set up a well-crafted sales term and credit policy allowing

it to collect its receivables and cash on a regular basis and minimize any counterparty or default risk. In fiscal 2010, the company recorded $48 million in allowances for doubtful accounts, $4,430 million of net receivables and generated $9,532 million cash flow from its operating activities. The company has significantly increased its sales in emerging economies especially in India, all over Africa due to FIFA world cup activation program, Latin American countries, but sales were even in Western Europe and decreased in some eastern European countries due to the economic slump and financial difficulties that these economies still undergoing. The company offer very interesting incentives to its customers and has specific sales terms to each transaction which basically minimize the credit risk and maximize the company ability to collect its cash due to the excellent partnership set up by the management based on very close collaboration and assistance to the distributors, bottling companies, convenience stores in every region and part of the world. On October 2nd 2010, Coca-Cola Company acquired 67% of Coca-Cola Enterprises North American business that was not already owned by the Company as a step forward to achieve its sustainable growth strategy through the creation of a unified operating system to enhance the distribution of its products and better serve its partners and customers in the very demanding and profitable North American market. The Companys acquisition of CCEs North America had a positive impact on 2010 net operating revenues that increase by $4,129 million, also sale of the Norwegian and

Swedish bottling operations to the new CCE and the deconsolidation of some other businesses had a positive effect on the Scandinavian operations. The company successfully achieved the acquisition of CCE North America due to the strong operating cash flow generated in 2009 and 2010 and consequently saved considerable funds in case it had contracted any long term bank loan that have to service the debt for many years using its future cash flow. As a determinant factor of the management credibility and financial statement accuracy, revenue recognition principle is a key element of cash collection and continuity of operations. Coca-Cola recognize revenue after product delivery has occurred and collectability is reasonably assured by transferring the title product to the resellers, bottling partners, or customers, also the company specify that no right of return is allowed according to the sales terms which definitely give more reliability to its revenues recognition. Furthermore, the company has a successful incentive program not limited to cash discount, but also promoting marketing tools and supporting its customers infrastructure program. The company has recorded $5.0 billion in deduction from revenue related to its incentive program in fiscal 2010. These actions and program have significantly reduced the likelihood of doubtful accounts and strengthened the company business cooperation with its different partners in order to set up a sort of brand loyalty. In spite of its worldwide incentive program, Coca-Cola Europe operations did not perform as forecasted in its business plan due to the tough economic conditions, high

jobless rates in Spain, Italy, Greece and austerity policies in Germany, France and United Kingdom. Consequently, the company net revenues were below expectation within the above stumbling economies but offset by the important sales growth in India, Latin America, Africa and also North America. With net receivables of $48 million 14% less than fiscal 2009 the company receivables overall did not significantly undergo the aftermath of the crisis and recorded a total write-offs of $18 million in 2010 comparing to $22 million in 2009.

In fiscal 2010, the company used a portion of its strong free cash flow as a form of financing its investment and acquisition program for a total amount of $2,511 million in addition to $2,215 million to purchase plant, property and equipment and received a total amount $972 million in cash related to its divestitures program especially through selling the Norwegian and Swedish operations. In addition to this, the acquisition of the 67% of CCEs North American business was a great opportunity to reconfigure operations, enhance supply chain and logistics according to the company productivity, integration and restructuring initiatives announced in 2008 which will significantly optimize the costs and benefit from an effective economy of scale. After this strategic acquisition, the company is expecting to generate $350 million a year from operational synergies within the next four years.

Concerning the intangible assets impairment, the management assesses the carrying value of its definite lives intangible assets and prepares estimations of future cash flow, sales, and profit. The impairment loss is recognized in case the expected cash flow is less than the asset carrying value. The company uses the discounted cash flow among other model to assess the goodwill and other intangible assets depending on each business unit and every region way of managing the business according to domestic impairment standards. The company recorded $1,025 million as impairment charges related to intangible assets in 2010 and particularly related to equity loss as indicated in its consolidated income statement. Coca-Cola generated an operating cash flow of $9,532 million in 2010 which allows the company to totally cover and pay off its vendors and suppliers before even converting the receivables into cash and in spite of all the cash the company used to finance the new strategic acquisition of CCEs North American business. The company is also able to meet its short term obligation regarding the current portion of long term debts of $1,276 million as well as the notes payables that have reached $8,100 million in 2010. Thus, we can confirm that the management is doing a good job in meeting the business short term obligations on time using the current assets converted into cash and the cash from sales. The company distributed considerable dividends of $4,068 million to its stockholders in fiscal 2010 as it used to do in accordance with its dividend policy in a way to attract more investors to buy or hold the company stock. The company had

$41,537 million in reinvested earnings in 2010 and was widely able to pay a generous dividend to its stockholders. Since the company generated significant cash flow from operations allowing financing acquisitions and other investment, I think it is a good decision to pay a dividend to the stockholders for trusting the management and investing their money in the business. Coca-Cola is in a good liquidity position in a way that the components of its short term assets cover its payables. In 2010, the cash, and cash equivalent was $8.517 million and the net receivables of $4,430 million after recording allowances for $48 million against accounts payable and accrued expenses of $8,859 million. The company operating leases are not very significant; the operating lease note for 2011 represents $205 million so the off balance sheet financing activity does not significantly affect the real value of the companys indebtedness. In 2010, Coca-Cola total long term debt have reached $14,041 million with an increase of $8.982 million essentially due to CCEs North American assumed debt with a total of $7,900 million as the fair value. Moreover, the company has issued long term notes for a total amount of $4,500 million and used the proceeds of the notes to repurchase $2,910 million of its long term debt partially due to the acquisition of CCE North America and the rest to of the outstanding debt before the acquisition. The company is able to meet the current maturity of its long term debt that reached $1,276 million in 2010 and the management implemented a good strategy to repurchase the debt and finance its acquisition without any default risk due to correctly managing the cash inflow and cash outflow.

Coca-Cola paid a dividend per share of $1.52 in 2008, $1.64 in 2009, and $1.76 in 2009 as a dividend distribution policy to increase the stock attractiveness and motivate more investors and analysts to buy the company stock as an annual commitment and habit toward the investors. As previously said, the company did not really miss investments in 2010 that could have been significantly profitable instead of simply distributing dividends because of the worldwide recession that had a considerable negative effect on the capital markets, then the management made a good decision of purchasing $3,188 million in treasury stock cheaper in order to re sell them after the market recovery and issued $1,666 million of stocks as an alternative to further long term debt, especially after acquiring CCEs North America and its considerable debt. Beyond acquiring the rest of CCEs North America as a major bottling partner and certain strategic acquisition in Russia and India, I think that the company made a good decision distributing dividends. In the case of non-distributing dividends I believe it would give bad signal to the community of investors and analysts because they would assume that the companys operations are going bad and its struggling to reach its objectives in spite of a context of crisis. The management strategy clearly states that the company is using its financial strength, assets brands, and distribution system to achieve a sustainable growth worldwide, so I think that this set of elements and the good management of the company create more value to maximize the shareholders stock value and offer them good reward through distribution of annual dividend.

Coca-Cola shareholders as value investors are firstly expecting the company stock to keep growing but are also expecting a long term stability and maturity of the stock value. A sustainable growth is the strategy that the management of the company set up in order to maximize its shareowners wealth through raising more considerable funds from issuing stocks but also strengthen the company solvency and liquidity by generating important cash flow from its operations and always distribute a dividend to motivate more investors to buy the company stock and persuade the current shareholders to keep holding Coca-Cola stock as growth stock due to its great leadership and vision through the nonalcoholic beverages industry. Coca-Cola investors are rather value investors than growth ones even if the management of the company clearer stated that they are adopting a growth strategy. The investors seek average but stable income and not very risk averse especially after the serious deep world recession, subprime crisis, housing bubble that led to a global financial crisis by the end of 2007. The company issued stocks in 2010 for a total amount of 1,666 million, with an increase of 150%. The management opted for this form of financing to raise funds necessary to partially finance its CCEs North American business acquisition and other investment. Raising capital would be a better way of financing in spite of the cost of capital in case its more interesting than contracting bank loans, especially than CocaCola is already indebted after the acquisition of CCEs North America and the support of its long term debts.

In 2010, the company had a total amount of trademarks with indefinite lives of $6,356 million, bottlers franchise rights with indefinite lives of $7,511 million, and a significant amount of goodwill of $11.665 million. As we can notice the intangibles represent a very significant part of Coca-Cola total assets, reason why they clearly disclose their different impairment and assessment methods depending on the country accounting standards and the closest market fair value. Coca-Cola net operating revenues have increased by more than 13% in fiscal 2010 despite of the economic difficulties around the world, but its assets have increased by more than 49% essentially due the acquisition of the 67% of CCEs North American business as the major bottling partner in the North American operations. This acquisition will definitely help the company to reduce its costs, better use its unified operating system to enhance the distribution of its products and optimize the supply chain and logistics of its activities. All these actions will increase the companys profits and consequently give more positive signals to the analysts and investors to buy more Coca-Cola stock. In addition to that, the strong generated operating cash flow would support the company stock value as one of the more reliable indicators of the company liquidity. The operating cash flow is a very determinant factor of investing in Coca-Cola stock because it is the main source of the cash dividend payment. The elimination of the noncash elements would relatively give more reliability to the company fair value. The 2010 strategic acquisitions would definitely support the stock value due to the future expected earnings and the divestitures of the Norwegian and Swedish bottlers would increase the company cash flow and improve its earnings within the

Scandinavian operations making it more profitable after the management has decided to get rid of the less profitable units. CCEs acquisition is also a strong signal to the stock market analyst in sense that Coca-Cola keeps investing considerable funds in rational and profitable projects which will definitely have a positive impact on the trading volume and the stock value of the company.

Coca-Cola stock traded at the New York Stock Exchange registered its highest level of $65.88 and lowest level of $58.55 by the end of the fourth quarter of fiscal 2010. After looking into the company fundamentals and analyzing its historic trading, we can say that the investor are not overpaying to buy Coca-Cola stock and do not risk any soon bubble because of the increasing cash flow from operations that would permanently allow the company to pay off its obligations and keep making profits high enough to distribute dividends to the shareowners whom will be able to realize capital gain after the sale of the stock. CCEs North American business contributed significantly in the total revenues of the Coca-Cola Company in fiscal 2010. The net revenues generated by the new acquisition have reached $3,436 million and the net losses of $122 million from October 2, 2010 through December 31, 2010. Despite this outstanding performance, the company volume trading and stock value had undergo the stock market trend and the investors bearish sentiment after the severe global market crash in 2009. However, the company stock price recovered rapidly to its average trading price and the traded volume was significant without any form of deep volatility.

The management of Coca-Cola considers all macro-economic variables when investing in a foreign market with hyperinflation and currency rate exchange risk such in Venezuela or Argentina, and also the local government global trade policies and new regulations as major elements of making business and accurately projecting the future earnings and cash flow. The management also assess any loss generated from a change of a macroeconomic variable and reflect it on the company statement of income or the related financial statement as the $103 million loss recorded in the Venezuelan operation due to the permanently changing currency exchange rate and hyperinflation in that country.

In 2010, Coca-Colas did way better than its closest competitor Pepsi inn term of net income and operating cash flow in spite of less revenue. Pepsis net income in 2010 of $6.32 billion was almost twice less than Coca-Colas $11.81 billion net income. Pepsi stock is trading couple of dollars less than Coca-Cola stock but still more expensive for the investors regarding both companies earnings and Coca-Cola outperform Pepsi in term of results and cash flow. The nonalcoholic beverages industry is still doing well and both main competitors keep investing worldwide in the sparkling and still drinks to realize significant growth and gain more market share especially in the emerging markets where the growth rate of the sales is over 10% and can reach 15 to 17% in India, Russia and also major African countries. As previously said, Coca-Cola has distributed an annual dividend of $1.76 per share in 2010 with an increase of 7.31% comparing to 2009 as a strong commitment of permanent growth and expansion toward its stockowners and the investors community.

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We can definitely consider Coca-Cola as a dividend paying stock that pay growing dividend each year which is definitely an incentive to hold the company stock. In 2010, the company generated enough free cash flow to pay cash dividend to its shareholders and also made strategic acquisitions and profitable investments, due to its strong financial performance and well managed operating activities through its core business. We can confirm that the company had the ability to distribute dividends without missing any major investment opportunity since it acquired the remaining share in CCEs North America as a major bottler and distributor in the North American market. Shareholders satisfaction comes through the companys stock growth, maximizing the earnings and generating significant cash flow from its operations. In that case, it would be fair and worth it to pay a dividend to the shareholders after generating $9,532 million in operating cash flow, servicing debt and paying off the due liabilities. The amount of the paid dividend is pretty interesting since its keep growing year by year. It is strategic to pay a dividend but to the extent that the remaining of the earnings would allow the company to finance its growth and investment plans especially after the expected recovery. Coca-Cola might pay more generous dividend to the extent of its net income cash flow growth; however the management should consider all the recent capital expenditures that might slow down the growth rate of the operating cash flow before start generating profitable results according the expect rate of return. The company has introduced new products in the still beverages segment. The sale of the launched products was very successful and generated significant cash flow like the 22% growth in the Maaza juice brand in India, 21% growth of Minute Maid pulpy

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juice in China and the forecasted sales of the juices produced by the acquired Russian company OAO Nidan Juices are significantly high. The introduction of the new products worldwide among other strategic acquisition is supposed to support and grow the stock value, which is going to motivate more investors to buy Coca-Cola stock, and the management to pay more interesting dividend to the shareowners.

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Ratios questions
Cash Flow Indicator Ratios

Operating Cash Flow/Sales Ratio How CC change in credit policy and sales term could affect1 the companys ability to generate cash? What consequences on cash generating had the CC 2010 strategic..1 acquisitions and divestitures? How the company 2010 strong generated cash could boost such transactions? How the companys revenue recognition principal could affects..2 the accuracy of generating cash from its operating activities? To what extent CC customers incentive program could have an effect..2 on the sales? How it could improve cash collection? To what extent the recent economic downturn slowed its international..3 market sales especially over the European market? What consequences on the receivables? Any impact on doubtful accounts? Free Cash Flow/Operating Cash Ratio How important is CC capital expenditures for 2010? What cash implications?..3 Does the company have sufficient cash in hand to invest in productive plants, machinery as set up in its growth strategy?.........................................................3 Is CC FCF allowing the company to honor its commitments regarding service debt, dividend distribution, and future investments?............................................3 To what extent the acquisition of 67% of CCE North America as a strategic..3 investment will generate additional operating cash flow? How the impairment of intangible assets would impact the CC cash flow?.........4

Cash Flow Coverage Ratio Does CC operating cash flow cover the total amount of its short term obligations, the current portion of the long term debt and the operating leases if any?.....................................................................................................4 Does the company hold sufficient cash flow to pay dividends to stockholder and re invests the remaining?...........................................................................4 Can the analysts conclude anything relevant regarding CC liquidity position?.5 Is the company heavily indebted? To what extent the generated free cash flow allows the company to meet its long term obligations?.......................................5
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Dividend Payout Ratio Is CC paying too much dividends to its stockholders? If so, why?.....................6 Is the company missing more interesting investment opportunities for its stock growth instead of paying important amounts of cash dividend in a context of crisis?.........................................................................................6 Was the issuance of new stocks in 2010 a good financing alternative in spite of the cost of capital that might reduce the company earnings?..........6 Would the non-distribution of dividends create a conflict between the stockholders and the management of the company as the agency theory suggest? What is the role of the strategy in that matter?...................................6 Investment Valuation Ratios

Price/Book Value Ratio What are CC investors expectations regarding the stock price?.....................7 Can we conclude if CC investors are value or growth investors? 7 To what extent is the issuance of stocks a good financing strategy?...............7 CC intangible assets are considerable, what impact on the stock price has the evaluation and eventual impairment of the goodwill, trademarks, and other intangibles?.............................................................................................8 To what extent CC revenues support the company stock? Are the revenues growing at the same trend as the assets?.......................................................8

Price/Cash Flow Ratio Is CC generating enough cash to support the company market price?..........8 How accurate would be the determination of the future cash flow as its variables change over time?...........................................................................................8 Is it fundamental for investors that CC generate strong operating cash flow to invest in the company stock?..........................................................................8 To what extent will CC new acquisitions and divestitures impact the company ability to maintain or increase the market stock price?....................................8 Price/Earnings Ratio What are investors expectations regarding CC current stock price? Is it overpriced?...................................................................................................9 What is the impact of the company acquisition of CCE North America as a growth strategy, on its 2010 earnings?................................................9 To what extent was CC stock trading impacted in the capital markets and Wall Street undergoing the aftermath of the recent financial crisis?.....................9 Does the management of the company take in consideration inflation exchange rates and economic variables when computing the net income? ..10
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Is the nonalcoholic beverages industry doing well enough for CC stock growth? What about the competition?........................................................10

Dividend Payout Ratio Is CC considered as a dividend paying stock? What is the company dividend policy?.......................................................................................10 Does the company generate enough cash flow to pay dividends to its shareholders? If so, was it worth it to distribute dividend in 2010 instead of investing more?....................................................................................11 Is the company management essentially concerned by satisfying the shareholders in the short term by distributing dividends rather than keep growing the stock value? .11 Was the amount of the dividend paid significantly high or low? To what extent is it strategic?..................................................................................11 The company investments and introduction of new products would strengthen the stock value, is that an important element to distribute more dividends next fiscal year? ..11

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References
The Coca-Cola Company, December, 31,2010. Annual report, pursuant to section 13 or 15(d) of the securities exchange act of 1934

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