Coca Cola Bonds

KO
 Stock
  

USD 63.04  1.16  1.87%   

Coca Cola's financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Coca Cola's financial risk is the risk to Coca Cola stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Please see the analysis of Coca Cola Fundamentals Over Time.
  
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Coca Cola Total Debt is quite stable at the moment as compared to the past year. The company's current value of Total Debt is estimated at 46.19 Billion. Debt Current is expected to rise to about 4.8 B this year, although the value of Debt Non Current will most likely fall to about 35.2 B.

Coca Cola Current Financial Burden

Coca Cola's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Coca Cola's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Coca Cola Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Coca Cola's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Coca Cola, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Coca-Cola the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
Price Book
10.59
Book Value
5.74
Operating Margin
0.3
Profit Margin
0.26
Return On Assets
0.0809
Return On Equity
0.42
Given that Coca Cola's debt-to-equity ratio measures a company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Coca Cola is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Coca Cola to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Coca Cola is said to be less leveraged. If creditors hold a majority of Coca Cola's assets, the company is said to be highly leveraged.

Coca Cola Quarterly Debt to Equity Ratio

2.706

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Given the importance of Coca Cola's capital structure, the first step in the capital decision process is for the management of Coca Cola to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Coca-Cola to issue bonds at a reasonable cost.

Coca Cola Bond Ratings

Coca-Cola bond ratings play a critical role in determining how much Coca Cola have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Coca Cola's borrowing costs.
Piotroski F Score
5  Healthy
Beneish M Score

Coca-Cola Debt to Cash Allocation

As Coca-Cola follows its natural business cycle, the capital allocation decisions will not magically go away. Coca Cola's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company reports 41.7 B of total liabilities with total debt to equity ratio (D/E) of 1.55, which is normal for its line of buisiness. Coca-Cola has a current ratio of 1.16, indicating that it may not be capable to disburse its debt commitments in time. Debt can assist Coca Cola until it has trouble settling it off, either with new capital or with free cash flow. So, Coca Cola's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Coca-Cola sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Coca Cola to invest in growth at high rates of return. When we think about Coca Cola's use of debt, we should always consider it together with cash and equity.

Coca Cola Inventories Over Time

Coca Cola Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Coca Cola uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Coca Cola Debt Ratio

    
  45.99   
It seems about 54% of Coca Cola's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Coca Cola's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Coca Cola, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Coca Cola debt ratio should be compared their industry average or other competing firms.
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Coca Cola Corporate Bonds Issued

Coca Cola issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Coca-Cola uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt. Most Coca Cola bonds can be classified according to their maturity, which is the date when Coca-Cola has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.

Coca-Cola Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of Coca Cola, understanding its historical liability is critical in projecting Coca Cola's future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how Coca Cola uses its financing power over time.
In order to fund their growth, businesses such as Coca Cola widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up Coca Cola's capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, the concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Understaning Coca Cola Use of Financial Leverage

Coca Cola financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Coca Cola's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Coca Cola assets, the company is considered highly leveraged. Understanding the composition and structure of overall Coca Cola debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it.
Last ReportedProjected for 2022
Total Debt42.8 B46.2 B
Debt Current4.6 B4.8 B
Debt Non Current38.1 B35.2 B
Issuance Repayment of Debt Securities228 M234 M
Long Term Debt to Equity 1.66  1.35 
Debt to Equity Ratio 3.02  3.16 
The Coca-Cola Company, a beverage company, manufactures, markets, and sells various nonalcoholic beverages worldwide. The company was founded in 1886 and is headquartered in Atlanta, Georgia. Coca Cola operates under BeveragesNon-Alcoholic classification in the United States and is traded on New York Stock Exchange. It employs 79000 people.
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Please see the analysis of Coca Cola Fundamentals Over Time. Note that the Coca-Cola information on this page should be used as a complementary analysis to other Coca Cola's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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When running Coca-Cola price analysis, check to measure Coca Cola's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy Coca Cola is operating at the current time. Most of Coca Cola's value examination focuses on studying past and present price action to predict the probability of Coca Cola's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Coca Cola's price. Additionally, you may evaluate how the addition of Coca Cola to your portfolios can decrease your overall portfolio volatility.
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Is Coca Cola's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Coca Cola. If investors know Coca Cola will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Coca Cola listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth YOY
0.23
Market Capitalization
273.3 B
Quarterly Revenue Growth YOY
0.16
Return On Assets
0.0809
Return On Equity
0.42
The market value of Coca-Cola is measured differently than its book value, which is the value of Coca Cola that is recorded on the company's balance sheet. Investors also form their own opinion of Coca Cola's value that differs from its market value or its book value, called intrinsic value, which is Coca Cola's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Coca Cola's market value can be influenced by many factors that don't directly affect Coca Cola's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Coca Cola's value and its price as these two are different measures arrived at by different means. Investors typically determine Coca Cola value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Coca Cola's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.