As we all know that Coca Cola is a multinational company, and have branches in almost every part and country of the world. Although Coca Cola company in other parts of the world works autonomously but all their activities are monitored at it’s headquarter. In this paper we will discuss the following four issues:
* Financial Statement Analysis
* Foreign Currency Translation
* Foreign Price Changes
* Reporting and Disclosures
All these points play a vital role when it comes to the franchise of any company, without considering these points a company cannot decide to go for globalization.
Financial Statement Analysis
As it is quite simple and straightforward that financial information is very important for any business, especially when it comes to multinational company it becomes obligatory. Financial statements of the company can be used for many purposes but in this report we will discuss and analyze financial statement for the purpose of the global management of the multinational company.
Financial statements should be analyzed by the global management of a multinational company to figure out the position of their business in the market. As we are talking about the company Coca Cola, so we would discuss a case in which we show why the analysis of financial statements is important for the global management of a multinational company.
By analyzing the financial statement thoroughly, the global management have concluded that how their regional management is running their business in any specific region. They have also figured out what necessary measures should be taken to improve the condition of the business in any region. They can get the amount of revenue generated and the net profit derived from it and compares it with the figures of any different region.
Foreign Currency Translation
One of the most important issues in this regard is the translation of currency, because every region has its own currency, which does contain different value. In this matter global management should recognize the value of currency of that specific region and compare it with the value of the currency they are changing in, this is something very important in order to recognize the amount of profit earned. It has been estimated that due to foreign currency translation, Coca Cola, in the fourth quarter of 2003 alone, earned more than $5 billion.
Foreign Price Changes
We have discussed the importance of foreign currency translation in the previous paragraph, now we will discuss importance of foreign price changes. If the foreign price fluctuates with high values, it would affect the business because when comes to the translation of currency it would definitely reflects some big changes. Some definite measure must be taken to resolve the issues related the problem specified in this point.
Reporting and Disclosures
It has been noticed that the quality of financial reporting directly affects the capital markets. Arthur Leviit, Chairman of the SEC says, “Disclosure systems that are founded on high quality standards give investors confidence in the credibility of financial reporting, and without investor confidence, markets cannot thrive”.
Coca Cola Company has mentioned the disclosure in its financial statement that almost 90% of the sales of Coca cola Company comes from the selling of Coca Cola products. Coca Cola is the only supplier of sweetener and concentrate for its products. Thus it is possible that company at any time may not be able to fulfill the requirement of sweetener and concentrate which leads to the shortage of the product. Coca Cola has also mentioned disclosure that it acquires its cans from two suppliers and it is possible that it may face shortage of cans and hence the shortage of the product if no alternative supplier is arranged.