03 Mar Strategic Management
9555Discussion Post Response:
According to David and David (2019), when companies plan to implement strategic plans, they must assess the value of their business and in order to obtain a fair evaluation, they have to utilize both qualitative and quantitative measures (p.256). The financial facts are to be considered along with non-financial factors such as employee and customer loyalty, pending litigation, etc, and then of course “common sense and good judgment enter into the process” (David & David, 2019, p.256). To calculate Coca-Cola’s financial worth I used their 2021 Annual Report.
1. Net worth method = shareholders’ equity – (goodwill + intangibles)
Goodwill = 19,363
Intangibles = trademarks 14,465
Other intangible assets = 785
Equity = 24,860
24,860 – (19,363+14,465+785)= 24,860-34,613=(9,753)
2. The net income method = net income x five = 9,804 x 5 = 49,020
3. Price-earnings ratio method = (stock price/EPS) x NI
Stock price = stockholders’ equity/common shares outstanding = 24,860/4,325=5.74
EPS (earnings per share) = net income/number of shares outstanding = 9,804/4,325=2.26
Price-earnings ratio method = (5.74/2.26) x 9,804= 2.53 x 9,804 = 24,804
4. Outstanding shares method = number of shares outstanding x stock price = 4,325 x 5.74= 24,825
To average the amount: (24,825+24,804+49,020-9,753)/4=22,224
I think their valuation analysis will vary based on the objectives the company has in running an assessment as its method will provide some biased and inaccurate data. For example, the net income method might be useful as they look at projected financial statements, but the method does not take into account factors that influence an increase or decrease in product demand, new government regulations, global pandemic or wars, etc. Conducting an EPS/EBIT analysis will be more helpful for Coca-Cola as they asses raising capital for the implementation of their strategies.
References
Coca-Cola 2021 Annual Report. [Form 10-K]. https://investors.coca-colacompany.com/filings-reports/all-sec-filings/content/0000021344-22-000009/0000021344-22-000009.pdf
David, F.R. & David, F.R. (2019). Strategic management: A competitive advantage approach, concepts and cases (17th ed.). Upper Saddle River: Pearson.
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