25 Aug Calculate the financial worth of Coca-Cola based on four approaches: (1) the net worth method, (2) the net income method, (3) the price-earnings ration method, and (4) the outstanding shares method.
Part 1(a) Should be between 400-500 words. This is a discussion post. Please use citations that are websites and based in the United States at least 2 references. Use the attachment titled Exercise 8C.
Challenge
Step 1: Calculate the financial worth of Coca-Cola based on four approaches:
(1) the net worth method,
(2) the net income method,
(3) the price-earnings ration method, and
(4) the outstanding shares method.
Step 2: Get an average of the four methods. In a dollar amount, how much is Coca-Cola worth?
Step 3: Compare your analyses and conclusions with those of other students.
Part 1(b) Should be at least 300 words with in text citations that are websites and based in the United States. This is a discussion response. This is also a discussion response to Part 1(a).
Starting from the bottom (please see attached spreadsheet), using the “Outstanding Share Method” which is also called Market Capitalization (Market Cap), this amount came to approximately $193M (David et al. 2019, pg. 257). I mention this first because I wanted to compare the 2017 data (found in the Cohesion Case/our text) to what I found on the S&P NetAdvantage today, to see how close the 2017 numbers were to the 2023 numbers which came in at $261M. The 2017 numbers are consistent given a 6-year difference and the current share price of $60.48 (S&P NetAdvantage, 2023).
I was expecting the Price Earning Method to be the same as the Outstanding Share Method as demonstrated/depicted in the Proctor & Gamble example in Table 8-12 of our text, but clearly this did not occur (David et al., 2019, pg. 257). Also, I can’t see the value in averaging these four methods.
References
David, F. R., David, F. R., & David, M. E. (2019). Strategic Management: A Competitive Advantage Approach, Concepts and Cases (17th ed.). Pearson Education (US). https://reader2.yuzu.com/books/9780135203699
S&P NetAdvantage. (2023, May). Company Overview: Coca-Cola. Shibboleth authentication request. https://www-capitaliq-com.saintleo.idm.oclc.org/CIQDotNet/Research/InvestmentResearch.aspx?CompanyId=26642&pagemode=7
Net Worth Method
=
SE –
(Goodwill+
Intangibles)
$9,208
$18,977
$9,401
$368
David et al, 2019
Pg. 30
Pg. 30
Pg. 30
Net Income Method
=
Net Income X
Five
$6,240
$1,248
5
David et al, 2019
Pg. 29
Pg. 256
Price Earning Method
=
(Stock Price /
EPS) x
Net Income 5-yr Average
$59,825.18
$45.54
$0.95
$1,248
David et al, 2019
Pg. 263
Pg. 263
Pg. 257
Outstanding Share Method
=
# Shares Out
x Stock Price
$193,271.76
4,244
$45.54
David et al, 2019
Pg. 263
Pg. 263
Average All Four Methods
$67,136.23
Part 1(c) Should be at least 300 words with in text citations that are websites and based in the United States. This is a discussion response. This is also a discussion response to Part 1(a).
Hello Fellow Classmates,
As shared by David & David (2019), “Evaluating the worth of a business is central to strategy implementation…and is not an exact science” (p. 256). It is important to know your company’s worth, especially when acquiring or divesting becomes part of the plan. It is vital to note that both quantitative and qualitative evaluation must occur; financial facts are crucial but so is consumer loyalty, growth history, current lawsuits, employee commitments, credit and rental state, valuable patents, and so on (David & David, 2019).
There are four main valuation methods used to determine a company’s worth; however, they yield different results. I did my best in compiling Coca-Cola’s company worth from our text’s Cohesion Case. My calculations are with the 2017 data. The first two methods result low corporation valuation. If Coca-Cola were wanting to sell, they would not want to use these methods in negotiating a selling price. The third and fourth method result the same, much higher valuation. It they can sell above this price, it yields them a premium. If they sell below this price, it yields the buyer a discount (David & David, 2019).
My analysis concluded that Coca-Cola, in 2017, was worth just over $99 million. Today, it is worth $213 billion (Macrotrends, 2023).
CocaCola’s Company Worth Analysis (in millions)
The Input Data
2017
Shareholder’s Equity
$18,977
Net Income
$1,248
Stock Price
$44
EPS (net income/outstanding shares)
$0.29
Number of Shares Outstanding
4,324,000
Goodwill
$9,401
Intangibles
$368
The Four Valuation Methods
Stockholders’ Equity – (Goodwill + Intangibles)
$9,208
Net Income x 5
$6,240
(Share Price/EPS) x Net Income
$190,645
Number of Shares Outstanding x Share Price
$190,645
Average of Four Methods
$99,185
References
David, F. R., & David, F. R. (2019). Strategic management: a competitive advantage approach, concepts and cases (17th ed.). Upper Saddle River: Pearson. ISBN: 978-0135192221
Macrotrends. (2023). CocaCola shares outstanding 2010-2023. Retrieved August 12, 2023, from https://www.macrotrends.net/stocks/charts/KO/cocac…
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