Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 115

Using cash flow information—The Coca-Cola Company Following are comparative statements of cash flows, as reported by The Coca-Cola Company in its 2008 annual report:

THE COCA-COLA COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Year Ended December 31 (in millions)
	2008	2007	2006
Operating Activities (details omitted)
Net cash provided by operating activities	$ 7,571	$ 7,150	$ 5,957
Investing Activities
Acquisitions and investments, principally beverage
and bottling companies and trademarks	(759)	(5,653)	(901)
Purchases of other investments	(240)	(99)	(82)
Proceeds from disposals of bottling companies
and other investments	479	448	640
Purchases of property, plant, and equipment	(1,968)	(1,648)	(1,407)
Proceeds from disposals of property, plant,
and equipment	129	239	112
Other investing activities	(4)	(6)	(62)
Net cash used in investing activities	(2,363)	(6,719)	(1,700)
Financing Activities
Issuances of debt	4,337	9,979	617
Payments of debt	(4,308)	(5,638)	(2,021)
Issuances of stock	586	1,619	148
Purchases of stock for treasury	(1,079)	(1,838)	(2,416)
Dividends	(3,521)	(3,149)	(2,911)
Net cash provided by (used in) financing activities	(3,985)	973	$ (6,583)
Effect of Exchange Rate Changes on
Cash and Cash Equivalents	(615)	249	65
Cash and Cash Equivalents
Net increase (decrease) during the year	608	1,653	(2,261)
Balance at beginning of the year	4,093	2,440	4,701
Balance at end of year	$ 4,701	$ 4,093	$ 2,440

Required:

a. Briefly review the consolidated statements of cash flows, and then provide an overall evaluation of the “big picture” during the three years presented for Coca-Cola. Have operating cash flows been sufficient to meet investing needs and to pay dividends?

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b. Were there significant changes to any of the specific line-item details that you think would require further explanation or analysis?

Step 1 of 2

a) For the total three year period, net cash presented by operations exceeded to the net cash used in investing activities along with payment for dividends, while in 2007 net cash flows from operations was not seems adequate to meet these disbursements, as bellows (amounts in millions):

It should be eminent from the above shown table that the movement in net cash flows used for these enter items would be hard to properly evaluate without having a perceptive of reasons of using such huge amount on investing activities in 2007.

The trend of net cash flows from operations is positive plus it shows a stable growth pattern. Similarly, the trend of dividends payment suggests that company has taken good concern of its shareholders while providing a sufficient increase in dividend disbursements each year.