The Coca-Cola Company (KO)

Activity ratios

Short-term

Turnover ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Inventory turnover	4.19	4.25	4.50	4.11	4.33
Receivables turnover	13.42	12.33	11.01	10.50	9.38
Payables turnover	3.31	2.88	2.68	2.89	3.84
Working capital turnover	14.47	15.00	14.90	7.12	—

The activity ratios of Coca-Cola Co for the past five years indicate the efficiency of the company in managing its operational assets.

1. Inventory turnover has been relatively stable over the years, ranging from 4.11 to 4.50. This suggests that Coca-Cola effectively manages its inventory levels and quickly converts inventory into sales. A consistent inventory turnover ratio is crucial in balancing production levels with customer demand.

2. Receivables turnover has shown a consistent increasing trend, from 9.38 in 2019 to 13.42 in 2023. This signifies that Coca-Cola is collecting its accounts receivable at a faster rate, reflecting efficient credit management and timely collection practices. A higher receivables turnover ratio indicates that the company is effectively managing its credit sales and reducing the risk of bad debts.

3. Payables turnover has shown some fluctuation but has remained relatively stable over the years, ranging from 3.31 to 3.84. This indicates that Coca-Cola is efficiently managing its accounts payable, striking a balance between delaying payments to suppliers and sustaining positive relationships. A stable payables turnover ratio suggests effective cash flow management.

4. The working capital turnover has exhibited a significant increase from 7.12 in 2020 to 14.47 in 2023. This indicates that Coca-Cola is generating revenue more efficiently relative to its working capital, which includes current assets and liabilities. A higher working capital turnover ratio implies that the company is using its resources effectively to generate sales, improving overall operational efficiency.

Overall, the activity ratios of Coca-Cola Co reflect a strong operational efficiency, with stable inventory turnover, improving receivables turnover, and efficient management of payables and working capital. These ratios suggest that Coca-Cola is effectively utilizing its assets and resources to drive revenue growth and maintain a competitive position in the market.

Average number of days

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Days of inventory on hand (DOH)	days	87.19	85.84	81.14	88.74	84.37
Days of sales outstanding (DSO)	days	27.20	29.60	33.16	34.76	38.89
Number of days of payables	days	110.17	126.55	135.95	126.46	94.98

Activity ratios provide insight into how efficiently a company is managing its assets and liabilities to generate sales revenue. Let's analyze Coca-Cola Co's activity ratios based on the provided data:

1. Days of Inventory on Hand (DOH): This ratio measures how many days, on average, inventory is held before being sold. Coca-Cola Co's DOH has been increasing steadily over the past five years, from 84.37 days in 2019 to 87.19 days in 2023. This indicates that the company may be holding onto its inventory for a longer period, which could tie up capital and increase carrying costs.

2. Days of Sales Outstanding (DSO): DSO shows the average number of days it takes for a company to collect its accounts receivable. Coca-Cola Co's DSO has been gradually decreasing over the years, from 38.89 days in 2019 to 27.20 days in 2023. A lower DSO suggests that the company is collecting receivables more quickly, improving its cash flow and liquidity position.

3. Number of Days of Payables: This ratio represents the average number of days it takes for a company to pay its trade payables. Coca-Cola Co's days of payables have fluctuated over the years, with an increase from 94.98 days in 2019 to 110.17 days in 2023. A higher number of days of payables may indicate that the company is taking longer to settle its debts, potentially indicating strained supplier relationships or cash flow management.

In summary, Coca-Cola Co's activity ratios show a mixed performance. While the company is improving its efficiency in collecting receivables (lower DSO), there are concerns related to inventory management (increasing DOH) and payment practices to suppliers (higher days of payables). Monitoring and managing these ratios effectively are crucial for maintaining a healthy balance between liquidity and operational efficiency.

Long-term

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Fixed asset turnover	4.95	4.37	3.90	3.06	3.44
Total asset turnover	0.47	0.46	0.41	0.38	0.43

Coca-Cola Co's long-term activity ratios provide insights into the efficiency of the company's utilization of its assets over a period of five years. The fixed asset turnover ratio has shown an increasing trend from 3.44 in 2019 to 4.95 in 2023. This indicates that the company is generating more sales revenue relative to its investment in fixed assets, reflecting improved efficiency in utilizing long-term assets to drive revenue generation.

On the other hand, the total asset turnover ratio has fluctuated slightly over the same period, with a slight increase from 0.43 in 2019 to 0.47 in 2023. This ratio signifies the company's ability to generate sales in relation to its total assets. The increment in total asset turnover suggests that Coca-Cola Co has been able to enhance its efficiency in utilizing both long-term and short-term assets to drive revenue.

Overall, the upward trend in the fixed asset turnover ratio implies that Coca-Cola Co has been successful in increasing the productivity of its long-term assets, while the relatively stable total asset turnover ratio points towards the company's consistent ability to efficiently generate sales in proportion to its total asset base over the years. These ratios collectively indicate an improvement in asset utilization efficiency and effectiveness, reflecting positively on Coca-Cola Co's operational performance.