portfolio containing an analysis of Apple Inc. and The Coca-Cola Company.

FACULTY OF BUSINESS AND LAW
ACADEMIC YEAR 2020/2021

COURSEWORK BRIEF
STUDENT ID: 20055737
THE MODULE TITLE: Introduction to Finance
THE MODULE ID: UMADRU-15-2
WORD COUNT: 1500 words
THE COURSEWORK QUESTION: Students are required to build a portfolio containing an analysis
of Apple Inc. and The Coca-Cola Company.

1
1


INTRODUCTION
In governance, the review of financial statements plays a vital role. Analyzing financials will
best practices and entities see the actual financial results. During the business cycle,
manufacturing and business help managers assess their profitability prospects in making
appropriate. During the business cycle, firms' business operations help managers determine the
company's profits to optimize decisions and developments.
The main goal of reviewing financial statements is to help consumers of information
better determine the company's financial, economic profitability and pros, and then make the best
choices according to the category they care about.
In this report, the financial statement of Apple Inc. and the Coca-Cola company will be
mainly discussed and analyzed. From that point of view, conclusions about the financial position
of these two companies are drawn.

2
2

PART I – Company Profile
1.

Apple Inc.
Apple Inc. is a multinational information technology firm located in California. Apple was

known as Apple Computer, Inc. on April 1, 1976, and was renamed in early 2007 (Wikipedia,
2021). In 2005, annual global revenues hit $13.9 billion, with around 14,800 workers worldwide.
Many products, such as laptops, software, hardware, music devices, and other multimedia
devices, are manufactured by Apple Inc. Apple sells its goods mostly in the US, Canada, Japan,
and the United Kingdom.
2.

The Coca-Cola Company
In 1886, the Coca-Cola Company was first published in Wilmington, Delaware. They stated

their nerve-center in Atlanta, Georgia. This firm is a global drink corporation in the US, which
mainly produce the anti-alcoholic beverage. The business is known best for its Coca-Cola core
product, invented in 1886 in Columbus by a pharmacist named John Pemberton. Then, acquired
in 1889 by Asa Candler, founded the Coca-Cola company in 1892.
PART II – Financial Performance
The cash ratio and acid test ratio measure a firm's liquidity and evaluate the ability to cover

the debt. Overall, Apple's figure is more stable than Coca-Cola, it can be said that Apple Inc. can
have more liquidity than Coca-Cola. As shown in both models, these companies can quickly pay
back their debt as their cash ratio stays between 0 and 0,5. Considering the acid test ratio, both
companies are more significant than 1, although from 2017 to 2020, Coca-Cola has decreased to
3
3

between 0,5 and 1. It still can be said that the company can deal with its short-term debt and
inventory.

The total debt ratio and interest coverage ratio evaluate a firm's ability to cover its long-term
debt. In both figures, the scale of the total debt ratio is stable and very low. It can be said that the
liabilities of both companies account for a small proportion of total assets or total capital, less
financial difficulties. When mentioned about the interest coverage ratio, the two figures have
pointed out the capacity to pay off the long-term debt of Apple is better than Coca-Cola as the
higher the figure, the better the ability to pay the interest to their creditor.

4
4


Asset turnover ratios calculate the company's revenue or sales volume relative to the asset
company's value. Overall, the stable financial leverage for both Apple and Coca-Cola is not too
high or low. As mentioned above, these businesses use their assets for product development and
business operations. Stock turnover is another financial way of measuring the market of a
company. It denotes inductance in the inventory over a long period. Apple has a higher figure

than Coca-Cola, as in figure 3.1 and figure 3.2, which means that Apple can increase sales than
Coca-Cola. It has a limited amount of stock.
The net profit and share price calculate the cost of gross profit annual gross by total index.
For Apple, at about 0.2, which is at a steady stage, whereas Coca-Cola has fluctuated.
Additionally, Apple has an impressive ratio compared to the market, as the overall net profit is
0.17 and 0.15 for Coca-Cola, which is larger than their proportion in 2016 and 2017. On the
other hand, from 2017 to 2020, Apple's profitability grew steadily, although Coca-face Cola's
shot up in 2017. We can see that these companies' profitability and net profits are the highest in

their industry.
PART III – Market Performance
Financial markets are a simple market where people participate in trading currency, assets,
trading instruments instead of making money. It is an essential aspect of the economy. In the
financial market, the cash flows are rapidly moving, creating variations between securities and
payments. There are three primary roles of the stock sector. They will access funds from
entitlements that are willing to provide those who need them with monetary assistance. They
5
5


may be capable of can liquidity for securities. The third fragile banking market is to provide
financial information and determine the valuation of a business. In attracting and mobilizing
financial sources' stability, the financial market plays a part in promoting and saving. It also
facilitates and improves the effective use of finance. Finally, trade policy and money supply are
applied.
The market share is the product of such forces falling into different classes: fundamental
factors, technological factors, and market sentiment. Earnings and profitability from the
manufacture and demand of customers are essential elements that drive stock prices. The next
factor is the technical factor, which refers to the dividend background relating to traders' and
investors' chart trends, momentum, and lifestyle choices. Finally, the last element is the
sentiment of the market. It describes and collectively about the psychology of traders.

Average
Stdev
Min
Max
Skewness
Kurtosis
No. of Obs

AAPL

KO

S&P500

0,136%
1,888%
-12,865%
11,981%

0,023%
1,247%
-9,672%
6,480%

0,052%
1,210%
-11,984%
9,383%

0
7

-1
11

-1
21

1258

1258

1258

Figure 1 Summary Statistic of Apple Inc., Coca-Cola Company and the market index

6
6


The figure compares the summary statistics of Apple Inc. and the Coca-Cola Company with
the market index in 6 years from October 2015 to October 2020. The graph shows the result by
comparing the standard deviation of Apple and Coca-Cola with S&P500. Apple Inc. has a
standard deviation higher than the market index, 1,888% to 1,210%, and the average return also
much more extensive, 0,136% to 0,052%. On the other hand, the Coca-Cola Company has its
average return lower than the market index, 0,023% compared with 0,052%, while the standard
deviation is still slightly higher than S&P500. Moreover, in figure 2, Apple and Coca-Cola's
density plot compared with the market index shows a considerable difference. Apple's kurtosis is
7, lower than 21, the market index, and the graph also fatter than the market graph. Otherwise,
the shape of Coca-Cola's map is much steeper, and the kurtosis of this company is 11, which is
higher than the Apple one. All of this sign means that Apple Inc. can bring back an evenly level
of profit, which will lead to a higher risk than the Coca-Cola Company, although it can make a
better return.
PART IV – Portfolio of Shares

7
7

Correlation is a calculation of how closely a linear equation applies to independent values. If
it is essential to store the cause and effect linearly, it can be calculated employing noise in the
relationship. The closer the correlation value is to 1 or -1, the less sound is present. A negative
value correlation indicates that two variables have an inverse relation or a negative correlation
(absolute inverse when the value is -1). For two factors, the correlation with a positive implies a
positive relationship or correlation (whole positive when the value is 1). The correlation is zero.
In economics, investors can use correlation to hedge their portfolios and reduce the risk of
market volatility. They can also use it to foresee the change in the correlation of two variables,
such as the stock market, to decide which one is better to invest.

A diversified investment is a multi-asset portfolio that maximizes return for the minimum
risk. There is a mixture of stocks, fixed income, and commodities in a traditional portfolio.
Diversification works because of the economic event absence of properties. Diversification only
reduces the risks, which include systematic risks and non-systematic risks. However,
diversification has some limitations. Diversification can quickly reduce the risk in investing;
however, it may lead to a consequence that limiting the risks presents a disproportionate way to
resources.
Moreover, according to Chambers D. and Zdanowicz J. (2014), they proved that
diversification is not an effective way to reduce the risk as it is hard to predict how the stock
market change. Another research by Ken Faulkenberry said that there are several good quality
businesses and far fewer that are priced at prices that have a margin. The more stocks you bring
into your portfolio, the greater possibilities your portfolio is less concentrated. For example,
investing in Apple Inc. and Coca-Cola company will calculate both company's correlation. As
shown in figure 1, the closer the proportion to 1, the better the investment.

8
8

An efficiency margin is a directed graph that is portfolios that, for a given risk level, bring a
high expected return or the lowest risk for a given return level. Portfolios below the output
frontier are not suitable because they do not have an adequate return for the chance to be offset.
The portfolios to the productivity frontier's right are almost optimal since they have a higher risk
level. For example, figure 2 above illustrates the efficient line of two companies: Apple and
Coca-Cola. Base on this graph, the investors can decide on some investment options that can
make a profit. Consider if the share price falls into the right side of the line, the investors will
receive a high yield, although the risk will also be very high. On the contrary, if shares fall into
the left side, it will be very safe to invest, but the returns will not as high as on the right side. The
highest point to receive the best profit is the top point at the right of the line.

9
9


CONCLUSION
For any company that wants to prevail in competition, stand firm, and succeed in the market
economy, financial analysis is essential. Analyzing financial statements plays the most critical
role in economic analysis. Financial statement reviews offer the most precise financial details on
the financial condition, market situation, capital situation, and debts for corporate managers to
issue investment decisions promptly.
Students have completed the assignment after a period of theoretical study on financial
statements and review of financial statements and learning about the situation of financial
statement analysis at Apple Inc. and the Coca-Cola company. In the study, research material and
criteria have been thoroughly articulated with self-effort and devoted assistance from subject
teachers.

10
10

REFERENCES
1. Liquidity Measures: Net Working Capital, Current Ratio, Quick Ratio, Cash Ratio (no date).
Available
at:
/>(Accessed: 2 February 2021).
2. Chỉ số thanh khoản (Liquidity Ratio) là gì? Ý nghĩa và các loại chỉ số thanh khoản thường gặp
(no date). Available at: (Accessed: 2 February
2021).
3. Bouchey, P. et al. (2012) ‘Volatility harvesting: Why does diversifying and rebalancing create
portfolio growth?’, Journal of Wealth Management, 15(2), pp. 26–35. doi:
10.3905/jwm.2012.15.2.026.
4. Chambers, D. R. and Zdanowicz, J. S. (2014) ‘The limitations of diversification return’,
Journal of Portfolio Management, 40(4), pp. 65–76. doi: 10.3905/jpm.2014.40.4.065.
5. Chambers, D. R. and Zdanowicz, J. S. (2014) ‘The Limitations of Diversification Return’,
The Journal of Portfolio Management, 40(4).Willenbrock, S. (2011) ‘Diversification return,
portfolio rebalancing, and the commodity return puzzle’, Financial Analysts Journal, 67(4),
pp. 42–49. doi: 10.2469/faj.v67.n4.1.
6. Disadvantages of Diversification in Investing - Arbor Asset Allocation Model Portfolio
(AAAMP)
Value
Blog
(no
date).
Available
at:
/>(Accessed: 2 February 2021).
7. Volatility / Mức Biến Động; Độ Bất Ổn Định (no date). Available at:
(Accessed: 2

February 2021).
8. Hệ số tương quan (Correlation coefficient) là gì? Ứng dụng của hệ số tương quan trong tài
chính (no date). Available at: (Accessed: 2
February 2021).
9. Đường biên hiệu quả (Efficient Frontier - EF) là gì? Danh mục đầu tư tối ưu (no date).
Available at: (Accessed: 2 February 2021).
10.
Khả năng thanh tốn dài hạn (Solvency) là gì? Phân biệt với thanh khoản (no date).
Available at: (Accessed: 2 February 2021).
11.
Hệ số khả năng thanh toán lãi vay của doanh nghiệp (no date). Available at:
/>(Accessed: 2 February 2021).
12.
Tỉ số nợ trên tổng tài sản (Total-Debt-to-Total-Assets Ratio - TD/TA) là gì? Cơng thức
tính (no date). Available at: (Accessed: 2 February
2021).

11
11