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Coca Cola Company Capital Budgeting Process And Procedures

Coca Cola – Introduction of the Company:

In 1892, Coca-Cola Company was developed and its headquarter was held in Atlanta. Its franchise is considered as world’s greatest beverage industry. It captures 48% of market share. In 200 countries almost more than 160 franchises are working properly. Coca-cola mission statements are: to make value and create s difference, to refresh the world and to inspire moments of optimism and happiness.

The vision and objectives of this company are “be a super area the work so people perform their best to maintain their position”. Provide all people of the world a high-quality beverage with a surety of safety which is mainly required and first priority of people. With a mutual relationship with customers and suppliers, we create a strong network. They want to be a highly effective, lean and fast-moving organization. They think that as a responsible citizen they help in build and support sustainable communities by creating a difference. Fulfill their all responsibilities and provide a maximum return in long terms to shareholders.

Also Study: Coca Cola International Strategic Management Project Report

Coca-cola uses strong marketing strategies and advertisement techniques to attract customers. Its good image builds by its consistent customers. They can produce innovative products in the market. Having an integrated system of marketing. They capture a high market share. All products have reasonably priced convenient characteristics and unique flavor.

Due to extreme big size, control on every product is not possible. Customers not satisfied with the ingredients of coca cola. Competitors can easily capture the customer because of same pricing and taste. They cannot maintain the same quality because of bottled drinks.

Coca-Cola Capital Business Process:

We can study many discussions on budgeting process of the company. Weighted debt and equity make the structure of capital in the company. Dividends also distributed to equity holders. Proper budgeting set up is prepared in all areas of a company like the decision of investment, investment on asset and return level against such investments. They follow capital budgeting decision process. Researchers work on the need and requirements of customers and introduce such products which are the demand of customers. Almost more than 3500 products they provide in the market of above 200 countries. Company commitment clearly shows that they produce customized products for their customers.

Budgeting Process and Procedures for coca cola:

  • Preparation techniques: in accordance with the 10k annual reports of coca cola present that both financial and nonfinancial budgeting is basic purpose of the company. In such a way that company set the budget according to their requirement and desire and then selects objectives, so the main purpose of making budgets to achieve these objectives in last.
  • Uses of evaluation:  for both evaluations, internal and external, company prepares a budget. A detailed analysis of brands performance shown in annual reports because they want to present what is their actual production as compared to budgeted they set at the start of the year.
  • Difference between business units: as we know, coca cola is a multinational brand, which has a large number of departments and units who perform different actions to achieve their objectives. So verifying these departments’ performance and making a comparison with each other is very important. The company performs this action because they make targets for each department and then compare these targets with actual outcomes of all departments. So evaluation is compulsory to compare the performance of departments with each other to check the set objective delivery.

Coca-cola management accounting information system:

Management accounting is based on all accounting data collected from companies for making an internal decision and manage all expenses and sales. Coca-cola uses cashbook ledger having two sections; one section is used to save all records of disbursements and payments and the second section is utilized to record all cash information and receipts. All record must be kept on a daily basis.

Coca-cola Cost Accounting Approach:

Costing system of products presents that all costs are related to departments or processes and costs assign to products according to the utilization of process. In short, the company considers each product cost depend on activities which include in the production process. Main three activities are shown the production process features like concentrate and syrup blending, packaging and manufacturing. So it is clearly showed that company uses activity-based costing. The company also makes a budget of its costs according to activities related to process. In simple, higher activities will be the result of the higher budget of coca cola production.

Coca-cola Capital Decision-making Process:

The capital decision is very compulsory because as we consider all brands, a large number of investment involve which make this decision riskier. Payback period is very important to calculate because of investment returns. With this, internal rate of return and net present value also determine in case of investment decision process to clearly show the actual return on investments and also verify how much investment needs to get expected results. After budgeting and costing method, coca cola use WACC weighted average cost of capital to run the process of capital decision. In such type of capital decisions, according to the cost of capital of every related activity and related capital are weighted as per requirement for the intention of investment. In this regard, company checks all outcomes and sources of capital that may cause to increase investment if for equity, beta and return rate both increased.

Coca-cola Capital Acquisition and Structure:

For capital acquisition and structure, coca cola uses equity-based capital. This type of capital acquires through available in the market for investing a point of view and then investment interest in the form of dividend payments to investors. In other words, it’s a shareholder bases structure where that shareholder becomes chairman who has the highest investment in the company.

Decision-making criteria for acquiring a new investment in coca cola:

Two main points we have to consider or analyze whether or not we have to take the decision on investment in the company:

  1. Expected returns: because of higher return on any investment, the chances of adopting that investment becomes higher. As we know the criteria that only those investments selected which provide positive results of returning in future.
  2. Impact on brand image: coca cola is very much concerned about its brand image and always make decisions for selecting any investment who reflect no nay negative impact on its brand image. That’s why the company didn’t rely on government systems because of corrupt reputation.

Zero-base Budgeting:

In last few years, the demand for the company going to decrease because customers are going to be more concern about their health issues. So in this regard, the company cut down their expenses and cut down jobs to maintain their position in the markets. In this regard, the company uses zeros base budgeting. Zero based budgeting shows that review of expenses, again and again, happens because no any extra expense takes spending further. At the end of each financial quarter, expenses should be equals to income that means utilize where actually we need, like rent, supplies, and funds for emergency or retirement savings. It is also very popular cost-cutting measure from last many years. Because many companies going to use this method and save their extra expenses.

Coca-cola uses this technique to save its money through cutting thousand of extra jobs, selling corporate jets, removing inefficient factories and even appoint worker and before making copies that have to take permission.  Zero-base budgeting really focuses on reviewing your expenses so you can check where your money is gone or spend, and budget items can be managed properly. Always focus the spending of every amount and its basic utilization for the benefit of the company.

Coca-cola Sale Growth:

The sale growth is going to increase. It is only because of reducing any type of extra costs from budgeting. In this case, the company can produce more units for sale, which automatically increase the profit of the company. Its current growth rate in the economy in more than 35% which shows that coca cola is competitive with the demand of markets.

Coca-cola Competitors:

Coca-cola is not a single company who takes the market and also full fill customers need. Also, many companies are here which is doing the same job like PepsiCo and Cadbury Schweppes. But coca cola is considered a leader in the market of USA. Because it captures 42.9% of market share while PepsiCo take 31.2% and Cadbury covers 17.6% in the market. All debts or liabilities are paid against the interest of 4%.

Participants in Budgeting:

Normally, management and workers of the company together decide the budget as comparing the actual results with standard budget and with the previous budget, but in coca cola, with all this, customer’s demand play a very important role in making a budget. Customer demand and requirement making the high budget as well as low. So likeness and dislikes of users of coca cola is a main point while making a budget for future.


Coca-cola is well reputed and largest company in the world. People like all brands of this company. They use different costing and capital method by; managing their investments and spending also consider the market demand and trends. It’s a very important part of industry sector.

Also Study:

Coca Business Environment

  • The introduction of coca cola Company, Marketing essay. Copyright©2003-2018
  • Coca-Cola Company budget, ©2018GPAHelp.com
  • Management accounting information System in Coca-Cola, Iloka Benneth Chiemelie, Published 4th of October 2014.
  • Verizon’s and Coca-Cola budgeting plan may be the smartest way for you to spend less and save more, Nicole Lyn Pesce, published Sep 19, 2017.
  • Budgeting process and procedure in Coca-Cola, Iloka Benneth Chiemelie, Published 15th of December 2014.
  • Accounting in the headlines, Dr.Wendy Tietz, Published 13th February 2015.

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