Accounting Method and Coca Cola Questionnaire

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Does Coca-Cola have the ability to influence CCE's debt levels?

The debt to equity ratio of Coca Cola is: .92 for 2009 and 1.33 for 2010. While CCE has a debt to equity ratio of: 1.51 for 2009 and 1.3 for 2010. Coca Cola does have the ability to influence the debt levels of CCE. The way that this can take place is to use Coca Cola's credit line to help the firm raise additional working capital in the public markets. This would cause the debt levels of CCE to increase. Another option is that Coca Cola can purchase CCE and assume a percentage of their debt. A good example of this can be seen with Coca Cola's acquisition of CCE North America. In exchange for increasing their ownership in this segment, there was also an agreement for Coca Cola to take on CCE North America's debt of $7.9 billion.

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This is significant in showing how Coca Cola has a major influence on CCE's debt levels. ("2010 Annual Report," 2011)

How are Coca Cola's financial affected by its relationship with CCE? In general, how would Coca Cola's financials change if it consolidated CCE?

There are both positive and negative effects for Coca Cola. The positive effects are that earnings have increased from $6.82 billion (for 2009) to $11.80 billion (for 2010). While the negative effect is that debt has increased for the firm going from $5.05 billion (for 2009) to $14.04 billion (for 2010). The way the financials would change is the total amounts of debt will increase. At the same time, there will be an improvement in the revenues of the firm. This will help to increase their stock price once the organization has been.....

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