AN INVESTIGATION INTO THE ACCOUNT OF EXCHANGE RATE FLUCTUATION IN THE
VALUATION OF ASSETS IN THE COCA-COLA COMPANY
NAME:KINGSLEY EBUKA UZOH
STUDENT ID: 22046866
Research Aims
The aim of this investigation is to explore the
impact of exchange rate fluctuations on the
valuation of assets in the Coca-Cola Company and
to determine how the company accounts for
these fluctuations in its financial statements.
RESEARCH OBJECTIVES
1. To examine the impact of exchange rate fluctuations
on the valuation of assets in the Coca-Cola Company.
2. To identify other factors influencing the fluctuation of
exchange rates in Coca-Cola company
3. To make policy recommendations based on the
findings of the study.
INTRODUCTION
Exchange rate fluctuations are a common occurrence in
the global financial market. The Coca-Cola Company is a
prime example of a multinational corporation that
operates in various countries and is exposed to exchange
rate risk. According to recent studies, the valuation of
assets in multinational corporations is affected by
exchange rate fluctuations (Hess, 2021). Changes in
exchange rates can impact the translation of foreign assets
into the parent company's reporting currency, leading to
fluctuations in asset values. This effect is particularly
significant in companies with a high percentage of foreign
assets. The Coca-Cola Company, for instance, operates in
more than 200 countries, with about 80% of its revenue
coming from outside the United States (The Coca-Cola
Company, 2021).
Research model
Asset = B0 + B1Exrt +B2Inrt + μ
This equation suggests that the value of an asset (Asset) is
a function of the exchange rate (Exrt) and the interest
rate (Inrt). It can be interpreted as a regression model,
where B0 represents the intercept, B1 represents the
coefficient for Exrt, B2 represents the coefficient for Inrt,
and μ represents the error term.
The equation provided is a multiple regression model
using time series data where the value of the assets
(Asset) is predicted by two variables: the exchange rate
(Exrt) and the interest rate (Inrt), the constant term (B 0)
and the error term (μ) that captures any unobserved
factors affecting the asset value.
Research questions
i. How do exchange rate fluctuations impact the valuation of
assets in the Coca-Cola Company?
ii. What are the accounting practices and methods used by
the Coca-Cola Company to account for exchange rate
fluctuations in its financial statements?
iii. What is the approach of the Coca-Cola Company to
managing exchange rate risk?
iv. How effective is the approach of the Coca-Cola Company to
managing exchange rate risk in mitigating the impact of
exchange rate fluctuations on asset valuations?
Research Limitations
v. Availability and quality of data
vi. Sample size
vii. Research bias
viii. Time constraints
ix. Language barrier
Research ethics
Informed consent refers to the process of ensuring that
research participants are fully aware of and understand the
risks, privacy and confidentiality are important in protecting the
identities and personal information of research participants,
data integrity involves ensuring that research data is accurate,
complete, and reliable, institutional review involves obtaining
ethical approval from an independent review board before
beginning research, and conflict of interest refers to situations
where personal interests may influence the objectivity and
integrity of research.
RESEARCH METHOGOLOGY
Figure 1: Research Onion
Research Philosophy – Interpretivism
By adopting an interpretivist perspective, we shall acknowledge
and explore the subjective meanings and interpretations that
underlie the accounting practices and financial reporting of the
Coca-Cola Company.
Research approach
Mixed-methods approach will be used, which combines both
qualitative and quantitative research methods.
Quantitative research methods will be used to analyze the financial data
of the Coca-Cola Company, including its financial statements, stock prices,
and other financial indicators, to investigate the impact of exchange rate
fluctuations on the valuation of assets in the company. Regression
analysis, correlation analysis, and other statistical techniques shall be
used to identify and quantify the relationship between exchange rate
fluctuations and asset valuations.
Qualitative research methods will be used to understand the company's
approach to managing exchange rate risk and accounting for exchange
rate fluctuations in its financial statements. Interviews and focus groups
with key stakeholders in the company, such as finance executives and
accountants, will be used to explore their perspectives and experiences
regarding the company's approach to managing exchange rate risk and
accounting for exchange rate fluctuations.
Research strategy- case study
A case study strategy involves the in-depth investigation of a particular
case, in this case, the Coca-Cola Company, to gain a detailed and
comprehensive understanding of the impact of exchange rate fluctuations
on the valuation of assets and the company's approach to managing
exchange rate risk
Research gaps
 Limited research on the impact of exchange rate
fluctuations on different types of assets
 Limited research on the impact of exchange rate
fluctuations on emerging market multinational
corporations
 Limited research on the impact of exchange rate
fluctuations on long-term investment decisions
 Limited research on the impact of exchange rate
fluctuations on supply chain management
Research methods
 Data collection
 Quantitative analysis
 Case study
 Expert opinion
 Data collection method
 Interviews
 Surveys
 Document analysis Case studies
Data analysis method
Descriptive statistics: This involves the use of statistical
measures such as mean, median, mode, and standard
deviation to summarize and describe the data collected.
Inferential statistics: This involves the use of statistical tests
such as correlation analysis and regression analysis to
determine the relationships between variables.
Content analysis: This involves the systematic analysis of
text data, such as financial statements and annual reports,
to identify themes and patterns related to exchange rate
fluctuations and their impact on asset valuations.
Case study analysis: This involves the detailed analysis of a
specific case to identify the impact of exchange rate
fluctuations on asset valuations in the Coca-Cola
Research scope
Figure 2: Research scope
LITERATURE REVIEW
According to Shih and Keller (2016), exchange rate
fluctuations can have a significant impact on
multinational corporations' financial performance,
especially for those with substantial foreign currency
exposure. Exchange rate fluctuations can lead to
fluctuations in the value of assets, liabilities, and
revenues, resulting in significant volatility in earnings
and cash flows. In addition, exchange rate fluctuations
can affect a company's competitiveness and market
position, as they can impact prices and demand for
products and services.
Conclusion
In conclusion, the account of exchange rate fluctuation
in the valuation of assets is an important topic of
research, especially for multinational corporations such
as the Coca-Cola Company. The investigation into the
impact of exchange rate fluctuations on asset valuations
can provide valuable insights into the company's risk
management strategies and the effectiveness of these
strategies in mitigating the impact of fluctuations on
asset valuations.
Through a comprehensive literature review, it has been
shown that exchange rate fluctuations can have a
significant impact on asset valuations, and this impact
can be amplified in multinational corporations due to
the complexity of their operations and exposure to
foreign markets.
Figure 3: Gantt Chart – Dissertation Time Line
References
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American Political Science Review, 111(1), 90-104.
Goyal, R. K., & Joshi, N. K. (2018). Impact of
exchange rate volatility on the Indian economy:
Evidence from the manufacturing sector.
International Journal of Economics, Commerce and
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Odedokun, M. O. (2017). Determinants of foreign
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536.