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AN EXECUTIVE SUMMARY

This report is concentrating on the financial position of THE COCA-COLA COMPANY, based in Atlanta, Georgia, USA First listed on the New York Stock Exchange in 1986 (NYSE: CCE), our roots go back to the birth of the Coca-Cola bottling business in the 19th century.

THE COCA-COLA COMPANY (KO) COCA-

The COCA-COLA COMPANY, the world leading soft drinks maker, operates in more than 200 countries and sell 400 brands of non-alcoholic beverages. COCA-COLA is also the most valuable brand in the world. COCA-COLA is a globally recognized successful company.

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CCE first expanded from its North American roots to Europe in 1993 with the purchase of bottling rights in the Netherlands. Our European reach grew in the late 1990s with the addition of Belgium, France, Great Britain, and Luxembourg.

In 2010, The Coca-Cola Company acquired our North American operations, and today, we serve customers and consumers in Belgium, Great Britain, France, Luxembourg, the Netherlands, Norway, and Sweden.

In each nation and local community, we strive to be an outstanding corporate citizen and work in partnership with our constituents at every level.
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Mission

Our vision target: People Portfolio Partner Planet Profit Productivity People Portfolio Partners Planer Profit Productivity
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Major Brands
Coca-Cola Diet Coca-Cola Sprite Fanta Barq's Root Beer Glaceau Vitamin Water Coke Zero Dasani bottled water Aquarius sports drinks Nestea

Packaging and Principal Activities

Packaging Details: The Coca-Cola products are available in different packing 24 regular bottle shell 6 bottle pack for 1.5 pets 12 bottles in a pack for disposable bottle 24 cans in one pack. Principal Activities: The three principal activities of the Coca-Cola business system which create greenhouse gases are:1. Manufacturing plants 2. The distribution fleet 3. Cold drink equipment.

DERIVATIVES
Understanding the word itself, Derivatives is a key to mastery of the topic. The word originates in mathematics and refers to a variable, which has been derived from another variable. For example, a measure of weight in pound could be derived from a measure of weight in kilograms by multiplying by two. In financial sense, these are contracts that derive their value from some underlying asset. Without the underlying product and market it would have no independent existence. Underlying asset can a Stock, Bond, Currency, Index or a Commodity. Someone may take an interest in the derivative products. Without having an interest in the underlying product market, but the two are always related and may therefore interact with each other.

CHARACTERISTICS OF DERIVATIVES

1. Their value is derived from an underlying instrument such as stock index, currency, etc. 2. They are vehicles for transferring risk. 3. They are leveraged instruments

Some of the characteristics of derivative

Zero Net Supply Element of Futurity Expiration of Derivative Contracts

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TYPES OF DERIVATIVES

Forwards: A forward contract is a customized contract between two entities where settlement takes place on a specific date in the futures at todays pre-agreed price. Forward contracts offer tremendous flexibility to the partys to design the contract in terms of the price, quantity, quality, delivery, time and place. Liquidity and default risk are very high. Futures: A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. Futures contracts are special types of forward contracts in the sense, that the former are standardized exchange traded contracts.

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Options:
Options are two types - Calls and Puts. Calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset at a given price on or before a given future date. Puts give the buyer the right but not the obligation to sell a given quantity of the underlying asset at a given price on or before a given date.

Warrants:

Longer dated options are called warrants and are generally traded over the counter. Options generally have lives up to one year, the majority of options traded on options exchanges having a maximum maturity of nine months.

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LEAPS: The acronym LEAPS means Long Term Equity Anticipation Securities. These are options having a maturity of up to three years. Baskets: Basket options are options on portfolios of underlying assets. The underlying asset is usually a moving average of a basket of assets. Equity index options are a form of basket options.

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Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to a pre-arranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are: Interest rare swaps: These entail swapping only the interest related cash flows between the parties in the same currency. Currency swaps: These entail swapping both the principal and interest between the parties, with the cash flows in one direction being in a different currency than those in opposite direction.

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Advantage of derivatives

Flexibility: Derivatives can be used with respect to commodity price, interest and exchange rates and equity price. They can be used in many ways. Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks. Stable Economy: Derivatives have a stabilizing effect on the economy by reducing the number of businesses that go under due to volatile market forces.

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Disadvantage of derivatives
Credit Risk: While derivatives cut down on the risks caused by a fluctuating market, they increase credit risk. Even after minimizing the credit risk through collateral, you still face some risk from credit protection agencies. Crimes: Derivatives have a high potential for misuse. They have been the caused the downfall of many companies that used trade malpractices and fraud. Interest Rates: Wrong forecasts can result in losses amounting to millions of dollars for large companies; it can wipe out small businesses. You need to accurately forecast the long term and short term interest rates, something that many businesses cannot do.
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How derivatives traded in Singapore market


Securities - Turnover fell 21% year on year to $30 billion, in line with global markets, due to economic and fiscal uncertainties. Securities daily average value was $1.4 billion, down 25% from a year earlier. Derivatives - Total volume increased 33% year on year to 7.2 million contracts; derivatives daily average volume was 349,378 contracts. Commodities and Clearing - SICOM rubber futures trading rose 62% year on year to 24,512 contracts following the migration of the contracts onto the SGX platform in May.

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Financial Assess: CAPM Capital Asset Pricing Model

CAPM )

It is used to determine a theoretically appropriate required rate of return of an asset if that asset is to be added to an already well-diversified portfolio, given that assets non-diversifiable risk.

Financial Assess: CAPM

Formula

E (Ra) = Rf + (E (Rm) - Rf )

E (Ra) is the expected return on the capital asset Rf is the risk-free interest rate Beta Coefficient is the sensitivity of the expected excess asset returns to the expected excess market returns. E (Rm) is the expected return of the market (the expected market rate of return is usually estimated by measuring the Geometric Average of the historical returns on a market portfolio)

Financial Assess: CAPM

 Risk free rate of interest

3.0%

 Beta coefficient of KO: 0.55  We used SP&500 to estimate the expected return of market, it equals to 14%.

Financial Assess: CAPM

expected return on the capital asset:


E (Ra) = 3% + 0.55(14% -3%) = 9.6%

If the expected rate is higher than our required rate, then it should be taken If it is lower, then, it should be given up

Financial Assess: CAPM

Advantage:
 divided all the securities risk into three pieces. (Risk free rate of return, risk and price risk unit risk )  Usefulness. It allows investor assess and select the financial assets based on the absolute risk instead of overall risk

Financial Assess: CAPM

Limitations:
the model assumes the market is a perfect competition. the model assumes investors have same investing time limit and not take the later period of investment into consider. the model assumes investors can get loan with an unlimited, stable and risk free rate. the model assumes market is frictionless the model assumes all the investor are rational

Discussion on result finding

SML
Security Market Line

SML says about the fair value

SML

Point A: with same Beta Return is higher than SML Expected return > Required return Low price Worth buying Point B: with same Beta Return is lower than SML Expected return < Required return High price Not worth

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Result captured

E (Ra) = 3% + 0.55(14% -3%) = 9.6%

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Discussion

To decide whether we take the investment, we should focus on: If the expected return is higher than required rate, then it should be taken. If the expected return is lower than required rate, then the investment should be given up
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Discussion

Depends on the research, usually, the CAPM value for other companies will be around 10%15%. As a result, Coca cola is not good enough for investment.

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Conclusion

Coke combination of people's taste and production of the appropriate "derivatives."

From only focus on the business of Coca-Cola beverage derivatives, Coca-Cola is innovative a variety of methods of communication with consumers, which will help increase consumer brand loyalty for Coca-Cola

Feasibility for the financial derivatives market development

Risks and regulatory issues should not be underestimated,in order to use credit derivatives to better manage credit risk.