Coca-Cola issued their quarterly earnings release (2020 24) this past week which includes the following unaudited 2020 financial statements: (1) an income statement and a cash flows statement for the year ended December 31, 2020 and (2) a balance sheet as of December 31, 2020. A copy of each of these financial statements is included at the end of this file. Use these financial statements to respond to each of the following five prompts. In formulating your responses, seek to demonstrating your understanding of the related concepts we discussed in class. You may consult your e-text and any other sources that you think will help you to be accurate and complete. You may not work together with or consult with or compare responses with those of any other student. Each of these questions is worth 3 points (total of 15 points for the quiz). Your responses will be graded for accuracy, completeness/comprehensiveness, and demonstration of your understanding of the concepts we discussed in class. When you are finished, save your work to a PDF and upload it to the dropbexon Blackboard under Quizzes and Exams. The deadline for submission is 10:00pm on Wednesday, February 17th. No late submissions will be accepted. 1. Coca-Cola presents their income statement in a multi-step format. Discuss your understanding of the multi-step income statement. Here are a few questions to consider: What does multi-step" mean? As a publicly traded company, is Coca-Cola required to use this format? What are the advantages of using a multi-step format over a single-step format? What information is conveyed, or at least made apparent, by the subtotals and groupings in a multi-step income statement? In your opinion, which subtotals in Coca-Cola's multi-step income statement are particularly informative? What can an investor learn from them? Response: 2. Coca-Cola presents two EPS calculations in its income statement (Basic and Diluted). What is the meaning of each of these two figures? Why do we need both? If you were an investor in Coca-Cola, would you want the difference between the two numbers to be small or large? Why? Response: 3. Coca-Cola reports Consolidated Net Income of $7,768 million in 2020. Their income statement makes no mention of discontinued operations. Assume instead the following hypothetical scenario: On January 15, 2021 Coca-Cola disposed of a domestic bottling business that qualifies as a material segment of the company. As of December 31, 2020, the segment was considered held for sale. The segment experienced a net operating loss of $130 million in 2020. As of December 31, 2020, the book value of the bottling segment was $430 million. Management of Coca-Cola estimates the segment's fair value on that date to be $360 million. Management also estimates $10 million in costs associated with selling the segment. Assume Coca-Cola pays income taxes of 20%. Construct the bottom portion of Coca-Cola's income statement to reflect discontinued operations. Begin your income statement with Income from Continuing Operations of $7,768 million. Response: Income from Continuing Operations $ 7,768 4. Define the term Comprehensive Income. In your response, use the language we used in class. Coca- Cola did not include a statement of comprehensive income in their earnings release (it will be part of the 10-K which will come out later this month). What can you learn about the amount of total comprehensive income from the financial statements provided here? Is it possible to estimate the total amount of comprehensive income? Show me. Response: 5. Does Coca-Cola use the direct or indirect method of presenting the statement of cash flows? How do you know this? How would the statement look different if the opposite method was used? Describe why Coca-Cola lists Depreciation and amortization as a positive number in the Operating Activities section of the cash flows statement. Response: THE COCA-COLA COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (UNAUDITED) (In millions except par value) December 31 2020 December 31. 2019 $ 6,795 $ 1,771 8,566 2,348 3,144 3.266 1,916 19,240 19,273 812 6,184 2,460 10,777 10,395 17,506 649 87,296 $ 6,480 1,467 7.947 3,228 3,971 3.379 1,886 20,411 19,025 854 6,075 2,412 10,838 9,266 16.764 736 86,381 $ ASSETS Current Assets Cash and cash equivalents Short-term investments Total Cash, Cash Equivalents and Short-Term Investments Marketable securities Trade accounts receivable, less allowances of $526 and $524, respectively Inventories Prepaid expenses and other assets Total Current Assets Equity method investments Other investments Other assets Deferred income tax assets Property, plant and equipment - net Trademarks with indefinite lives Goodwill Other intangible assets Total Assets LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued expenses Loans and notes payable Current maturities of long-term debt Accrued income taxes Total Current Liabilities Long-term debt Other liabilities Deferred income tax liabilities The Coca-Cola Company Shareowners' Equity Common stock, $0.25 par value; authorized - 11,200 shares; issued - 7,040 shares Capital surplus Reinvested earnings Accumulated other comprehensive income (loss) Treasury stock, at cost - 2,738 and 2,760 shares, respectively Equity Attributable to Shareowners of The Coca-Cola Company Equity attributable to noncontrolling interests Total Equity Total Liabilities and Equity $ 11,145 $ 2,183 485 788 14,601 40,125 9,453 1,833 11,312 10,994 4,253 414 26,973 27,516 8,510 2,284 1,760 17,601 66,555 (14,601) (52,016) 19,299 1,985 21,284 87,296 $ 1,760 17,154 65,855 (13,544) (52,244) 18,981 2,117 21,098 86,381 $ THE COCA-COLA COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (UNAUDITED) (In millions) Year Ended December 31, December 31, 2019 2020 7,768 $ 1,536 126 (18) (511) (88) (914) 556 699 690 9,844 8,985 1,365 201 (280) (421) 91 (467) 127 504 366 10,471 Operating Activities Consolidated net income Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity (income) loss - net of dividends Foreign currency adjustments Significant (gains) losses - net Other operating charges Other items Net change in operating assets and liabilities Net Cash Provided by Operating Activities Investing Activities Purchases of investments Proceeds from disposals of investments Acquisitions of businesses, equity method investments and nonmarketable securities Proceeds from disposals of businesses, equity method investments and nonmarketable securities Purchases of property, plant and equipment Proceeds from disposals of property, plant and equipment Other investing activities Net Cash Provided by (Used in) Investing Activities Financing Activities Issuances of debt Payments of debt Issuances of stock Purchases of stock for treasury Dividends Other financing activities Net Cash Provided by (Used in) Financing Activities Effect of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the year Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents at End of Year Less: Restricted cash and restricted cash equivalents at end of year Cash and Cash Equivalents at End of Year (13,583) 13,835 (1,052) 189 (1,177) 189 122 (1,477) (4,704) 6,973 (5,542) 429 (2,054) 978 (56) (3,976) 26,934 (28,796) 647 (118) (7,047) 310 (8,070) 23,009 (24,850) 1,012 (1,103) (6,845) (227) (9,004) 76 (72) 373 6,737 7,110 315 6,795 $ (2,581) 9,318 6,737 257 6,480 $ Coca-Cola issued their quarterly earnings release (2020 24) this past week which includes the following unaudited 2020 financial statements: (1) an income statement and a cash flows statement for the year ended December 31, 2020 and (2) a balance sheet as of December 31, 2020. A copy of each of these financial statements is included at the end of this file. Use these financial statements to respond to each of the following five prompts. In formulating your responses, seek to demonstrating your understanding of the related concepts we discussed in class. You may consult your e-text and any other sources that you think will help you to be accurate and complete. You may not work together with or consult with or compare responses with those of any other student. Each of these questions is worth 3 points (total of 15 points for the quiz). Your responses will be graded for accuracy, completeness/comprehensiveness, and demonstration of your understanding of the concepts we discussed in class. When you are finished, save your work to a PDF and upload it to the dropbexon Blackboard under Quizzes and Exams. The deadline for submission is 10:00pm on Wednesday, February 17th. No late submissions will be accepted. 1. Coca-Cola presents their income statement in a multi-step format. Discuss your understanding of the multi-step income statement. Here are a few questions to consider: What does multi-step" mean? As a publicly traded company, is Coca-Cola required to use this format? What are the advantages of using a multi-step format over a single-step format? What information is conveyed, or at least made apparent, by the subtotals and groupings in a multi-step income statement? In your opinion, which subtotals in Coca-Cola's multi-step income statement are particularly informative? What can an investor learn from them? Response: 2. Coca-Cola presents two EPS calculations in its income statement (Basic and Diluted). What is the meaning of each of these two figures? Why do we need both? If you were an investor in Coca-Cola, would you want the difference between the two numbers to be small or large? Why? Response: 3. Coca-Cola reports Consolidated Net Income of $7,768 million in 2020. Their income statement makes no mention of discontinued operations. Assume instead the following hypothetical scenario: On January 15, 2021 Coca-Cola disposed of a domestic bottling business that qualifies as a material segment of the company. As of December 31, 2020, the segment was considered held for sale. The segment experienced a net operating loss of $130 million in 2020. As of December 31, 2020, the book value of the bottling segment was $430 million. Management of Coca-Cola estimates the segment's fair value on that date to be $360 million. Management also estimates $10 million in costs associated with selling the segment. Assume Coca-Cola pays income taxes of 20%. Construct the bottom portion of Coca-Cola's income statement to reflect discontinued operations. Begin your income statement with Income from Continuing Operations of $7,768 million. Response: Income from Continuing Operations $ 7,768 4. Define the term Comprehensive Income. In your response, use the language we used in class. Coca- Cola did not include a statement of comprehensive income in their earnings release (it will be part of the 10-K which will come out later this month). What can you learn about the amount of total comprehensive income from the financial statements provided here? Is it possible to estimate the total amount of comprehensive income? Show me. Response: 5. Does Coca-Cola use the direct or indirect method of presenting the statement of cash flows? How do you know this? How would the statement look different if the opposite method was used? Describe why Coca-Cola lists Depreciation and amortization as a positive number in the Operating Activities section of the cash flows statement. Response: THE COCA-COLA COMPANY AND SUBSIDIARIES Condensed Consolidated Balance Sheets (UNAUDITED) (In millions except par value) December 31 2020 December 31. 2019 $ 6,795 $ 1,771 8,566 2,348 3,144 3.266 1,916 19,240 19,273 812 6,184 2,460 10,777 10,395 17,506 649 87,296 $ 6,480 1,467 7.947 3,228 3,971 3.379 1,886 20,411 19,025 854 6,075 2,412 10,838 9,266 16.764 736 86,381 $ ASSETS Current Assets Cash and cash equivalents Short-term investments Total Cash, Cash Equivalents and Short-Term Investments Marketable securities Trade accounts receivable, less allowances of $526 and $524, respectively Inventories Prepaid expenses and other assets Total Current Assets Equity method investments Other investments Other assets Deferred income tax assets Property, plant and equipment - net Trademarks with indefinite lives Goodwill Other intangible assets Total Assets LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued expenses Loans and notes payable Current maturities of long-term debt Accrued income taxes Total Current Liabilities Long-term debt Other liabilities Deferred income tax liabilities The Coca-Cola Company Shareowners' Equity Common stock, $0.25 par value; authorized - 11,200 shares; issued - 7,040 shares Capital surplus Reinvested earnings Accumulated other comprehensive income (loss) Treasury stock, at cost - 2,738 and 2,760 shares, respectively Equity Attributable to Shareowners of The Coca-Cola Company Equity attributable to noncontrolling interests Total Equity Total Liabilities and Equity $ 11,145 $ 2,183 485 788 14,601 40,125 9,453 1,833 11,312 10,994 4,253 414 26,973 27,516 8,510 2,284 1,760 17,601 66,555 (14,601) (52,016) 19,299 1,985 21,284 87,296 $ 1,760 17,154 65,855 (13,544) (52,244) 18,981 2,117 21,098 86,381 $ THE COCA-COLA COMPANY AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (UNAUDITED) (In millions) Year Ended December 31, December 31, 2019 2020 7,768 $ 1,536 126 (18) (511) (88) (914) 556 699 690 9,844 8,985 1,365 201 (280) (421) 91 (467) 127 504 366 10,471 Operating Activities Consolidated net income Depreciation and amortization Stock-based compensation expense Deferred income taxes Equity (income) loss - net of dividends Foreign currency adjustments Significant (gains) losses - net Other operating charges Other items Net change in operating assets and liabilities Net Cash Provided by Operating Activities Investing Activities Purchases of investments Proceeds from disposals of investments Acquisitions of businesses, equity method investments and nonmarketable securities Proceeds from disposals of businesses, equity method investments and nonmarketable securities Purchases of property, plant and equipment Proceeds from disposals of property, plant and equipment Other investing activities Net Cash Provided by (Used in) Investing Activities Financing Activities Issuances of debt Payments of debt Issuances of stock Purchases of stock for treasury Dividends Other financing activities Net Cash Provided by (Used in) Financing Activities Effect of Exchange Rate Changes on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents during the year Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of year Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents at End of Year Less: Restricted cash and restricted cash equivalents at end of year Cash and Cash Equivalents at End of Year (13,583) 13,835 (1,052) 189 (1,177) 189 122 (1,477) (4,704) 6,973 (5,542) 429 (2,054) 978 (56) (3,976) 26,934 (28,796) 647 (118) (7,047) 310 (8,070) 23,009 (24,850) 1,012 (1,103) (6,845) (227) (9,004) 76 (72) 373 6,737 7,110 315 6,795 $ (2,581) 9,318 6,737 257 6,480 $