portfolio containing an analysis of Apple Inc. and The Coca-Cola Company.

phân tích portfolio dựa trên báo cáo tài chính của hai công ty Apple và Coca-Cola

FACULTY OF BUSINESS AND LAW ACADEMIC YEAR 2020/2021

COURSEWORK BRIEF STUDENT ID: 20055737

THE MODULE TITLE: Introduction to Finance

THE MODULE ID: UMADRU-15-2

WORD COUNT: 1500 words

THE COURSEWORK QUESTION: Students are required to build a portfolio containing an analysis

of Apple Inc and The Coca-Cola Company

In governance, the review of financial statements plays a vital role Analyzing financials will best practices and entities see the actual financial results During the business cycle, manufacturing and business help managers assess their profitability prospects in making appropriate During the business cycle, firms' business operations help managers determine the company's profits to optimize decisions and developments

The main goal of reviewing financial statements is to help consumers of information better determine the company's financial, economic profitability and pros, and then make the best choices according to the category they care about

In this report, the financial statement of Apple Inc and the Coca-Cola company will be mainly discussed and analyzed From that point of view, conclusions about the financial position

of these two companies are drawn

PART I – Company Profile

1 Apple Inc.

Apple Inc is a multinational information technology firm located in California Apple was known as Apple Computer, Inc on April 1, 1976, and was renamed in early 2007 (Wikipedia, 2021) In 2005, annual global revenues hit $13.9 billion, with around 14,800 workers worldwide Many products, such as laptops, software, hardware, music devices, and other multimedia devices, are manufactured by Apple Inc Apple sells its goods mostly in the US, Canada, Japan, and the United Kingdom

2 The Coca-Cola Company

In 1886, the Coca-Cola Company was first published in Wilmington, Delaware They stated their nerve-center in Atlanta, Georgia This firm is a global drink corporation in the US, which mainly produce the anti-alcoholic beverage The business is known best for its Coca-Cola core product, invented in 1886 in Columbus by a pharmacist named John Pemberton Then, acquired

in 1889 by Asa Candler, founded the Coca-Cola company in 1892

PART II – Financial Performance

The cash ratio and acid test ratio measure a firm's liquidity and evaluate the ability to cover the debt Overall, Apple's figure is more stable than Coca-Cola, it can be said that Apple Inc can have more liquidity than Coca-Cola As shown in both models, these companies can quickly pay back their debt as their cash ratio stays between 0 and 0,5 Considering the acid test ratio, both

companies are more significant than 1, although from 2017 to 2020, Coca-Cola has decreased to between 0,5 and 1 It still can be said that the company can deal with its short-term debt and

inventory

The total debt ratio and interest coverage ratio evaluate a firm's ability to cover its long-term debt In both figures, the scale of the total debt ratio is stable and very low It can be said that the liabilities of both companies account for a small proportion of total assets or total capital, less financial difficulties When mentioned about the interest coverage ratio, the two figures have pointed out the capacity to pay off the long-term debt of Apple is better than Coca-Cola as the higher the figure, the better the ability to pay the interest to their creditor

Asset turnover ratios calculate the company's revenue or sales volume relative to the asset company's value Overall, the stable financial leverage for both Apple and Coca-Cola is not too high or low As mentioned above, these businesses use their assets for product development and business operations Stock turnover is another financial way of measuring the market of a

company It denotes inductance in the inventory over a long period Apple has a higher figure than Coca-Cola, as in figure 3.1 and figure 3.2, which means that Apple can increase sales than Coca-Cola It has a limited amount of stock

The net profit and share price calculate the cost of gross profit annual gross by total index For Apple, at about 0.2, which is at a steady stage, whereas Coca-Cola has fluctuated

Additionally, Apple has an impressive ratio compared to the market, as the overall net profit is 0.17 and 0.15 for Coca-Cola, which is larger than their proportion in 2016 and 2017 On the other hand, from 2017 to 2020, Apple's profitability grew steadily, although Coca-face Cola's shot up in 2017 We can see that these companies' profitability and net profits are the highest in their industry

PART III – Market Performance

Financial markets are a simple market where people participate in trading currency, assets, trading instruments instead of making money It is an essential aspect of the economy In the financial market, the cash flows are rapidly moving, creating variations between securities and payments There are three primary roles of the stock sector They will access funds from entitlements that are willing to provide those who need them with monetary assistance They may be capable of can liquidity for securities The third fragile banking market is to provide financial information and determine the valuation of a business In attracting and mobilizing financial sources' stability, the financial market plays a part in promoting and saving It also

facilitates and improves the effective use of finance Finally, trade policy and money supply are applied

The market share is the product of such forces falling into different classes: fundamental factors, technological factors, and market sentiment Earnings and profitability from the manufacture and demand of customers are essential elements that drive stock prices The next factor is the technical factor, which refers to the dividend background relating to traders' and investors' chart trends, momentum, and lifestyle choices Finally, the last element is the sentiment of the market It describes and collectively about the psychology of traders

Figure 1 Summary Statistic of Apple Inc., Coca-Cola Company and the market index

The figure compares the summary statistics of Apple Inc and the Coca-Cola Company with the market index in 6 years from October 2015 to October 2020 The graph shows the result by comparing the standard deviation of Apple and Coca-Cola with S&P500 Apple Inc has a standard deviation higher than the market index, 1,888% to 1,210%, and the average return also much more extensive, 0,136% to 0,052% On the other hand, the Coca-Cola Company has its average return lower than the market index, 0,023% compared with 0,052%, while the standard deviation is still slightly higher than S&P500 Moreover, in figure 2, Apple and Coca-Cola's density plot compared with the market index shows a considerable difference Apple's kurtosis is

7, lower than 21, the market index, and the graph also fatter than the market graph Otherwise, the shape of Coca-Cola's map is much steeper, and the kurtosis of this company is 11, which is higher than the Apple one All of this sign means that Apple Inc can bring back an evenly level

of profit, which will lead to a higher risk than the Coca-Cola Company, although it can make a better return

PART IV – Portfolio of Shares

Correlation is a calculation of how closely a linear equation applies to independent values If

it is essential to store the cause and effect linearly, it can be calculated employing noise in the relationship The closer the correlation value is to 1 or -1, the less sound is present A negative value correlation indicates that two variables have an inverse relation or a negative correlation (absolute inverse when the value is -1) For two factors, the correlation with a positive implies a positive relationship or correlation (whole positive when the value is 1) The correlation is zero

In economics, investors can use correlation to hedge their portfolios and reduce the risk of market volatility They can also use it to foresee the change in the correlation of two variables, such as the stock market, to decide which one is better to invest

A diversified investment is a multi-asset portfolio that maximizes return for the minimum risk There is a mixture of stocks, fixed income, and commodities in a traditional portfolio Diversification works because of the economic event absence of properties Diversification only reduces the risks, which include systematic risks and non-systematic risks However, diversification has some limitations Diversification can quickly reduce the risk in investing; however, it may lead to a consequence that limiting the risks presents a disproportionate way to resources

Moreover, according to Chambers D and Zdanowicz J (2014), they proved that diversification is not an effective way to reduce the risk as it is hard to predict how the stock market change Another research by Ken Faulkenberry said that there are several good quality

An efficiency margin is a directed graph that is portfolios that, for a given risk level, bring a high expected return or the lowest risk for a given return level Portfolios below the output frontier are not suitable because they do not have an adequate return for the chance to be offset The portfolios to the productivity frontier's right are almost optimal since they have a higher risk level For example, figure 2 above illustrates the efficient line of two companies: Apple and Coca-Cola Base on this graph, the investors can decide on some investment options that can make a profit Consider if the share price falls into the right side of the line, the investors will receive a high yield, although the risk will also be very high On the contrary, if shares fall into the left side, it will be very safe to invest, but the returns will not as high as on the right side The highest point to receive the best profit is the top point at the right of the line

For any company that wants to prevail in competition, stand firm, and succeed in the market economy, financial analysis is essential Analyzing financial statements plays the most critical role in economic analysis Financial statement reviews offer the most precise financial details on the financial condition, market situation, capital situation, and debts for corporate managers to issue investment decisions promptly

Students have completed the assignment after a period of theoretical study on financial statements and review of financial statements and learning about the situation of financial statement analysis at Apple Inc and the Coca-Cola company In the study, research material and criteria have been thoroughly articulated with self-effort and devoted assistance from subject teachers

1 Liquidity Measures: Net Working Capital, Current Ratio, Quick Ratio, Cash Ratio (no date) Available at: https://thismatter.com/money/stocks/valuation/liquidity-measures.htm (Accessed: 2 February 2021)

2 Chỉ số thanh khoản (Liquidity Ratio) là gì? Ý nghĩa và các loại chỉ số thanh khoản thường gặp (no date) Available at: https://vietnambiz.vn/chi-so-thanh-khoan-liquidity-ratio-la-gi-y-nghia-va-cac-loai-chi-so-thanh-khoan-thuong-gap-20200610165951841.htm (Accessed: 2 February 2021)

3 Bouchey, P et al (2012) ‘Volatility harvesting: Why does diversifying and rebalancing create portfolio growth?’, Journal of Wealth Management, 15(2), pp 26–35 doi: 10.3905/jwm.2012.15.2.026

4 Chambers, D R and Zdanowicz, J S (2014) ‘The limitations of diversification return’, Journal of Portfolio Management, 40(4), pp 65–76 doi: 10.3905/jpm.2014.40.4.065

5 Chambers, D R and Zdanowicz, J S (2014) ‘The Limitations of Diversification Return’, The Journal of Portfolio Management, 40(4).Willenbrock, S (2011) ‘Diversification return, portfolio rebalancing, and the commodity return puzzle’, Financial Analysts Journal, 67(4),

pp 42–49 doi: 10.2469/faj.v67.n4.1

6 Disadvantages of Diversification in Investing - Arbor Asset Allocation Model Portfolio

https://www.arborinvestmentplanner.com/disadvantages-of-diversification-in-investing/ (Accessed: 2 February 2021)

7 Volatility / Mức Biến Động; Độ Bất Ổn Định (no date) Available at: https://www.saga.vn/thuat-ngu/volatility-muc-bien-dong-do-bat-on-dinh~3908 (Accessed: 2 February 2021)

8 Hệ số tương quan (Correlation coefficient) là gì? Ứng dụng của hệ số tương quan trong tài chính (no date) Available at: https://vietnambiz.vn/he-so-tuong-quan-correlation-coefficient-la-gi-ung-dung-cua-he-so-tuong-quan-trong-tai-chinh-20191023132739901.htm (Accessed: 2 February 2021)

9 Đường biên hiệu quả (Efficient Frontier - EF) là gì? Danh mục đầu tư tối ưu (no date) Available at: https://vietnambiz.vn/duong-bien-hieu-qua-efficient-frontier-ef-la-gi-danh-muc-dau-tu-toi-uu-20191104181713419.htm (Accessed: 2 February 2021)

10 Khả năng thanh toán dài hạn (Solvency) là gì? Phân biệt với thanh khoản (no date) Available at: https://vietnambiz.vn/kha-nang-thanh-toan-dai-han-solvency-la-gi-phan-biet-voi-thanh-khoan-20190924154311617.htm (Accessed: 2 February 2021)

11 Hệ số khả năng thanh toán lãi vay của doanh nghiệp (no date) Available at: https://taichinhnganhang.edu.vn/he-so-kha-nang-thanh-toan-lai-vay-cua-doanh-nghiep/

(Accessed: 2 February 2021)

12 Tỉ số nợ trên tổng tài sản (Total-Debt-to-Total-Assets Ratio - TD/TA) là gì? Công thức tính (no date) Available at: https://vietnambiz.vn/ti-so-tong-no-tren-tong-tai-san-total-debt-to-total-assets-ratio-td-ta-la-gi-cong-thuc-tinh-20191126171259715.htm (Accessed: 2 February 2021)