Financial Risks in Business - Essay Example

Financial risks are the risks that businesses experience when planning for the future when making investments, as well as conducting their daily business. Every business organization encounters risks when making financial decisions (Adams, 2005). This paper will examine the risk factors, which the Coca-Cola Company faces and the techniques used by the company to overcome these risks. It will also locate a two-year pro-forma financial statement and discuss what it says about the performance of the company, in general (Adams, 2005). Finally, this paper will recommend strategies that will maximize the organization's value to various stakeholders.

Question 1
The risk factors associated with the Coca-Cola Company are either external or internal. External factors related to Coca-Cola mostly depend on the decisions made by other beverage companies, but internal factors arise from the poor strategies, as well as actions, that the Coca-Cola company implements. Some of these factors include market rates, government regulations, credit, liquidity, and cash flows (Adams, 2005). The market rate is the leading financial risk for Coca-Cola. The market changes depending on customer interests, demand, supply, and new technology, as well. When these factors reduce, it becomes intricate for Coca-Cola Company to acquire loans or credit. This might affect them financially. Government regulation is yet another vital financial risk for the Coca-Cola Company. It is, however, an external risk. Governments frequently change existing tariffs, and this put new financial regulations in place. Some modifications are beneficial, but it might take a while before companies adapt to the changes. In addition, this creates a financial risk for Coca-Cola (Adams, 2005). Techniques that Coca-Cola has incorporated to overcome these factors include improving technology, imposing techniques of attracting customers, and increasing their supplies (Adams, 2005).

Question 2
The two-year pro-forma financial statement that this paper looked into suggests that the world is dollarized (Academic & Students Affairs, 2012). According to the statement, the world is turning into a free market economy with low inflation. The world is mainly anchored on the service industry, heavily weighted on commerce and tourism (Academic & Students Affairs, 2012). According to the pro-forma statement, the world today is founded mainly on a well-developed service sector, which accounts for roughly 80% of the world's businesses. According to the statement, the output of products, in an economy, is fairly easy to compute. It is easy to record the value of output to enter in nominal Gross Domestic Products, but approximating the quantity of output to use is another matter (Academic & Students Affairs, 2012).

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