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Final Analysis - Pepsico and Coca Cola

Autor:   •  October 23, 2011  •  Case Study  •  1,748 Words (7 Pages)  •  1,555 Views

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Final Analysis

PepsiCo, Inc. and Coca-Cola Co are two of the industry leaders when it comes to soft drinks and refreshments. In my Final Analyst I have reviewed both the financial statements of PepsiCo and Coca-Cola, using the Vertical analysis and Horizontal analysis to conduct my comparison. The Vertical analyst analyzes the base of the assets as Total assets, the Liabilities and stockholder’s equity, base is the Total Liabilities, the Stockholders’ equity, and the Income Statement accounts, which are base off the net sales or net revenues. Using the Horizontal analysis I evaluated a number of series of data from both financial statements over a period time. The Horizontal analysis is used to determine the increase or decrease that takes place during that time period. The results are expressed as either an amount or stated as a percentage.

After reviewing and evaluating both financial statements provided by PepsiCo, Inc, and Coca-Cola Co, the conclusion of my analysis are as followed: PepsiCo and Coca-Cola Co both provides data, which shows both companies improving through using the Vertical analysis and Horizontal analysis. First my analysis of PepsiCo is as followed: PepsiCo had many items on its balance sheet that had favorable increases during the timeframe of 2004 to 2005, however PepsiCo’s current assets have not increased at the same rate as its current liabilities. The lack of increase will explain why the current ratio from 2004 to 2005 has decreased. Meanwhile for PepsiCo, inventories increased from $1,541 in 2004 to $1,693 in 2005, which is a favorable sign for PepsiCo that shows signs of improvement in the inventory turnover ratio and the days’ sales of PepsiCo’s inventory. However, the increase in inventory usually is viewed as unfavorable, but since the increase inventory meets increase demand will actually help PepsiCo. PepsiCo Cash and Cash equivalents also increased from $1,280 in 2004 to $1,716 in 2005, which is a 34% increase. Accounts receivable have also increased from $2,999 in 2004 to $3,261 in 2005 a 8.7% increase, while sales have increased from $29,261 in 2004 to $32,562 in 2005 an increase of 11.28%. These increases will explain the inventory increase of PepsiCo as higher demand for its product. PepsiCo’s larger cash and cash equivalents compared with the increase in receivables are a direct result of measures PepsiCo has put into place to maintain its company’s credit policy. PepsiCo had a Retained Earnings as a percentage of Total Liabilities and Stockholders’ Equity have decreased from 66.92% in 2004 to 66.56% in 2005, which would indicate that PepsiCo is maintaining a constant payout ratio of dividends. Along with the higher demand for PepsiCo’s products, PepsiCo has positioned itself in a favorable position.

My analysis of Coca-Cola Co, its current assets have decreased from $12,281 in 2004 to $10,250 in 2005, at the same time


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