Final

2099 Words Mar 31st, 2011 9 Pages
Final Project: Financial Analysis

• Review the annual reports for PepsiCo, Inc. and The Coca-Cola Company in Appendixes A & B, especially the Consolidated Statements of Income and the Balance Sheets on pp. A4, A6, B1, & B2 of Financial Accounting.

• Write a 1750- to 2,050-word paper in APA format with citations and references that provides a financial comparison of the two companies and your recommendations to improve the financial status of each.

• Include the following:

o An introductory paragraph with a statement of the purpose of your paper and a synopsis of what readers may expect to find in the paper – It is best to write this after writing the rest of the paper.

o Vertical analyses
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Also, as a result of the increase in demand, Pepsico is probably in a stronger position and can therefore ask its customers to purchase its products in cash.
For Coca-Cola, cash and cash equivalents have decreased from $6,707 in 2004 to $4,701 in 2005 (29.91% decrease), while receivables have increased from $2,244 in 2004 to $2,281 in 2005 (8.2% increase). This is coupled with an increase in sales from $21,742 in 2004 to $23,104 in 2005 (6.26% increase).
Coca-Cola management should seek new ways to regain its market share as Pepsico seems to be acquiring more market share as clear from comparing the percentage increase in sales of the two companies.
For Pepsico, Retained Earnings as a percentage of Total Liabilities and Stockholders’ Equity have decreased from 66.92% in 2004 to 66.56% in 2005 which indicates that Pepsico is maintaining a constant payout ratio of dividends.
For Coca-Cola, however Retained Earnings as a percentage of Total Liabilities and Stockholders’ Equity have increased from 92.57% in 2004 to 106.36% in 2005 (7.54% increase), this means that Coca-Cola is decreasing its payout ratio so as to meet future expansion needs.

Additionally, and by conducting a ratio analysis of each company, I came to notice the following:

First: Liquidity Ratios:
By examining the current ratio (which measures the company’s short-term debt-paying ability), and the acid test ratio (quick ratio which measures the immediate short-tern debt-paying ability of the

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