Xacc 280 Final: Coke/Pepsi

1847 Words Oct 9th, 2012 8 Pages
Financial Analysis

Edward Kowalski

XACC/280

22July12

Dr. Edward Walden

University of Phoenix a) PEPSICO, INC. Trend Analysis of Net Sales and Net Income For the Five Years Ended 2005

Base Period 2001—(in millions) | | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | | | | | | | | | | | | | (1) | ------------------------------------------------- Net sales Trend | | $32562 | | $29261 | | $26971 | | $25112 | | $23512 | | | | +38.5% | | +24.5% | | +14.7% | | +6.8% | | 0% | | | | | | | | | | | | | (2) |
…show more content…
What I find to be the biggest indicator of concern is that PepsiCo’s profitability is currently declining, despite its ever-increasing sales figures. It has lost 2% on both its profit margin, and return on assets. The return on common stockholder’s equity, has dipped by 4%, and they lost $.02 over every dollar invested in assets in 2005. This goes back to my assessment of their sales and net income figures. Here again, I see indications that their spending has increased dramatically, which is having a negative impact on profitability. Since the soft drink industry is a high-volume, low-overhead industry, controlling and minimizing expenses is of paramount importance. I find this trend to be very troubling, considering PepsiCo’s sales haven’t stopped climbing, yet they are starting to lose their profitability. Should their sales dip, they will be very hard put to maintain themselves.
c) Compute for 2005 and 2004 the (1) debt to total assets and (2) times interest earned ratio.

1) Debt to Total Assets 2005: $_17476_ ÷ $ _31727_= _55_% 2004: $_14464_ ÷ $_27987_ = _51.7_%

2) Times Interest Earned Ratio 2005: $_6638_ ÷ $ _256_= _25.9_ times 2004: $_5713_ ÷ $_167_ = _34.2_ times

Evaluation
Although they can still clearly meet their obligations without difficulty, PepsiCo has definitely lost a

More about Xacc 280 Final: Coke/Pepsi

Open Document