Essay on Xacc 280 Week 9 Final

1627 Words Dec 24th, 2011 7 Pages
Coca-Cola VS. PepsiCo
Elizabeth Hendley
XACC/280
September 4th 2011
Charmaine Arjoon- Ramjattan, Ph.D

Coca-Cola VS. PepsiCo
When determining which company has the most to offer it is necessary to look at each set of numbers from several different views. For instance this paper will cover vertical and horizontal analysis, profitability, solvency, and liquidity ratios. I will be explaining how each set of results play into the decision making of which company would be best to invest in, by comparing both companies numbers in able to collect the necessary data to make a calculated decision.
Coca-Cola and PepsiCo have been in competition since day one, each have a very profitable company. When running the number through and
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PepsiCo’s net income in 2004 was $4,212.00 or 14.3%, in 2005 the net income dropped by 1.8% bringing the net income to 12.5%. Both companies net income percentage decreased in 2005, though not by detrimental amounts it still is necessary to understand the financial status of both companies. Vertical analysis is a method of evaluating a company’s financial performance over a single accounting period, this helps to identify product items who’s sales may be increasing or decreasing at a faster rate than others, having the ability to perform this analysis throughout the year simplifies the process of product increase or decrease.
When obtaining the liquidity ratio for PepsiCo I took the current assets of 2004, $8,639.00, and divided them by 2004’s current liabilities, $6,752.00. After dividing the two numbers the current ratio was 1.27:1. I followed with the 2005 year and divided the current assets by the current liabilities, $10,454.00 divided by $9,406.00, the current ratio for 2005 was 1.11:1. After finding the PepsiCo liquidity ratio I moved on to find Coca-Cola’s liquidity ratio in order to compare the two. By following the same formula I found the 2004 current assets, $12,281.00, and divided them by the current liabilities, $11,133.00, finding the ratio for 2004 to be 1.10:1. When looking for the 2005 liability ratio I took the 2005 current assets, $10,250.00, and divided

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