Chapter 2, Problem 2WE

Scroll all the way down to “Financials� and click on “Income Statement.� Compute the annual percentage change between the three years for the following:

a. Total revenue.

b. Net income applicable to common shares.

Summary Introduction

To calculate: The annual percentage change in the total revenue of PepsiCo.

Introduction:

PepsiCo, Inc.:

PepsiCo, Inc. is an American multinational beverage, food, and snack corporation founded in the year 1965, resulting from the merger between Pepsi-Cola Company as well as Frito-Lay Inc. It mainly deals in manufacturing, marketing, and distribution of beverages, snacks, and various other foods. It was founded in 1898 by Caleb Braham.

Answer to Problem 2WE

For PepsiCo., the annual percentage change in the total revenues for 2016-2017, 2017-2018, and 2018-2019 are 1.15%, 1.78%, and 3.86%, respectively.

Explanation of Solution

The calculation of annual percentage change in the total revenue for 2016-2017:

$\begin{array}{c}{\text{Annual percentage Change}}_{\text{for 2016-2017}}\text{= }\frac{\text{Total revenue of 2017 }-\text{ Total Revenue of 2016}}{\text{Total Revenue of 2016}}\times 100\\ =\frac{\$63,525,000-\$62,799,000}{\$62,799,000}\times 100\\ =1.15\%\end{array}$

The calculation of annual percentage change in the total revenue for 2017-2018:

$$ $\begin{array}{c}{\text{Annual percentage Change}}_{\text{for 2017-2018 }}\text{=}\frac{\text{Total Revenue of 2018}-\text{Total Revenue of 2017}}{\text{Total Revenue of 2017}}\times 100\\ =\frac{\$64,661,000-\$63,525,000}{\$63,525,000}\times 100\\ =1.78\%\end{array}$

The calculation of annual percentage change in the total revenue for 2018-2019:

$\begin{array}{c}{\text{Annual percentage Change}}_{\text{for 2018-2019}}\text{ =}\frac{\text{Total Revenue of 2019}-\text{ Total Revenue of 2018}}{\text{Total Revenue of 2018}}\times 100\\ =\frac{\text{\$67,161,000}-\$64,661,000}{\$64,661,000}\times 100\\ =3.86\%\end{array}$

Summary Introduction

To calculate: The annual percentage change in the net income applicable to common shares.

Introduction:

PepsiCo, Inc.:

PepsiCo, Inc. is an American multinational beverage, food, and snack corporation founded in the year 1965, resulting from the merger between Pepsi-Cola Company as well as Frito-Lay Inc. It mainly deals in manufacturing, marketing, and distribution of beverages, snacks, and various other foods. It was founded in 1898 by Caleb Braham.

Answer to Problem 2WE

For PepsiCo.,

The annual percentage change is -23.24% in the net income applicable (NIA) to common shares for 2016-2017.

The annual percentage change is 157.84% in the net income applicable (NIA) to common shares for 2017-2018.

The annual percentage change is -41.54% in the net income applicable to common shares for 2018-2019.

Explanation of Solution

Calculation of annual percentage change in Net Income Applicable to Common Shares for 2016-2017:

$\begin{array}{c}{\text{Annual \% change}}_{\text{Net Income}}{}_{\text{Applicable to Common Shares for 2016-2017}}=\frac{\left(\begin{array}{l}{\text{Net Income}}_{\text{ Applicable to Common Shares for 2017}}-\\ {\text{Net Income}}_{\text{ Applicable to Common Shares for 2016}}\end{array}\right)}{\text{Net Income}}\\ =\frac{\$4,853,000-\$6,323,000}{\$6,323,000}\times 100\\ =-23.24\%\end{array}$

Calculation of annual percentage change in Net Income Applicable to Common Shares for 2017-2018:

$\begin{array}{c}{\text{Annual \% change}}_{\text{Net Income}}{}_{\text{Applicable to Common Shares for 2017-2018}}=\frac{\left(\begin{array}{l}{\text{Net Income}}_{\text{ Applicable to Common Shares for 2018}}-\\ {\text{Net Income}}_{\text{ Applicable to Common Shares for 2017}}\end{array}\right)}{\text{Net Income}}\\ =\frac{\$12,513,000-\$4,853,000}{\$4,853,000}\times 100\\ =157.84\%\end{array}$

Calculation of annual percentage change in Net Income Applicable to Common Shares for 2018-2019:

$\begin{array}{c}{\text{Annual \% change}}_{\text{Net Income}}{}_{\text{Applicable to Common Shares for 2018-2019}}=\frac{\left(\begin{array}{l}{\text{Net Income}}_{\text{ Applicable to Common Shares for 2019}}-\\ {\text{Net Income}}_{\text{ Applicable to Common Shares for 2018}}\end{array}\right)}{\text{Net Income}}\\ =\frac{\$7,314,000-\$12,513,000}{\$12,513,000}\times 100\\ =-41.54\%\end{array}$