Overview of Companies The Coca-Cola company is a non-alcoholic beverage company with world wide headquarters located in Atlanta, Georgia.

The company owns and markets over 5 beverages. !our o" these beverages are within #the world$s top "ive nonalcoholic beverage brands.% &' (' ( -k p)*. Coca-Cola$s ' ' vision is to #double the si+e o" our business- and the value we create- during this decade.% &annual review p('*. Coca-Cola is e,pecting #rising economic vitality in the developing world, a billion people -oining the global middle class this decade and rapid urbani+ation% &p( *. .epsico is a nonalcoholic beverage and snack company that serves customer in over ' countries. .epsico owns '' brands that each separately generate /( billion in

estimated retail sales. &.epsi ' (' Annual report p((*. .epsi is trans"orming its business to #rein"orce its e,isting value drivers%, move its port"olios #towards attractive high-growth spaces,% increase the bene"its o" #one .epsiCo,% aggressively build #new capabilities,% strengthen the team culture, and support sustainability. &' (' annual report '-))* Coca-Colas acquisition of Coca-Cola Enterprises Coca-Cola 0nterprises is one o" Coca-Cola$s ma-or bottling companies. 1n 2ctober ' ( , The Coca-Cola Company purchased the business o" Coca-Cola 0nterprises. The acquisition would #better serve the unique needs o" the 3orth American market.% &' ( ( -k p( 4*. Although the CC0 transaction was structured to be primarily cashless, Coca-Cola assumed #appro,imately /5.6 billion o" CC0 debt.% &p( )* The acquisition has made serious changes to Coca-Cola$s "inancial statements. !irst o" all, since the acquisition o" CC0, Coca-Cola$s #inventory turnover% increased "rom 4.55 to 7. . This means that Coca-Cola should be able to move its inventory

through production in a shorter amount o" time. This encouraged Coca-Cola$s #inventory

purchase% to almost double between '

6 and ' ( . 8econd, #The Company recorded

/5, 5 million o" goodwill% and increased ( billion since. &.4 *. The goodwill primarily increased the synergistic value o" the company by creating #a uni"ied operating system% &p( )*. Third, Coca-Cola$s sales increased about (5 billion dollars &or 5 9*, net income increased ) billion, and cash "low "rom operations increased ' billion. Although Coca-Cola received many bene"its "rom the acquisition o" CC0, the "allout "rom the acquisition poses challenges. The purchase o" CC0 almost tripled long-term debt and increased cost o" goods sold. !urther, the company$s long-term debt increased almost 4 9 since ' :. Current liabilities almost doubled between ' 6 and

' ('. The acquisition has not yet improved the company$s asset turnover rate, return on assets, or pro"it margin ratio. The company$s cash "low ratio also decreased since the purchase. Instead of using equity to finance debt, Coca-Cola issues debt to lower our overall cost of capital and increase our return on shareowners equity. Coca-Cola issued 42 billion and paid 38 billion in debt in 2012. Coca-Cola$s return on equity and pro"it margin ratio "or return on equity decreased since the CC0 purchase. The company$s #capital structure leverage% increased "rom (.65 to '.55 between ' : and ' ('. The company assets have grown at a "aster

rate than equity and possibly increased risk. 1n ' (', Coca-Cola made equity more accessible to investors by announcing a two-"or-one stock split in ;uly o" ' ('. 2ver the last three years, Coca-Cola has continued to report current ratios above (. Coca-Cola maintains a quick ratio above .:5 &the industry standard is about .5 *. Coca-Cola also continues to pay dividends to shareholders. Coca-Cola$s stock currently trades at about /):. . The company$s .rice to 0arning ratio is (6.):. Pepsicos Acquisition of Pepsi Bottling Group and PepsiAmericas.

The .epsi <ottling Group was the world$s largest bottler o" .epsi beverages. .epsico purchased The .epsi <ottling Group and .epsi Americas in ' ( . #The total purchase price was appro,imately /('.7 billion, which included /5.) billion o" cash and equity and the "air value o" our previously held equity interests in .<G and .A8 o" /4.) billion.% &' ( ( -k p ((5*. The acquisition included 6 billion in debt 5 billion in goodwill, and 5 billion in property plant and equipment. &note (5* A"ter the acquisition, .epsi$s inventory turnover rate increased substantially "rom 7.') to 5.45. The company increased its sales by over ' billion, almost doubled its inventory purchase, and increased its accounts receivable turnover rate. The company$s cash "low "rom operations has increased over ( billion dollars since the acquisition. =owever, .epsi$s long-term debt increased almost ' billion between ' : and ' ('. At the same time, the cost o" goods sold has almost doubled. >uring this period the company reported decreases in #return on assets% and #asset turnover rate.% This has resulted in the company$s pro"it margin ratios decreasing. The company has not used large amounts o" debt "inancing to generate cash "or repayment o" its debt. .epsico$s liquidity has generally decreased since the acquisition. The current ratio hovers around ( and the quick ratio steadily decreased to .:4. The company$s cash "low ratio has continually decreased to .45. The company$s #capital structure leverage% increased "rom '.4 to ).4' between ' : and ' 6. .epsi$s stock trades about /:6. .

The company has a .?0 ratio o" (5.:7. Assessment 1n assessing the two companies, Coca-Cola is most likely a better investment than .epsi. @ith that said, both companies have not had incredible per"ormance recently. <oth company$s A2A and A20 have decreased, their long-term debts have increased, and they have become less liquid.

=owever, Coca-Cola is the best "or "our reasons. !irst, Coca-Cola$s net income is about ) billion dollars more than .epsi, Coca-Colas has more than ( billion more in retained earnings and pays higher dividend rates than .epsiCo. Coca-Cola achieves this even though it makes "ewer purchases and makes ' billion dollars less in sales. This can be attributable to Coca-Cola$s higher return on asset rates. Although .epsiCo has higher turnover rates and higher levels o" sales, the company is selling its products at lower costs with higher costs o" goods sold and is there"ore not making very high pro"its. 8econd, Coca-Cola has about ( billion dollars less in long-term debts than .epsi. This makes Coca-Cola a sa"e bet "or a long term investment. Coca-Cola is actively "inancing its debt by issuing larger amounts o" debt than .epsi. Coca-Cola will be able to generate cash by collecting more interest payments. Third, Coca-Cola$s #Cash !low !rom 2perations% is almost ' billion dollars more than .epsi. Coca-Cola is making more money "rom its essential operations and the company is moving towards its #' ' % goal. .epsi is not success"ully utili+ing its vast array o" products and revenue. .epsi$s beverage and snack segments may be too large "or the company to make substantial pro"its in the "uture !inally, Coca-Cola$s stock is more a""ordable and pays higher dividends than .epsi. 1nvestors will make more "rom dividend payments with Coca-Cola.