PepsiCo and Coca Cola - Financial Analysis

PepsiCo & Coca Cola Financial Analysis 1
PepsiCo & Coca Cola Financial Analysis

The report presented below is the financial analysis of Coca Cola and Pepsi Inc. In the
beginning a brief overview of both the companies is given ,followed by a detailed view of
each of the companys financial health , comprising of the horizontal and vertical analysis of
the balance sheet and income statement and finally key ratios are calculated to observe the
trends and make recommendations. The financial data is taken from MSN Money Central
website referenced below.
Coca Cola
Coca Cola was invented by a pharmacist in the year 1886 when he was experimenting for a
recipe for headache and an energizer. Nowadays Coke serves as one of the number one
recognized brands of the world with a unit sales close to 3200 servings. Coke followed a path
of being known as a tonic and a healer with caffeines in late 1890s to being number one
beverage in 1900 till present. Subsequently Coca Cola rose its domination under the
leadership of various intelligent minds. By the time World War two started Coca Cola was
already introduced and expanded in forty four countries. Today Coca cola has the credit of
being one of the top most brands with a huge net worth and brand value.(Kulaiwik,2009)
Pepsi
Pepsi Cola has a long a rich history starting from 1898. Similar to the story of Coca Cola
,Pepsi was also developed by a pharmacist who was experimenting with spices and different
herbs . After developing this new taste he applied for Patent trademark. The business finally
started to grow and finally Pepsi was registered in 1903 by the US Patent office. In addition
to this a strong franchise system was also built which was mainly responsible for Pepsis
success worldover. Moreover different marketing campaigns helped Peps built it brand name
worldover.(Andrew ,2002)
Vertical Analysis
A detailed Vertical Analysis of Income Statement and Balance Sheet of both companies is given .
(Day,2008)
Income Statement
Vertical Analysis
PepsiCo Inc
2009
2008
2009
2008
43,232
43,251
100%
100%
43,232
43,251
100%
100%
20,099
20,351
46.49%
47.05%
23,133
22,900
53.51%
52.95%
14,612
15,489
33.80%
35.81%
414
388
0.96%
0.90%
63
64
0.15%
0.15%
Operating Income
8,044
6,959
18.61%
16.09%
Income Before Tax
8,079
7,045
18.69%
16.29%
Income Tax Total
2,100
1,879
4.86%
4.34%
Income After Tax
5,979
5,166
13.83%
11.94%
-33
-24
-0.08%
-0.06%
0.00%
0.00%
5,946
5,142
13.75%
11.89%
5,946
5,142
13.75%
11.89%
Revenue
Total Revenue
Cost of Revenue, Total
Gross Profit
Selling Expense
Research & Development
Depreciation/Amortization
Minority Interest
U.S. GAAP Adjustment
Net Income Before
Extra. Items
Net Income
Income Statement
Analysis
Coca Cola
Vertical
2009
2008
2009
2008
30,990.0
0
30,990.0
0
11,088.0
0
19,902.0
0
11,358.0
0
31,944.0
0
31,944.0
0
11,374.0
0
20,570.0
0
11,774.0
0
100.0%
100.0%
100.0%
100.0%
35.8%
35.6%
64.2%
64.4%
36.7%
36.9%
313
350
1.0%
1.1%
8,231.00
8,446.00
26.6%
26.4%
40
39
0.1%
0.1%
8,946.00
7,506.00
28.9%
23.5%
Income Tax Total
2,040.00
1,632.00
6.6%
5.1%
Income After Tax
6,906.00
5,874.00
22.3%
18.4%
-82
-67
-0.3%
-0.2%
6,824.00
5,807.00
22.0%
18.2%
6,824.00
5,807.00
22.0%
18.2%
Revenue
Total Revenue
Gross Profit
Selling Expenses
Unusual Expense
(Income)
Operating Income
Other, Net
Income Before Tax
Minority Interest
Net Income Before
Extra. Items
Net Income
Balance Sheet
2009
2008
Cash and Short Term Investments
4,135.00
2,277.00
10.38%
6.33%
Total Receivables, Net
4,624.00
4,683.00
11.60%
13.01%
Total Inventory
2,618.00
2,522.00
6.57%
7.01%
Prepaid Expenses
1,194.00
1,324.00
3.00%
3.68%
12,571.0
0
12,671.0
0
10,806.0
0
11,663.00
31.55%
30.02%
31.80%
32.40%
Goodwill, Net
6,534.00
5,124.00
16.40%
14.24%
Intangibles, Net
2,623.00
1,860.00
6.58%
5.17%
Long Term Investments
4,484.00
3,883.00
11.25%
10.79%
Note Receivable - Long Term
118
115
0.30%
0.32%
Other Long Term Assets, Total
847
2,543.00
2.13%
7.07%
39,848.0
0
35,994.0
0
100.00%
100.00%
Liabilities and Shareholders'

Equity
Accounts Payable
2,881.00
2,846.00
7.23%
7.91%
Accrued Expenses
2,947.00
2,843.00
7.40%
7.90%
PepsiCo Inc.
Property/Plant/Equipment, Total
Net
Total Assets
Notes Payable/Short Term Debt
2008
Vertical Analysis
Assets
Total Current Assets
2009
464
369
1.16%
1.03%
2,464.00
2,729.00
6.18%
7.58%
8,756.00
8,787.00
21.97%
24.41%
7,400.00
7,858.00
18.57%
21.83%
Deferred Income Tax
659
226
1.65%
0.63%
Minority Interest
638
476
1.60%
1.32%
5,591.00
6,541.00
14.03%
18.17%
23,044.0
0
-104.00
23,888.0
0
-97.00
57.83%
66.37%
-0.26%
-0.27%
Other Current Liabilities, Total

Total Current Liabilities
Total Long Term Debt
Other Liabilities, Total

Total Liabilities
Preferred Stock - Non Redeemable,
Net
Common Stock
Additional Paid-In Capital
Retained Earnings (Accumulated
Deficit)
Treasury Stock Common
Other Equity, Total
Total Equity
Total Liabilities & Shareholders
Equity
30.00
30.00
0.08%
0.08%
250.00
351.00
0.63%
0.98%
33,805.0
0
13,383.0
0
-3,794.00
30,638.00
84.83%
85.12%
14,122.00
-33.59%
-39.23%
-4,694.00
-9.52%
-13.04%
16,804.0
0
39,848.0
0
12,106.00
42.17%
33.63%
35,994.0
0
100.00%
100.00%
Coca Cola
2009
2008
Cash and Short term

Investment
Total Inventory
Prepaid Expenses
Property/Plant/Equipment,
Total Net
Goodwill, Net
Intangibles, Net
Other Long Term Assets,
Total
Total Assets

Deferred Income Tax
Minority Interest
Total Liabilities
Common Stock
Retained Earnings
(Accumulated Deficit)
Treasury Stock - Common
Other Equity, Total
Total Equity
Total Liabilities &
Shareholders Equity
2008
9,213.00
4,979.00
18.93%
12.29%
3,758.00
3,090.00
7.72%
7.63%
2,354.00
2,187.00
4.84%
5.40%
2,226.00
1,920.00
4.57%
4.74%
17,551.0
0
9,561.00
12,176.0
0
8,326.00
36.06%
30.05%
19.64%
20.55%
4,224.00
4,029.00
8.68%
9.94%
8,604.00
8,476.00
17.68%
20.92%
6,755.00
5,779.00
13.88%
14.26%
1,976.00
1,733.00
4.06%
4.28%
48,671.0
0
40,519.0
0
100.00%
100.00%
0.00%
0.00%

Equity
Accounts Payable
Accrued Expenses
Notes Payable/Short Term
Debt
Current Port. of LT
Debt/Capital Leases
Other Current Liabilities,
Total
2009
Vertical Analysis
Assets
1,410.00
1,370.00
2.90%
3.38%
5,247.00
4,835.00
10.78%
11.93%
6,749.00
6,066.00
13.87%
14.97%
51
465
0.10%
1.15%
264
252
0.54%
0.62%
13,721.0
0
5,059.00
12,988.0
0
2,781.00
28.19%
32.05%
10.39%
6.86%
1,580.00
877
3.25%
2.16%
547
390
1.12%
0.96%
2,965.00
3,011.00
6.09%
7.43%
23,872.0
0
880
20,047.0
0
880
49.05%
49.48%
1.81%
2.17%
8,537.00
7,966.00
17.54%
19.66%
41,537.00
38,513.00
85.34%
95.05%
-25,398.00
-52.18%
-59.76%
-757
24,213.00
-2,674.00
-1.56%
-6.60%
24,799.0
0
48,671.0
0
20,472.0
0
40,519.0
0
50.95%
50.52%
100.00%
100.00%
Horizontal Analysis
A detailed Horizontal Analysis of Income Statement and Balance Sheet of both companies is given.
The base year for both companies is taken as 2008.
Income Statement
Horizontal
Analysis
(base year 08)
Pepsi Co
2009
2008
2009
2008
43,232
43,251
-0.04%
0.00%
43,232
43,251
-0.04%
0.00%
20,099
20,351
-1.24%
0.00%
23,133
22,900
1.02%
0.00%
14,612
15,489
-5.66%
0.00%
414
388
6.70%
0.00%
63
64
-1.56%
0.00%
Operating Income
8,044
6,959
15.59%
0.00%
Income Before Tax
8,079
7,045
14.68%
0.00%
Income Tax Total
2,100
1,879
11.76%
0.00%
Income After Tax
5,979
5,166
15.74%
0.00%
-33
-24
37.50%
0.00%
5,946
5,142
15.64%
0.00%
5,946
5,142
15.64%
0.00%
Revenue
Total Revenue
Gross Profit
Selling Expenses
Research & Development
Depreciation/Amortization
Minority Interest
U.S. GAAP Adjustment
Net Income Before
Extra. Items
Net Income
Horizontal
Analysis
(base year
08)
Coca Cola
Revenue
Total Revenue
Gross Profit
Selling Expenses
Unusual Expense
(Income)
2009
2008
2009
2008
30,990.0
0
30,990.0
0
11,088.0
0
19,902.0
0
11,358.0
0
31,944.0
0
31,944.0
0
11,374.0
0
20,570.0
0
11,774.0
0
-2.99%
0.00%
-2.99%
0.00%
-2.51%
0.00%
-3.25%
0.00%
-3.53%
0.00%
313
350
-10.57%
0.00%

Operating Income
Other, Net
Income Before Tax
Income Tax Total
Income After Tax
Minority Interest
Net Income Before
Extra. Items
Net Income
8,231.00
8,446.00
-2.55%
0.00%
40
39
2.56%
0.00%
8,946.00
7,506.00
19.18%
0.00%
2,040.00
1,632.00
25.00%
0.00%
6,906.00
5,874.00
17.57%
0.00%
-82
-67
-0.3%
-0.2%
6,824.00
5,807.00
22.0%
18.2%
6,824.00
5,807.00
22.0%
18.2%
Balance Sheet
Pepsi Co
2009
2008
Assets
Cash and Short term
Investments
Total Inventory
Prepaid Expenses
Total - Net
Goodwill, Net
Intangibles, Net
Note Receivable - Long Term
Total
Total Assets
Liabilities and
Shareholders' Equity
Accounts Payable
Accrued Expenses
Debt
Other Current Liabilities,
Total
Deferred Income Tax
Minority Interest
Total Liabilities
Preferred Stock - Non
Redeemable, Net
Common Stock
2009
2008
Horizontal Analysis base

year 08
4,135.00
2,277.00
81.60%
0.00%
4,624.00
4,683.00
-1.26%
0.00%
2,618.00
2,522.00
3.81%
0.00%
1,194.00
1,324.00
-9.82%
0.00%
12,571.0
0
12,671.0
0
10,806.0
0
11,663.00
16.33%
0.00%
8.64%
0.00%
6,534.00
5,124.00
27.52%
0.00%
2,623.00
1,860.00
41.02%
0.00%
4,484.00
3,883.00
15.48%
0.00%
118
115
2.61%
0.00%
847
2,543.00
-66.69%
0.00%
39,848.0
0
35,994.0
0
10.71%
0.00%
2,881.00
2,846.00
1.23%
0.00%
2,947.00
2,843.00
3.66%
0.00%
464
369
25.75%
0.00%
2,464.00
2,729.00
-9.71%
0.00%
8,756.00
8,787.00
-0.35%
0.00%
7,400.00
7,858.00
-5.83%
0.00%
659
226
191.59%
0.00%
638
476
34.03%
0.00%
5,591.00
6,541.00
-14.52%
0.00%
23,044.0
0
-104.00
23,888.0
0
-97.00
-3.53%
0.00%
7.22%
0.00%
30.00
30.00
0.00%
0.00%
250.00
351.00
-28.77%
0.00%

Retained Earnings
Other Equity, Total
Total Equity
Total Liabilities &
Shareholders Equity
33,805.0
0
30,638.00
10.34%
0.00%
13,383.0
0
-3,794.00
14,122.00
-5.23%
0.00%
-4,694.00
-19.17%
0.00%
16,804.0
0
39,848.0
0
12,106.0
0
35,994.0
0
38.81%
0.00%
10.71%
0.00%
2008
2009
2008
2009
Coca Cola
Horizontal Analysis
(base year 08)
Assets
Cash and Short Term
Investments
Total Inventory
Prepaid Expenses
Total - Net
Goodwill, Net
Intangibles, Net
Total
Total Assets
9,213.00
4,979.00
85.04%
0.00%
3,758.00
3,090.00
21.62%
0.00%
2,354.00
2,187.00
7.64%
0.00%
2,226.00
1,920.00
15.94%
0.00%
17,551.0
0
9,561.00
12,176.0
0
8,326.00
44.14%
0.00%
14.83%
0.00%
4,224.00
4,029.00
4.84%
0.00%
8,604.00
8,476.00
1.51%
0.00%
6,755.00
5,779.00
16.89%
0.00%
1,976.00
1,733.00
14.02%
0.00%
48,671.0
0
40,519.0
0
20.12%
0.00%
1,410.00
1,370.00
2.92%
0.00%
5,247.00
4,835.00
8.52%
0.00%
6,749.00
6,066.00
11.26%
0.00%
51
465
-89.03%
0.00%
264
252
4.76%
0.00%
13,721.0
0
5,059.00
12,988.0
0
2,781.00
5.64%
0.00%
81.91%
0.00%
1,580.00
877
80.16%
0.00%
547
390
40.26%
0.00%
2,965.00
3,011.00
-1.53%
0.00%

Equity
Accounts Payable
Accrued Expenses
Debt
Current Port. of LT
Debt/Capital Leases
Other Current Liabilities
Deferred Income Tax
Minority Interest

Total Liabilities
Common Stock
Retained Earnings
Other Equity, Total
Total Equity
Total Liabilities &
Shareholders Equity
23,872.0
0
880
20,047.0
0
880
19.08%
0.00%
0.00%
0.00%
8,537.00
7,966.00
7.17%
0.00%
41,537.0
0
38,513.00
7.85%
0.00%
25,398.0
0
-757
24,213.00
4.89%
0.00%
-2,674.00
-71.69%
0.00%
24,799.0
0
48,671.0
0
20,472.0
0
40,519.0
0
21.14%
0.00%
20.12%
0.00%
Ratio Calculation
The financial data is taken from MSN Money central website ,referenced below. The found out ratios
are then interpreted to see the trends. (Gattis,2009)
Liquidity Ratio
Current Ratio = Current Assets/Current Liabilities
Coca Cola
Year
(000)
Current
Assets
Current
Liabilities
Current
Ratio
Pepsi
Year (000)
Current
Assets
Current
Liabilities
Current
Ratio
2008
2009
12,176 17,551
12,988 13,721
0.94
2008
1.28
2009
10,806
12,571
8,787
8,756
1.23
1.44
Quick Ratio =Current Assets Inventory/Current Liabilities
Coca Cola
Year
(000)
2008
Current
Assets
Inventory
2009
12,176 17,551
4,224 4,029
Current
Liabilities
Current
Ratio
12,988 13,721
0.61
0.99
Pepsi
Year (000)
2008
Current
Assets
Current
Liabilities
Inventory
Quick Ratio
2009
10,806
12,571
8,787
2,522
0.94
8,756
2,618
1.14
Liquidity ratios deal with the companys ability to deal with its short term obligations. As far
as the current ratio is concerned both the companies have improved with an increase in
current assets and current liabilities. Similar is the case with quick ratio ,both the companies
have shown an increased trend in this ratio which is a good signal. However inventory level
for Coca Cola is decreasing and inventory level for Pepsi is increasing , this indicates that
Coca Cola is efficiently managing its inventory levels.
Profitability Ratio
Gross Profit Margin= Gross Profit/Sales
Coca Cola
Year (000)
Gross Profit
Revenue
Gross Profit
Margin
2008
19,902
31,944
2009
20,570
30,990
62.30%
66.38%
Pepsi
Year (000)
Gross Profit
Revenue
2008
Gross Profit
Margin
22,900
43,251
2009
23,133
43,232
52.95%
53.51%
Return on Assets = Net income/Total Assets

Coca Cola
Year (000)
Net Income
Total Assets
ROA
2008
5,807
35,994
16.13%
2009
6,824
39,848
17.13%
Pepsi
Year (000)
Net Income
Total Assets
ROA
2008
5,142
35,994
14.29%
2009
5,946
39,848
14.92%
Profitability ratio deals with whether the company is making sufficient profit or not .Gross
Profit is assed as a percentage of Sales . In this scenario both the companies are showing an
increased trend as compared to past year. For Coca Cola the gross profit is increasing but the
revenue is showing a decreased trend ,however for Pepsi there is an increase in both the gross
profit and revenue. Coca Cola on the other hand is showing a greater increase for the profit
margin, this is because of access to large variety of market a greater likeness for the brand.
As far as ROA is concerned both the companies are showing an increased trend. This is a
good signal for investors for both companies.
Solvency
Debt to Equity =Total Debt/Owners Equity
Coca Cola
Year (000)
Total Debt
Owners
Equity
D/E
2008
20,047
2009
23,872
20,472
97.92%
24,799
96.26%
Pepsi
Year (000)
Total Debt
Owners
Equity
D/E
2008
23,888
2009
23,044
12,106
197.32%
16,804
137.13%
Debt to Asset= Total Debt/Total Assets

Coca Cola
Year (000)
Total Debt
Total Assets
D/A
2008
20,047
40,519
49.48%
2009
23,872
48,671
49.05%
Pepsi
Year (000)
Total Debt
Total Assets
D/A
2008
23,888
35,994
66.37%
2009
23,044
39,848
57.83%
Solvency Ratios are used to assess the companies abilities to fulfil it long term obligations.
The factors such as total debt ,owners equity are used to find out these ratios.
Total Debt to Total Equity ratio for both companies is decreasing ,for Coca Cola the debt and
equity both are increasing and for Pepsi total debt is decreasing and equity is increasing
which is a very good signal for Pepsi. As far as total debt to total assets ratio is concerned
total assets for both the companies is increasing which is resulting in a decrease in D/A for
both the companies. This is a good signal as assets are being properly managed.
Recommendations
Coca Cola and Pepsi ,both companies are financially looking sound with good profit margins.
Recommendations for both companies is given below.
Coca Cola although is showing increased profit margin but the revenue is showing a
decreased trend which is a cause of concern .It needs to work on methods to increase its
revenue. Coca Cola also need to work on reducing its debt. Other factors are increasing
which a good signal for the company. Pepsi firstly is showing a slight decrease in current
liabilities, which is good needs to work more on it . Likewise Coca Cola the revenue for
Pepsi is also decreasing but with a very slight number. Pepsi needs to work on increasing the
revenue . The total debt for Pepsi is also decreasing which is a very good signal for the
company . (Brigham,2005)
Conclusion
Overall both the companies are doing good financially , the decreasing trend for revenue is
mainly due to the current global economic crises which has affected the profit margins , but a
consistency is observed in all the ratios which indicates that the companies according to each
ones capability is doing good despite the current economic situation.
References
Books
Brigham, E,F , Erhhardth ,M ,C (2005) .Financial Management Theory and Practice.

Eleventh Edition. South Western Publishers
Thomas ,A,(2002).Introduction to Financial Accounting. Fourth Edition. McGraw Hill.
Website
Kulawik, A (2009),The development of Coca Cola Advertising Campaigns, retrieved on
November 29th,2010 from,
http://images.nexto.pl/upload/publisher/All%20Free
%20Media/public/the_development_of_coca-cola_advertising_campaigns_(18862007)_demo.pdf
Andrew (2002),A brief Pepsi History retrieved on November 29th 2010 from,
<http://www.sirpepsi.com/pepsi11.htm>
Day, J (2008), Theme: Analyzing Financial Statements, retrieved on 30th November 2010
from
<http://www.reallifeaccounting.com/pubs/Article_Theme_Analyzing_Financial_Statements.p
df>
Gattis ,C,G.(2009).Using Financial Ratios
< http://bluepointstrategies.com/uploads/White_Paper_-_Using_Financial_Ratios.pdf> [30th
November 2010]
MSN Money (2010),Pepsi Co Financial Statements, retrieved on 30th November 2010 from
<http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=pep>
MSN Money (2010),Coca Cola Financial Statements, retrieved on 30th November 2010 from
<http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=ko>

PepsiCo and Coca Cola - Financial Analysis

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PepsiCo and Coca Cola - Financial Analysis

Uploaded by

Copyright:

Available Formats

PepsiCo & Coca Cola Financial Analysis 1

PepsiCo & Coca Cola Financial Analysis

PepsiCo & Coca Cola Financial Analysis 2

Income Before Tax

Income Tax Total

Income After Tax

PepsiCo & Coca Cola Financial Analysis 3

Income Tax Total

Income After Tax

PepsiCo & Coca Cola Financial Analysis 4

Cash and Short Term Investments

Total Receivables, Net

Long Term Investments

Note Receivable - Long Term

Other Long Term Assets, Total

Liabilities and Shareholders'

Notes Payable/Short Term Debt

Total Current Assets

Deferred Income Tax

Other Current Liabilities, Total

Other Liabilities, Total

PepsiCo & Coca Cola Financial Analysis 5

Cash and Short term

Total Current Liabilities

Liabilities and Shareholders'

PepsiCo & Coca Cola Financial Analysis 6

PepsiCo & Coca Cola Financial Analysis 7

Income Before Tax

Income Tax Total

Income After Tax

PepsiCo & Coca Cola Financial Analysis 8

Horizontal Analysis base

PepsiCo & Coca Cola Financial Analysis 9

Liabilities and Shareholders'

PepsiCo & Coca Cola Financial Analysis 10

Quick Ratio =Current Assets Inventory/Current Liabilities

PepsiCo & Coca Cola Financial Analysis 11

PepsiCo & Coca Cola Financial Analysis 12

Return on Assets = Net income/Total Assets

PepsiCo & Coca Cola Financial Analysis 13

Debt to Asset= Total Debt/Total Assets

PepsiCo & Coca Cola Financial Analysis 14

PepsiCo & Coca Cola Financial Analysis 15

Brigham, E,F , Erhhardth ,M ,C (2005) .Financial Management Theory and Practice.

You might also like