Financial Accounting Concepts: Pepsico, Inc. and the Coca Cola Company

Financial Analysis Randall Meeks Financial Accounting Concepts Mr. Carraher 9-12-2010 PepsiCo, Inc. and The Coca Cola Company have both been in production for ages. Both PepsiCo, Inc. and The Coca Cola Company have become common house hold names through out the world today. Pepsi is one of the best selling products in American history. â€Å"Pepsi is the number 2 soft drink company producer, the world over. Pepsi’s number one priority is making sure that their shareholders investments are profitable. Pepsi has been able to achieve this goal for the most part via increased sales, keeping cost low, and spending money wisely.Pepsi takes pride in the name, they have built an excellent brand by deliver a product that is satisfying to the consumer, as well as safe. The investors in the company also can be happy with the return of investment†(investorguide. com). â€Å"The Coca Cola Company is likely, one of the most significant brands in American history. Coke can go in a ca tegory with a company like McDonalds when it comes to brand value, these two trademarks are 2 of the most recognized in the world. Coke is the highest seller of soft drinks, moving 1. 3 billion beverages that are served daily†(investorguide. com).Pepsi and Coke have been mass producing soft-drinks on an assembly line for a very long time and they both have been competing for the number one soft drink seller spot. PepsiCo, Inc and The Coca Cola Company targets all income segments of customers in the entire world as their products are high quality and very recognizable. Coke and Pepsi offer products so similar that you probably could not tell the difference in a blindfolded taste test. It is a well known fact that when a business goes outside of the United States borders, that production and supply channel become very important concerns.Both Coke and Pepsi own plants that manufacturer their products all over the world in many different countries and continents.. Both companies c ompete with each other and try to make sure they stay relevant. They also tend to copy each other and try to outdo one another on a day to day basis. I will go in detail to explain the financial comparison and contrasting between both companies. I will also explain the vertical and horizontal comparison between the two companies. The main point I will make is to show the difference between both companies financially. Vertical AnalysisConsolidated Income Statement The cost of goods of PepsiCo Inc was $11,031 and $12,314 in 2004 and 2005. The price of product sold in 2004 was 38% of net sales and in 2005, it was 37. 82% of net sale. The price of goods sold went down in 2005. The cost of commodities was $7,674 and $8,195 in 2004 and 2005 for Coke. It was 35% and 35. 47% of net sales in 2004 and 2005. Cost of commodities sold increased for The Coca Cola Company and decreased for PepsiCo, Inc. The operating expense for PepsiCo, Inc was 43% and 43. 54% of net sales in 2004 and 2005. The o perating expenses for Coca Cola were 36% and 37. 2% of net sales in 2004 and 2005. PepsiCo, Inc and The Coca Cola Companies operating expense increased in 2005. The earning before T&I of PepsiCo Inc was 18% and 18. 19% of sales in 2004 and 2005.The operating income for The Coca Cola Company was 26% and 26. 34% in 2004 and 2005. PepsiCo, Inc and The Coca Cola Companies operating income increased. The net income for PepsiCo, Inc. and The Coca Cola Company for 2005 was 21. 09% and 12. 52% The Coca Cola Companies net income ratios was higher than PepsiCo, Inc. Consolidated Balance Sheet The current and total assets for PepsiCo, Inc were 31% and 32. 5% in 2004 and 2005. On the opposite side, the total current assets were 39% and 34. 83% in 2004 and 2005. The liquidity position for PepsiCo, Inc. decreased in 2005 and The Coca Cola Company increased in 2005. The additional assets and fixed assets for PepsiCo Inc, were 69% and 67. 05% in 2004 and 2005. The Coca Cola Companies fixed assets w ere 61% and 65. 17% in 2004 and 2005. The current liabilities for PepsiCo, Inc were $6,752 and $9,406 in 2004 and 2005. The total assets were 24% and 29. 65%. The current liabilities for The Coca Cola Company were $11,133 and $9. 836 in 2004 and 2005.The total assets were 35% and 33. 43%. The current liabilities for PepsiCo, Inc increased while the current liabilities for The Coca Cola Company decreased in 2005. The total liabilities for both companies in 2005 were 55. 08% and 44. 42% of total assets in 2005†¦ The equity for PepsiCo, Inc. was 48% assets in 2004 and 44. 92% assets in 2005. In 2005 PepsiCo, Inc. share holder’s holdings reduced. The equity shares were 55. 58% of assets in 2005 for The Coca Cola Company while in 2004, there were only 51% equity shares. The Coca Cola Companies equity shares were more in relative value as compared to PepsiCo.Horizontal Analysis Consolidated Income Statements The total revenue for PepsiCo, Inc in 2005 and 2004 were $32,562 and $29,261. PepsiCo, Inc had a considerable amount of net revenue in 2005 compared to 2004. The base year of analysis is 2004. The net revenue for PepsiCo, Inc. was 111. 11% in 2005. The total revenue for The Coca Cola Company in 2005 and 2004 were $23,104 and $21,742. Both 2005 and 2004’s revenues were less than PepsiCo, Inc. The net revenue of the company in 2005 was 106. 26% over 2004. The net revenue for 2005 was 6. 26% while 2004 was less.The growth rate of revenue for The Coca Cola Company is less than PepsiCo, Inc. The growth rate of revenue for both PepsiCo and Coca Cola was 11. 11% and 6. 26%. The cost of commodities sold for PepsiCo, Inc was $11,031 and $12,314 in 2004 and 2005. The price of goods sold went up as sales went up. The price of goods sold was 111. 63% compared to 2004's. The cost of commodities sold for The Coca Cola Company was $7,674 and $ 8,195. The cost of commodities sold increased for The Coca Cola Company in 2005 than in 2004. In general and adminis tration expenses of PepsiCo, Inc were $12,674 and $14,176.The operating expenses was 111. 85% in 2005 and 11. 85% more than 2004's. The total operating expenses for The Coca Cola Company was 110. 75% and 10. 75% in comparison to 2004's. PepsiCo, Inc had higher operating expenses than The Coca Cola Company. The operating income for PepsiCo, Inc was $5,259 and $5,922 in 2004 and 2005. The Coca Cola Companies total operating income was $5,698 and $6,085 in 2004 and 2005. PepsiCo, Inc. total operating income was 112. 61% over earlier years. The Coca Cola Companies total operating income was 106. 79% over earlier years.The Coca Cola Companies interest expenses for 2005 were $240 and for PepsiCo, Inc $256. PepsiCo, Inc. interest expenses were more than The Coca Cola Companies. PepsiCo, Inc. net income was $4,078 and $4,212 in 2005 and 2004, PepsiCo, Inc sustained losses in 2005 compared to 2004. The net income for The Coca Cola Company was $4,847 and $4,872 in 2005 and 2004. The Coca Cola Company earned more in 2005 than 2004. Consolidated Balance Sheet The total current assets of PepsiCo, Inc. were $8,639 and $10,454 in 2004 and 2005. The total current assets of PepsiCo, Inc. were 121. 1% prior year’s current assets. PepsiCo, Inc. current assets increased in 2005. The total current assets for The Coca Cola Company were $10,250 and $12,281 in 2004 and 2005. PepsiCo, Inc. current assets were 21. 01% more than prior year’s and The Coca Cola Company were 16. 57% less than previous year's assets. Further more the quick assets of PepsiCo, Inc were more than The Coca Cola Companies quick assets. It shows that PepsiCo, Inc liquidity was more than The Coca Cola Company. PepsiCo, Inc total assets were $27,987 and $31,727 in 2004 and 2005. PepsiCo, Inc. total assets increased by 13. 6%. The Coca Cola Companies total assets were $31,441 and $29,427. The Coca Cola Company decreased by 6. 41%. It shows that PepsiCo, Inc. increased in 2005 more than The Coca Cola Co mpany. PepsiCo, Inc. current liabilities were $6,752 and $9,406 in 2004 and 2005. The total current liabilities of company were 139. 31% over prior year's liabilities. The current liabilities of Coca Cola were $11,133 and $9,836 in 2004 and 2005. The current liabilities were 88. 35% of previous year's liabilities. The Coca Cola Companies current assets and current liabilities decrease in 2005.The total liabilities of PepsiCo, Inc were $14,464 and $17,476 in 2004 and 2005. The total liabilities in 2005 were 120. 82% prior years. The Coca Cola Companies total liabilities were $15,506 and $13,072 in 2004 and 2005. The Coca Cola Companies assets and liabilities decreased in 2005. In 2005 PepsiCo, Inc. share holder’s equity were $20,638 and The Coca Cola Company $16,355. The share holder’s equity increased in both PepsiCo, Inc. and The Coca Cola Company. PepsiCo Inc. equity increased by11. 90% and The Coca Cola Company 2. 64%. Ultimately after reviewing and analyzing PepsiC o, Inc. nd The Coca Cola Company I have came to the conclusion that the net profit of PepsiCo, Inc. and The Coca Cola Company decreased in 2005 and in 2004 there was a profit. The operating expenses of PepsiCo, Inc. and The Coca Cola Company improved quite a bit in 2005. I believe both companies should reduce their operating expense. The interest expenses were also high in 2005. I believe all expenses for interest on a loan made to a corporation or other entities or finances from equity shares should be kept at a minimum. The main purpose of this paper is to explain the financial comparison between The Coca Cola Company and PepsiCo, Inc.Further more I explained vertical and horizontal analyses for the years of 2005 and 2004 for The Coca Cola Company and PepsiCo, Inc. The main idea was to show how both companies are financially different from each other. References Coca Cola Company (2010). Coca Cola Company. Retrieved September 8, 2010. From www. coca-cola. com PepsiCo Inc. (2010). PepsiCo Inc. Retrieved September 9. From www. pepsico. com Investorguide (2010). PepsiCo, Inc. Retrieved September 8, 2010. From investorguide. com Investor Guide (2010). The Coca Cola Company. Retrieved September 8, 2010. From investorguide. com