Financial Analysis of 2 American beverage companies: Coca Cola Vs Pepsi Cola

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Analyzing Financial Statements Financial Analysis of 2 American beverage companies:

Résumé du document

Through this study which in an analysis of financial statements of 2 competitors in beverage activity, Coca Cola and Pepsi Cola. This analyze is based on features available on a website specialized in finances.
In a first part, we have presented both companies with an overview of each one. Through this part, we have established SWOT analysis in order to analyze the strengths and weaknesses. We discussed also the different events that occurred for these two companies and how they have impacted on the results.
In a second part, we have analyzed the financial ratios by comparing both companies. We used the main ratios with the current ratio, debt ratio, equity ratio, profit margin, return on total assets, price earnings ratio and dividend yield which are regrouped in profitability ratio, liquidity and solvency ratios. We have done this analysis thanks to the DuPont method which is a way to show how profit margin, turnover ratio and equity ratio are the value drivers of the Return on equity (ROE).

Extraits

[...] Formula: 365 / Accounts receivable turnover ratio Comment: We can see that Coca Cola increased significantly its costs in making longer credits to its customers. It increases the customer risk but in another hand, it creates a relationship with the customer. Pepsi Cola is keeping the same ratio for 2008 and 2009 which means that the credit extension is always the same and they are not taking more risks. Solvency ratios Debt to total assets ratio: This ratio is used to define what part of the company's assets are paid via debts. [...]

[...] Formula: Current assets/current liabilities Comment: We can see that Coca Cola had a difficult period time concerning the liabilities in 2008. In fact, they were unable to cover the short term debts. The year 2009 was more profitable because Coca Cola had perceived a positive ratio meaning that they have now the capacity to cover the short term liabilities. Concerning Pepsi Cola, they succeeded in keeping a stable and growing ratio meaning a perfect capacity to cover the liabilities Asset turnover ratios Receivable turnover ratio: It allows determining the efficiency of the companies to use assets in order to apply extensions of credits for example. [...]

[...] Pepsi is making the difference because they have a higher ratio with vs only for Coca Cola. This difference is due to the hugest quantity of products to deal with for Coca Cola. Pepsi with a lower stock is more able to manage its inventory turnover. Day's sales of inventory ratio This is another indicator as the previous one which concerns the inventory and the rotation. The lowest day's inventory will show the most efficient company. Formula: (Inventory/cost of sales) x 365 Comment: In this case again Pepsi Cola shows its largest potential to manage and control the inventory factor. [...]

[...] We discussed also the different events that occurred for these two companies and how they have impacted on the results. In a second part, we have analyzed the financial ratios by comparing both companies. We used the main ratios with the current ratio, debt ratio, equity ratio, profit margin, return on total assets, price earnings ratio and dividend yield which are regrouped in profitability ratio, liquidity and solvency ratios. We have done this analysis thanks to the DuPont method which is a way to show how profit margin, turnover ratio and equity ratio are the value drivers of the Return on equity (ROE). [...]

[...] Thanks to this method of calculation for the ROE, we can see that the profitability in Pepsi Cola company is more generated thanks to the stakeholders and the investments they made with a ratio in 2008 and 2009 higher than Coca Cola but which is falling down of about 6%. Return on asset ratio: This is one of the decisive ratios. This is very useful when Coca Cola or Pepsi wants to start a project and measure how much return they will have on the assets engaged. Formula: Net income / total assets Comment: Both companies have quasi equal ROA, which means that unless the fact that Coca Cola is generating more assets, Pepsi is earning more return. [...]