Analyzing financial statements of Coca-Cola and Pepsi

Résumé du document

"In 2010, The Coca-Cola Company (TCCC) stands firm in the top spot, while PepsiCo trails way behind its archrival. In light of the slow economic recovery and lingering discussions about a double-dip recession in developed Western markets, it is important to note which players have proved resilient or even outperformed the overall market, and the possible factors affecting their global performance." Ratios are used in much of our daily life. When we buy cars based on miles per gallon, when we evaluate soccer players based on goals per game, or target per shoots and so on. All these ratios allow us to compare performance.

Financial ratios serve the same purpose, but it is important to understand what is being measured in order to understand the results and make judgments. It seems logical that only companies within a same industry can be compared in order to make accurate assumptions or forecasts. Some ratios would be able to show more efficiency but some times its just different ways of doing business. In the first part we are going to analyze Coca-Cola's financial ratios. Secondly, we will analyze Pepsi's financial ratios. Finally, in the third and last part we will compare both companies' ratios. Let us now see Coca-Cola's financial ratios.

Extraits

[...] Hirt, Foundations of Financial Management, page Stanley B. Block & Geoffrey A. Hirt, Foundations of Financial Management, page 13Stanley B. Block & Geoffrey A. Hirt, Foundations of Financial Management, page Stanley B. Block & Geoffrey A. Hirt, Foundations of Financial Management, page Unisgned, DuPont Analysis, [...]

[...] Every day, people experience a delicious, refreshing moment that only Coca- Cola can bring them. Through more than a century of change, Coca-Cola remains a timeless symbol of quality refreshment.”[2] Please see the footnote for the source of Coca-Cola's data.[3] Vertical analysis: Vertical analysis = = Horizontal analysis: Horizontal analysis = = Ratio analysis: Profitability Ratios: The profitability ratios, allow us to measure the ability of the firm to earn an adequate return on sales, total assets, and invested capital.[4] Profit Margin = Return on Asset = Return on Equity = After analyzing these three ratios we can see that Coca-Cola as a high profit margin staying constant over the three last years, around 64%. [...]

[...] Profitability Ratios: 1/Profit Margin: Profit Margin Ratio in % 2/Return on Assets: Return on Assets Ratio in % 3/Return on Equity: Return on Equity Ratio in % After analyzing these three charts we can see that Pepsi is more efficient in using its assets. On the other hand, with a strong profit margin Coca- Cola, the company shows its strong position among the competitors on the market. The low percentage on the return on equity of Coca-Cola illustrates their high confidence in their financial management. In the other hand Pepsi, with a higher percentage on the return on equity, it's trying to bring long-term investor in the business. [...]

[...] The firm is accumulating a huge amount of cash and provides to its investors low-risk investments. In averse, Pepsi has sent messages to long-term risk-takers investors. The concerned industry is facing an intense competition and the advantage that Coca-Cola currently has, might be smaller and smaller over the years as Pepsi is willing to take some risks to catch up the soda leader. Indeed, with high debt utilization ratios and a higher asset utilization ratio, Pepsi strategy seems to be working. [...]

[...] More than anything, that system is dedicated to people working long and hard to sell Coca-Cola, Diet Coke, Sprite, Fanta and other Company products. From Boston to Beijing, from Montreal to Moscow, Coca-Cola, more than any other consumer product, has brought pleasure to thirsty consumers around the globe. For more than 120 years, Coca-Cola has created a special moment of pleasure for hundreds of millions of people every day. The history of Coca-Cola is a story of special moments. Moments, that originated with Dr. Pemberton in Atlanta and has been multiplied billions of times around the world. [...]