Financial analysis of Coca Cola and Pepsi

Thèmes abordés

Coca Cola - Pepsi - Liquidity ratio - Profitability ratio - Solvency ratio - accounting methods - financial investors

Résumé du document

Financial analysis is a way to evaluate the result of a company. This method provides a kind of transparency and objectivity from companies to their partners, for example, as their shareholders. Indeed, financial analyzing statement is a reference to decision makers as well as internal management team than external direct or indirect financial investors. In this case, we will focus on Coca Cola company and PepsiCo financial situation. Indeed, it is interesting to work on the comparison of these both competitors because our analysis enables to show ways in which the first firm situation deviates from the other.
This financial analysis is possible thanks to minor differences between Coca cola and Pepsi cola in their accounting methods. It is the reason why the financial analysis can be relevant. This method uses tools commonly named ratio. There are four performance measures: liquidity, solvency profitability and market measures.

The objective of the ratio analysis is to give an overview on a financial situation. This method standardizes financial information by using percentage instead of raw number for instance. Percentage is used to facilitate evaluation and comparison of various operations. Indeed, it is allows us to enhance number proportionately of the both companies in order to evaluate their results. In order to have results, each company has some resources also called assets. Changing these resources into profits is the goal of a company.

Extraits

[...] Bibliography Financial statement available at: http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=ko http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?symbol=pep ESBCO Platform: Source: DATAMONITOR: Coca-Cola Enterprises Inc. Coca-Cola Enterprises, Inc. SWOT Analysis; Dec2010, p1-9, 9p Charts. Date consulted 12/12/11 Source: Soft Drinks Industry Profile: Global Date: May Date consulted 12/12/11 Internet website: http://www.investopedia.com/ Seminar: “Financial analyzing statement” Seminar By T. Lindenberg, November 2011, Paris Appendixes Table Global soft drinks market share: % share, by volume Source: ESBCO database, Soft Drinks Industry Profile: Global. Provided by Datamonitor May Consulted on December Information found on EBSCO platform. Source: Soft Drinks Industry Profile: Global. [...]

[...] Profitability ratio It is the company ability to have enough income to attract and keep investment capital. Return on Equity It measures how much income is earned with the common shareholder's investment in the company. Net income / Average common shareholders' equity Compare it to last year and comment on the trend: For Coca Cola the situation is improving between 2009 and 2010. For Pepsi, the situation is slightly going down between 2009 and 2010. For the both firms, common shareholders' equity is increasing between 2009 and 2010. [...]

[...] Ratio analysis measures efficiency and effectiveness of these resources according to use. By definition, to be effective means reaching desired goals whereas to be efficient means measuring using of resources in order to achieve these goals. In this final paper, we will focus on four main business goals: liquidity, solvency, profitability and market measures. Introduction To introduce you my paper, let's doing a brief analysis overview on the both companies into their industry and their economic environment. The core market of these two brands (Coca cola company and PepsiCo) is to produces, markets and distributes non-alcoholic beverages (also known as soft drink). [...]

[...] Current ratio Current ratio indicates short-term debt paying ability Current assets / Current liabilities Compare it to last year and comment on the trend: In 2010, the Coca Cola situation is slightly going down in comparison to 2009. There has been a deterioration in the liquidity position of the firm. It is exactly the same thing for Pepsi. The 2009 ratio was relatively high is comparison to ratio in 2010. It means that the firm is less able to pay its current obligations in time for example. In this case, current assets are almost equal to current liabilities (2010). [...]

[...] Compare it to the other company (2010): With results of 2010, Coca cola return on assets ratio is higher than Pepsi ratio. That is to say that Coca cola is better at converting its investment into profit. For example, one dollar invested in Coca will generated more income than one dollar invested in Pepsi. Assets turnover ratio It is the amount of net sales generated for every dollar's worth of assets. It measures how efficiently a company uses its assets. [...]