Nicole Mills XACC/280 Week 7 Checkpoint Lisa Pendleton We use various tools to evaluate the significance of financial statement

data. Three commonly used tools are these: Horizontal analysis evaluates a series of financial statement data over a period of time. Vertical analysis evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount. Ratio analysis expresses the relationship among selected items of financial statement data. Horizontal analysis is used primarily in intracompany comparisons. Two features in published financial statements facilitate this type of comparison: First, each of the basic financial statements presents comparative financial data for a minimum of two years. Second, a summary of selected financial data is presented for a series of five to ten years or more. Vertical analysis is used in both intra- and intercompany comparisons. Ratio analysis is used in all three types of comparisons. (Waygandt, Kimmel, & Kleso, 2008, P. 699). Calculate the following for PepsiCo, Inc. and show your work: The Current Ratio for 2005 The Current Ratio for 2004

The current ratio formula is Current Ratio = Pepsi Co 2005 $10,454 = 1.11:1 $9,405 Vertical Analysis = CurrentAssets CurrentLiabilities Pepsi Co 2004 $8,639 = 1.28 :1 $6,752 EachItemOnB /S = % Or TotalAssets

ItemOnB /S =% TotalLiabilitiesW /Stockholders' Equity Two measures of vertical analysis: CurrentAssets 10,454 = = 33% TotalAssets 31,727 ShortTermObligations 2,889 = = 9% TotalLiabilitiesW /ShareholdersEquity 31,727 Horizontal Analysis Base Period CurrentYearAmount = Current Results in relation to BaseYearAmount

Two Measures of horizontal analysis: CurrentAssets2005 10,454 = = 121% Or an increase of 21% in assets from CurrentAssets2004 8,639 2004 to 2005 CurrentLiabilities2005 9,406 = = 139% Or an increase of 39% in liabilities from CurrentLiabilities2004 6,752 2004 to 2005 Calculate the following for Coca-Cola and show your work: The Current Ratio for 2005 The Current Ratio for 2004 Coca-Cola 2004 12,281 = 1.10 :1 11,133

Coca-Cola 2005 10,250 = 1.04 :1 9,836

Two measures of vertical analysis: CurrentAssets 10,250 = = 34.8% TotalAssets 29,427 LoanNotesPayable 4,518 = = 15.4% TotalLiabilitiesW /Shareholders' Equity 29,427

Two measures of horizontal analysis: CurrentAssets2005 10,250 = = 83.5% Or a decrease by 16.5% in assets from CurrentAssets2004 12,281 2004 to 2005 CurrentLiabilities2005 9,836 = = 88.4% Or a decrease of 11.6% in liabilities CurrentLiabilities2004 11,133 from 2004 to 2005 Reference: Waygandt, J.J., Kimmel, P.D., & Kleso, D.E. (2008). Financial Accounting (6th ed.). Hoboken, NJ: Wiley.