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The Coca-Cola Company PepsiCo Inc

Statement of Financial Position Statement of Financial Position


(in millions except per share amounts) (in millions except per share amounts)
Absolute % Absolute % Absolute %
ASSETS Absolute % Absolute % Absolute % Absolute %
Cash and Cash Equivalents 8,517 $ 11.68% 4,286 $ 50.32% 12,803 $ 16.01% (4,361) $ -34.06% 8,442 $ 9.80% 1,972 $ 23.36% 10,414 $ 11.56%
Short-Term Investments 2,682 $ 3.68% (1,594) $ -59.43% 1,088 $ 1.36% 3,929 $ 361.12% 5,017 $ 5.82% 1,690 $ 33.69% 6,707 $ 7.45%
Marketable Securities 138 $ 0.19% 6 $ 4.35% 144 $ 0.18% 2,948 $ 2047.22% 3,092 $ 3.59% 55 $ 1.78% 3,147 $ 3.49%
Accounts Receivable 4,430 $ 6.08% 490 $ 11.06% 4,920 $ 6.15% (161) $ -3.27% 4,759 $ 5.52% 114 $ 2.40% 4,873 $ 5.41%
Inventories 2,650 $ 3.63% 442 $ 16.68% 3,092 $ 3.87% 172 $ 5.56% 3,264 $ 3.79% 13 $ 0.40% 3,277 $ 3.64%
Prepaid Expenses and Other Assets 3,162 $ 4.34% 288 $ 9.11% 3,450 $ 4.31% (669) $ -19.39% 2,781 $ 3.23% 105 $ 3.78% 2,886 $ 3.20%
Assets Held for Sale - $ 0.00% - $ - $ 0.00% 2,973 $ 2,973 $ 3.45% (2,973) $ - $ 0.00%
TOTAL CURRENT ASSETS 21,579 $ 29.59% 3,918 $ 18.16% 25,497 $ 31.88% 4,831 $ 18.95% 30,328 $ 35.19% 976 $ 3.22% 31,304 $ 34.76%
- $ - $ - $
Equity Method Investments 6,954 $ 9.54% 279 $ 4.01% 7,233 $ 9.04% 1,983 $ 27.42% 9,216 $ 10.69% 1,177 $ 12.77% 10,393 $ 11.54%
Other Investments 631 $ 0.87% 510 $ 80.82% 1,141 $ 1.43% 91 $ 7.98% 1,232 $ 1.43% (113) $ -9.17% 1,119 $ 1.24%
Other Assets 2,121 $ 2.91% 1,374 $ 64.78% 3,495 $ 4.37% 90 $ 2.58% 3,585 $ 4.16% 1,076 $ 30.01% 4,661 $ 5.18%
Property Plant and Equipment - Net 14,727 $ 20.20% 212 $ 1.44% 14,939 $ 18.68% (463) $ -3.10% 14,476 $ 16.80% 491 $ 3.39% 14,967 $ 16.62%
Trademarks 6,356 $ 8.72% 74 $ 1.16% 6,430 $ 8.04% 97 $ 1.51% 6,527 $ 7.57% 217 $ 3.32% 6,744 $ 7.49%
Bottlers' Franchise 7,511 $ 10.30% 259 $ 3.45% 7,770 $ 9.72% (365) $ -4.70% 7,405 $ 8.59% 10 $ 0.14% 7,415 $ 8.23%
Goodwill 11,665 $ 16.00% 554 $ 4.75% 12,219 $ 15.28% 36 $ 0.29% 12,255 $ 14.22% 57 $ 0.47% 12,312 $ 13.67%
Other Intangible Assets 1,377 $ 1.89% (127) $ -9.22% 1,250 $ 1.56% (100) $ -8.00% 1,150 $ 1.33% (10) $ -0.87% 1,140 $ 1.27%
TOTAL NON-CURRENT ASSETS 51,342 $ 70.41% 3,135 $ 6.11% 54,477 $ 68.12% 1,369 $ 2.51% 55,846 $ 64.81% 2,905 $ 5.20% 58,751 $ 65.24%
TOTAL ASSETS 72,921 $ 100.00% 7,053 $ 9.67% 79,974 $ 100.00% 6,200 $ 7.75% 86,174 $ 100.00% 3,881 $ 4.50% 90,055 $ 100.00%
LIABILITIES & EQUITY
Accounts payable and accrued expenses 8,859 $ 12.15% 150 $ 1.69% 9,009 $ 11.26% (329) $ -3.65% 8,680 $ 10.07% 897 $ 10.33% 9,577 $ 10.63%
Loans and notes payable 8,100 $ 11.11% 4,771 $ 58.90% 12,871 $ 16.09% 3,426 $ 26.62% 16,297 $ 18.91% 604 $ 3.71% 16,901 $ 18.77%
Current maturities of long-term debt 1,276 $ 1.75% 765 $ 59.95% 2,041 $ 2.55% (464) $ -22.73% 1,577 $ 1.83% (553) $ -35.07% 1,024 $ 1.14%
Accrued income taxes 273 $ 0.37% 89 $ 32.60% 362 $ 0.45% 109 $ 30.11% 471 $ 0.55% (162) $ -34.39% 309 $ 0.34%
Liabilities held for sale - $ 0.00% - $ - $ 0.00% 796 $ 796 $ 0.92% (796) $ - $ 0.00%
TOTAL CURRENT LIABILITIES 18,508 $ 25.38% 5,775 $ 31.20% 24,283 $ 30.36% 3,538 $ 14.57% 27,821 $ 32.28% (10) $ -0.04% 27,811 $ 30.88%
Long-term debt 14,041 $ 19.26% (385) $ -2.74% 13,656 $ 17.08% 1,080 $ 7.91% 14,736 $ 17.10% 4,418 $ 29.98% 19,154 $ 21.27%
Other liabilities 4,794 $ 6.57% 626 $ 13.06% 5,420 $ 6.78% 48 $ 0.89% 5,468 $ 6.35% (1,970) $ -36.03% 3,498 $ 3.88%
Deferred income taxes 4,261 $ 5.84% 433 $ 10.16% 4,694 $ 5.87% 287 $ 6.11% 4,981 $ 5.78% 1,171 $ 23.51% 6,152 $ 6.83%
TOTAL NON-CURRENT LIABILITIES 23,096 $ 31.67% 674 $ 2.92% 23,770 $ 29.72% 1,415 $ 5.95% 25,185 $ 29.23% 3,619 $ 14.37% 28,804 $ 31.98%
TOTAL LIABILITIES 41,604 $ 57.05% 6,449 $ 15.50% 48,053 $ 60.09% 4,953 $ 10.31% 53,006 $ 61.51% 3,609 $ 6.81% 56,615 $ 62.87%
1,760 $ 2.41% - $ 0.00% 1,760 $ 2.20% - $ 0.00% 1,760 $ 2.04% - $ 0.00% 1,760 $ 1.95%
Capital Surplus 9,177 $ 12.58% 1,155 $ 12.59% 10,332 $ 12.92% 1,047 $ 10.13% 11,379 $ 13.20% 897 $ 7.88% 12,276 $ 13.63%
Reinvested Earnings 49,278 $ 67.58% 4,343 $ 8.81% 53,621 $ 67.05% 4,424 $ 8.25% 58,045 $ 67.36% 3,615 $ 6.23% 61,660 $ 68.47%
Accumulated Other Comprehensive Income (Loss) (1,450) $ -1.99% (1,324) $ 91.31% (2,774) $ -3.47% (611) $ 22.03% (3,385) $ -3.93% (47) $ 1.39% (3,432) $ -3.81%
(27,762) $ -38.07% (3,542) $ 12.76% (31,304) $ -39.14% (3,705) $ 11.84% (35,009) $ -40.63% (4,082) $ 11.66% (39,091) $ -43.41%
TOTAL SHAREHOLDERS' EQUITY 31,003 $ 42.52% 632 $ 2.04% 31,635 $ 39.56% 1,155 $ 3.65% 32,790 $ 38.05% 383 $ 1.17% 33,173 $ 36.84%
Equity Attributable to Noncontrolling Interests 314 $ 0.43% (28) $ -8.92% 286 $ 0.36% 92 $ 32.17% 378 $ 0.44% (111) $ -29.37% 267 $ 0.30%
TOTAL LIABILITIES AND EQUITY 72,921 $ 100.00% 7,053 $ 9.67% 79,974 $ 100.00% 6,200 $ 7.75% 86,174 $ 100.00% 3,881 $ 4.50% 90,055 $ 100.00%
Common Stock, $0.25 par; Authorized-11200
shares; Issued-7040 shares
Treasury Stock, at cost- 2514, 2571, and 2638
shares respectively
12/31/2011 12/31/2012 12/31/2013
For the Period Ending:
12/31/2010
CHANGE FROM LAST YR CHANGE FROM LAST YR CHANGE FROM LAST YR
The Coca-Cola Company PepsiCo Inc
Absolute % Absolute
Sales 46,542 $ 100.00% 1,475 $
Cost of goods sold 18,215 $ 39.14% 838 $
GROSS PROFIT 28,327 $ 60.86% 637 $
Selling. General, and Administrative Expenses 17,422 $ 37.43% 316 $
Other Operating Charges 732 $ 1.57% (285) $
OPERATING INCOME 10,173 $ 21.86% 606 $
Interest Income 483 $ 1.04% (12) $
Interest Expense 417 $ 0.90% (20) $
Equity Income (Loss) - Net 690 $ 1.48% 129 $
Other Income (Loss) - Net 529 $ 1.14% (392) $
INCOME BEFORE INCOME TAXES 11,458 $ 24.62% 351 $
Income Taxes 2,812 $ 6.04% (89) $
CONSOLIDATED NET INCOME 8,646 $ 18.58% 440 $
Less: Net Income Attributatble to Noncontrolling Interests 62 $ 0.13% 5 $
NET INCOME ATTRIBUTABLE TO SHAREHOLDERS 8,584 $ 18.44% 435 $
4568
BASIC EPS 1.88 $
Statement of Financial Performance
(in millions except per share amounts)
CHANGE FROM LAST YR
For the Year Ended December 31,
2011
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
6,435 $
The Coca-Cola Company PepsiCo Inc
Statement of Financial Performance
% Absolute % Absolute % Absolute %
3.17% 48,017 $ 100.00% (1,163) $ -2.42% 46,854 $ 100.00% Sales
4.60% 19,053 $ 39.68% (632) $ -3.32% 18,421 $ 39.32% Cost of goods sold
2.25% 28,964 $ 60.32% (531) $ -1.83% 28,433 $ 60.68% GROSS PROFIT
1.81% 17,738 $ 36.94% (428) $ -2.41% 17,310 $ 36.94% Selling. General, and Administrative Expenses
-38.93% 447 $ 0.93% 448 $ 100.22% 895 $ 1.91% Amortization of Intangible Assets
5.96% 10,779 $ 22.45% (551) $ -5.11% 10,228 $ 21.83% OPERATING INCOME
-2.48% 471 $ 0.98% 63 $ 13.38% 534 $ 1.14% Interest Income
-4.80% 397 $ 0.83% 66 $ 16.62% 463 $ 0.99% Interest Expense
18.70% 819 $ 1.71% (217) $ -26.50% 602 $ 1.28% INCOME BEFORE INCOME TAXES
-74.10% 137 $ 0.29% 439 $ 320.44% 576 $ 1.23% Provision for Income Taxes
3.06% 11,809 $ 24.59% (332) $ -2.81% 11,477 $ 24.50% CONSOLIDATED NET INCOME
-3.17% 2,723 $ 5.67% 128 $ 4.70% 2,851 $ 6.08% Less: Net Income Attributatble to Noncontrolling Interests
5.09% 9,086 $ 18.92% (460) $ -5.06% 8,626 $ 18.41% NET INCOME ATTRIBUTABLE TO PEPSICO
8.06% 67 $ 0.14% (25) $ -37.31% 42 $ 0.09% Preferred Dividends
5.07% 9,019 $ 18.78% (435) $ -4.82% 8,584 $ 18.32% Redemption Premium
4504 4434 NET INCOME AVAILABLE FOR PEPSICO COMMON SHAREHOLDERS
2.00 $ 1.94 $ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC EPS
Statement of Financial Performance
(in millions except per share amounts) (in millions except per share amounts)
For the Year Ended December 31,
CHANGE FROM LAST YR CHANGE FROM LAST YR 2012 2013
PepsiCo Inc
Statement of Financial Performance
Absolute % Absolute %
66,504 $ 100.00% (1,012) $ -1.52%
Cost of goods sold 31,593 $ 47.51% (302) $ -0.96%
GROSS PROFIT 34,911 $ 52.49% (710) $ -2.03%
Selling. General, and Administrative Expenses 25,145 $ 37.81% (175) $ -0.70%
Amortization of Intangible Assets 133 $ 0.20% (14) $ -10.53%
OPERATING INCOME 9,633 $ 14.48% (521) $ -5.41%
Interest Income 57 $ 0.09% 34 $ 59.65%
Interest Expense 856 $ 1.29% 43 $ 5.02%
INCOME BEFORE INCOME TAXES 8,834 $ 13.28% (530) $ -6.00%
Provision for Income Taxes 2,372 $ 3.57% (282) $ -11.89%
CONSOLIDATED NET INCOME 6,462 $ 9.72% (248) $ -3.84%
Less: Net Income Attributatble to Noncontrolling Interests 19 $ 0.03% 17 $ 89.47%
NET INCOME ATTRIBUTABLE TO PEPSICO 6,443 $ 9.69% (265) $ -4.11%
Preferred Dividends (1) $ 0.00% - $ 0.00%
Redemption Premium (6) $ -0.02% - $ 0.00%
NET INCOME AVAILABLE FOR PEPSICO COMMON SHAREHOLDERS 6,436 $ 9.68% (265) $ -4.12%
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1576
BASIC EPS 4.08 $
(in millions except per share amounts)
For the Year Ended December 31,
2011 CHANGE FROM LAST YR
PepsiCo Inc
Statement of Financial Performance
Absolute % Absolute % Absolute %
65,492 $ 100.00% 923 $ 1.41% 66,415 $ 100.00%
31,291 $ 47.78% (48) $ -0.15% 31,243 $ 47.04%
34,201 $ 52.22% 971 $ 2.84% 35,172 $ 52.96%
24,970 $ 38.13% 387 $ 1.55% 25,357 $ 38.18%
119 $ 0.18% (9) $ -7.56% 110 $ 0.17%
9,112 $ 13.91% 593 $ 6.51% 9,705 $ 14.61%
91 $ 0.14% 6 $ 6.59% 97 $ 0.15%
899 $ 1.37% 12 $ 1.33% 911 $ 1.37%
8,304 $ 12.68% 587 $ 7.07% 8,891 $ 13.39%
2,090 $ 3.19% 14 $ 0.67% 2,104 $ 3.17%
6,214 $ 9.49% 573 $ 9.22% 6,787 $ 10.22%
36 $ 0.05% 11 $ 30.56% 47 $ 0.07%
6,178 $ 9.43% 562 $ 9.10% 6,740 $ 10.15%
(1) $ 0.00% - $ 0.00% (1) $ 0.00%
(6) $ -0.02% (1) $ 16.67% (7) $ -0.02%
6,171 $ 9.42% 561 $ 9.09% 6,732 $ 10.14%
1557 1541
3.96 $ 4.37 $
(in millions except per share amounts)
2012 2013 CHANGE FROM LAST YR
TAX RATES
For Coca-Cola
For PepsiCo
NET INCOME
For PepsiCo
PREFERRED SHARES
For PepsiCo
MARKET PRICE PER SHARE
For Coca-Cola
2011 58.84 $ www.cocacolacompany.com/investors/stock-history/investors-info-year-and-market-values
2012 61.64 $
2013 81.75 $
For PepsiCo
2011 69.97 $ http://finance.yahoo.com/q/hp?s=PEP&a=00&b=1&c=2013&d=11&e=31&f=2013&g=m
2012 36.25 $
2013 41.31 $
www.cocacolacompany.com/investors/stock-history/investors-info-year-and-market-values
http://finance.yahoo.com/q/hp?s=PEP&a=00&b=1&c=2013&d=11&e=31&f=2013&g=m
Coca-Cola Co PepsiCo Coca-Cola Co
LIQUIDITY RATIO
Current Ratio 1.05 0.96 1.09
Quick Ratio 0.78 0.62 0.87
ASSET MANAGEMENT RATIO .
Inventory Turnover 6.34 8.78 6
Average Sale Period 57.53 41.59 60.88
Accounts Receivable Turnover 9.96 11.82 9.92
Average Collection Period 36.66 30.87 36.79
Fixed Assets Turnover 3.14 3.43 3.26
Total Assets Turnover 0.61 0.94 0.58
DEBT MANAGEMENT RATIO
Debt Ratio 0.6 0.71 0.62
Debt-to-Equity Ratio 1.52 2.52 1.62
Times Interest Earned 28.48 11.32 30.75
PROFITABILITY RATIO
Gross Margin 60.86 52.49 60.32
Operating Margin 21.86 14.48 22.45
Net Profit Margin 18.44 9.69 18.78
Return on Total Assets 11.64 10.02 11.22
Return on Common Equity 27.41 30.69 28
Basic Earning Power 15.53 13.74 14.69
MARKETABILITY RATIO
Price-Earnings Ratio 31.31 17.13 30.78
Market-to-Book Ratio 8.5 5.33 8.47
KEY FINANCIAL RATIOS
Year 2011 Year 2012
PepsiCo Coca-Cola Co PepsiCo
1.1 1.13 1.24
0.8 0.9 0.93
8.45 5.63 8.94
43.21 64.8 40.83
10.97 9.73 10.99
33.26 37.52 33.22
3.37 3.18 3.52
0.89 0.53 0.87
0.7 0.63 0.69
2.34 1.71 2.19
10.24 25.79 10.76
52.22 60.68 52.96
13.91 21.83 14.61
9.43 18.32 10.15
9.28 10.14 9.77
28.65 26.03 28.78
12.48 13.55 12.89
9.15 42.23 9.46
2.52 10.93 2.61
Year 2013 Year 2012
>the higher the ratio, the better the company's liquidity position, and the less risky the company
1. Working Capital: Current Assets - Current Liabilities
>measures the company's ability to repay current liabilities using ony current assets
Working capital 2011 2012 2013
The Coca-Cola Company 1,214 $ 2,507 $ 3,493 $
PepsiCo Inc (713) $ 1,631 $ 4,364 $
2. Current Ratio: Current Assets Current Liabilities
>tests the company's short-term debt paying abilitiy
Current Ratio 2011 2012 2013
The Coca-Cola Company 1.05 1.09 1.13
PepsiCo Inc 0.96 1.10 1.24
LIQUIDITY RATIOS
>show the relationship of a firm's cash and other current assets to its current liabilities
$(1,000)
$-
$1,000
$2,000
$3,000
$4,000
$5,000
2011 2012 2013
Working Capital
The Coca-Cola Company PepsiCo Inc
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2011 2012 2013
Current Ratio
3. Quick Ratio: Quick Assets Current Liabilities
>tests the company's short-term debt paying ability without having to rely on inventory
Quick Ratio 2011 2012 2013
The Coca-Cola Company 0.78 0.87 0.90
PepsiCo Inc 0.62 0.80 0.93
Assessments
Recommendations
In order to increase its current and quick ratio, the company may try to:
1. Sell-off unproductive fixed assets for cash
2. Sell inventories at a profit on account or for cash
3. Increase current assets from new equity contributions
4. Get loans or other borrowings with a long-term maturity period
5. Renegotiate short-term debt to long-term debt financing
>The companys current ratio is greater than 1 but its quick ratio is less than 1, then it is well
said that the company is not stable and may face difficulty in paying-off their debts especially
short-term.
>Based on the data, the company has a lesser increase in liquidity ratios from year 2011 up to
2013 as compare to its major competitor.
0.00
0.20
The Coca-Cola Company PepsiCo Inc
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
2011 2012 2013
Quick Ratio
The Coca-Cola Company PepsiCo Inc
LIQUIDITY RATIOS
>show the relationship of a firm's cash and other current assets to its current liabilities
1. Inventory Turnover = Cost of Goods Sold Average Inventory Balance
>measures how many times a company's inventory has been sold during the year
Inventory Turnover 2011 2012 2013
The Coca-Cola Company 6.34 6.00 5.63
PepsiCo Inc 8.78 8.45 8.94
2. Average Sale Period = 365 days Inventory Turnover
>measures the average number of days taken to sell the inventory one time
Average Sale Period 2011 2012 2013
The Coca-Cola Company 57.53 60.88 64.80
PepsiCo Inc 41.59 43.21 40.83
ASSET MANAGEMENT RATIOS
>measure how effectively a firm is managing its assets
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2011 2012 2013
Inventory Turnover
The Coca-Cola Company PepsiCo Inc
0
10
20
30
40
50
60
70
2011 2012 2013
Average Sale Period
The Coca-Cola Company PepsiCo Inc
3. Accounts Receivable Turnover = Sales Average Accounts Receivable Balance
>measures how many times a company's accounts receivable have been turned into cash during the year
Accounts Receivable Turnover 2011 2012 2013
The Coca-Cola Company 9.96 9.92 9.73
PepsiCo Inc 11.82 10.97 10.99
4. Average Collection Period = 365 days Accounts Receivable Turnover
>measures the average number of days taken to collect an account receivable
Average Collection Period 2011 2012 2013
The Coca-Cola Company 36.66 36.79 37.52
PepsiCo Inc 30.87 33.26 33.22
5. Fixed Assets Turnover = Sales Average Net Fixed Assets
>measures how effectively the firm uses its plant and equipment
The Coca-Cola Company PepsiCo Inc
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2011 2012 2013
Accounts Receivable Turnover
The Coca-Cola Company PepsiCo Inc
0
5
10
15
20
25
30
35
40
2011 2012 2013
Average Collection Period
The Coca-Cola Company PepsiCo Inc
Fixed Assets Turnover 2011 2012 2013
The Coca-Cola Company 3.14 3.26 3.18
PepsiCo Inc 3.43 3.37 3.52
6. Total Assets Turnover = Sales Average Total Assets
>measures the turnover of all the firm's assets
Total Assets Turnover 2011 2012 2013
The Coca-Cola Company 0.61 0.58 0.53
PepsiCo Inc 0.94 0.89 0.87
Assessment
>Compared to PepsiCo, The Coca-Cola Company has lower inventory turnover. Low inventory turnover ratios indicate
a company is carrying too much inventory, which could suggest poor inventory management or low sales. This
indicates that PepsiCo manages its inventory better than Coca-Cola. Conversely, high inventory turnover ratios may
indicate a company is enjoying strong sales or practicing just-in-time inventory methods. However, higher is not always
better, and exceptionally high inventory turnover may indicate a company is running out of items frequently or making
ineffective purchases and therefore losing sales to competitors.We can also see that The Coca-Cola Companys
inventory turnover ratio decreased from 2011 to 2013. This shows that the company is not converting its inventory into
cash as quickly as before.
2.90
3.00
3.10
3.20
3.30
3.40
3.50
3.60
2011 2012 2013
Fixed Assets Turnover
The Coca-Cola Company PepsiCo Inc
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
2011 2012 2013
Total Assets Turnover
The Coca-Cola Company PepsiCo Inc
Recommendations
>Adopt JIT product ordering to avoid overstock and lessen the holding costs
>Set a better overall price for the products to increase demand, which in turn boosts sales and inventory turnover
>Revise credit policy and payment terms
>Offer incentives for early payment
>increase sales
>Sell assets that the company does not use
>Coca-Colas total assets turnover ratio is declining since 2011. It is also lower compared to PepsiCos total assets
turnover ratio. The lower the total asset turnover ratio, as compared to historical data for the firm and competitors
data, the slower the firm's sales. This may indicate a problem with one or more of the asset categories composing
total assets - inventory, receivables, or fixed assets.
>Coca-Colas receivable turnover was 9.73 indicating that Coca-Cola turns its inventory over much more slowly than
PepsiCo. This indicates that it takes Coca-Cola a lot longer than PepsiCo to collect payment from its customers.
Also, based on the data above, the PepsiCo takes less number of days in collecting accounts receivables. This tells us
>Compared to PepsiCo, The Coca-Cola Company has lower inventory turnover. Low inventory turnover ratios indicate
a company is carrying too much inventory, which could suggest poor inventory management or low sales. This
indicates that PepsiCo manages its inventory better than Coca-Cola. Conversely, high inventory turnover ratios may
indicate a company is enjoying strong sales or practicing just-in-time inventory methods. However, higher is not always
better, and exceptionally high inventory turnover may indicate a company is running out of items frequently or making
ineffective purchases and therefore losing sales to competitors.We can also see that The Coca-Cola Companys
inventory turnover ratio decreased from 2011 to 2013. This shows that the company is not converting its inventory into
cash as quickly as before.
>The Average Sale Period is inversely proportional to the inventory turnover ratio. The lower the turnover ratio is, the
longer it takes to sell the products. If the number of inventory days is higher, this could indicate that sales are poor and
inventory is piling up. The data above means that The Coca-Cola Company takes a longer time to sell their products
that PepsiCo.
>The data above shows that Coca-Cola is uses its investments on fixed assets to generate revenues almost the same
as PepsiCo. Coca-Colas fixed assets turnover increased in 2012 and decreased in 2013. An increase in fixed assets
turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of
sales. A decline in fixed asset turnover may mean that the company is over investing in the property, plant and
equipment.
ASSET MANAGEMENT RATIOS
>measure how effectively a firm is managing its assets
>Compared to PepsiCo, The Coca-Cola Company has lower inventory turnover. Low inventory turnover ratios indicate
a company is carrying too much inventory, which could suggest poor inventory management or low sales. This
indicates that PepsiCo manages its inventory better than Coca-Cola. Conversely, high inventory turnover ratios may
indicate a company is enjoying strong sales or practicing just-in-time inventory methods. However, higher is not always
better, and exceptionally high inventory turnover may indicate a company is running out of items frequently or making
ineffective purchases and therefore losing sales to competitors.We can also see that The Coca-Cola Companys
inventory turnover ratio decreased from 2011 to 2013. This shows that the company is not converting its inventory into
cash as quickly as before.
For Inventory Turnover
For Average Sale Period
For Accounts Receivable Turnover and Average Collection Period
For Fixed Assets Turnover
For Total Assets Turnover
>Set a better overall price for the products to increase demand, which in turn boosts sales and inventory turnover
>Coca-Colas total assets turnover ratio is declining since 2011. It is also lower compared to PepsiCos total assets
turnover ratio. The lower the total asset turnover ratio, as compared to historical data for the firm and competitors
data, the slower the firm's sales. This may indicate a problem with one or more of the asset categories composing
total assets - inventory, receivables, or fixed assets.
>Coca-Colas receivable turnover was 9.73 indicating that Coca-Cola turns its inventory over much more slowly than
PepsiCo. This indicates that it takes Coca-Cola a lot longer than PepsiCo to collect payment from its customers.
Also, based on the data above, the PepsiCo takes less number of days in collecting accounts receivables. This tells us
>Compared to PepsiCo, The Coca-Cola Company has lower inventory turnover. Low inventory turnover ratios indicate
a company is carrying too much inventory, which could suggest poor inventory management or low sales. This
indicates that PepsiCo manages its inventory better than Coca-Cola. Conversely, high inventory turnover ratios may
indicate a company is enjoying strong sales or practicing just-in-time inventory methods. However, higher is not always
better, and exceptionally high inventory turnover may indicate a company is running out of items frequently or making
ineffective purchases and therefore losing sales to competitors.We can also see that The Coca-Cola Companys
inventory turnover ratio decreased from 2011 to 2013. This shows that the company is not converting its inventory into
cash as quickly as before.
>The Average Sale Period is inversely proportional to the inventory turnover ratio. The lower the turnover ratio is, the
longer it takes to sell the products. If the number of inventory days is higher, this could indicate that sales are poor and
inventory is piling up. The data above means that The Coca-Cola Company takes a longer time to sell their products
that PepsiCo.
>The data above shows that Coca-Cola is uses its investments on fixed assets to generate revenues almost the same
as PepsiCo. Coca-Colas fixed assets turnover increased in 2012 and decreased in 2013. An increase in fixed assets
turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of
sales. A decline in fixed asset turnover may mean that the company is over investing in the property, plant and
equipment.
1. Debt Ratio= Total Liabilities Total Assets
>measures the percentage of funds provided by creditors
Debt Ratio 2011 2012 2013
The Coca-Cola Company 0.60 0.62 0.63
PepsiCo Inc 0.71 0.70 0.69
2. Debt-to-Equity Ratio= Total Liabilities Total Shareholder's Equity
Debt-to-Equity Ratio 2011 2012 2013
The Coca-Cola Company 1.52 1.62 1.71
PepsiCo Inc 2.52 2.34 2.19
DEBT MANAGEMENT RATIOS
>measure how effectively a firm is managing its debt
>measures the amount of assets being provided by creditors for each dollar of assets being provided by shareholders
0.54
0.56
0.58
0.60
0.62
0.64
0.66
0.68
0.70
0.72
0.74
2011 2012 2013
Debt Ratio
The Coca-Cola Company PepsiCo Inc
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2011 2012 2013
Debt-to-Equity Ratio
3. Tmes Interest Earned Ratio= EBIT Interest Expense
>measures the firm's ability to meet its annual interest payments
Times Interest Earned Ratio 2011 2012 2013
The Coca-Cola Company 28.48 30.75 25.79
PepsiCo Inc 11.32 10.24 10.76
Assessments
Recommendations
>Lower credit limit
>Sell inventories at profit
>Choose cheaper leverage
>Choose creditors offering lower interest rates
>The Coca-Cola Company has a higher TIE ratio, meaning they are more capable in making interest payments than
its major competitor
>Based on the above data, we can say that the company has lower debt ratio compared to its major competitor which
gives them an advantage with regards to the investors. However, it doesn't mean a positive effect to the company
because both of them exceeded the industry average of 59.6% which means that more than half of their total funds
are provided by the company's creditors
>Lower debt-to-equity ratio of the Coca-Cola Company may indicate that they are not taking advantage of the
increased profits that financial leverage may bring
0.00
The Coca-Cola Company PepsiCo Inc
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2011 2012 2013
Times Interest Earned Ratio
The Coca-Cola Company PepsiCo Inc
DEBT MANAGEMENT RATIOS
>measure how effectively a firm is managing its debt
>measures the amount of assets being provided by creditors for each dollar of assets being provided by shareholders
>The Coca-Cola Company has a higher TIE ratio, meaning they are more capable in making interest payments than
its major competitor
>Based on the above data, we can say that the company has lower debt ratio compared to its major competitor which
gives them an advantage with regards to the investors. However, it doesn't mean a positive effect to the company
because both of them exceeded the industry average of 59.6% which means that more than half of their total funds
are provided by the company's creditors
>Lower debt-to-equity ratio of the Coca-Cola Company may indicate that they are not taking advantage of the
increased profits that financial leverage may bring
1. Gross Margin Percentage = Gross Profit Sales
>a broad measure of profitability
Gross Margin 2011 2012 2013
The Coca-Cola Company 60.86% 60.32% 60.68%
PepsiCo Inc 52.49% 52.22% 52.96%
2. Operating Margin Percentage = Operating Income Sales
>measures operating income per dollar of sales
Operating Margin 2011 2012 2013
The Coca-Cola Company 21.86% 22.45% 21.83%
PepsiCo Inc 14.48% 13.91% 14.61%
PROFITABILITY RATIOS
>show the combined effects of liquidity, asset management, and debt management on operating results
46.00%
48.00%
50.00%
52.00%
54.00%
56.00%
58.00%
60.00%
62.00%
2011 2012 2013
Gross Margin
The Coca-Cola Company PepsiCo Inc
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
2011 2012 2013
Operating Margin
The Coca-Cola Company PepsiCo Inc
3. Net Profit Margin = Net Income Sales
>measures net income per dollar of sales
Net Profit Margin 2011 2012 2013
The Coca-Cola Company 18.44% 18.78% 18.32%
PepsiCo Inc 9.69% 9.43% 10.15%
4. ROA = Net Income + [Interest Expense x (1 - Tax Rate)] / Average Total Assets
>measures how well assets have been employed by management
Return on Assets 2011 2012 2013
The Coca-Cola Company 11.64% 11.22% 10.14%
PepsiCo Inc 10.02% 9.28% 9.77%
5. Return on Common Equity = (Net Income - Preferred Dividends)/Average Common Shareholder's Equity
The Coca-Cola Company PepsiCo Inc
0.00%
5.00%
10.00%
15.00%
20.00%
2011 2012 2013
Net Profit Margin
The Coca-Cola Company PepsiCo Inc
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
2011 2012 2013
Return on Total Assets
The Coca-Cola Company PepsiCo Inc
>measures the rate of return on common shareholders' investment
Return on Equity 2011 2012 2013
The Coca-Cola Company 27.41% 28.00% 26.03%
PepsiCo Inc 30.69% 28.65% 28.78%
6. Basic Earning Power = EBIT Average Total Assets
>measures the ability of the firm's assets to generate operating income
Basic Earning Power 2011 2012 2013
The Coca-Cola Company 15.53% 14.69% 13.55%
PepsiCo Inc 13.74% 12.48% 12.89%
Assessments
>Based on the above data, we can conclude that The Coca-Cola Company earned much more profit than its major
competitor which indicates that the company provides better cost controls than PepsiCo
23.00%
24.00%
25.00%
26.00%
27.00%
28.00%
29.00%
30.00%
31.00%
32.00%
2011 2012 2013
Return on Common Equity
The Coca-Cola Company PepsiCo Inc
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
2011 2012 2013
Basic Earning Power
The Coca-Cola Company PepsiCo Inc
Recommendations
>Reduce cost of inventories
>Reduce Selling and Administrative Expenses
>Cheaper Leverage
>Increase sales and inventory turnover
>Since the ROA of both companies has a little difference, it means that they are both properly managing their assets in
generating profit. Still, both of them have lower ROA compared to the industry average of 13.7%
>The ROE of Coca-Cola is somewhat lower than its major competitor which means that their stockholders receive
lesser return on their money than the shareholders of Pepsi
PROFITABILITY RATIOS
>show the combined effects of liquidity, asset management, and debt management on operating results
5. Return on Common Equity = (Net Income - Preferred Dividends)/Average Common Shareholder's Equity
>Based on the above data, we can conclude that The Coca-Cola Company earned much more profit than its major
competitor which indicates that the company provides better cost controls than PepsiCo
>Since the ROA of both companies has a little difference, it means that they are both properly managing their assets in
generating profit. Still, both of them have lower ROA compared to the industry average of 13.7%
>The ROE of Coca-Cola is somewhat lower than its major competitor which means that their stockholders receive
lesser return on their money than the shareholders of Pepsi
>indicator of what investors think of firm's past result and future prospects
1. Price Earnings Ratio= Market Price Per Share Earnings Per Share
>shows the dollar amount investors will pay for $1 of current earnings
Price Earnings Ratio 2011 2012 2013
The Coca-Cola Company 31.31 30.78 42.23
PepsiCo Inc 17.13 9.15 9.46
2. Market to Book Ratio= Market Price Per Share Book Value Per Share
> it reflects how many times book value investors are ready to pay for a share
Market to Book Ratio 2011 2012 2013
The Coca-Cola Company 8.50 8.47 10.93
PepsiCo Inc 5.33 2.52 2.61
MARKETABILITY RATIOS
>relate the firm's stock price to its earnings and book value per share
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
2011 2012 2013
Price Earnings Ratio
The Coca-Cola Company PepsiCo Inc
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2011 2012 2013
Market to Book Ratio
Assessments
Recommendations
>the company should increase the current level of earnings and cash flows to maintain a high market value ratio
>Share repurchase programs could lead to lower book values in order to increase the market book ratio.
>As we see, the Coca Cola Company's P/E ratio and Market/Book ratio is relatively high as compared to its major
competitor PepsiCo. This suggests that the company is less risky, as having strong growth prospects or both. The
investors are more optimistic with respect to the company's potential growth. It reflects greater expected future gains
because of perceived growth opportunities and/or some competitive advantages and at the same time, it indicates that
the share price is relatively more expensive
0.00
The Coca-Cola Company PepsiCo Inc
MARKETABILITY RATIOS
>relate the firm's stock price to its earnings and book value per share
>the company should increase the current level of earnings and cash flows to maintain a high market value ratio
>As we see, the Coca Cola Company's P/E ratio and Market/Book ratio is relatively high as compared to its major
competitor PepsiCo. This suggests that the company is less risky, as having strong growth prospects or both. The
investors are more optimistic with respect to the company's potential growth. It reflects greater expected future gains
because of perceived growth opportunities and/or some competitive advantages and at the same time, it indicates that
the share price is relatively more expensive
You may see the Graphs here:
FSAnalysis-Coca-ColaAndPepsiCoGraphs.xlsx