Financial analysis of PepsiCo

Profitability ratios (2020)

Ratio 2020 2019
Gross goss profit 38,575 goss profit 37,029
= x 100= x 100 = x 100= x 100=55.1 %
profit net sales 70,372 net sales 67,161
margin ¿ 54.8 %

Operatin operating profit 10,080 operating profit 10,291

¿ x 100= x 100=14.32 % x 100= x 100=15.32 %
g profit Net revenue 70,372 Net revenue 67161
margin
Net ¿ 7,120 ¿
Net income attributable ¿ PepsiCo Net
x 100=
income attributable ¿ PepsiCo x 100=
profit Net revenue 70,372 Net revenue
margin x100= 10.12% x100= 10.89%
ROE ¿ 7,120
Net income attributable ¿ PepsiCo Net income attributable ¿x PepsiCo
100= x 100=
Total PepsiCo shareholders’ equity 13,454
Total PepsiC

ROA ¿ 7120 ¿
Net income attributable ¿ PepsiCo xNet
100=
income attributable
x 100=7.66
¿ PepsiCo
%
Total assets 92,918 Total assets

Liquidity ratio
Ratio 2020 2019
Current ratio Current assets 23001 Current assets 24,060
= =0.98 = =0.93
current liabilities 23,372 current liabilities 26,009
Quick ratio total quick assets 17,955 total quick assets 19,000
= =0.77 = =0.73
current liabilities 23372 current liabilities 26,009
Cash ratio Total cash assets 9551 Total cash assets 9,705
= =0.41 = =0.37
current liabilities 23372 current liabilities 26,009

Inventory turnover
Ratio 2020 2019
Inventory ratio cost of sales 31797 cost of sales 31797
= =7.62 = =7.62
inventories 4172 inventories 4172

P/E Ratio
Ratio 2020 2019
P/E Ratio Market price per common share 147.13
Market price per common share 147.13
= =28.62 = =28.62
Earning per share 5.14 Earning per share 5.14
THE EXPLANATION
In general, the current ratio of PepsiCo indicates that the company can generate cash to meet its
short-term goals. The proportion has increased because of a decrease in short-term debt and an
increase in current assets.
The profitability ratio indicates the company efficiently generates profit and value of editors.
However, from the analysis, it is seen that the ratio reduced from 2019, which shows that the
company's assets were unable to generate a higher profit than the previous year. This happened
due to the effects of COVID-19.
1. Characteristics of consolidated financial statements
Consolidated financial statements are the company's financial statement of an entity with many
divisions. When preparing the consolidated financial statements, the company must integrate and
combine its financial accounting functions. The statements are shown in the balance sheet,
income statements and cashflows statements reporting.
2. Effects that the method a parent uses to carry an investment in a subsidiary has on
the investment balance
The consolidated financial statement is the preparation of accounts by the parent organisation
where subsidiaries records are recorded. The main statement here is the balance sheet. The
consolidated balance sheet indicates the entire structure of the conglomerate. The method the
parent is using affects the investment balance. It provides the exact investment balance and the
liabilities of the company, and it is essential to the organisation's stakeholders as it allows for the
actual.
3. Characteristics of cost method of accounting
 Provides information for the investor to make an informed decision and budget for the
future.
 It assists to come up with a specific standard cost and budgets for investment.
 It is an essential tool to establish efficiency. In addition, it will disclose time wastage and
resources during the investment.
4. Necessary treatment of the consolidating worksheet
The consolidated method will affect the financial statement by controlling the stake of other
firms. In consolidating the worksheet, the parent will incorporate the revenues, expenses, tax,
liabilities, and profits of the other organisation on the income statement. Then it will deduct the
portion it does not own.
5. Allocate the purchase price for a less than 100% acquisition.
Assets: $ 92,918,000.00
Liabilities: $ 79,366,000.00
Net identifiable assets = 92918000-79366000 = $13,552,000
Good will = 18,757,000
Price allocation purchase = 32,309,000
7) Complete a calculation of basic EPS
For q1
=net income/no. of outstanding shares
No. of outstanding shares = Weighted average of shares
=100,000 * (12/12) = 100,000
On august 30 made sales 15,000 i.e. 15000 * (4/12) =5000
Total = 100,000+5000 = 105,000
Numerator =801,000
Denominator = 105,000
Basic EPS =801,000/105,000 = $7.63
For q2
Numerator (Basic EPS): Net income = $500,000; Preferred
dividends = $60,000 ($5 x 12,000 shares)
500,000/100,000 = $5.00
8) Complete a calculation of diluted EPS.
For q1
Proceeds received = 24000* 24 = 576,000
Buyback average market price = 576,000/28.8 = 20,000
Net increase no of shares = 24,000-20,000 = 4,000
Diluted EPS= 801,000/(105,000+4000) = $7.35
For q2
Diluted EPS = ($500,000 - $60,000 + $60,000 + $60,000) ÷ (100,000 + 32,000 + 30,000) =
$560,000 ÷ 162,000 = $3.46 Already computed Basic EPS = ($500,000 - $60,000) ÷ 100,000 =
$4.40
9) Complete a calculation of weighted average shares outstanding with stock issuance,
repurchase, dividends, and splits.

For q1
24,000 shares x $37.50 (exercise price)
$900,000 / 45 = 20000 shares
For q2
Denominator (Basic EPS): Weighted average # shares of
common stock outstanding
1/1 – 12/31 100,000 x (12/12) = 100,000
Weighted average # shares 100,000
Basic EPS = ($500,000 - $60,000) ÷ 100,000 = $4.40