M.

COM SEMESTER I
MANAGERIAL ACCOUNTING
114-2017

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 Abstract
Finance is considered as life blood of business enterprise. Finance is one of the basic foundations of
all kinds of economic activities. The success and survival of any organization depends upon how
efficiently it is able to raise funds as and when needed and their proper utilization. This study is
conducted between two global giants Coca Cola & PepsiCo. This research paper is basically a
comparative financial statement analysis of two well known competitors in beverage industry
dominating the global market i.e. Pepsi Co & Coca Cola. Different Financial analysis techniques are
used namely, ratio analysis and comparative financial statements to analyse the performance of
both the companies in terms of solvency, profitability and liquidity.

Keywords: Financial statements, Ratio analysis, Solvency, profitability

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 CHAPTER I

1.1. INTRODUCTION

We know business is mainly concerned with the financial activities. In order to ascertain the
financial status of the business every enterprise prepares certain statements, known as
financial statements. Financial statements are mainly prepared for decision making purposes.
But the information as is provided in the financial statements is not adequately helpful in
drawing a meaningful conclusion. Thus, an effective analysis and interpretation of financial
statements is required.

1.1. A. Meaning of Financial statement Analysis

Financial Statement Analysis is a method of reviewing and analyzing a company’s financial

statements in order to gauge its past, present or projected future performance. This process of
reviewing the financial statements allows for better economic decision making. It uses
financial statements and supplementary statements namely, income statement, balance
sheet, statement of cash flows, and a statement of changes in equity and analyses the
relationship among various factors in order to draw meaningful conclusions to obtain a better
insight into a firm’s financial position and performance. The basic objectives are as follows:

 To judge the financial health of the firm

 To evaluate the profitability of the enterprise
 To gauge the debt servicing capacity of the firm
 To understand the long-term and short-term solvency of the firm
 To know the return on capital employed or invested

1.1. B. Users of financial statement analysis

The users can be classified into internal and external. Internal users refer to the management
of the company who analyzes financial statements in order to make decisions related to the
operations of the company. On the other hand, external users do not necessarily belong to the
company but still hold some sort of financial interest. These include owners, investors,
creditors, government, employees, customers, and the general public. These users are
elaborated on below:

 Investors and potential investors are interested in their potential profits and the
security of their investment. Future profits may be estimated from the target
company's past performance as shown in the income statement. The security of their
investment will be revealed by the financial strength and solvency of the company as
shown in the statement of financial position and depending on company’s
performance, they will make decision either to hold onto their stock, sell it or buy
more.

 Suppliers are interested in knowing if a company will be able to honour its payments
as they become due. They use cash flow analysis of the company’s accounting records
to measure the company’s liquidity, or its ability to make short-term payments.

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  Lenders need to know if they will be repaid. This will depend on the solvency of the
company, which should be revealed by the statement of financial position. Long-term
loans may also be backed by 'security' given by the business over specific assets. The
value of these assets will be indicated in the statement of financial position.

 Government agencies need to know how the economy is performing in order to plan
financial and industrial policies. The tax authorities also use financial statements as a
basis for assessing the amount of tax payable by a business.

 Employees and trade union representatives need to know if an employer can offer
secure employment and possible pay rises. They will also have a keen interest in the
salaries and benefits enjoyed by senior management.

 Customers need to know that a company can continue to supply them into the future.
This is especially true if the customer is dependent on a company for specialised
supplies.

 The public may wish to assess the effect of the company on the economy, local
environment and local community. Companies may contribute to their local economy
and community through providing employment and business for local suppliers. Some
companies also run corporate responsibility programmes through which they support
the environment, economy and community by, for example supporting recycling
schemes.

1.1. C. Methods of Analyzing Financial Statements:

For analysis of financial statements, they should be rearranged to reveal the relative
significance and effect of various items of data in relation to time period and for making
inter-firm comparisons. While rearranging the data, logical relationship and sequence should
be given consideration. The analysis of financial statements will help in interpretation and
logical conclusions. The important methods are as follows:

a. Comparative Financial Statements:

Comparative financial statements are statements of financial positions at different
periods of time. It is a statement which studies the magnitude and direction of changes
in financial position and performances of a company over a period of time. It provides
meaningful information when compared to the similar data of prior periods. The
comparative statement of income statements enables to review the operational
performance and to draw conclusions, whereas the balance sheets, presenting a
change in the financial position during the period, show the effects of operations on
the assets and liabilities. Comparative financial statements reveal the following:
 Absolute data (money values)
 Increase or decrease in absolute data in terms of money values
 Increase or decrease in absolute data in terms of percentages
 Comparison in terms of ratios
 Percentage of totals

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b. Common Size Statements:
The figures of financial statements are converted to percentages. In common size
income statement, the sales figure is taken as 100 and all other figures of costs and
expenses are expressed as percentages to sales. Whereas in common size balance
sheet, the total of asset side or liabilities side is taken as 100 and all the figures of
assets and liabilities, capital and reserves are expressed as proportion to the total i.e.
100. These statements are useful in analysis of the performance of the company by
analysing each individual element to the total figure of the statement.

c. Trend Analysis:
It is an important tool of horizontal analysis. Under this analysis, ratios of different
items of the financial statements for various periods are calculated and the comparison
is made accordingly. The analysis over the prior years indicates the trend or direction.
Trend analysis is a useful tool to know whether the financial health of a business
entity is improving in the course of time or it is deteriorating.

d. Ratio Analysis:
The most popular way to analyze the financial statements is computing ratios. It is an
important and widely used tool of analysis of financial statements. While developing
a meaningful relationship between the individual items or group of items of balance
sheets and income statements, it highlights the key performance indicators, such
as, liquidity, solvency and profitability of a business entity. The tool of ratio analysis
performs in a way that it makes the process of comprehension of financial statements
simpler, at the same time, it reveals a lot about the changes in the financial condition
of a business entity.

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1.2. INTRODUCTION TO BEVERAGE INDUSTRY

The beverage industry refers to the industry that produces drinks. Although many of the
beverages, including beer, wine and tea, have been around for thousands of years, but the
industry has developed only over the past few centuries.

The beverage industry consists of two major categories and eight sub-groups. The non-
alcoholic category is comprised of soft drink syrup manufacture; soft drink and water bottling
and canning; fruit juices bottling, canning and boxing; the coffee industry and the tea
industry. Alcoholic beverage categories include distilled spirits, wine and brewing.

Tea,Coffee,Fruit
Non- Carbonated
juices
Non- Alchoholic
Soda, Soft drinks,
Carbonated
Energy drinks
Beverage

Fermented Beer, Wine

Alchoholic
Whiskey, Vodka,
Distilled
Rum

The beverage products industry, viewed as an aggregate group, is highly fragmented. This is
evident by the number of manufacturers, methods of packaging, production processes and
final products. The soft drink industry is the exception to the rule, as it is quite concentrated.

Since the early 1900s beverage companies have evolved from regional firms that mainly
produced goods for local markets, to today’s corporate giants that make products for
international markets. This shift began when companies in this manufacturing sector adopted
mass production techniques that let them expand. Also during this time period there were
advances in product packaging and processes that greatly increased product shelf life. Air-
tight containers for tea prevented absorption of moisture, which is the principle cause of loss
of flavour. In addition, the advent of refrigeration equipment enabled lager beers to be
brewed during the summer months.

The beverage industry employs several million people worldwide, and each type of beverage
grosses billions of dollars in revenue each year. Indeed, in several small, developing
countries, the production of coffee is the major support of the entire economy.

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1.3. COMPANY PROFILES

THE COCA COLA COMPANY

The Coca-Cola Company is a beverage company. The Company owns or licenses and
markets non-alcoholic beverage brands, primarily sparkling beverages and a range of still
beverages, such as waters, flavoured waters and enhanced waters, juices and juice drinks,
ready-to-drink teas and coffees, sports drinks, dairy and energy drinks. The Company's
segments include Europe, Middle East and Africa; Latin America; North America; Asia
Pacific; Bottling Investments, and Corporate. The Company owns and markets a range of
non-alcoholic sparkling beverage brands, including Coca-Cola, Diet Coke, Fanta and Sprite.
The Company owns or licenses and markets over 500 non-alcoholic beverage brands. The
Company markets, manufactures and sells beverage concentrates, which are referred to as
beverage bases, and syrups, including fountain syrups, and finished sparkling and still
beverages.

Name The Coca Cola Company

Industry Beverage
Area served Worldwide
Founders John Pemberton as Coca-Cola
Asa Griggs Candler as The Coca-Cola
Company
Headquarters Atlanta, Georgia, United States
Chairperson Muhtar Kent
Revenue US$41.863 billion (2016)
Employees 123,200 (2016)
Website Coca-ColaCompany.com
PEPSICO

PepsiCo, Inc. is an American multinational food, snack, and beverage corporation. PepsiCo
has interests in the manufacturing, marketing, and distribution of grain-based snack foods,
beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-
Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake
product Pepsi to a broader range of food and beverage brands, the largest of which included
an acquisition of Tropicana Products in 1998 and the Quaker Oats Company in 2001, which
added the Gatorade brand to its portfolio.

Name PepsiCo
Industry Beverages and Food processing
Area served Worldwide
Founders Caleb Bradham
Headquarters Purchase, New York, U.S.
Chairperson Indra Nooyi
Revenue US$62.799 billion (2016)
Employees 246,000 (2016)
Website PepsiCo.com

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1.4. RESEARCH METHODOLOGY

In the present study, an attempt has been made to analyse, compare and interpret the
financial performance of The Coca Cola Company and PepsiCo. The study is based on
secondary data that has been collected from annual reports of the respective company,
magazines, journals, documents, online database and other published information. The study
covers the period of 3 years i.e. 2014, 2015 and 2016. To analyze the data the tools like ratio
analysis and comparative statement analysis are applied for the study for evaluating the
financial performance and better controlling the activities of the company.

1.5. OBJECTIVES
 To assess the profitability.
 To assess short and long-term solvency.
 To judge the utilization of its resources.
 To analyze the financial performance of the selected companies.

1.6. SCOPE

This study is vital because just earning profit is not enough, a business should earn sufficient
profit to cover its cost of capital and create surplus to grow. So finding the surplus profit is
made essential. Study aim to analyze the liquidity, profitability, solvency position of the firm
and efficiency which it converts its resources into service.

1.7. LIMITATION

Due to constraints of time and resources, the study is likely to suffer from certain limitations.
Some of these are mentioned here under so that the findings of the study may be understood
in a proper perspective. The limitations of the study are:

 The secondary data was taken from the annual reports of the company. It may be
possible that the data shown in the annual reports may be window dressed which does
not show the actual position of the company.
 The financial analysis is limited to three years i.e. 2014, 2015 and 2016.

1.8. COLLECTION OF DATA

Data for this project is collected through Secondary sources which are as follows:

 Annual reports of the selected companies from the 2014 to 2016

 Reference Books: Theory relating to the subject matter and various concepts taken
from various financial reference books.

The study contains secondary data i.e. data from books, authenticated websites and journals
for the latest updates just to gain an insight for the views of various experts.

1.9. TOOLS FOR ANALYSIS

The study uses graphical presentation for analysing and interpreting the data.

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 CHAPTER II

REVIEW OF LITERATURE

Agarwal, Nidhi (2015) the study focus on the comparative financial performance of Maruti
Suzuki and Tata motors ltd. The financial data and information required for the study are
drawn from the annual reports of companies. The liquidity and leverage analysis of both the
firms are done. To analyze the leverage position four ratios are considered namely, capital
gearing, debt-equity, total debt and proprietary ratio. The result shows that Tata motors ltd
has to increase the portion of proprietor’s fund in business to improve long term solvency
position.

Rapheal Nisha (2013) the author tries to evaluate the financial performance of Indian tyre
industry. The study was conducted for period 2003-04 to 2011-12 to analyze the performance
with financial indicators, sales trend, export trend, production trend etc. The result suggests
the key to success in industry is to improve labour productivity and capital efficiency.

Dr. Miss Kailash P. Damor (2002) has done research on “A comparative analysis of
profitability trends in co-operative sugar industry of India”. In her research she has given
clear idea about profit and profitability. Profitability is related with two words, Profit and
Ability. We discuss the word profit in many senses but the word profit is used as per its
purpose, where as the ability shows the capability of earning profit from business.
Profitability also shows our capacity of how much return we can give to our investors on their
investment.

Rao and Chandar have made attempt to assess the financial efficiency of cement companies
for the period from 1970-71 to 1977-78 which covers 70% of entire industries. They found
out that the profitability of selected companies had decreased continuously from 1970-71 to
1974-75 owing to causes such as inflationary pressure in the country, continuous fall in
capacity utilization due to drastic power - cuts and shortage of coal, oil and wagon. The
profitability increased in 1975-76 because of appreciable increase in the sales.

Harrison (2003) conducted study and argued that financial ratio analyses are very useful.
During his study he found that financial ratios analysis are also effective in automobile
industry, it guide governing body to determine effective and efficient strategies and identify
the weak areas which need attention.

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 CHAPTER III

INTRODUCTION TO RATIO ANALYSIS

3.1. CONCEPT OF RATIO ANALYSIS

Managers and investors use a number of different tools and comparisons to tell whether a company is
doing well and whether it is worth investing in. The most common ways people analyse a company's
performance are horizontal analysis, vertical analysis, and ratio analysis. Horizontal and vertical
analysis compare a company's performance over time and to a base or set of standard performance
numbers whereas a financial ratio helps to express the relationship between two accounting figures in
such a way that users can draw conclusions about the performance, strengths and weakness of a firm.
It is an important tool of financial analysis. The ratio indicates quantitative relationship which is used
for analysis and decision making. It helps the management to analyse the past performance of the firm
and to make further projections. It allows interested parties like shareholders, investors, creditors,
government and analyst to make an evaluation of certain aspects of a firm’s performance. It is helpful
to know about the liquidity, solvency, capital structure and profitability of an organization.

Ratio analysis is extremely helpful in providing valuable insight into a company’s financial picture.
Ratios normally pinpoint a business firm’s strengths and weakness in two ways:

 Ratios provide an easy way to compare present performance with the past.
 Ratios depict the areas in which a particular business is competitively advantaged or
disadvantaged through comparing ratios to those of other businesses of the same size within
the same industry.

The rationale of ratio analysis lies in the fact that it makes related information comparable. A single figure by
itself has no meaning but when expressed in terms of a related figure, it yields significant understanding.
3.2. CLASSIFICATION OF RATIOS

The ratio analysis is grouped under four broad categories according to financial activity or
function be evaluated.

1. Liquidity Ratio
2. Leverage Ratio
3. Activity or Turnover Ratio
4. Profitability Ratio

3.2.1 LIQUIDITY RATIO

Liquidity means ability of the business to meet its short term obligations, usually for a period
of one year. Liquidity is a prerequisite for the survival of the firm. These ratios are used to
assess the short-term financial position of the concern. They indicate the firm’s ability to
meet its current obligation out of the current resources. Excess liquidity, though a guarantor
of solvency would reflect lower profitability, deterioration in managerial efficiency etc.
Whereas too little liquidity may lead missing of profitable business opportunities, reduced
rate of return. A proper balance between two contradictory requirements, that is, liquidity and
profitability, is required for efficient financial management. Liquidity ratio can be further
classified as follows:

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3.2.1. a. CURRENT RATIO

This ratio explains the relationship between the current assets and current liabilities of a
business. ‘Current assets’ includes those assets which can be converted into cash with in a
year’s time. ‘Current liabilities’ include those liabilities which are repayable in a year’s time.
A current ratio of 2:1 is supposed to be an ideal ratio. It means that current assets of a
business should, at least, be twice of its current liabilities. The higher ratio indicates the better
liquidity position; the firm will be able to pay its current liabilities more easily. But a very
high ratio will have adverse impact on the profitability of the company. A high current ratio
may be due to the piling up of the inventory, inefficiency in collection of debtors, high
balances in cash and bank accounts without proper investment etc. If the ratio is less than 2:1,
it indicates lack of liquidity and shortage of working capital.

Current ratio = Current assets/ Current liabilities

Year 2014 2015 2016
PepsiCo 1.14 1.31 1.28
Coca Cola 1.02 1.24 1.28

3.2.1. b. QUICK RATIO

One Key problem with the current ratio is that it assumes that all current assets can be
converted in to cash in order to meet short-term obligations. We know this assumption highly
untrue. Firms carry current assets, such as inventory and pre-paid expenses which cannot be
converted into cash quickly. To correct this problem, the quick asset ratio (QAR) removes
from current assets less liquid current assets, such as inventory and pre-paid expenses, which
cannot be converted into cash quickly. The quick ratio, also called the acid test ratio. It
indicates the extent to which current liabilities can be paid off through liquid current assets. A
quick ratio of 1:1 indicates highly solvent position.

Quick ratio = Quick assets/ Current liabilities

Quick assets = Current assets – (Inventory + prepaid expenses)

Year 2014 2015 2016

PepsiCo 0.92 1.13 1.18
Coca Cola 0.97 1.16 1.15

3.2.1. c. ABSOLUTE LIQUID RATIO

This ratio explains the relationship between absolute liquid to current liabilities. The ideal
absolute liquid ratio is taken as 1:2.

Absolute Liquid Ratio = Absolute Liquid Assets / Current liabilities

Absolute liquid assets = Cash and Cash equivalents + Short term Investments

Year 2014 2015 2016

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PepsiCo 0.48 0.68 0.76
Coca Cola 0.67 0.74 0.84

3.2.2. LEVERAGE RATIO

Leverage Ratios measure the ability of the firm to meet the cost of interest and repayment
capacity of its long-term loans. Following are some of the ratios:

3.2.2. a. DEBT EQUITY RATIO

This ratio expresses the relationship between long term debts and shareholder’s fund. Long
term debt includes debentures, mortgage loan, bank loan, loans from financial institutions and
public deposits etc. Shareholders fund includes common stocks, capital surplus, retained
earnings, treasury stock and other equity. If the ratio is increasing, it indicates that the
company is being financed by creditors rather than from its own financial sources which may
be a dangerous trend. An organization having stable profit can afford to operate on a
relatively high debt-equity ratio. Lenders usually prefer low debt-to-equity ratios because
their interests are better protected against possible losses in the events of liquidation. Thus,
companies with high debt-to-equity ratios may not be able to attract additional lending
capital. Also if the proportion of debt to equity is low, a company is said to be low geared and
vice versa.

Debt Equity ratio = Long term debt / Shareholders funds

Year 2014 2015 2016

PepsiCo 1.36 2.42 2.67
Coca Cola 0.63 1.11 1.29

3.2.2. b. PROPRIETARY RATIO

In this ratio, the relationship is established between shareholder’s funds and the total assets. A
higher proprietary ratio is generally treated as an indicator of sound financial position from
long term point of view, because it means that the firm is less dependent on external sources
of finance. And a reduction in shareholder’s equity signalling over dependence on outside
sources for long term financial needs and this carries the risk of higher levels of gearing. This
ratio indicates the degree to which unsecured creditors are protected against loss in the event
of liquidation. Shareholders fund includes common stocks, capital surplus, retained earnings,
treasury stock and other equity.

Proprietary ratio = Shareholder’s funds/ Total assets

Year 2014 2015 2016

PepsiCo 0.25 0.17 0.15
Coca Cola 0.33 0.28 0.26

3.2.2. c. FINANCIAL LEVERAGE RATIO

This ratio indicates the effects on earnings by rise of fixed cost funds. It refers to the use of
debt in the capital structure. Financial leverage arises when a firm deploys debt funds with

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fixed charge. The higher the ratio, the lower the cushion for paying interest on borrowings. A
low ratio indicates a low interest outflow and consequently lower borrowings. A high ratio is
risky and constitutes a strain on profits. The financial leverage is an indicator of
responsiveness of firm’s EPS to the changes in its profit before interest and tax. It indicates
the use of earnings in making payments for fixed interest and fixed dividend bearing
securities.

Financial Leverage = EBIT/ EBT

Year 2014 2015 2016

PepsiCo 1.10 1.13 1.16
Coca Cola 1.05 1.08 1.09

3.2.3 TURNOVER RATIO

This ratio measures how effectively the firm employs its resources. Since the ratios are
calculated on the bases of ‘cost of sales’ or sales, therefore, these ratios are called turnover
ratio. Turnover indicates the speed or number of times the capital employed has been rotated
in the process of doing business. Higher turnover ratio indicates the better use of capital or
resources and in turn leads to higher profitability.

3.2.3. a. INVENTORY TURNOVER RATIO

A considerable amount of a company’s capital may be tied up in the financing of raw

materials, work-in-progress and finished goods. It is important to ensure that the level of
stocks is kept as low as possible, consistent with the need to fulfil customer’s orders in time.
The inventory turnover ratio measures how times a company’s inventory has been sold
during the year. If the inventory turnover ratio has decreased from the past, it means that
either the inventory is growing or sales are dropping. Higher the ratio, the better it is, since it
indicates that stock is selling quickly. Low inventory turnover has impact on the liquidity of
the business.

Inventory Turnover Ratio = Cost of goods sold/ Average inventory at cost

Average inventory at cost = (Opening stock + Closing stock) / 2

Year 2014 2015 2016

PepsiCo 9.94 10.56 10.36
Coca Cola 5.77 6.02 6.16

****Note: Since details about opening and closing stock are not given, Inventory is assumed
as average inventory at cost****

3.2.4. PROFITABILTY RATIO

The profitability ratio measures the company’s ability to generate profits from its operations
and also helps to discover whether profitability is increasing or decreasing. The profitability
of the firm is the net result of a large number of policies and decisions. The profitability ratio

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shows the combined effects of liquidity, asset management and debt management on
operating results. Profitability ratios are measured with the reference sales, capital employed,
total assets employed, shareholders funds etc. Following are some of the ratios:

3.2.4. a. GROSS PROFIT RATIO

The gross profit or gross profit margin (GPM) shows the firm`s profit margin after deducting
costs of goods sold but before deducting operating expenses, interest expenses, and taxes.
The higher the gross profit ratio, the better it is. No ideal standard is fixed for this ratio, but
the gross profit ratio should be adequate enough not only to cover the operating expenses but
also to provide for depreciation, interest on loans, dividends and creation of reserves. The
GPM depends primarily on the firm`s product pricing and cost control. The price of the
product impacts sales. Production cost such as material, labour, and overhead or the cost of
purchases affect the cost of goods sold. A firm with a better ability to price products in line
with inflation of cost of production and the ability to control production costs or suppliers
will be able to maintain or increase gross margins.

Gross Profit ratio = Gross profit/ Net sales *100

Year 2014 2015 2016

PepsiCo 53.15% 54.43% 55.08%
Coca Cola 61.11% 60.53% 60.67%

3.2.4. b. OPERATING PROFIT RATIO

The operating profit or operating profit margin (OPM) shows the firm`s profit margin after
deducting cost of goods sold and operating expenses but before interest expenses and taxes.
The OPM reflects the true profitability of firm`s business in that it is calculated before
deducting interest costs, which are a result from firm`s financing decision, and taxes, which
are outside the control of the firm. In other words, regardless of the way the firm is financed,
whether through debt or equity, and regardless of the taxes imposed by the government, the
firm is able to earn this margin.

Operating Profit ratio = Operating profit/ Net sales *100

Year 2014 2015 2016

PepsiCo 14.37% 13.25% 15.58%
Coca Cola 21.11% 19.70% 20.61%

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 CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

RATIOS IN TABULAR FORMAT

Serial Types of Ratios Year

no.
2014 2015 2016
1. LIQUIDITY RATIOS
1.1 Current Ratio 1.14 1.31 1.28
1.2 Quick Ratio 0.92 1.13 1.18
1.3 Absolute Liquid Ratio 0.48 0.68 0.76

2. LEVERAGE RATIOS
2.1 Debt-equity Ratio 1.36 2.42 2.67
2.2 Equity/Proprietary Ratio 0.25 0.17 0.15
2.3 Financial Leverage Ratio 1.10 1.13 1.16

3. TURNOVER RATIO
3.1 Inventory Turnover Ratio 9.94 10.56 10.36

4. PROFITABILTY
RATIO
4.1 Gross Profit Ratio 53.15% 54.43% 55.08%
4.2 Operating Profit Ratio 14.37% 13.25% 15.58%

Serial Types of Ratios Year

no.
2014 2015 2016
1. LIQUIDITY RATIOS
1.1 Current Ratio 1.02 1.24 1.28
1.2 Quick Ratio 0.97 1.16 1.15
1.3 Absolute Liquid Ratio 0.67 0.74 0.84

2. LEVERAGE RATIOS
2.1 Debt-equity Ratio 0.63 1.11 1.29
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2.2 Equity/Proprietary Ratio 0.33 0.28 0.26
2.3 Financial Leverage Ratio 1.05 1.08 1.09

3. TURNOVER RATIO
3.1 Inventory Turnover Ratio 5.77 6.02 6.16

4. PROFITABILITY
RATIO
4.1 Gross Profit Ratio 61.11% 60.53% 60.67%
4.2 Operating Profit Ratio 21.11% 19.70% 20.61%

1. LIQUIDITY RATIO:

A) Current Ratio

Current Ratio
1.4 1.31 1.28 1.28
1.24
1.14
1.2 1.02
1
0.8
0.6 PEPSICO
0.4 COCA COLA
0.2
0
2014 2015 2016
Figure 1.1

Interpretation: The above chart depicts that the current ratios of PepsiCo is slightly
fluctuating for the three consecutive years, whereas the current ratios of coca cola are
gradually increasing. In the year 2014 and 2015 we see that PepsiCo’s current ratio is
comparatively higher than coca cola, but in the year 2016 the ratio of both companies are
same. We can also see that both the companies do not satisfy the ideal ratio of 2:1.

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 B) Quick Ratio

Quick Ratio
1.4
1.13 1.16 1.18 1.15
1.2
1 0.92 0.97

0.8
0.6 PEPSICO
0.4 COCA COLA
0.2
0
2014 2015 2016
Figure1.3

Interpretation: In the above chart we observe that the quick ratios of PepsiCo show a gradual
increase for the three consecutive years. Whereas the ratios of the coca cola company show
an increasing trend from the year 2014 to 2015, but in the year 2016 the ratio has very
slightly decreased by 0.01. The ideal quick ratio of 1:1 is not satisfied by both the companies
in the year 2014. But in the year 2015 and 2016 both the companies have quick ratio greater
than 1 which means they have sufficient quick assets to meet their current liabilities.

C) Absolute Liquid Ratio

Absolute Liquid Ratio

1
0.84
0.74 0.76
0.8 0.67 0.68
0.6 0.48
0.4 PEPSICO
COCA COLA
0.2

0
2014 2015 2016
Figure 1.2

Interpretation: The above chart depicts that the absolute ratios of both the companies are
increasing. We can also conclude that coca cola has higher absolute liquid assets to meet its
current liabilities for all the three years. We can also observe that the ratios of coca cola are
increasing gradually while the ratio of PepsiCo from the year 2014 to 2015 has increased by
0.20 and later in the year 2016 it is slightly increased by 0.08. Both the companies do not
satisfy the ideal ratio of 1:2. Hence both the company’s liquidity position is not good.

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 2. LEVERAGE RATIO

A) Debt Equity Ratio

Debt Equity Ratio

3 2.67
2.42
2.5

1.5 1.36 1.29

1.11 PEPSICO
1
0.63 COCA COLA
0.5

0
2014 2015 2016
Figure 2.1

Interpretation: In the above chart we see that PepsiCo has higher debt equity ratio compared
to coca cola. This indicates that PepsiCo is being financed by creditors rather than from its
own financial sources and also the company is said to be high geared. On the contrary, coca
cola has lower debt equity ratio indicating that its dependence on the external sources of
finance is comparatively lower than PepsiCo and thus said to be low geared. We can also
observe that the debt equity ratio of PepsiCo is twice the ratio of coca cola for the year 2015
and 2016.

B) Proprietary Ratio

Proprietary Ratio
0.35 0.33

0.3 0.28
0.25 0.26
0.25
0.2 0.17
0.15
0.15 PEPSICO
0.1 COCA COLA
0.05
0
2014 2015 2016
Figure 2.2

Interpretation: From the above chart we see that both the company’s proprietary ratios are
declining. The chart also depicts that coca cola has high proprietary ratio compared to

18 | P a g e
PepsiCo which indicates sound financial position and lesser dependence on external sources
of finance. On the contrary, PepsiCo has to rely or depend on outside sources of finance to
meets its long-term financial needs, hence carrying a risk of higher levels of gearing which
PepsiCo can have advantage over coca cola.

C) Financial Leverage Ratio

Financial Leverage Ratio

1.18 1.16
1.16
1.14 1.13
1.12 1.1
1.1 1.09
1.08
1.08
1.06 1.05 PEPSICO
1.04 COCA COLA
1.02
1
0.98
2014 2015 2016
Figure 2.3

Interpretation: From the above chart we see that PepsiCo has high financial leverage ratio
compared to coca cola. This indicates more use of earnings in making payments for fixed
interest on debt funds which is risky and constitutes a strain on profits. Whereas coca cola has
lower ratio that indicates a low interest outflow and consequently lower borrowing. Both the
companies show an increasing trend in financial leverage ratio.

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3. TURNOVER RATIO

A) Inventory Turnover Ratio

Inventory Turnover Ratio

12 10.56
9.94 10.36
10

8
5.77 6.02 6.16
6
PEPSICO
4
COCA COLA
2

0
2014 2015 2016
Figure 3.1

Interpretation: The inventory turnover ratios of both the companies show a fluctuating trend.
PepsiCo has higher inventory turnover ratio compared to coca cola which indicates that the
stock is selling quickly. It also indicates effective utilization of capital or resources. Coca cola
has low inventory turnover ratio for all the three consecutive years and hence this will impact
the liquidity of the coca cola’s business.

4. PROFITABILITY RATIO

A) Gross Profit Ratio

Gross Profit Ratio

62.00% 61.11% 60.67%
60.53%
60.00%
58.00%
56.00% 55.08%
54.43%
54.00% 53.15% PEPSICO
52.00% COCA COLA
50.00%
48.00%
2014 2015 2016
Figure 4.1

20 | P a g e
Interpretation: The gross profit ratio of coca cola shows a fluctuating trend whereas the GP
ratios in case of PepsiCo show an increasing trend. But the GP ratio of Coca cola is higher
which indicates that the product pricing and cost control is better compared to PepsiCo.

B) Operating Profit Ratio

Operating Profit Ratio

25.00%
21.11% 20.61%
19.70%
20.00%
15.58%
14.37%
15.00% 13.25%

10.00% PEPSICO
COCA COLA
5.00%

0.00%
2014 2015 2016
Figure 4.2

Interpretation: In the above chart, both the companies depict a fluctuating trend. The
operating profit of coca cola is higher in the three consecutive years compared to PepsiCo.
Higher the ratio better it is.

21 | P a g e
 Comparative Balance Sheet of Coca Cola for the year ending 31/12/2016

Period Ending: 12/31/2015 12/31/2016 Increase or Percentage

(Values in 000’s in Decrease change
USD)
Current Assets
Cash and Cash 73,09,000 85,55,000 12,46,000 17.05
Equivalents
Short-Term 125,91,000 136,46,000 10,55,000 8.38
Investments
Net Receivables 39,41,000 38,56,000 (85,000) (2.16)
Inventory 29,02,000 26,75,000 (2,27,000) (7.82)
Other Current 66,52,000 52,78,000 (13,74,000) (20.66)
Assets
Total Current 333,95,000 340,10,000 6,15,000 1.84
Assets
Long-Term Assets
Long-Term 157,88,000 172,49,000 14,61,000 9.25
Investments
Fixed Assets 125,71,000 106,35,000 (19,36,000) (15.40)
Goodwill 112,89,000 106,29,000 (6,60,000) (5.85)
Intangible Assets 128,43,000 104,99,000 (23,44,000) (18.25)
Other Assets 41,10,000 42,48,000 1,38,000 3.36
Deferred Asset - - - -
Charges
Total Assets 899,96,000 872,70,000 (27,26,000) (3.03)
Current Liabilities
Accounts Payable 99,91,000 97,97,000 (1,94,000) (1.94)
Short-Term Debt / 158,05,000 160,25,000 2,20,000 1.39
Current Portion of
Long-Term Debt
Other Current 11,33,000 7,10,000 (4,23,000) (37.33)
Liabilities
Total Current 269,29,000 265,32,000 (3,97,000) (1.47)
Liabilities
Long-Term Debt 283,11,000 296,84,000 13,73,000 4.85
Other Liabilities 43,01,000 40,81,000 (2,20,000) (5.12)
Deferred Liability 46,91,000 37,53,000 (9,38,000) (20.00)
Charges
Misc. Stocks - - - -
Minority Interest 2,10,000 1,58,000 (52,000) (24.76)
Total Liabilities 644,42,000 642,08,000 (2,34,000) (0.36)
Stock Holders Equity
Common Stocks 17,60,000 17,60,000 - -
Capital Surplus 140,16,000 149,93,000 9,77,000 6.97
Retained Earnings 650,18,000 655,02,000 4,84,000 0.74

22 | P a g e
Treasury Stock -450,66,000 -479,88,000 29,22,000 6.48
Other Equity -101,74,000 -112,05,000 10,31,000 10.13
Total Equity 255,54,000 230,62,000 (24,92,000) (9.75)
Total Liabilities & 899,96,000 872,70,000 (27,26,000) (3.03)
Equity

Interpretation: The absolute liquid asset (cash and cash equivalents + short term investment) has
increased by 25.43%. Whereas the net receivable, inventory and other current assets has decreased.
The long term investments have increased whereas fixed assets, intangible assets and goodwill has
decreased. There is also increase in short and long term debt. The overall financial performance of the
company is fairly satisfactory.

Comparative Income statement of Coca Cola for the year ending 31/12/2016

Period Ending: 12/31/2015 12/31/2016 Increase or Percentage

(Values in 000’s in USD) Decrease change
Total Revenue 442,94,000 418,63,000 (24,31,000) (5.49)
Cost of Revenue 174,82,000 164,65,000 (10,17,000) (5.82)
Gross Profit 268,12,000 253,98,000 (14,14,000) (5.27)
Operating Expenses
Research and Development - - - -
Sales, General and Admin. 180,84,000 167,72,000 (13,12,000) (7.26)
Non-Recurring Items - - - -
Other Operating Items - - - -
Operating Income 87,28,000 86,26,000 (1,02,000) (1.17)
Add'l income/expense items 12,44,000 -5,92,000 (18,36,000) (147.59)
Earnings Before Interest and Tax 104,61,000 88,69,000 (15,92,000) (15.22)
Interest Expense 8,56,000 7,33,000 (1,23,000) (14.37)
Earnings Before Tax 96,05,000 81,36,000 (14,69,000) (15.29)
Income Tax 22,39,000 15,86,000 (6,53,000) (29.16)
Minority Interest -15,000 -23,000 8,000 53.33
Equity Earnings/Loss 4,89,000 8,35,000 3,46,000 70.76
Unconsolidated Subsidiary
Net Income-Cont. Operations 78,40,000 73,62,000 (4,78,000) (6.10)
Net Income 73,51,000 65,27,000 (8,24,000) (11.21)
Net Income Applicable to 73,51,000 65,27,000 (8,24,000) (11.21)
Common Shareholders

Interpretation: The gross profit of the company has decreased by 5.27% along with decrease in net
profit of the company. The overall financial performance of the company is not satisfactory since the
company has incurred losses.

23 | P a g e
 Comparative Balance Sheet of PepsiCo for the year ending 31/12/2016

Period Ending: 12/26/2015 12/31/2016 Increase or Percentage

(Values in 000’s in Decrease change
USD)
Current Assets
Cash and Cash 90,96,000 91,58,000 62,000 0.68
Equivalents
Short-Term 29,13,000 69,67,000 40,54,000 139.17
Investments
Net Receivables 64,37,000 66,94,000 2,57,000 3.99
Inventory 27,20,000 27,23,000 3,000 0.11
Other Current Assets 18,65,000 15,47,000 (3,18,000) (17.05)
Total Current Assets 230,31,000 270,89,000 40,58,000 17.62
Long-Term Assets
Long-Term 23,11,000 19,50,000 (3,61,000) (15.62)
Investments
Fixed Assets 163,17,000 165,91,000 2,74,000 1.68
Goodwill 141,77,000 144,30,000 2,53,000 1.78
Intangible Assets 130,81,000 134,33,000 3,52,000 2.69
Other Assets 7,50,000 6,36,000 (1,14,000) (15.20)
Deferred Asset - - - -
Charges
Total Assets 696,67,000 741,29,000 44,62,000 6.40
Current Liabilities
Accounts Payable 135,07,000 142,43,000 7,36,000 5.45
Short-Term Debt / 40,71,000 68,92,000 28,21,000 69.30
Current Portion of
Long-Term Debt
Other Current - - - -
Liabilities
Total Current 175,78,000 211,35,000 35,57,000 20.24
Liabilities
Long-Term Debt 292,13,000 300,53,000 8,40,000 2.88
Other Liabilities 58,87,000 66,69,000 7,82,000 13.28
Deferred Liability 49,59,000 50,73,000 1,14,000 2.30
Charges
Misc. Stocks -1,45,000 -1,51,000 6,000 4.14
Minority Interest 1,07,000 1,04,000 (3,000) (2.80)
Total Liabilities 575,99,000 628,83,000 52,84,000 9.17
Stock Holders Equity
Common Stocks 24,000 24,000 - -
Capital Surplus 40,76,000 40,91,000 15,000 0.37
Retained Earnings 504,72,000 525,18,000 20,46,000 4.05
Treasury Stock -291,85,000 -314,68,000 22,83,000 7.82
Other Equity -133,19,000 -139,19,000 6,00,000 4.50

24 | P a g e
Total Equity 120,68,000 112,46,000 (8,22,000) (6.81)
Total Liabilities & 696,67,000 741,29,000 44,62,000 6.40
Equity

Interpretation: The short term investment has increased by 139.17%. Fixed assets, goodwill and
intangible assets have been increased by 6.15%. The total liability of the company has increased by
9.17%.

Comparative Income statement of PepsiCo for the year ending 31/12/2016

Period Ending: 12/26/2015 12/31/2016 Increase or Percentage

(Values in 000’s in USD) Decrease change
Total Revenue 630,56,000 627,99,000 (2,57,000) (0.41)
Cost of Revenue 287,31,000 282,09,000 (5,22,000) (1.82)
Gross Profit 343,25,000 345,90,000 2,65,000 0.77
Operating Expenses
Research and - - - -
Development
Sales, General and 245,38,000 247,35,000 1,97,000 0.80
Admin.
Non-Recurring Items 13,59,000 - (13,59,000) (100.00)
Other Operating Items 75,000 70,000 (5,000) (6.67)
Operating Income 83,53,000 97,85,000 14,32,000 17.14
Add'l income/expense 59,000 1,10,000 51,000 86.44
items
Earnings Before Interest 84,12,000 98,95,000 14,83,000 17.63
and Tax
Interest Expense 9,70,000 13,42,000 3,72,000 38.35
Earnings Before Tax 74,42,000 85,53,000 11,11,000 14.93
Income Tax 19,41,000 21,74,000 2,33,000 12.00
Minority Interest -49,000 -50,000 1,000 2.04
Equity Earnings/Loss - - - -
Unconsolidated
Subsidiary
Net Income-Cont. 54,52,000 63,29,000 8,77,000 16.09
Operations
Net Income 54,52,000 63,29,000 8,77,000 16.09
Net Income Applicable 54,52,000 63,29,000 8,77,000 16.09
to Common
Shareholders

Interpretation: The gross and net profit of the company has increased which is a good sign. The non-
recurring items has decreased by 100%.

25 | P a g e
 CHAPTER V

FINDINGS AND CONCLUSION

Analysis and interpretation of financial statements is an important tool in assessing

company’s performance. It reveals the strengths and weaknesses of a firm. It helps the clients
to decide in which firm the risk is less or in which one they should invest so that maximum
benefit can be earned. It is known that investing in any company involves a lot of risk. So
before putting up money in any company one must have thorough knowledge about its past
records and performances. Based on the data available the trend of the company can be
predicted in near future. This project of financial analysis & interpretation in the production
concern is not merely a work of the project but a brief knowledge and experience of that how
to analyze the financial performance of the firm. The study undertaken has brought in to the
light of the following conclusions.

Both the companies i.e. PepsiCo and Coca cola do not satisfy the ideal current ratio of 2:1
indicating lack of liquidity and shortage of working capital. The companies need to improve
their current ratio in order to meet their current liabilities.

The ideal quick ratio of 1:1 is not satisfied by both the companies in the year 2014. But in the
year 2015 and 2016 both the companies have quick ratio greater than 1 which means they
have sufficient quick assets to meet their current liabilities.

Both the companies do not satisfy the ideal absolute liquid ratio of 1:2. Hence both the
company’s liquidity position is not good. The overall liquidity position of both the companies
is quite satisfactory but the companies still need to work on improving their current ratio and
absolute liquid ratio as liquidity is a prerequisite for the survival of any company.

PepsiCo has higher debt equity ratio compared to coca cola. This indicates that PepsiCo is
being financed by creditors rather than from its own financial sources and also the company
is said to be high geared and vice versa. The debt equity ratio of PepsiCo is twice the ratio of
coca cola for the year 2015 and 2016. Debt equity ratio of both the companies shows an
increasing trend. PepsiCo should aim at lowering this ratio as Lenders usually prefer low
debt-to-equity ratios because their interests are better protected against possible losses in the
events of liquidation. Thus, companies with high debt-to-equity ratios may not be able to
attract additional lending capital.

Coca cola has high proprietary ratio compared to PepsiCo indicating a strong financial
position of the business. The higher the ratio, the better it is.

PepsiCo has high financial leverage ratio compared to coca cola because the debt equity ratio
of PepsiCo is also high. This indicates more use of earnings in making payments for fixed
interest on debt funds which is risky and constitutes a strain on profits.

PepsiCo has higher inventory turnover ratio compared to coca cola which indicates that the
stock is selling quickly. It also indicates effective utilization of capital or resources. The low

26 | P a g e
inventory turnover ratio of the coca cola compared to PepsiCo indicates that it will impact the
liquidity of the coca cola’s business.

GP ratio of Coca cola is higher which indicates that the product pricing and cost control is
better compared to PepsiCo. Also the operating profit ratio of coca cola is higher in the three
consecutive years compared to PepsiCo. Higher the ratio better it is.

27 | P a g e
 BIBLOGRAPHY

Website

www.nasqad.com

www.wikipedia.com

www.slideshare.com

www.scribd.com

http://www.irjcjournals.org/

http://www.encyclopedia.com

Reference

Financial management by Ravi M. Kishore

28 | P a g e
 Annexure

Balance sheet of Coca cola

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Current Assets
Cash and Cash $8,555,000 $7,309,000 $8,958,000 $10,414,000
Equivalents
Short-Term $13,646,000 $12,591,000 $12,717,000 $9,854,000
Investments
Net Receivables $3,856,000 $3,941,000 $4,466,000 $4,873,000
Inventory $2,675,000 $2,902,000 $3,100,000 $3,277,000
Other Current Assets $5,278,000 $6,652,000 $3,745,000 $2,886,000
Total Current $34,010,000 $33,395,000 $32,986,000 $31,304,000
Assets
Long-Term Assets
Long-Term $17,249,000 $15,788,000 $13,625,000 $11,512,000
Investments
Fixed Assets $10,635,000 $12,571,000 $14,633,000 $14,967,000
Goodwill $10,629,000 $11,289,000 $12,100,000 $12,312,000
Intangible Assets $10,499,000 $12,843,000 $14,272,000 $15,299,000
Other Assets $4,248,000 $4,110,000 $4,407,000 $4,661,000
Deferred Asset $0 $0 $0 $0
Charges
Total Assets $87,270,000 $89,996,000 $92,023,000 $90,055,000
Current Liabilities
Accounts Payable $9,797,000 $9,991,000 $9,634,000 $9,886,000
Short-Term Debt / $16,025,000 $15,805,000 $22,682,000 $17,925,000
Current Portion of
Long-Term Debt
Other Current $710,000 $1,133,000 $58,000 $0
Liabilities
Total Current $26,532,000 $26,929,000 $32,374,000 $27,811,000
Liabilities
Long-Term Debt $29,684,000 $28,311,000 $19,063,000 $19,154,000
Other Liabilities $4,081,000 $4,301,000 $4,389,000 $3,498,000
Deferred Liability $3,753,000 $4,691,000 $5,636,000 $6,152,000
Charges
Misc. Stocks $0 $0 $0 $0
Minority Interest $158,000 $210,000 $241,000 $267,000
Total Liabilities $64,208,000 $64,442,000 $61,703,000 $56,882,000
Stock Holders Equity
Common Stocks $1,760,000 $1,760,000 $1,760,000 $1,760,000
Capital Surplus $14,993,000 $14,016,000 $13,154,000 $12,276,000
Retained Earnings $65,502,000 $65,018,000 $63,408,000 $61,660,000
Treasury Stock ($47,988,000) ($45,066,000) ($42,225,000) ($39,091,000)
Other Equity ($11,205,000) ($10,174,000) ($5,777,000) ($3,432,000)
Total Equity $23,062,000 $25,554,000 $30,320,000 $33,173,000

29 | P a g e
Total Liabilities & $87,270,000 $89,996,000 $92,023,000 $90,055,000
Equity

Annual Income statement of Coca cola

Period Ending: Trend 12/31/2016 12/31/2015 12/31/2014 12/31/2013

Total Revenue $41,863,000 $44,294,000 $45,998,000 $46,854,000
Cost of Revenue $16,465,000 $17,482,000 $17,889,000 $18,421,000
Gross Profit $25,398,000 $26,812,000 $28,109,000 $28,433,000
Operating Expenses
Research and Development $0 $0 $0 $0
Sales, General and Admin. $16,772,000 $18,084,000 $18,401,000 $18,205,000
Non-Recurring Items $0 $0 $0 $0
Other Operating Items $0 $0 $0 $0
Operating Income $8,626,000 $8,728,000 $9,708,000 $10,228,000
Add'l income/expense items ($592,000) $1,244,000 ($669,000) $1,110,000
Earnings Before Interest and $8,869,000 $10,461,000 $9,808,000 $11,940,000
Tax
Interest Expense $733,000 $856,000 $483,000 $463,000
Earnings Before Tax $8,136,000 $9,605,000 $9,325,000 $11,477,000
Income Tax $1,586,000 $2,239,000 $2,201,000 $2,851,000
Minority Interest ($23,000) ($15,000) ($26,000) ($42,000)
Equity Earnings/Loss $835,000 $489,000 $769,000 $602,000
Unconsolidated Subsidiary
Net Income-Cont. $7,362,000 $7,840,000 $7,867,000 $9,186,000
Operations
Net Income $6,527,000 $7,351,000 $7,098,000 $8,584,000
Net Income Applicable to $6,527,000 $7,351,000 $7,098,000 $8,584,000
Common Shareholders

Balance Sheet of PepsiCo

Period Ending: Trend 12/31/2016 12/26/2015 12/27/2014 12/28/2013
Current Assets
Cash and Cash $9,158,000 $9,096,000 $6,134,000 $9,375,000
Equivalents
Short-Term $6,967,000 $2,913,000 $2,592,000 $303,000
Investments
Net Receivables $6,694,000 $6,437,000 $6,651,000 $6,954,000
Inventory $2,723,000 $2,720,000 $3,143,000 $3,409,000
Other Current Assets $1,547,000 $1,865,000 $2,143,000 $2,162,000
Total Current $27,089,000 $23,031,000 $20,663,000 $22,203,000
Assets
Long-Term Assets

30 | P a g e
Long-Term $1,950,000 $2,311,000 $2,689,000 $2,623,000
Investments
Fixed Assets $16,591,000 $16,317,000 $17,244,000 $18,575,000
Goodwill $14,430,000 $14,177,000 $14,965,000 $16,613,000
Intangible Assets $13,433,000 $13,081,000 $14,088,000 $16,039,000
Other Assets $636,000 $750,000 $860,000 $1,425,000
Deferred Asset $0 $0 $0 $0
Charges
Total Assets $74,129,000 $69,667,000 $70,509,000 $77,478,000
Current Liabilities
Accounts Payable $14,243,000 $13,507,000 $13,016,000 $12,533,000
Short-Term Debt / $6,892,000 $4,071,000 $5,076,000 $5,306,000
Current Portion of
Long-Term Debt
Other Current $0 $0 $0 $0
Liabilities
Total Current $21,135,000 $17,578,000 $18,092,000 $17,839,000
Liabilities
Long-Term Debt $30,053,000 $29,213,000 $23,821,000 $24,333,000
Other Liabilities $6,669,000 $5,887,000 $5,744,000 $4,931,000
Deferred Liability $5,073,000 $4,959,000 $5,304,000 $5,986,000
Charges
Misc. Stocks ($151,000) ($145,000) ($140,000) ($130,000)
Minority Interest $104,000 $107,000 $110,000 $110,000
Total Liabilities $62,883,000 $57,599,000 $52,931,000 $53,069,000
Stock Holders Equity
Common Stocks $24,000 $24,000 $25,000 $25,000
Capital Surplus $4,091,000 $4,076,000 $4,115,000 $4,095,000
Retained Earnings $52,518,000 $50,472,000 $49,092,000 $46,420,000
Treasury Stock ($31,468,000) ($29,185,000) ($24,985,000) ($21,004,000)
Other Equity ($13,919,000) ($13,319,000) ($10,669,000) ($5,127,000)
Total Equity $11,246,000 $12,068,000 $17,578,000 $24,409,000
Total Liabilities & $74,129,000 $69,667,000 $70,509,000 $77,478,000
Equity

]Income Statement of PepsiCo

Period Ending: Trend 12/31/2016 12/26/2015 12/27/2014 12/28/2013

Total Revenue $62,799,000 $63,056,000 $66,683,000 $66,415,000
Cost of Revenue $28,209,000 $28,731,000 $31,238,000 $31,243,000
Gross Profit $34,590,000 $34,325,000 $35,445,000 $35,172,000
Operating Expenses
Research and Development $0 $0 $0 $0
Sales, General and Admin. $24,735,000 $24,538,000 $25,772,000 $25,357,000
Non-Recurring Items $0 $1,359,000 $0 $0
Other Operating Items $70,000 $75,000 $92,000 $110,000
Operating Income $9,785,000 $8,353,000 $9,581,000 $9,705,000

31 | P a g e
Add'l income/expense items $110,000 $59,000 $85,000 $97,000
Earnings Before Interest and $9,895,000 $8,412,000 $9,666,000 $9,802,000
Tax
Interest Expense $1,342,000 $970,000 $909,000 $911,000
Earnings Before Tax $8,553,000 $7,442,000 $8,757,000 $8,891,000
Income Tax $2,174,000 $1,941,000 $2,199,000 $2,104,000
Minority Interest ($50,000) ($49,000) ($45,000) ($47,000)
Equity Earnings/Loss $0 $0 $0 $0
Unconsolidated Subsidiary
Net Income-Cont. $6,329,000 $5,452,000 $6,513,000 $6,740,000
Operations
Net Income $6,329,000 $5,452,000 $6,513,000 $6,740,000
Net Income Applicable to $6,329,000 $5,452,000 $6,513,000 $6,740,000
Common Shareholders

32 | P a g e