RATIO ANALYSIS:

Liquidity Ratio Current Ratio = Current Assets/Current Liabilities Coca Cola Year (000) Current Assets Current Liabilities Current Ratio Pepsi Year (000) Current Assets Current Liabilities Current Ratio 2008 2009 12,176 17,551 12,988 13,721 0.94 1.28

2008

2009 10,806 12,571 8,787 1.23 8,756 1.44

Quick Ratio =Current Assets Inventory/Current Liabilities Coca Cola Year (000) Current Assets Inventory Current Liabilities Current Ratio 2008 2009 12,176 17,551 4,224 4,029 12,988 13,721 0.61 0.99

Pepsi Year (000) 2008 2009

Current Assets Current Liabilities Inventory Quick Ratio

10,806 12,571 8,787 2,522 0.94 8,756 2,618 1.14

Liquidity ratios deal with the companys ability to deal with its short term obligations. As far as the current ratio is concerned both the companies have improved with an increase in current assets and current liabilities. Similar is the case with quick ratio ,both the companies have shown an increased trend in this ratio which is a good signal. However inventory level for Coca Cola is decreasing and inventory level for Pepsi is increasing , this indicates that Coca Cola is efficiently managing its inventory levels. Profitability Ratio Gross Profit Margin= Gross Profit/Sales Coca Cola
Year (000) Gross Profit Revenue Gross Profit Margin 2008 19,902 31,944 2009 20,570 30,990

62.30% 66.38%

Pepsi
Year (000) Gross Profit Revenue Gross Profit Margin 2008 22,900 43,251 2009 23,133 43,232

52.95% 53.51%

Return on Assets = Net income/Total Assets Coca Cola

Year (000) Net Income 2008 5,807 2009 6,824

Total Assets ROA

35,994

39,848

16.13% 17.13%

Pepsi
Year (000) Net Income Total Assets ROA 2008 5,142 35,994 2009 5,946 39,848

14.29% 14.92%

Profitability ratio deals with whether the company is making sufficient profit or not .Gross Profit is assed as a percentage of Sales . In this scenario both the companies are showing an increased trend as compared to past year. For Coca Cola the gross profit is increasing but the revenue is showing a decreased trend ,however for Pepsi there is an increase in both the gross profit and revenue. Coca Cola on the other hand is showing a greater increase for the profit margin, this is because of access to large variety of market a greater likeness for the brand. As far as ROA is concerned both the companies are showing an increased trend. This is a good signal for investors for both companies.

Solvency Debt to Equity =Total Debt/Owners Equity Coca Cola

Year (000) Total Debt Owners Equity D/E 2008 20,047 20,472 2009 23,872 24,799

97.92% 96.26%

Pepsi
Year (000) Total Debt Owners Equity D/E 2008 23,888 12,106 2009 23,044 16,804

197.32% 137.13%

Debt to Asset= Total Debt/Total Assets Coca Cola

Year (000) Total Debt Total Assets D/A 2008 20,047 40,519 2009 23,872 48,671

49.48% 49.05%

Pepsi
Year (000) Total Debt Total Assets D/A 2008 23,888 35,994 2009 23,044 39,848

66.37% 57.83%

Solvency Ratios are used to assess the companies abilities to fulfil it long term obligations. The factors such as total debt ,owners equity are used to find out these ratios.

Total Debt to Total Equity ratio for both companies is decreasing ,for Coca Cola the debt and equity both are increasing and for Pepsi total debt is decreasing and equity is increasing which is a very good signal for Pepsi. As far as total debt to total assets ratio is concerned total assets for both the companies is increasing which is resulting in a decrease in D/A for both the companies. This is a good signal as assets are being properly managed. Recommendations Coca Cola and Pepsi ,both companies are financially looking sound with good profit margins. Recommendations for both companies is given below. Coca Cola although is showing increased profit margin but the revenue is showing a decreased trend which is a cause of concern .It needs to work on methods to increase its revenue. Coca Cola also need to work on reducing its debt. Other factors are increasing which a good signal for the company. Pepsi firstly is showing a slight decrease in current liabilities, which is good needs to work more on it . Likewise Coca Cola the revenue for Pepsi is also decreasing but with a very slight number. Pepsi needs to work on increasing the revenue . The total debt for Pepsi is also decreasing which is a very good signal for the company . (Brigham,2005) Conclusion Overall both the companies are doing good financially , the decreasing trend for revenue is mainly due to the current global economic crises which has affected the profit margins , but a consistency is observed in all the ratios which indicates that the companies according to each ones capability is doing good despite the current economic situation.