PepsiCo and Coca Cola

A Financial Analysis Report

Financial Accounting

Ateneo Graduate School of Business

Submitted by:

Sesbreo, Deceree A.

Submitted to:

Dr. Diana Dela Vega

I. Introduction:
The report being presented is a financial analysis of two (2) direct competitor

companies and both well-known in Beverage industry, PepsiCo and Coca-

Cola. Both companies will be given a brief background, followed each

companys financial statements last 2014 and 2015 the companys financial

health and standing which comprises of the income statement, balance

sheet, and financial ratios. The financial data is taken from the Nasdaq Stock

Market website.

PepsiCo, Inc. is an American multinational food, snack and beverage

corporation headquartered in Purchase, New York. 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 have included an acquisition of Tropicana

Products in 1998 and the Quaker Oats Company in 2001, which added the

Gatorade brand to its portfolio. The company's products were distributed

across more than 200 countries, resulting in annual net revenues of

US$63.056 billion. Based on net revenue, PepsiCo is the second largest food

and beverage business in the world. Within North America, PepsiCo is the

largest food and beverage business by net revenue. Indra Krishnamurthy

Nooyi has been the Chief Executive of PepsiCo since 2006. The company's

beverage distribution and bottling is conducted by PepsiCo as well as by

licensed bottlers in certain regions.

Coca-Cola (often referred to simply as Coke) is an American carbonated soft

drink produced by The Coca-Cola Company in Atlanta, Georgia, United States.

 Originally intended as a patent medicine, it was invented in the late 19th

century by John Pemberton. Coca-Cola was bought out by businessman Asa

Griggs Candler, whose marketing tactics led Coke to its dominance of the

world soft-drink market throughout the 20th century. The drink's name refers

to two of its original ingredients, which were kola nuts (a source of caffeine)

and coca leaves. The current formula of Coca-Cola remains a trade secret,

although a variety of reported recipes and experimental recreations have

been published. The Coca-Cola Company produces concentrate, which is then

sold to licensed Coca-Cola bottlers throughout the world. The bottlers, who

hold exclusive territory contracts with the company, produce the finished

product in cans and bottles from the concentrate, in combination with filtered

water and sweeteners. A typical 12 oz (355 ml) can contains 38g of sugar

(usually in the form of high fructose corn syrup). The bottlers then sell,

distribute and merchandise Coca-Cola to retail stores, restaurants and

vending machines throughout the world. The Coca-Cola Company also sells

concentrate for soda fountains of major restaurants and food service

distributors. The Coca-Cola Company has on occasion introduced other cola

drinks under the Coke name. The most common of these is Diet Coke, with

others including Caffeine-Free, Diet Coke Caffeine-Free, Cherry, Zero, Vanilla

and special versions with lemon, lime and coffee. Based on Interbrand's best

global brand study of 2015, Coca-Cola was the world's third most valuable

brand. Coke products were sold in over 200 countries worldwide, with

consumers downing US$44.29B company beverage servings each day.

II. Financial Statements
A. Income Statement
B. Balance Sheet
III. Financial Ratio
The financial data is taken from Nasdaq Stock Market website. The following

ratios are interpreted to see the trends.

The current ratio shows that both the companies have improved with an

increase in current assets and current liabilities. The quick ratio also shows

the similar case wherein both the companies have shown an increased trend

in this ratio which is a good indicator. On the other hand, it also shows that

the inventory level for Coca Cola is decreasing which indicates that the

company is efficiently managing its inventory levels while inventory level for

Pepsi is increasing.

The profit ratio deals on whether the company is generating sufficient profit

or not whereas, Gross Profit is assed as a percentage of Sales. In this case,

PepsiCo showed an increased trend as compared to past year while there has

been a decrease for Coca Cola compared to the past year. For Coca Cola, the

gross profit is increasing but the revenue is showing a decreased trend,

however for PepsiCo there is an increase in revenue and decrease in gross

profit. Coca Cola showed a good increase for the profit margin is because of

access to large variety of market along with greater likeness for the brand. As

for the ROE, both companies showed an increased trend which is good signal

for investors of both companies.

IV. Recommendation
 PepsiCo and Coca Cola are both financially sound and healthy with good net

revenue and profit margin. Coca Cola shows an increase in profit margin but a

decrease in revenue is showing which is may raise little of concern. Thus,

Coca Cola needs to work on methods and strategies to increase its revenue

and work on reducing its debt. Nevertheless, several factors increased which

are good indicators for the financial standing of the company. PepsiCo

showed a slight decrease in current liabilities which is ideal and might require

some more improvement. On a similar case, Pepsi had a very slight decrease

in profit margin which would need methods and strategies for improvement

too.

V. Conclusion
Generally, both PepsiCo and Coca Cola are doing good financially. The

decrease in trend for revenue may be mainly due to the current global

economic crises which affect the profit margins. Nevertheless, consistency is

observed in all the ratios which is a good indicator that the companies are

capable of maintaining its stand despite the current economic crises.

VI. References
David F. Hawkins, Kenneth Merchant, and Robert Anthony. Accounting: Text

and Cases
http://www.nasdaq.com/markets/indices/major-indices.aspx
https://en.wikipedia.org/wiki/PepsiCo
https://en.wikipedia.org/wiki/Coca-Cola