INTRODUCTION

PepsiCo is a world leader in convenient snacks, foods and beverages

with revenues of more than $60 billion and over 285,000 employees.

Mission
"Our mission is to be the world's premier consumer products company
focused on convenient foods and beverages. We seek to produce
financial rewards to investors as we provide opportunities for growth
and enrichment to our employees, our business partners and the
communities in which we operate. And in everything we do, we strive
for honesty, fairness and integrity."

Vision
"PepsiCo's responsibility is to continually improve all aspects of the
world in which we operate - environment, social, economic - creating a
better tomorrow than today."

"Our vision is put into action through programs and a focus on

environmental stewardship, activities to benefit society, and a
commitment to build shareholder value by making PepsiCo a truly
sustainable company."

PepsiCo's business strategy and affairs are overseen by our Board of

Directors, which is comprised of one executive director and eleven
independent outside directors. Only independent outside directors
make up our three standing Board Committees, 1) Nominating and
Corporate Governance, 2) Audit, and 3) Compensation:
Shona L. Brown: Senior Vice President, Business Operations, Google
Inc.

Ian M. Cook: President and Chief Executive Officer, Colgate-Palmolive

Company

Dina Dublon: Consultant, Former Executive Vice President and Chief

Financial Officer, JP Morgan Chase & Co.

Victor J. Dzau, M.D.: Chancellor for Health Affairs, Duke University and
President & CEO, Duke University Health Systems

Ray L. Hunt: Chairman of the Board, President and Chief Executive

Officer of Hunt Consolidated, Inc

Alberto Ibargüen: President & Chief Executive Officer, John S. and

James L. Knight Foundation

Arthur C. Martinez: Former Chairman of the Board, President & Chief

Executive Officer, Sears, Roebuck and Co

Indra K. Nooyi: Chairman and Chief Executive Officer, PepsiCo

Sharon Percy Rockefeller: President & Chief Executive Officer, WETA

Public Stations

James J. Schiro: Former Chief Executive Officer, Zurich Financial

Services

Lloyd Trotter: Managing Partner, GenNx360 Capital Partner

Daniel Vasella:Chairman of the Board, Novartis AG

Principal Business Units

.PepsiCo Americas Foods

700 Anderson Hill Road

Purchase, NY, 10577
(914) 253-2000

• Frito-Lay North America

• Quaker Foods North America

• Latin America Food and Snacks

• Sabritas in Mexico
 • Gamesa in Mexico

.PepsiCo Americas Beverages

700 Anderson Hill Road

Purchase, NY, 10577
(914) 253-2000

• PepsiCo Beverages Americas

• Pepsi Beverages Company

.PepsiCo Europe

Rue du Rhône 50
1204 Geneva, Switzerland
(914) 253-2000

.PepsiCo Asia, Middle East and Africa

700 Anderson Hill Road

Purchase, N.Y. 10577
(914) 253-2000

Fiscal Year and Quarterly Reporting

PepsiCo's fiscal year consists of 52 weeks and is divided into 13 4-week
periods. Our fiscal year ends on the last Saturday in December and, as
a result, a 53rd week is added every five or six years.

Pepsi Cola Brands

Pepsi

• Pepsi

• Pepsi Max

• Pepsi Max Cease Fire

• Pepsi Natural

• Pepsi One

• Pepsi Throwback

• Pepsi Wild Cherry

 • Caffeine Free Pepsi

• Diet Pepsi

• Diet Pepsi Wild Cherry

• Caffeine Free Diet Pepsi

Sierra Mist

• Sierra Mist

• Diet Sierra Mist

• Sierra Mist Cranberry Splash

• Diet Sierra Mist Cranberry Splash

• Diet Sierra Mist Ruby Splash

Slice

• Slice - Diet Orange

• Slice - Grape

• Slice - Orange

• Slice - Peach

• Slice - Strawberry

Tropicana

• Tropicana Fruit Punch

• Tropicana Lemonade

• Tropicana Light - Lemonade

• Tropicana Light - Orangeade

• Tropicana Orangeade

• Tropicana Pink Lemonade

• Tropicana Strawberry Melon

• Tropicana Twister Soda - Diet Orange

• Tropicana Twister Soda - Grape

 • Tropicana Twister Soda - Orange

• Tropicana Twister Soda - Strawberry

Ocean Spray (License)

• Ocean Spray Apple Juice

• Ocean Spray Blueberry Juice Cocktail

• Ocean Spray Cranberry Juice Cocktail

• Ocean Spray Cran-Grape Drink

• Ocean Spray Cran-Pomegranate Juice Drink

• Ocean Spray Orange Juice

• Ocean Spray Pineapple Peach Mango Juice Blend

• Ocean Spray Ruby Red Grapefrui Juice Drink

• Ocean Spray Strawberry Kiwi Juice Drink

More

• Fiesta Mirinda Mango

• Fiesta Mirinda Pina

Mountain Dew

• Mountain Dew

• Mountain Dew Code Red

• Mountain Dew Distortion

• Mountain Dew Live Wire

• Mountain Dew Throwback

• Mountain Dew Typhoon

• Mountain Dew Voltage

• Mountain Dew White Out

• Caffeine Free Mountain Dew

• Caffeine Free Diet Mountain Dew

 • Diet Mountain Dew

• Diet Mountain Dew Code Red

AMP Energy

• AMP Energy

• AMP Energy - Elevate

• AMP Energy - Lightning

• AMP Energy - Lightning Sugar Free

• AMP Energy - Overdrive

• AMP Energy - ReLaunch

• AMP Energy - Sugar Free

• AMP Energy - Traction

• AMP Energy Juice - Mixed Berry

• AMP Energy Juice - Orange

• AMP Energy with Black Tea

• AMP Energy with Green Tea

Mug Root Beer

• Mug Root Beer

• Diet Mug Root Beer

• Mug Cream Soda

• Diet Mug Cream Soda

No Fear

• No Fear

• No Fear Motherload

• Sugar Free No Fear

Seattle's Best Coffee

• Seattle's Best Coffee - Iced Latte

 • Seattle's Best Coffee - Iced Mocha

• Seattle's Best Coffee - Iced Vanilla Latte

Tazo

• Tazo Brambleberry

• Tazo Giant Peach

• Tazo Organic Iced Black

• Tazo Organic Iced Green

SoBe

• SoBe Adrenaline Rush

• SoBe Sugar Free Adrenaline Rush

• SoBe Energize Citrus Energy

• SoBe Energize Green Tea

• SoBe Energize Mango Melon

• SoBe Energize Power Fruit Punch

• SoBe Lean Fuji Apple Cranberry

• SoBe Lean Honey Green Tea

• SoBe Lean Raspberry Lemonade

• SoBe Lifewater Acai Fruit Punch

• SoBe Lifewater Agave Lemonade

• SoBe Lifewater B-Energy Black Cherry Dragonfruit

• SoBe Lifewater B-Energy Strawberry Apricot

• SoBe Lifewater Black and Blue Berry

• SoBe Lifewater Blackberry Grape

• SoBe Lifewater Cherimoya Punch

• SoBe Lifewater Fuji Apple Pear

• SoBe Lifewater Goji Melon

 • SoBe Lifewater Mango Melon

• SoBe Lifewater Orange Tangerine

• SoBe Lifewater Pomegranate Cherry

• SoBe Lifewater Strawberry Dragonfruit

• SoBe Lifewater Strawberry Kiwi

• SoBe Smooth Black and Blue Berry Brew

• SoBe Smooth Orange Cream

• SoBe Smooth Pina Colada

• SoBe Smooth Strawberry Banana

• SoBe Smooth Strawberry Daiquiri

• SoBe Vita-Boom Cranberry Grapefruit

• SoBe Vita-Boom Orange Carrot

Aquafina

• Aquafina

• Aquafina FlavorSplash - Grape

• Aquafina FlavorSplash - Peach Mango

• Aquafina FlavorSplash - Raspberry

• Aquafina FlavorSplash - Strawberry Kiwi

• Aquafina FlavorSplash - Wild Berry

• Aquafina Sparkling - Berry Burst

• Aquafina Sparkling - Citrus Twist

Starbucks (Partnership)

• Frappuccino - Caramel

• Frappuccino - Coffee

• Frappuccino - Dark Chocolate Mocha

• Frappuccino - Light Vanilla

 • Frappuccino - Light Mocha

• Frappuccino - Mocha

• Frappuccino - Vanilla

• DoubleShot Coffee Drink

• DoubleShot Light Coffee Drink

• DoubleShot Energy - Cinnamon Dulce

• DoubleShot Energy - Coffee

• DoubleShot Energy - Mocha

• DoubleShot Energy - Vanilla

• DoubleShot Energy - Vanilla Light

Lipton (Partnership)

• Lipton Brisk Lemon Iced Tea

• Lipton Brisk No Calorie Lemon Iced Tea

• Lipton Brisk Raspberry Iced Tea

• Lipton Brisk Sweet Iced Tea

• Lipton Diet Green Tea with Citrus

• Lipton Diet Green Tea with Mixed Berry

• Lipton Diet Iced Tea with Lemon

• Lipton Diet White Tea with Raspberry

• Lipton Green Tea with Citrus

• Lipton Iced Tea Lemonade

• Lipton Iced Tea with Lemon

• Lipton PureLeaf - Diet Lemon

• Lipton PureLeaf - Extra Sweet

• Lipton PureLeaf - Green Tea with Honey

• Lipton PureLeaf - Lemon

 • Lipton PureLeaf - Peach

• Lipton PureLeaf - Raspberry

• Lipton PureLeaf - Sweetened

• Lipton PureLeaf - Unsweetened

• Lipton PureLeaf - White Tea with Tangerine

• Lipton PureLeaf-0Cal Naturally Sweet Raspberry

• Lipton PureLeaf-0Cal Naturally Sweetened Lemon

• Lipton Sparkling - Berry

• Lipton Sparkling - Diet Strawberry Kiwi

• Lipton Sparkling - Strawberry Kiwi

• Lipton Sweet Iced Tea

• Lipton White Tea with Raspberry

Outside North America

• Fiesta Mirinda Mango

• Fiesta Mirinda Pina

• Manzanita Sol

• Kas Mas

Audit Committee

Dina Dublon, Chair

Ian M. Cook
Alberto Ibargüen
James J. Schiro
Lloyd G. Trotter

Nominating and Corporate Governance Committee Members

Ray L. Hunt, Chair

Shona L. Brown
Victor J. Dzau, MD
Arthur C. Martinez
Sharon Percy Rockefeller
Daniel Vasella

Compensation Committee
Arthur C. Martinez, Chair
Shona L. Brown
Victor J. Dzau, MD
Ray L. Hunt
Sharon Percy Rockefeller
Daniel Vasella

At PepsiCo, “Performance with Purpose” means delivering sustainable

growth by investing in a healthier future for people and our planet. We
bring that purpose to every aspect of our business

Stock Information

PEP (NYSE): $65.41 -0.34 -0.52%

Minimum 20 Minute Delay

Intraday High 66.19

Intraday Low 65.12

Volume 7,899,761

Last Trade 65.75

INDUSTRY SITUATION AND COMPANY'S PLAN

Strategic outlook for the soft drinks industry in 2010

The 'revolution' is already under way

Over the next decade the global soft drinks industry is likely to
undergo probably the most fundamental change in its entire history,
according to a new report from Canadean, the international beverage
research specialists. With its traditional focus mainly on carbonates,
and notably colas, often involving complicated franchise systems, the
soft drinks business is already in the throes of a major revolution which
encompasses the very concept of a 'soft drink' as well as questioning
the relevance of the franchise system that has served the industry so
well for so long.
"The report is essentially a think piece" says Kelsey van
Musschenbroek, Canadean's Chief Executive, "which analyses a
number of issues I believe will shape the future structure of the
industry over the coming decade."

Pushing the boundaries further out

While Canadean has long promoted the idea of a wider soft drinks
'universe' to include not only carbonates, but also packaged water,
fruit juices, still fruit drinks, iced teas, sports and energy drinks, the
significance of that concept has only recently been recognised by the
leading multinationals who are now pushing those boundaries further
and further out. Dairy drinks, functional drinks, nutraceutical drinks,
stimulation drinks - all of these are now to be found within a more all-
embracing definition of 'soft drinks' which recognises the interplay
between various product categories and has important strategic
implications for the industry.
Since 1998 PepsiCo, for example, has pursued an aggressive
acquisition programme which has brought Tropicana (fruit juices),
SoBe Beverages (new age drinks) and most recently Gatorade (sports
drinks) into its soft drinks portfolio. At the same time Pepsi has
launched its successful Aquafina water brand in the US, while
continuing to develop cold coffee drinks ( Frappucino ) and iced teas
( Lipton ).

Pressures for lower concentrate prices

Moreover, the growing importance of anchor bottlers within the

franchise system raises even more fundamental questions for the
brand owners. In recent years both Coke and Pepsi have learned to
their cost the need to stay close to local consumers, and are now
reversing earlier strategies aimed at centralising their global
operations, especially marketing. As they decentralise that role, and
the 'added value' function of global marketing becomes increasingly
superfluous, there will be growing pressure from anchor bottlers for the
brand owners to pass on corporate savings in lower concentrate prices.
That pressure is likely to become even more intense wherever it
becomes apparent that brand owners' field operations are duplicating
those functions already performed by anchor bottlers' local
subsidiaries. The franchise system can no longer afford a multiplicity of
brand managers 'responsible' for a single brand, for example.

Significantly reduced market growth (3-4% in the 1990s against 6%-

8% in the 1980s), coupled with low inflation, hugely increased retailer
customer buying power, as well as markedly lower entry costs for local
soft drinks manufacturers have brought about an intensification of
price competition. This has thrown into sharp relief the franchise
system's dependence on sharing the total profit available - at a time
when overall profitability is being eroded. So, sharing this smaller pie is
bound to create even more pressures within the franchise system.

The relative performance of share prices - brand owners vs bottlers -

has also underlined the significant differences that exist between the
low capital intensity of the brand owners' balance sheets (reflected in a
high return on capital employed) and the high capital intensity of the
anchor bottlers which typically achieve half the rate of return of brand
owners. Furthermore, the fact that Coke and Pepsi are still very
substantial owners of anchor bottlers' shares may also mean they
could be faced with a delicate fiduciary balancing act when it comes to
decisions which directly affect bottler profitability.
Changing competitive landscape

Finally, the report explains how local companies have emerged to

compete successfully with the US multinationals. Key factors working
in favour of local players include the sharply reduced costs of market
entry ranging from packaging to media; the widespread availability of
technical know-how provided by flavour houses, filling equipment
makers, packaging suppliers; the role of leading food chains in
demanding higher quality and lower prices in return for extended
supply contracts - an imperative which does much to explain the
continuing focus on pruning overheads within such companies.
Moreover, there is growing evidence that soft drinks manufacturers
which operate within a single integrated system may be attaining a
level of profitability which is greater than half the total profit pot which
has traditionally been available to the whole of the two-tier franchise
system.

Company plan

NEW YORK: PepsiCo, the food and beverage giant, is planning to focus
on innovation, emerging markets and enhancing its nutrition business
as a means of driving growth.

The company posted a 2% uptick in volume sales for snacks, and an

11% increase for beverages, during the last quarter, and is currently
implementing a variety of long-term initiatives.

Such ambitions include tripling its annual nutrition revenues from

$10bn (€7.1bn; £6.2bn) to $30bn by 2020, to which end PepsiCo has
established a new nutrition centre, to be based at the organisation's
Chicago office.

This move forms part of a broader aim to "position PepsiCo globally as

a leader in wholesome and convenience nutrition," said chairman/ceo
Indra Nooyi on a conference call.

She suggested that high-quality brands like Quaker, Tropicana and

Gatorade give PepsiCo a head start in the rapidly-developing health
and wellness segment.

"[We will] leverage our great portfolio brands across four target
platforms - fruit and vegetables, grains, dairy and functional nutrition -
to put PepsiCo in a uniquely advantageous position to win in the
$500bn global market for packaged nutrition," she added.

Dr Mehmood Khan, PepsiCo's chief scientific officer and head of

corporate R&D, has been named chief executive of this unit, reporting
directly to Nooyi.

His brief encompasses the remit to "collaborate with businesses across

the globe to ensure rapid growth of our nutrition portfolio," said Nooyi.

More specifically, Khan will champion innovation for food, drinks and a
range of related services, with an emphasis on "education and
incentives to help consumers change and sustain behaviours."

Gatorade has shown sports nutrition is one attractive category, but

PepsiCo's objectives incorporate extending its reach into as yet
untapped sectors.

Nooyi stressed that economic uncertainty and rising unemployment

levels were hampering a "consumer-led recovery" in many regions
where PepsiCo operates, particularly the US and Western Europe.

However, she also noted that the recent launch of the firm's first
mainstream natural carbonated soft drink, Sierra Mist Natural, "allows
consumers to have what they love about CSD's while removing some
key barriers."

PepsiCo distributed over 10m cans of Sierra Mist at Wal-Mart

superstores throughout the US, backing this hand-out with a
multimedia advertising campaign.

According to Nooyi, this programme constituted the biggest sampling

event either company had undertaken.

In addition, PepsiCo backed Sierra Mist with "a full year's worth of
marketing support in the fourth quarter of 2010 with continued heavy
support in 2011," Nooyi continued.

This strategy is symptomatic of PepsiCo's overarching agenda, moving

beyond simplistic measures to deliver sustainable future expansion.

"We are looking around the world, and wherever we see the
opportunity, we are ramping up … investments," said Nooyi.

"Just remember, the international market is not like the United States
where you get a return within the quarter. It does take two, three, four
years before the top-line starts ramping up in a meaningful way."

Such a description most clearly applies to emerging markets, which

have assumed a greater importance in the recession but still require a
nuanced approach.

"When you spend in China ... you are not going to get the profitability
impact in the next 12 months or 24 months," Nooyi argued.

"We are still in a massive investment mode in China ... (and) when we
step up investment in India, you are not getting the returns right
away."

"But it's a must-invest market because the demographics and the fact
that per capita levels are so low gives you many years of growth."

FINANCIAL STATEMENTS

Income statement format

Consolidated Statement of Income
PepsiCo, Inc. and Subsidiaries
Gross Profit:

Sales - GOGS = 43232 - 20099

= 23133

Income from operations:

operating profits = 8044

Net income:

From the income statement, net income = 5979

Gross profit from 2007 = 21436

Gross profit from 2008 = 22900

Gross profit from 2009 = 23133

As we notice in the figures above the gross profit has increased from
2007 till 2009 which is a positive thing for Pepsico.

The income from operations has slightly declined from 2007 till 2008 to
increase back again in 2009 an surpass that of 2007. Pepsico is doing
better in 2009. It is following a positiive trend.

As income from operations, net income decreased a little in 2008 and

went up again in 2009 which tells us that Pepsico is moslty on the right
track concerning its financial situation.

According to the cashflow statement, the cash and cash equivalent at

the end of the year have increased from 2007 till 2009 in a clear
detectable way from 910 till 3943 which is a difference to note here so
the company's ability to turn net income into cash have went better
through these 2 years.

The net cash used for investing activities decreased between 2007 and
2009 from 3744 to 2401 which means that the company isi investing
less and it is investing less and investment is not it major source of
expansion.

The company's debt to total asset ratio is as follows:

Debt to total asset ratio = Total debt / total assets

= 22406 / 39848
= 0.56

This ratio tells us what is the most important source of financing for the
company and whether it relies more on debt or equity to finance its
assets.

In Pepsico's case we see almost a balance in equity and debt as

sources of financing. and according the the cashflow statement, the
apparent major source of financing is from short term borrowings with
three months or less maturity.

Looking at the balance sheet we can clearly see that the cash balance
has increased from 2008 ill 2009 from 2064 to 3943 which is also
reflected in the cashflow statement as discussed before.

ACCOUNTING POLICIES

"Our critical accounting policies arise in conjunction with the following:

• revenue recognition,
• brand and goodwill valuations,
• income tax expense and accruals, and
• pension and retiree medical plans."

Revenue Recognition

Our products are sold for cash or on credit terms. Our credit terms,
which are established in accordance with local and industry practices,
typically require payment within 30 days of delivery in the U.S., and
generally within 30 to 90 days internationally, and may allow discounts
for early payment. We recognize revenue upon shipment or delivery to
our customers based on written sales terms that do not allow for a
right of return. However, our policy for DSD and chilled products is to
remove and replace damaged and out-of-date products from store
shelves to ensure that consumers receive the product quality and
freshness they expect. Similarly, our policy for certain warehouse-
distributed products is to replace damaged and out-of-date products.
Based on our experience with this practice, we have reserved for
anticipated damaged and out-of-date products. Our bottlers have a
similar replacement policy and are responsible for the products they
distribute.

Our policy is to provide customers with product when needed. In fact,

our commitment to freshness and product dating serves to regulate
the quantity of product shipped or delivered. In addition, DSD products
are placed on the shelf by our employees with customer shelf space
limiting the quantity of product. For product delivered through our
other distribution networks, we monitor customer inventory levels.

As discussed in “Our Customers,” we offer sales incentives and

discounts through various programs to customers and consumers.
Sales incentives and discounts are accounted for as a reduction of
revenue and totaled $12.5 billion in 2008, $11.3 billion in 2007 and
$10.1 billion in 2006. Sales incentives include payments to customers
for performing merchandising activities on our behalf, such as
payments for in-store displays, payments to gain distribution of new
products, payments for shelf space and discounts to promote lower
retail prices. A number of our sales incentives, such as bottler funding
and customer volume rebates, are based on annual targets, and
accruals are established during the year for the expected payout.
These accruals are based on contract terms and our historical
experience with similar programs and require management judgment
with respect to estimating customer participation and performance
levels. Differences between estimated expense and actual incentive
costs are normally insignificant and are recognized in earnings in the
period such differences are determined. The terms of most of our
incentive arrangements do not exceed a year, and therefore do not
require highly uncertain long-term estimates. For interim reporting, we
estimate total annual sales incentives for most of our programs and
record a pro rata share in proportion to revenue. Certain
arrangements, such as fountain pouring rights, may extend beyond
one year. The costs incurred to obtain these incentive arrangements
are recognized over the shorter of the economic or contractual life, as
a reduction of revenue, and the remaining balances of $333 million at
year-end 2008 and $314 million at year-end 2007 are included in
current assets and other assets on our balance sheet.

We estimate and reserve for our bad debt exposure based on our
experience with past due accounts and collectibility, the aging of
accounts receivable and our analysis of customer data. Bad debt
expense is classified within selling, general and administrative
expenses in our income statement.

Cash Equivalents

Cash equivalents are investments with original maturities of three

months or less which we do not intend to rollover beyond three months

Property, plant and equipment

Property, plant and equipment is recorded at historical cost.

Depreciation and amortization are recognized on a straight-line basis
over an asset's estimated useful life. Land is not depreciated and
construction in progress is not depreciated until ready for service.
Amortization of intangible assets for each of the next five years, based
on existing intangible assets as of December 26, 2009 and using
average 2009 foreign exchange rates, is expected to be $65 million in
both 2010 and 2011, $61 million in 2012, $58 million in 2013 and $52
million in 2014.

Depreciable and amortizable assets are only evaluated for impairment

upon a significant change in the operating or macroeconomic
environment. In these circumstances, if an evaluation of the
undiscounted cash flows indicates impairment, the asset is written
down to its estimated fair value, which is based on discounted future
cash flows. Useful lives are periodically evaluated to determine
whether events or circumstances have occurred which indicate the
need for revision. For additional unaudited information on our
amortizable brand policies, see "Our Critical Accounting Policies" in
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Topics of the notes to the financial statments:

Note 1 : basis of presentation and our divisions

Note 2 : our significant accounting policies
Note 3 : Restructuring and impairement charges
Note 4 : Property, plant and equipment and intangible assets
Note 5 : Income taxes
Note 6 : Stock based compensation
Note 7 : Pension, retiree medicals and saving plans
Note 8 : Non controlled bottling affiliates
Note 9 : Debt obligations and commitments
Note 10 : Financial instruments
Note 11 : Net income attributable to Pepsico per common share
Note 12 : Preferred stocks
Note 13 : Accumulated other comprehensive loss attributable to
Pepsico
Note 14 : Supplemental financial information
Note 15 : Acquisition of common stock of PBG and PAS

FINANCIAL ANALYSIS

Liquidity ratios

Current ratio = Total Current Assets / Total current liabilities

= 12571 / 8756

= 1.4

Each 1$ of liability gives out 1.4$ of assets. the ratio is acceptable.The

business has enough current assets to meet the payment schedule of
its current debts with a margin of safety for possible losses in current
assets, such as inventory shrinkage or collectable accounts. The
minimum acceptable current ratio is 1:1.

Quick ratio = Cash + Governments securities + reeivables / Current

liabilities

= 3943 + 192 + 4624 / 8756

= 1.0003

An acid-test of 1:1 is considered satisfactory. The Quick Ratio is a

much more exacting measure than the Current Ratio. By excluding
inventories, it concentrates on the really liquid assets, with value that
is fairly certain. So if all sales revenues disappear, Pepsico may meet
its current obligations with the readily convertible `quick' funds on
hand. The higher the acid-test ratio, the better.

Working Capital = Total current assets - Total current liabilities

= 12571 - 8756

= 3815

Working Capital is more a measure of cash flow than a ratio. The result
of this calculation must be a positive number. Bankers look at Net
Working Capital over time to determine a company's ability to weather
financial crises. Loans are often tied to minimum working capital
requirements. The higher this ratio the better is the company doing.

Cash debt coverage = (Cash flow from operations - dividends) / Total

debts

= ( 6796 - 2779 ) / 22406

= 0.29

The cash debt coverage ratio shows the percent of debt that current
cash flow can retire. A cash debt coverage ratio of 1:1 (100%) or
greater shows that the company can repay all debt within one year. So
the ratio for Pepsico is not quite acceptable.

Activity Ratios

Receivables turnover = Net credit sales / Average account receivables

= 43232 / 4624

= 9.35

It is an accounting measure used to quantify a firm's effectiveness in

extending credit as well as collecting debts. The receivables turnover
ratio is an activity ratio, measuring how efficiently a firm uses its
assets. Each 1$ of A/R inititates 9.35$ of sales.

Days in receivable = 365 / receivable turnover

 = 365 /9.35

= 39

On average it will take 39 days to collect what is owed. The lower the
better.

Inventory turnover = Net sales / average inventory on cost

= 43232 / 2618

= 16.5

This ratio reveals how well inventory is being managed. It is important

because the more times inventory can be turned in a given operating
cycle, the greater the profit. So the higher the ratio, the better. It is a
comparibility ratio.

Days in inventory = 365 / inventory turnover

= 365 / 16.5

= 22.12

Like days in account receivable, the days in inventory ratio is better

when lower.

Assets turnover = Revenues / total assets

= 43232 / 39848

= 1.08

This ratio is useful to determine the amount of sales that are

generated from each dollar of assets. The higher the better, here each
1$ of assets generates 1.08$ of sales. Companies with low profit
margins tend to have high asset turnover, those with high profit
margins have low asset turnover.

Profitability Ratios

Profit margin = Net income / revenue

= 5979 / 43232
 = 0.138

A profit margin of 13.8% means that for each dollar of sales that
Pepsico generates it is contributing 13.8 cents to its bottom line (net
income). Also, the higher the better.

Return on Assets = Net income / total assets

= 5979 / 39848

= 0.15

This is an important ratio for companies deciding whether or not to

initiate a new project. The basis of this ratio is that if a company is
going to start a project they expect to earn a return on it, ROA is the
return they would receive. Simply put, if ROA is above the rate that the
company borrows at then the project should be accepted, if not then it
is rejected.

Return on Equity = Net income / common equity

= 5979 / 16908

= 0.35

Sometimes ROE is referred to as Stockholder's return on investment, it

tells the rate that shareholders are earning on their shares. But ROE is
often misunderstood, for example if the return on equity is 35% then
35 cents of assets are created for each dollar that was originally
invested. Companies that generate high returns relative to their
shareholder's equity are companies that pay their shareholders off
handsomely, creating substantial assets for each dollar invested.

Earning per share = (Net income - dividends on preferred stocks) /

average outstanding shares

= (5979 - 2) / 1732

= 3.45

The earnings per share ratio is mainly useful for companies with
publicly traded shares. By itself, EPS doesn't really tell you a whole lot.
But if you compare it to the EPS from a previous quarter or year it
indicates the rate of growth a companies earnings are growing (on a
per share basis).

Price earning ratio = Market value per share / EPS

= 65.75 / 3.45

= 19.05

In general, a high P/E suggests that investors are expecting higher

earnings growth in the future compared to companies with a lower P/E.
However, the P/E ratio doesn't tell us the whole story by itself. It's
usually more useful to compare the P/E ratios of one company to other
companies in the same industry, to the market in general or against
the company's own historical P/E. The P/E is sometimes referred to as
the "multiple", because it shows how much investors are willing to pay
per dollar of earnings. Pepsico is trading at a multiple (P/E) of 19.05 ,
the interpretation is that an investor is willing to pay $19.05 for $1 of
current earnings.

Payout ratio = dividends per share / earning per share

= (2779/1732) / 3.45

= 0.46

It is the amount of earnings paid out in dividends to shareholders.

Investors can use the payout ratio to determine what companies are
doing with their earnings.

Coverage ratios

Debt to total asset ratio = Total debt / total assets

= 22406 / 39848
= 0.56

If this ratio is low, it means that assets are financed more through
equity rather than debt. In this case, the company is at a balance
almost. Companies with high ratios are placing themselves at risk,
especially in an increasing interest rate market. Creditors are bound to
get worried if the company is exposed to a large amount of debt and
may demand that the company pay some of it back.

Times interest earned ratio = EBIT / interest payable

= 8044 /
A metric used to measure a company's ability to meet its debt
obligations. It is calculated by taking a company's earnings before
interest and taxes (EBIT) and dividing it by the total interest payable
on bonds and other contractual debt. a high ratio can indicate that a
company has an undesirable lack of debt or is paying down too much
debt with earnings that could be used for other projects.

Cash debt coverage = (Cash flow from operations - dividends) / Total

debts

= ( 6796 - 2779 ) / 22406

= 0.29
already discussed.

Book value per share = (stockholders' equity - preferred stocks) /

stocks outstanding

= (17442-41) / 1732

= 10.04

BV is considered to be the accounting value of each share, drastically

different than what the market is valuing the stock at. And the truth is
that market and book value have nothing in common. Market value is
what the investment community's expectations are and book value is
based on costs and retained earnings. One situation where BV can be
useful is if the market value is trading below the book value, this rarely
happens, but if it does it could mean that the company is undervalued
and might be an attractive buy.