FSAnalysis Coca ColaAndPepsiCo

The Coca-Cola Company PepsiCo IncStatement of Financial Position Statement of Financial Position

(in millions except per share amounts) (in millions except per share amounts)

Absolute % Absolute % Absolute %

ASSETS Absolute % Absolute % Absolute % Absolute %

Cash and Cash Equivalents 8,517$ 11.68% 4,286$ 50.32% 12,803$ 16.01% (4,361)$ -34.06% 8,442$ 9.80% 1,972$ 23.36% 10,414$ 11.56%

Short-Term Investments 2,682$ 3.68% (1,594)$ -59.43% 1,088$ 1.36% 3,929$ 361.12% 5,017$ 5.82% 1,690$ 33.69% 6,707$ 7.45%

Marketable Securities 138$ 0.19% 6$ 4.35% 144$ 0.18% 2,948$ 2047.22% 3,092$ 3.59% 55$ 1.78% 3,147$ 3.49%

Accounts Receivable 4,430$ 6.08% 490$ 11.06% 4,920$ 6.15% (161)$ -3.27% 4,759$ 5.52% 114$ 2.40% 4,873$ 5.41%

Inventories 2,650$ 3.63% 442$ 16.68% 3,092$ 3.87% 172$ 5.56% 3,264$ 3.79% 13$ 0.40% 3,277$ 3.64%

Prepaid Expenses and Other Assets 3,162$ 4.34% 288$ 9.11% 3,450$ 4.31% (669)$ -19.39% 2,781$ 3.23% 105$ 3.78% 2,886$ 3.20%

Assets Held for Sale -$ 0.00% -$ -$ 0.00% 2,973$ 2,973$ 3.45% (2,973)$ -$ 0.00%

TOTAL CURRENT ASSETS 21,579$ 29.59% 3,918$ 18.16% 25,497$ 31.88% 4,831$ 18.95% 30,328$ 35.19% 976$ 3.22% 31,304$ 34.76%

-$ -$ -$

Equity Method Investments 6,954$ 9.54% 279$ 4.01% 7,233$ 9.04% 1,983$ 27.42% 9,216$ 10.69% 1,177$ 12.77% 10,393$ 11.54%

Other Investments 631$ 0.87% 510$ 80.82% 1,141$ 1.43% 91$ 7.98% 1,232$ 1.43% (113)$ -9.17% 1,119$ 1.24%

Other Assets 2,121$ 2.91% 1,374$ 64.78% 3,495$ 4.37% 90$ 2.58% 3,585$ 4.16% 1,076$ 30.01% 4,661$ 5.18%

Property Plant and Equipment - Net 14,727$ 20.20% 212$ 1.44% 14,939$ 18.68% (463)$ -3.10% 14,476$ 16.80% 491$ 3.39% 14,967$ 16.62%

Trademarks 6,356$ 8.72% 74$ 1.16% 6,430$ 8.04% 97$ 1.51% 6,527$ 7.57% 217$ 3.32% 6,744$ 7.49%

Bottlers' Franchise 7,511$ 10.30% 259$ 3.45% 7,770$ 9.72% (365)$ -4.70% 7,405$ 8.59% 10$ 0.14% 7,415$ 8.23%

Goodwill 11,665$ 16.00% 554$ 4.75% 12,219$ 15.28% 36$ 0.29% 12,255$ 14.22% 57$ 0.47% 12,312$ 13.67%

Other Intangible Assets 1,377$ 1.89% (127)$ -9.22% 1,250$ 1.56% (100)$ -8.00% 1,150$ 1.33% (10)$ -0.87% 1,140$ 1.27%

TOTAL NON-CURRENT ASSETS 51,342$ 70.41% 3,135$ 6.11% 54,477$ 68.12% 1,369$ 2.51% 55,846$ 64.81% 2,905$ 5.20% 58,751$ 65.24%

TOTAL ASSETS 72,921$ 100.00% 7,053$ 9.67% 79,974$ 100.00% 6,200$ 7.75% 86,174$ 100.00% 3,881$ 4.50% 90,055$ 100.00%

LIABILITIES & EQUITY

Accounts payable and accrued expenses 8,859$ 12.15% 150$ 1.69% 9,009$ 11.26% (329)$ -3.65% 8,680$ 10.07% 897$ 10.33% 9,577$ 10.63%

Loans and notes payable 8,100$ 11.11% 4,771$ 58.90% 12,871$ 16.09% 3,426$ 26.62% 16,297$ 18.91% 604$ 3.71% 16,901$ 18.77%

Current maturities of long-term debt 1,276$ 1.75% 765$ 59.95% 2,041$ 2.55% (464)$ -22.73% 1,577$ 1.83% (553)$ -35.07% 1,024$ 1.14%

Accrued income taxes 273$ 0.37% 89$ 32.60% 362$ 0.45% 109$ 30.11% 471$ 0.55% (162)$ -34.39% 309$ 0.34%Liabilities held for sale -$ 0.00% -$ -$ 0.00% 796$ 796$ 0.92% (796)$ -$ 0.00%TOTAL CURRENT LIABILITIES 18,508$ 25.38% 5,775$ 31.20% 24,283$ 30.36% 3,538$ 14.57% 27,821$ 32.28% (10)$ -0.04% 27,811$ 30.88%

Long-term debt 14,041$ 19.26% (385)$ -2.74% 13,656$ 17.08% 1,080$ 7.91% 14,736$ 17.10% 4,418$ 29.98% 19,154$ 21.27%

Other liabilities 4,794$ 6.57% 626$ 13.06% 5,420$ 6.78% 48$ 0.89% 5,468$ 6.35% (1,970)$ -36.03% 3,498$ 3.88%

Deferred income taxes 4,261$ 5.84% 433$ 10.16% 4,694$ 5.87% 287$ 6.11% 4,981$ 5.78% 1,171$ 23.51% 6,152$ 6.83%

TOTAL NON-CURRENT LIABILITIES 23,096$ 31.67% 674$ 2.92% 23,770$ 29.72% 1,415$ 5.95% 25,185$ 29.23% 3,619$ 14.37% 28,804$ 31.98%

TOTAL LIABILITIES 41,604$ 57.05% 6,449$ 15.50% 48,053$ 60.09% 4,953$ 10.31% 53,006$ 61.51% 3,609$ 6.81% 56,615$ 62.87%

1,760$ 2.41% -$ 0.00% 1,760$ 2.20% -$ 0.00% 1,760$ 2.04% -$ 0.00% 1,760$ 1.95%

Capital Surplus 9,177$ 12.58% 1,155$ 12.59% 10,332$ 12.92% 1,047$ 10.13% 11,379$ 13.20% 897$ 7.88% 12,276$ 13.63%

Reinvested Earnings 49,278$ 67.58% 4,343$ 8.81% 53,621$ 67.05% 4,424$ 8.25% 58,045$ 67.36% 3,615$ 6.23% 61,660$ 68.47%

Accumulated Other Comprehensive Income (Loss) (1,450)$ -1.99% (1,324)$ 91.31% (2,774)$ -3.47% (611)$ 22.03% (3,385)$ -3.93% (47)$ 1.39% (3,432)$ -3.81%

(27,762)$ -38.07% (3,542)$ 12.76% (31,304)$ -39.14% (3,705)$ 11.84% (35,009)$ -40.63% (4,082)$ 11.66% (39,091)$ -43.41%

TOTAL SHAREHOLDERS' EQUITY 31,003$ 42.52% 632$ 2.04% 31,635$ 39.56% 1,155$ 3.65% 32,790$ 38.05% 383$ 1.17% 33,173$ 36.84%

Equity Attributable to Noncontrolling Interests 314$ 0.43% (28)$ -8.92% 286$ 0.36% 92$ 32.17% 378$ 0.44% (111)$ -29.37% 267$ 0.30%

TOTAL LIABILITIES AND EQUITY 72,921$ 100.00% 7,053$ 9.67% 79,974$ 100.00% 6,200$ 7.75% 86,174$ 100.00% 3,881$ 4.50% 90,055$ 100.00%

Common Stock, $0.25 par; Authorized-11200

shares; Issued-7040 shares

Treasury Stock, at cost- 2514, 2571, and 2638

shares respectively

12/31/2011 12/31/2012 12/31/2013For the Period Ending: 12/31/2010CHANGE FROM LAST YR CHANGE FROM LAST YR CHANGE FROM LAST YR

The Coca-Cola Company PepsiCo Inc

Absolute % Absolute

Sales 46,542$ 100.00% 1,475$

Cost of goods sold 18,215$ 39.14% 838$

GROSS PROFIT 28,327$ 60.86% 637$

Selling. General, and Administrative Expenses 17,422$ 37.43% 316$

Other Operating Charges 732$ 1.57% (285)$

OPERATING INCOME 10,173$ 21.86% 606$

Interest Income 483$ 1.04% (12)$

Interest Expense 417$ 0.90% (20)$

Equity Income (Loss) - Net 690$ 1.48% 129$

Other Income (Loss) - Net 529$ 1.14% (392)$

INCOME BEFORE INCOME TAXES 11,458$ 24.62% 351$

Income Taxes 2,812$ 6.04% (89)$

CONSOLIDATED NET INCOME 8,646$ 18.58% 440$

Less: Net Income Attributatble to Noncontrolling Interests 62$ 0.13% 5$

NET INCOME ATTRIBUTABLE TO SHAREHOLDERS 8,584$ 18.44% 435$

4568

BASIC EPS 1.88$

Statement of Financial Performance(in millions except per share amounts)

CHANGE FROM LAST YR

For the Year Ended December 31,2011

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

6,435$

The Coca-Cola Company PepsiCo IncStatement of Financial Performance

% Absolute % Absolute % Absolute %

3.17% 48,017$ 100.00% (1,163)$ -2.42% 46,854$ 100.00% Sales

4.60% 19,053$ 39.68% (632)$ -3.32% 18,421$ 39.32% Cost of goods sold

2.25% 28,964$ 60.32% (531)$ -1.83% 28,433$ 60.68% GROSS PROFIT

1.81% 17,738$ 36.94% (428)$ -2.41% 17,310$ 36.94% Selling. General, and Administrative Expenses

-38.93% 447$ 0.93% 448$ 100.22% 895$ 1.91% Amortization of Intangible Assets

5.96% 10,779$ 22.45% (551)$ -5.11% 10,228$ 21.83% OPERATING INCOME

-2.48% 471$ 0.98% 63$ 13.38% 534$ 1.14% Interest Income

-4.80% 397$ 0.83% 66$ 16.62% 463$ 0.99% Interest Expense

18.70% 819$ 1.71% (217)$ -26.50% 602$ 1.28% INCOME BEFORE INCOME TAXES

-74.10% 137$ 0.29% 439$ 320.44% 576$ 1.23% Provision for Income Taxes

3.06% 11,809$ 24.59% (332)$ -2.81% 11,477$ 24.50% CONSOLIDATED NET INCOME

-3.17% 2,723$ 5.67% 128$ 4.70% 2,851$ 6.08% Less: Net Income Attributatble to Noncontrolling Interests

5.09% 9,086$ 18.92% (460)$ -5.06% 8,626$ 18.41% NET INCOME ATTRIBUTABLE TO PEPSICO

8.06% 67$ 0.14% (25)$ -37.31% 42$ 0.09% Preferred Dividends

5.07% 9,019$ 18.78% (435)$ -4.82% 8,584$ 18.32% Redemption Premium

4504 4434 NET INCOME AVAILABLE FOR PEPSICO COMMON SHAREHOLDERS

2.00$ 1.94$ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING

BASIC EPS

Statement of Financial Performance(in millions except per share amounts) (in millions except per share amounts)

For the Year Ended December 31,CHANGE FROM LAST YR CHANGE FROM LAST YR2012 2013

PepsiCo IncStatement of Financial Performance

Absolute % Absolute %

66,504$ 100.00% (1,012)$ -1.52%

Cost of goods sold 31,593$ 47.51% (302)$ -0.96%

GROSS PROFIT 34,911$ 52.49% (710)$ -2.03%

Selling. General, and Administrative Expenses 25,145$ 37.81% (175)$ -0.70%

Amortization of Intangible Assets 133$ 0.20% (14)$ -10.53%

OPERATING INCOME 9,633$ 14.48% (521)$ -5.41%

Interest Income 57$ 0.09% 34$ 59.65%

Interest Expense 856$ 1.29% 43$ 5.02%

INCOME BEFORE INCOME TAXES 8,834$ 13.28% (530)$ -6.00%

Provision for Income Taxes 2,372$ 3.57% (282)$ -11.89%

CONSOLIDATED NET INCOME 6,462$ 9.72% (248)$ -3.84%

Less: Net Income Attributatble to Noncontrolling Interests 19$ 0.03% 17$ 89.47%

NET INCOME ATTRIBUTABLE TO PEPSICO 6,443$ 9.69% (265)$ -4.11%

Preferred Dividends (1)$ 0.00% -$ 0.00%

Redemption Premium (6)$ -0.02% -$ 0.00%

NET INCOME AVAILABLE FOR PEPSICO COMMON SHAREHOLDERS 6,436$ 9.68% (265)$ -4.12%

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1576

BASIC EPS 4.08$

(in millions except per share amounts)

For the Year Ended December 31,2011 CHANGE FROM LAST YR

PepsiCo IncStatement of Financial Performance

Absolute % Absolute % Absolute %

65,492$ 100.00% 923$ 1.41% 66,415$ 100.00%

31,291$ 47.78% (48)$ -0.15% 31,243$ 47.04%

34,201$ 52.22% 971$ 2.84% 35,172$ 52.96%

24,970$ 38.13% 387$ 1.55% 25,357$ 38.18%

119$ 0.18% (9)$ -7.56% 110$ 0.17%

9,112$ 13.91% 593$ 6.51% 9,705$ 14.61%

91$ 0.14% 6$ 6.59% 97$ 0.15%

899$ 1.37% 12$ 1.33% 911$ 1.37%

8,304$ 12.68% 587$ 7.07% 8,891$ 13.39%

2,090$ 3.19% 14$ 0.67% 2,104$ 3.17%

6,214$ 9.49% 573$ 9.22% 6,787$ 10.22%

36$ 0.05% 11$ 30.56% 47$ 0.07%

6,178$ 9.43% 562$ 9.10% 6,740$ 10.15%

(1)$ 0.00% -$ 0.00% (1)$ 0.00%

(6)$ -0.02% (1)$ 16.67% (7)$ -0.02%

6,171$ 9.42% 561$ 9.09% 6,732$ 10.14%

1557 1541

3.96$ 4.37$

(in millions except per share amounts)2012 2013CHANGE FROM LAST YR

TAX RATES

For Coca-Cola

For PepsiCo

NET INCOME

For PepsiCo

PREFERRED SHARES

For PepsiCo

MARKET PRICE PER SHARE

For Coca-Cola

2011 58.84$ www.cocacolacompany.com/investors/stock-history/investors-info-year-and-market-values

2012 61.64$

2013 81.75$

For PepsiCo

2011 69.97$ http://finance.yahoo.com/q/hp?s=PEP&a=00&b=1&c=2013&d=11&e=31&f=2013&g=m

2012 36.25$

2013 41.31$

http://www.cocacolacompany.com/investors/stock-history/investors-info-year-and-market-values

http://finance.yahoo.com/q/hp?s=PEP&a=00&b=1&c=2013&d=11&e=31&f=2013&g=m

www.cocacolacompany.com/investors/stock-history/investors-info-year-and-market-values

http://finance.yahoo.com/q/hp?s=PEP&a=00&b=1&c=2013&d=11&e=31&f=2013&g=m

Coca-Cola Co PepsiCo Coca-Cola Co

LIQUIDITY RATIO

Current Ratio 1.05 0.96 1.09

Quick Ratio 0.78 0.62 0.87

ASSET MANAGEMENT RATIO .

Inventory Turnover 6.34 8.78 6

Average Sale Period 57.53 41.59 60.88

Accounts Receivable Turnover 9.96 11.82 9.92

Average Collection Period 36.66 30.87 36.79

Fixed Assets Turnover 3.14 3.43 3.26

Total Assets Turnover 0.61 0.94 0.58

DEBT MANAGEMENT RATIO

Debt Ratio 0.6 0.71 0.62

Debt-to-Equity Ratio 1.52 2.52 1.62

Times Interest Earned 28.48 11.32 30.75

PROFITABILITY RATIO

Gross Margin 60.86 52.49 60.32

Operating Margin 21.86 14.48 22.45

Net Profit Margin 18.44 9.69 18.78

Return on Total Assets 11.64 10.02 11.22

Return on Common Equity 27.41 30.69 28

Basic Earning Power 15.53 13.74 14.69

MARKETABILITY RATIO

Price-Earnings Ratio 31.31 17.13 30.78

Market-to-Book Ratio 8.5 5.33 8.47

KEY FINANCIAL RATIOSYear 2011 Year 2012

PepsiCo Coca-Cola Co PepsiCo

1.1 1.13 1.24

0.8 0.9 0.93

8.45 5.63 8.94

43.21 64.8 40.83

10.97 9.73 10.99

33.26 37.52 33.22

3.37 3.18 3.52

0.89 0.53 0.87

0.7 0.63 0.69

2.34 1.71 2.19

10.24 25.79 10.76

52.22 60.68 52.96

13.91 21.83 14.61

9.43 18.32 10.15

9.28 10.14 9.77

28.65 26.03 28.78

12.48 13.55 12.89

9.15 42.23 9.46

2.52 10.93 2.61

Year 2013Year 2012

>the higher the ratio, the better the company's liquidity position, and the less risky the company

1. Working Capital: Current Assets - Current Liabilities

>measures the company's ability to repay current liabilities using ony current assets

Working capital 2011 2012 2013The Coca-Cola Company 1,214$ 2,507$ 3,493$

PepsiCo Inc (713)$ 1,631$ 4,364$

2. Current Ratio: Current Assets ÷ Current Liabilities

>tests the company's short-term debt paying abilitiy

Current Ratio 2011 2012 2013The Coca-Cola Company 1.05 1.09 1.13

PepsiCo Inc 0.96 1.10 1.24

LIQUIDITY RATIOS

>show the relationship of a firm's cash and other current assets to its current liabilities

$(1,000)

$-

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Current Ratio

3. Quick Ratio: Quick Assets ÷ Current Liabilities

>tests the company's short-term debt paying ability without having to rely on inventory

Quick Ratio 2011 2012 2013The Coca-Cola Company 0.78 0.87 0.90

PepsiCo Inc 0.62 0.80 0.93

Assessments

Recommendations

In order to increase its current and quick ratio, the company may try to:

1. Sell-off unproductive fixed assets for cash

2. Sell inventories at a profit on account or for cash

3. Increase current assets from new equity contributions

4. Get loans or other borrowings with a long-term maturity period

5. Renegotiate short-term debt to long-term debt financing

>The company’s current ratio is greater than 1 but its quick ratio is less than 1, then it is well

said that the company is not stable and may face difficulty in paying-off their debts especially

short-term.

>Based on the data, the company has a lesser increase in liquidity ratios from year 2011 up to

2013 as compare to its major competitor.

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2011 2012 2013

Quick Ratio


LIQUIDITY RATIOS

>show the relationship of a firm's cash and other current assets to its current liabilities

1. Inventory Turnover = Cost of Goods Sold ÷ Average Inventory Balance

>measures how many times a company's inventory has been sold during the year

Inventory Turnover 2011 2012 2013The Coca-Cola Company 6.34 6.00 5.63

PepsiCo Inc 8.78 8.45 8.94

2. Average Sale Period = 365 days ÷ Inventory Turnover

>measures the average number of days taken to sell the inventory one time

Average Sale Period 2011 2012 2013The Coca-Cola Company 57.53 60.88 64.80

PepsiCo Inc 41.59 43.21 40.83

ASSET MANAGEMENT RATIOS

>measure how effectively a firm is managing its assets

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3. Accounts Receivable Turnover = Sales ÷ Average Accounts Receivable Balance

>measures how many times a company's accounts receivable have been turned into cash during the year

Accounts Receivable Turnover 2011 2012 2013The Coca-Cola Company 9.96 9.92 9.73

PepsiCo Inc 11.82 10.97 10.99

4. Average Collection Period = 365 days ÷ Accounts Receivable Turnover

>measures the average number of days taken to collect an account receivable

Average Collection Period 2011 2012 2013The Coca-Cola Company 36.66 36.79 37.52

PepsiCo Inc 30.87 33.26 33.22

5. Fixed Assets Turnover = Sales ÷ Average Net Fixed Assets

>measures how effectively the firm uses its plant and equipment


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Fixed Assets Turnover 2011 2012 2013The Coca-Cola Company 3.14 3.26 3.18

PepsiCo Inc 3.43 3.37 3.52

6. Total Assets Turnover = Sales ÷ Average Total Assets

>measures the turnover of all the firm's assets

Total Assets Turnover 2011 2012 2013The Coca-Cola Company 0.61 0.58 0.53

PepsiCo Inc 0.94 0.89 0.87

Assessment

>Compared to PepsiCo, The Coca-Cola Company has lower inventory turnover. Low inventory turnover ratios indicate

a company is carrying too much inventory, which could suggest poor inventory management or low sales. This

indicates that PepsiCo manages its inventory better than Coca-Cola. Conversely, high inventory turnover ratios may

indicate a company is enjoying strong sales or practicing just-in-time inventory methods. However, higher is not always

better, and exceptionally high inventory turnover may indicate a company is running out of items frequently or making

ineffective purchases and therefore losing sales to competitors.We can also see that The Coca-Cola Company’s

inventory turnover ratio decreased from 2011 to 2013. This shows that the company is not converting its inventory into

cash as quickly as before.

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2011 2012 2013

Total Assets Turnover


Recommendations

>Adopt JIT product ordering to avoid overstock and lessen the holding costs

>Set a better overall price for the products to increase demand, which in turn boosts sales and inventory turnover

>Revise credit policy and payment terms

>Offer incentives for early payment

>increase sales

>Sell assets that the company does not use

>Coca-Cola’s total assets turnover ratio is declining since 2011. It is also lower compared to PepsiCo’s total assets

turnover ratio. The lower the total asset turnover ratio, as compared to historical data for the firm and competitor’s

data, the slower the firm's sales. This may indicate a problem with one or more of the asset categories composing

total assets - inventory, receivables, or fixed assets.

>Coca-Cola’s receivable turnover was 9.73 indicating that Coca-Cola turns its inventory over much more slowly than

PepsiCo. This indicates that it takes Coca-Cola a lot longer than PepsiCo to collect payment from its customers.

Also, based on the data above, the PepsiCo takes less number of days in collecting accounts receivables. This tells us









>The Average Sale Period is inversely proportional to the inventory turnover ratio. The lower the turnover ratio is, the

longer it takes to sell the products. If the number of inventory days is higher, this could indicate that sales are poor and

inventory is piling up. The data above means that The Coca-Cola Company takes a longer time to sell their products

that PepsiCo.

>The data above shows that Coca-Cola is uses its investments on fixed assets to generate revenues almost the same

as PepsiCo. Coca-Cola’s fixed assets turnover increased in 2012 and decreased in 2013. An increase in fixed assets

turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of

sales. A decline in fixed asset turnover may mean that the company is over investing in the property, plant and

equipment.

ASSET MANAGEMENT RATIOS

>measure how effectively a firm is managing its assets









For Inventory Turnover

For Average Sale Period

For Accounts Receivable Turnover and Average Collection Period

For Fixed Assets Turnover

For Total Assets Turnover

>Set a better overall price for the products to increase demand, which in turn boosts sales and inventory turnover

>Coca-Cola’s total assets turnover ratio is declining since 2011. It is also lower compared to PepsiCo’s total assets

turnover ratio. The lower the total asset turnover ratio, as compared to historical data for the firm and competitor’s

data, the slower the firm's sales. This may indicate a problem with one or more of the asset categories composing

total assets - inventory, receivables, or fixed assets.

>Coca-Cola’s receivable turnover was 9.73 indicating that Coca-Cola turns its inventory over much more slowly than

PepsiCo. This indicates that it takes Coca-Cola a lot longer than PepsiCo to collect payment from its customers.

Also, based on the data above, the PepsiCo takes less number of days in collecting accounts receivables. This tells us









>The Average Sale Period is inversely proportional to the inventory turnover ratio. The lower the turnover ratio is, the

longer it takes to sell the products. If the number of inventory days is higher, this could indicate that sales are poor and

inventory is piling up. The data above means that The Coca-Cola Company takes a longer time to sell their products

that PepsiCo.

>The data above shows that Coca-Cola is uses its investments on fixed assets to generate revenues almost the same

as PepsiCo. Coca-Cola’s fixed assets turnover increased in 2012 and decreased in 2013. An increase in fixed assets

turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of

sales. A decline in fixed asset turnover may mean that the company is over investing in the property, plant and

equipment.

1. Debt Ratio= Total Liabilities ÷ Total Assets

>measures the percentage of funds provided by creditors

Debt Ratio 2011 2012 2013The Coca-Cola Company 0.60 0.62 0.63

PepsiCo Inc 0.71 0.70 0.69

2. Debt-to-Equity Ratio= Total Liabilities ÷ Total Shareholder's Equity

Debt-to-Equity Ratio 2011 2012 2013The Coca-Cola Company 1.52 1.62 1.71

PepsiCo Inc 2.52 2.34 2.19

DEBT MANAGEMENT RATIOS

>measure how effectively a firm is managing its debt

>measures the amount of assets being provided by creditors for each dollar of assets being provided by shareholders

0.54

0.56

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0.74

2011 2012 2013

Debt Ratio


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3. Tmes Interest Earned Ratio= EBIT ÷ Interest Expense

>measures the firm's ability to meet its annual interest payments

Times Interest Earned Ratio 2011 2012 2013The Coca-Cola Company 28.48 30.75 25.79

PepsiCo Inc 11.32 10.24 10.76

Assessments

Recommendations

>Lower credit limit

>Sell inventories at profit

>Choose cheaper leverage

>Choose creditors offering lower interest rates

>The Coca-Cola Company has a higher TIE ratio, meaning they are more capable in making interest payments than

its major competitor

>Based on the above data, we can say that the company has lower debt ratio compared to its major competitor which

gives them an advantage with regards to the investors. However, it doesn't mean a positive effect to the company

because both of them exceeded the industry average of 59.6% which means that more than half of their total funds

are provided by the company's creditors

>Lower debt-to-equity ratio of the Coca-Cola Company may indicate that they are not taking advantage of the

increased profits that financial leverage may bring

0.00


0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

2011 2012 2013

Times Interest Earned Ratio


DEBT MANAGEMENT RATIOS

>measure how effectively a firm is managing its debt

>measures the amount of assets being provided by creditors for each dollar of assets being provided by shareholders

>The Coca-Cola Company has a higher TIE ratio, meaning they are more capable in making interest payments than

its major competitor

>Based on the above data, we can say that the company has lower debt ratio compared to its major competitor which

gives them an advantage with regards to the investors. However, it doesn't mean a positive effect to the company

because both of them exceeded the industry average of 59.6% which means that more than half of their total funds

are provided by the company's creditors

>Lower debt-to-equity ratio of the Coca-Cola Company may indicate that they are not taking advantage of the

increased profits that financial leverage may bring

1. Gross Margin Percentage = Gross Profit ÷ Sales

>a broad measure of profitability

Gross Margin 2011 2012 2013The Coca-Cola Company 60.86% 60.32% 60.68%

PepsiCo Inc 52.49% 52.22% 52.96%

2. Operating Margin Percentage = Operating Income ÷ Sales

>measures operating income per dollar of sales

Operating Margin 2011 2012 2013The Coca-Cola Company 21.86% 22.45% 21.83%

PepsiCo Inc 14.48% 13.91% 14.61%

PROFITABILITY RATIOS

>show the combined effects of liquidity, asset management, and debt management on operating results

46.00%

48.00%

50.00%

52.00%

54.00%

56.00%

58.00%

60.00%

62.00%

2011 2012 2013

Gross Margin


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2011 2012 2013

Operating Margin


3. Net Profit Margin = Net Income ÷ Sales

>measures net income per dollar of sales

Net Profit Margin 2011 2012 2013The Coca-Cola Company 18.44% 18.78% 18.32%

PepsiCo Inc 9.69% 9.43% 10.15%

4. ROA = Net Income + [Interest Expense x (1 - Tax Rate)] / Average Total Assets

>measures how well assets have been employed by management

Return on Assets 2011 2012 2013The Coca-Cola Company 11.64% 11.22% 10.14%

PepsiCo Inc 10.02% 9.28% 9.77%

5. Return on Common Equity = (Net Income - Preferred Dividends)/Average Common Shareholder's Equity


0.00%

5.00%

10.00%

15.00%

20.00%

2011 2012 2013

Net Profit Margin


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

2011 2012 2013

Return on Total Assets


>measures the rate of return on common shareholders' investment

Return on Equity 2011 2012 2013The Coca-Cola Company 27.41% 28.00% 26.03%

PepsiCo Inc 30.69% 28.65% 28.78%

6. Basic Earning Power = EBIT ÷ Average Total Assets

>measures the ability of the firm's assets to generate operating income

Basic Earning Power 2011 2012 2013

The Coca-Cola Company 15.53% 14.69% 13.55%

PepsiCo Inc 13.74% 12.48% 12.89%

Assessments

>Based on the above data, we can conclude that The Coca-Cola Company earned much more profit than its major

competitor which indicates that the company provides better cost controls than PepsiCo

23.00%

24.00%

25.00%

26.00%

27.00%

28.00%

29.00%

30.00%

31.00%

32.00%

2011 2012 2013

Return on Common Equity


0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

2011 2012 2013

Basic Earning Power


Recommendations

>Reduce cost of inventories

>Reduce Selling and Administrative Expenses

>Cheaper Leverage

>Increase sales and inventory turnover

>Since the ROA of both companies has a little difference, it means that they are both properly managing their assets in

generating profit. Still, both of them have lower ROA compared to the industry average of 13.7%

>The ROE of Coca-Cola is somewhat lower than its major competitor which means that their stockholders receive

lesser return on their money than the shareholders of Pepsi

PROFITABILITY RATIOS

>show the combined effects of liquidity, asset management, and debt management on operating results

5. Return on Common Equity = (Net Income - Preferred Dividends)/Average Common Shareholder's Equity

>Based on the above data, we can conclude that The Coca-Cola Company earned much more profit than its major

competitor which indicates that the company provides better cost controls than PepsiCo

>Since the ROA of both companies has a little difference, it means that they are both properly managing their assets in

generating profit. Still, both of them have lower ROA compared to the industry average of 13.7%

>The ROE of Coca-Cola is somewhat lower than its major competitor which means that their stockholders receive

lesser return on their money than the shareholders of Pepsi

>indicator of what investors think of firm's past result and future prospects

1. Price Earnings Ratio= Market Price Per Share ÷ Earnings Per Share

>shows the dollar amount investors will pay for $1 of current earnings

Price Earnings Ratio 2011 2012 2013The Coca-Cola Company 31.31 30.78 42.23

PepsiCo Inc 17.13 9.15 9.46

2. Market to Book Ratio= Market Price Per Share ÷ Book Value Per Share

> it reflects how many times book value investors are ready to pay for a share

Market to Book Ratio 2011 2012 2013The Coca-Cola Company 8.50 8.47 10.93

PepsiCo Inc 5.33 2.52 2.61

MARKETABILITY RATIOS

>relate the firm's stock price to its earnings and book value per share

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

2011 2012 2013

Price Earnings Ratio


0.00

2.00

4.00

6.00

8.00

10.00

12.00

2011 2012 2013

Market to Book Ratio

Assessments

Recommendations

>the company should increase the current level of earnings and cash flows to maintain a high market value ratio

>Share repurchase programs could lead to lower book values in order to increase the market book ratio.

>As we see, the Coca Cola Company's P/E ratio and Market/Book ratio is relatively high as compared to its major

competitor PepsiCo. This suggests that the company is less risky, as having strong growth prospects or both. The

investors are more optimistic with respect to the company's potential growth. It reflects greater expected future gains

because of perceived growth opportunities and/or some competitive advantages and at the same time, it indicates that

the share price is relatively more expensive

0.00


MARKETABILITY RATIOS

>relate the firm's stock price to its earnings and book value per share

>the company should increase the current level of earnings and cash flows to maintain a high market value ratio

>As we see, the Coca Cola Company's P/E ratio and Market/Book ratio is relatively high as compared to its major

competitor PepsiCo. This suggests that the company is less risky, as having strong growth prospects or both. The

investors are more optimistic with respect to the company's potential growth. It reflects greater expected future gains

because of perceived growth opportunities and/or some competitive advantages and at the same time, it indicates that

the share price is relatively more expensive

You may see the Graphs here:

FSAnalysis-Coca-ColaAndPepsiCoGraphs.xlsx

FSAnalysis-Coca-ColaAndPepsiCoGraphs.xlsx

Date post:	20-Jul-2016
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FSAnalysis Coca ColaAndPepsiCo

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