Financial analysis of Coca Cola and PepsiCo

Financial Analysis of Coca Cola and PepsiCo

Introduction

Since the emergence of economic crises of 2008 and its devastating impact on the foundation of word's economy has prompt, the people of the world to gain proper and in-depth knowledge regarding the real capital worth of companies in which they plan to invest their money (Alexandre, 2011). In country like America where majority of the population tends to invest their accumulated capital in stock market, any incomplete information would not only raise chaotic situation in their personal lives but on overall health of country economy.

In presence of extreme uncertainty over financial position of the company, it is imperative for potential investors to conduct in-depth analysis of company's financial statement that include balance sheet, income statement, statement of cash flows, and must familiarize themselves with recent events that have occurred in the company, as this would enable investors to make sound investment decision.

In light of above facts, this paper would provide in-depth evaluation of two largest beverage companies (Coca Cola and Pepsi) that have accomplished phenomenal growth in recent years and are continuously trying to overcome each other through producing innovative products, launching innovative marketing programs and increasing their pool of customers(Andersson et al, 2006). In order to accomplish its main objectives the next section of this report would provide in-depth historical and vertical and ratio analysis of companies financial statements.

Discussion

Vertical analysis of Coca Cola and Pepsi

Coca Cola and Pepsi Co are world renowned beverages companies of the globe that have achieved phenomenal growth since there incorporation and are striving hard to overcome their major competitors by further introducing new products, providing added advantage to potential customer, enhancing their CSR activities and through various other ways. For instance, vertical analysis for the period of 2005 indicates that the Coco Cola company has gathered $23 in revenue and around $29 billion it total assets.

Moreover, it was further observed that company has able to distribute its valuable assets in appropriate portion throughout different segments, for instance, firm contain around $4 million of cash and cash equivalent assets which is 15.9 percent of its total assets(Cassady et al, 2006). A significant amount of cash and other liquid securities clearly indicates that firm's financial position is very strong and has the potential of paying off its short-term debt from its liquid assets. On the other hand, Pepsi has current have $1.7 million cash and cash equivalent assets, which is 5.42 percent of its total assets, and this indicates that Pepsi might not able to use its cash for paying off its short-term debt and other daily obligations

Moving forward, balance sheet for the year 2005 further indicated that Coca Cola has invested around $6.9 million of its cash in long-term projects, which is 23.52% of its overall assets. These long-term projects would provide company with the opportunity of increasing its annual revenue and further strengthen its market position (Coca Cola, 2012). Contrary to this, balance sheet of Pepsi indicates that like its competitors ...