PepsiCo & Coca Cola Financial Analysis

PepsiCo & Coca Cola Financial Analysis

Introduction

PepsiCo & Coca Cola Financial Analysis

In our report, we will be doing a financial analysis of Pepsi Inc and Coca Cola. The basic purpose of the report is to make an investing decision (Bragg, 2000). That is whether we should invest or not invest in the company. To find the answer to this question we will first to a ratio analysis of the company, than we will do the beta analysis after that we will look at the income statement, and stock price of the company. First, we will have a brief introduction of the company.

Pepsi

Pepsi has a long history of success. It started in the year 1908. It was developed by a pharmacist who was experimenting on herbs and spices. After the product was developed, it was patented in the year 1903 by the United States Patent office. The company has 22 powerful brands, which generate an estimated $ 1,000 million each. The company is headquarters in New York and employs around 297,000 people. In the year 2011, the company recorded revenue of around $66,504 million, which was an increase of 15% as compared to 2010. The operating profit of the company increased by 15.6%. The net profit of the company stood at $6,443 million in FY2011, which was an increase of 1.9%.

Coca Cola

It was also invented in the year 1886 by a Pharmacist. Today coke is one of the leading brands in soft drink, which occupies 90% of the industry (Bragg, 2000). The headquarter of the company is in Atlanta. The company in the year 2011 earned revenue of 66,504 as compared to the last year total of $57,838. The Gross profit of the company stood at $34,911 million. The net income of the company was $ 6,443 million, which was $ 6,320 in the last year.

Ratios

Ratio analysis are a good source in finding out the about the company. In Our analysis the red side represent Pepsi while the grey side represents coca cola.

Liquidity/Financial Health

2011-12

2010-12

2009-12

AVG

 

2011-12

2010-12

2009-12

AVG

Current Ratio

0.96

1.11

1.44

1.17

1.05

1.17

1.28

1.166667

Quick Ratio

0.62

0.8

1

0.806667

0.78

0.85

0.95

0.86

Financial Leverage

3.52

3.21

2.38

3.036667

2.53

2.35

1.96

2.28

Debt/Equity

0.99

0.94

0.44

0.79

0.43

0.45

0.2

0.36

 

 

 

 

 

 

 

 

 

 

Analysis

The current ratio of Pepsi is more than the coca cola. This shows that Pepsi has more current assets to pay out its current liabilities (Friedlob and Schleifer, 2003). The Quick ratio of Pepsi less than the coca cola , this is a sign that PEPSI has invested more into short term assets from its current assets. PEPSI is more levered up in terms of debt. That is 3.03 times while Coco Cola has less leverage that is of 2.28. The debt to equity ratio of PEPSI is more than the Coca Cola Company.

Profitability

2011-12

2010-12

2009-12

AVG

 

2011-12

2010-12

2009-12

AVG

Tax Rate %

26.85

23.01

25.99

25.28333

24.52

16.74

22.8

21.35333

Net Margin %

9.69

10.93

13.75

11.45667

18.42

33.63

22.02

24.69

Asset Turnover (Average)

0.94

1.07

1.14

1.05

0.61

0.58

0.69

0.626667

Return on Assets %

9.14

11.7

15.68

12.17333

11.21

19.42

15.3

15.31

Financial Leverage (Average)

3.52

3.21

2.38

3.036667

2.53

2.35

1.96

2.28

Return on Equity %

30.73

33.27

41.25

35.08333

27.37

42.32

30.15

33.28

Return on Invested Capital %

13.77

17.86

26.47

19.36667

 

14.96

25.93

20.54

20.47667

Analysis

The overall tax given by PEPSI is more than the Coca Cola (Friedlob and Schleifer, 2003). The net margin of PEPSI is half that of Coca Cola Company. The asset turnover of PEPSI is twice that of Coca Cola. The return on asset in PEPSI is less than ...