Coke VS. Pepsi
The Business Enterprise
Dr. Amanda Manners
June 11, 2011
Coke VS. Pepsi
The following paragraphs will discuss the financial positions of both Coke and Pepsi. There will be a discussion on which company has the greatest ability to pay off any current liabilities the companies have and what type of financial tools can be used to determine their capability to pay such debt. The reader will also be provided the tools that anyone can use to determine which company would be the best company to invest in, for their individual needs, and why they would invest in it. A determination of what company would be the best choice to invest in will be based upon the premise that an investor is looking for either future growth or current return and which company would be the best to provide both.
To assist everyone with choosing the company with which to invest, both financial and non financial data will be explored. Pepsi Has No Worries About Paying the Bills
Based upon the analysis of the financials of both the Coke Cola Bottling Company and PepsiCo a determination was made that indicated PepsiCo is currently in the best financial position to pay off their current liability. In reviewing the Liquidity and debt rations indicated in appendices a and b Coke is both highly leveraged and has less liquidity than PepsiCo. Coke’s Liquidity Ratio being 1.13% and PepsiCo at 1.44% and the overall Debt Ratio for Coke being a whopping 94.6% compared to PepsiCo at only 56% (Coca-Cola Enterprises Inc. [CCE], 2009) (PepsiCo, 2010). By reviewing the financial ratio’s indicated above, one can conclude that PepsiCo most certainly has the flexibility if needed to liquidate their current assets in order to pay for any current debt that the company may be called upon to pay. In addition, by reviewing the Cash Flow Ratio from all sources on a company basis it will support the fact that PepsiCo has almost twice the positive cash flow than Coca-Cola Enterprises (CCE, 2009)(PepsiCo, 2010). Profitability and Performance Determines Investment Decisions The ability for a company or individual investor to determine what, where and how to invest can be difficult to determine using multiple financial tools and graphs. On the other hand there are specific profitability ratios that everyday investors and executives use to determine quickly whether or not to look any further into investing in a company rather quickly. Profitability Ratios can allow the investor to determine whether a company is financially sound and shows promise of current and future profitability (Investopedia, n.d). These ratios are also used by company executives to determine what proposed project or investment a company should invest its cash on hand into. The determination of what to invest in that would make the most income from available cash can also come from P/E ratio, Debt ratio, Cash Flow Ratio and Investment Value Ratio amongst a host of others. This would actually just be the beginning of the research required to determine what company or project to invest in. The following section will include many other investment ratios used to determine investment returns and positions. Satisfying the Stockholders
The most intimidating thing about being an executive at a public company is the stockholders. The stockholders represent the ownership of the company and the objective is to insure they are receiving the highest return on their investment which is the reason the investor chose your company to begin with. Some individuals choose to invest for immediate income and other choose to invest for long term gain, yet others for both long term gain and immediate income. Some of the ratios that can be used to determine which company is providing the return that is expected are in appendices a & b. Some others more specifically are: Price/Book Value Ratio, Price/Earnings to Growth Ratio, Per Share Data, Profit Margin Analysis,...
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