Financial Accounting Concepts: Pepsico, Inc. and the Coca Cola Company

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Financial Analysis
Randall Meeks
Financial Accounting Concepts
Mr. Carraher
9-12-2010

PepsiCo, Inc. and The Coca Cola Company have both been in production for ages. Both PepsiCo, Inc. and The Coca Cola Company have become common house hold names through out the world today. Pepsi is one of the best selling products in American history. “Pepsi is the number 2 soft drink company producer, the world over. Pepsi’s number one priority is making sure that their shareholders investments are profitable. Pepsi has been able to achieve this goal for the most part via increased sales, keeping cost low, and spending money wisely. Pepsi takes pride in the name, they have built an excellent brand by deliver a product that is satisfying to the consumer, as well as safe. The investors in the company also can be happy with the return of investment”(investorguide.com). “The Coca Cola Company is likely, one of the most significant brands in American history. Coke can go in a category with a company like McDonalds when it comes to brand value, these two trademarks are 2 of the most recognized in the world. Coke is the highest seller of soft drinks, moving 1.3 billion beverages that are served daily”(investorguide.com). Pepsi and Coke have been mass producing soft-drinks on an assembly line for a very long time and they both have been competing for the number one soft drink seller spot. PepsiCo, Inc and The Coca Cola Company targets all income segments of customers in the entire world as their products are high quality and very recognizable. Coke and Pepsi offer products so similar that you probably could not tell the difference in a blindfolded taste test. It is a well known fact that when a business goes outside of the United States borders, that production and supply channel become very important concerns. Both Coke and Pepsi own plants that manufacturer their products all over the world in many different countries and continents.. Both companies compete with each other and try to make sure they stay relevant. They also tend to copy each other and try to outdo one another on a day to day basis. I will go in detail to explain the financial comparison and contrasting between both companies. I will also explain the vertical and horizontal comparison between the two companies. The main point I will make is to show the difference between both companies financially.

Vertical Analysis
Consolidated Income Statement
The cost of goods of PepsiCo Inc was $11,031 and $12,314 in 2004 and 2005. The price of product sold in 2004 was 38% of net sales and in 2005, it was 37.82% of net sale. The price of goods sold went down in 2005. The cost of commodities was $7,674 and $8,195 in 2004 and 2005 for Coke. It was 35% and 35.47% of net sales in 2004 and 2005. Cost of commodities sold increased for The Coca Cola Company and decreased for PepsiCo, Inc. The operating expense for PepsiCo, Inc was 43% and 43.54% of net sales in 2004 and 2005. The operating expenses for Coca Cola were 36% and 37.82% of net sales in 2004 and 2005. PepsiCo, Inc and The Coca Cola Companies operating expense increased in 2005. The earning before T&I of PepsiCo Inc was 18% and 18.19% of sales in 2004 and 2005. The operating income for The Coca Cola Company was 26% and 26.34% in 2004 and 2005. PepsiCo, Inc and The Coca Cola Companies operating income increased. The net income for PepsiCo, Inc. and The Coca Cola Company for 2005 was 21.09% and 12.52% The Coca Cola Companies net income ratios was higher than PepsiCo, Inc.

Consolidated Balance Sheet
The current and total assets for PepsiCo, Inc were 31% and 32.95% in 2004 and 2005. On the opposite side, the total current assets were 39% and 34.83% in 2004 and 2005. The liquidity position for PepsiCo, Inc. decreased in 2005 and The Coca Cola Company increased in 2005. The additional assets and fixed assets for PepsiCo Inc, were 69% and 67.05% in 2004 and 2005. The Coca Cola Companies fixed assets...
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