Common-size Income Statement Analysis
The common-size income statement shows that Coca-Cola’s cost of goods sold to revenues percentage rose very slightly from 39.14% in 2011 to 39.32% in 2013. At the same time, PepsiCo’s cost of goods sold to revenues percentage decreased from 47.51% in 2011 to 47.04% in 2013, bringing the 3-year-average to 47.44%. However, 47.44% is still much higher than Coca-Cola’s 3-year-average of 39.38%. With lower cost of goods sold to revenues ratio, Coca-Cola was able to obtain higher gross profit margin, which proves the advantages Coca-Cola have in pricing power over PepsiCo and other competitors. This makes sense because as stated in the overview, Coca-Cola is one of the most recognizable brand in the world and a leading producer, distributor, and marketer of soft drink concentrates, syrups, sparkling, and still beverages. Coca-Cola’s and PepsiCo’s selling, general, and administrative expenses to sales percentages averaged 37.11% and 38.04% respectively from 2011 to 2013. Lower selling, general, and administrative expenses to sales ratio, in combination with lower costs of goods sold to sales percentage, helped Coca-Cola achieve even higher operating profit than PepsiCo. This led to the differences in net income of the two companies: from 2011 to 2013, Coca-Cola’s net income to revenues percentage averaged at 18.52%, 8.76% greater than the ratio of 9.76% of PepsiCo. Common-size Balance Sheet Analysis
On average, from 2011 to 2013, Coca-Cola’s total current assets made up 33.95% of its total assets, and its current liabilities made up 31.18% of the total liabilities and equity. Coca-Cola did a good job maintaining its percentage of total current assets higher than its current liabilities. This gave Coca-Cola a little bit of cushion to cover the current debts from current assets. Even though the cushion was not much, it wasn’t too bad, considering the trend of decreasing in current ratio (current assets/current liabilities) across...
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