Finals Project - Financial Analysis of Pepsi Co. and Coca-Cola

Topics: Balance sheet, Asset, Generally Accepted Accounting Principles Pages: 7 (1924 words) Published: June 12, 2011
Pepsi Co. and Coca-Cola’s Vertical, Horizontal, and Ratio Analysis XACC/280
Submitted by: Lataikeii Evans
Date: April 8, 2011
Daneene Barton

Arbitrating a company’s monetary physical stability inculpate their financial statements (income statements, balance sheets, and statement of cash flow). These statements must follow the GAAP standards. Sidewise from the statements that are involved in balancing a company or in my case comparing the financial stability of the two successful companies’ three components are involved. The profitability, liquidity, and solvency are the three factors or components used in the analytical process of determining the success or nonsuccesses of a company. Understanding of the valuable components of accounting

One having an intuitive understanding of the terms makes for a smoother transaction as far as performing an analysis of the economic status of a company. The component profitability that term is used to ventilate the performance of a company over a specified time period; solvency is a term used to accredit a company’s ability to whether or not long-term financial obligations will be met as well as invest in future developments; and the last component liquidity is a term that is used that by description means a company’s capability in paying on short-term debts at the time in which they are due: by requisite deadlines. Tools used to support the components

Though solvency, profitability, and liquidity provide a useful way of measuring the status of a company’s finances the ratios provide a more thorough, yet a quick view of the where the company stands financial. With the ratios you are able to get a visual of how well off a company is or how far off from success it is going. In order to maneuver through the many functions of accounting and the components the tools used include vertical analysis, horizontal analysis, and ratio analysis. Vertical analysis according to (Investopedia ULC, 2011) is a “method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a proportion of the total account”. In order to get the results with the vertical analysis one would have to divide the expenses from the income statement by the net sales (by given year). The Vertical analysis methods give a decimal calculated outcome which can ultimately be used to determine the company’s expansion, growth, or constricted area if any exist. The horizontal analysis according to (Investopedia ULC, 2011) is a “procedure in fundamental analysis in which an analyst compares ratios or line items in a company's financial statements over a certain period of time (side by side). The analyst will use his or her discretion when choosing a particular timeline; however, the decision is often based on the investing time horizon under consideration”. Lastly; the ratio analysis is a tool basically used by individuals to manipulate a calculable analysis on a company’s fiscal/economical statements. Calculating the Liquidity Ratios of Coca-Cola

We are to utilize the information from the condensed balance sheet in our text books and abstract the data used to find the results. These tools can be utilized to measure both the PepsiCo Incorporated and Coca Cola’s financial consummation. In previous discussions I suggested that Coca Cola would be the best choice to invest in below shows the financial status of Coca-Cola. Current Ratio (2005)

10,250 (current total assets) = 1.04
9,836 (current total liabilities)

The same method will be applied to calculate the status of 2004 Current Ratio (2004)
12,281 (current total assets) = 1.10
11,133 (current total liabilities)
It is prominent that whatever strategies that Coca Cola is using is generating more assets for them. The data has been calculated so now we can proceed to getting the vertical analysis ratio results. To calculate the cash value we would...
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