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Financial Analysis of Pepsi Co and The Coca Cola Company Essay

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Before you make an investment into any company, you would need to first take the time to review and study the financial records of the company. I have been given the opportunity to review the financial records of two major companies; Pepsi Co and The Coca Cola Company and decided which company is more financially sound. In order to make the best choice, I will look at the three financial statement analyses on each company and compare them.

The three tools of financial statement analysis that I will review are the Horizontal Analysis which evaluates a series of financial statement data over a period of time. The purpose of this analysis is to determine the increase or decrease that has taken place. The Vertical Analysis which evaluates financial statement data by expressing each item in a financial statement as a percent of a base amount. Vertical analysis shows the relative size the categories in the balance sheet. It also can show the percentage change in the individual asset, liability, and stockholders’
equity items. Finally the Ratio Analysis which expresses the relationship among selected items of financial statement data. The relationship is expressed by percentage, rate, or proportion (University of Phoenix, Axia College, 2009).

First we will calculate the horizontal analysis for both companies. We look at the percentage change in current asset for Pepsi Co between 2004 and 2005. The percentage change was $10,454/ 8,639= 1.21% or 10,454-8,639/ 8,639= 21% increase. Then we will look at the percentage change in current assets for Coco Cola between 2004 and 2005. The percentage change was $10,250/ 12,281= 0.83% or 10,250-12,281/ 12,281= 16.5% decrease. Based on these calculations, Pepsi Co increased their cur...


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...se these numbers also. One more figure that was increased was the software cost. I recommend that they find some cheaper software because the price went from 181 million to 327 million. Some recommendation that I would make to Coca Cola are to decrease the number of outstanding common shares that they have and decrease some of the operating cost.

After reviewing the financial records for both companies, if I had the opportunity I would invest in them both because there is potential with both. Coca Cola seems to be the company that is the most financially sound. If Coca Cola continues to follow the same pattern, I see them being very profitably in the future because from 2004 to 2005 the company has really made some changes in the right direction. If Pepsi Co decreasing the expenses that I recommended, I can see them becoming more profitable than Coca Cola.


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