Vertical Analysis of PepsiCo and Coca Cola

All companies use financial documents to record and journalize their business transactions. These financial documents are not only used internally by company executives, but the financial documents are also used by outside sources to evaluate the strengths and weaknesses of a company. The purpose of this paper is to provide financial analysis of PepsiCo and Coca Cola, provide examples that explain which company is more financially sound, and to provide recommendations on how to improve each company financially. The first item that I will discuss is a vertical analysis of both companies.

Vertical analysis is used to evaluate data and express the items of a financial statement as a percentage of a base amount listed. For the vertical analysis of PepsiCo and Coca Cola I looked at both the balance sheet and the income statements. The valuations that I took into consideration for this vertical analysis were the cost of goods sold as a percentage of net sales, net income as a percentage of net sales, current assets compared to total assets and the percentage change year to year, and the current liabilities compared to total liabilities and the percentage change from year to year. The cost of goods sold percentage shows how much is actually costs to produce and sell the items that a make company money. The net income as a percentage of sales shows how much money from the sale of an item is actually considered income that the company makes. The current assets compared to total assets shows how much of the assets a company has are actually available at a given time. The current liabilities compared to total liabilities shows how much of a company’s liability lays in a current status for the year.

PepsiCo 2004 2005 Percentage C...

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...it would add capital to the reserves and they would in turn be able to expand. With Coca Cola I would recommend increasing their assets. One way to increase their assets would be to decrease their payout ratio, in my opinion these two items go hand in hand. With an increase in assets the company would be able to expand and ultimately increase their profits as well.

In conclusion, all companies use financial documents to record and journalize their business transactions. These financial documents are not only used internally by company executives, but the financial documents are also used by outside sources to evaluate the strengths and weaknesses of a company. The ability to read and understand financial statements and to perform a financial analysis is a great skill for all business professional, whether they are investors, creditors, or company executives.