Coca-Cola vs. Pepsico-Reference From Coca-Cola Annual Report Analysis (Term Paper Sample)

FINANCIAL ACCOUNTING
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Coca cola vs. PepsiCo-reference from Coca-Cola annual report analysis
* Working capital =Current assets / current liabilities
Year

2014

2013

Workings

32986/32374

31304/27811

Ratio

1.02

1.25

Normally, a ratio that is less than 1 makes a company to face liquidity issues. Therefore, Coca-Cola Company is in a good position to settle its debtors and that it has no reason of selling its assets to pay debts and therefore the firm has no liquidity problems. CITATION Ano1411 \l 1033 (Anonymous, 2014) Ordinarily the greater the working capital, the more likely it will be to make its payments on time. Its competitor has working capital of 0.95 meaning it is facing liquidity problems.
* Quick ratio. The quick ratio measures the firm’s ability to meet its short term obligations with its liquid assets. Quick ratio= {(Cur.Ass-Invt)/Cur.lia)
Year

2014

2013

Workings

32986-3100/32374

31304-3277/27811

Ratio

1.01

1.00

This ratio 1 is good and it implies that the Coca cola Company’s liquidity is in good position. On the other hand, its competitor 1.5 ratio puts it at competitive advantage.
* Gross Profit Margin = Gross Profit/Total Sales
Year

2014

2013

2012

Workings

28109/17889

28433/18421

28964/19053

Ratio

1.57

1.54

1.51

Gross margin has increased significantly meaning that the business is doing well and rising in profitability as the year’s progresses. This also implies that the company has a lot of money to spend on other business operations including marketing
* Inventory Turnover = Cost of Sales/Average Inventory.
Year

2014

2013

Workings

17889/3100/2

18421/3277/2

Ratio

11.5

11.6

This is a good indication of production and purchasing efficiency. A high ratio of 11 indicates inventory is selling quickly and that little unused inventory is being stored. There are no overstocking, obsolete inventories or selling issues.
* Turnover = Revenue/Average Total Assets.
Year

2014

2013

Workings

45998/92023/2

46854/90055/2

Ratio

1.04

.99

This rising ratio means that the Coca-Cola Company is using its assets more productively
* Debt to Equity = Short Term Debt + Long Term Debt/Total Equity.
Year

2014

2013

Workings

17889/3100/2

18421/3277/2

Ratio

11.5

11.6

The ratio is moderate and balanced, therefore the business is safe.Ordinarily, too much debt put the firm at risk, but too little debt may limit your potential. CITATION Pol08 \l 1033 (Gregor, 2008) Owners want to get some leverage on their investment to boost profits. This has to be balanced with the ability to service debt
* Accounts Payable Turnover = Cost of Sales/Average Accounts Payable.