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Pepsico and Coca-Cola Financial Analysis

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You will assume the role of a financial analyst and create a full analysis between Coca-Cola and PepsiCo. Please explain all calculations and ensure that you answer each and every question thoroughly. You will need to locate Coca-Cola and PepsiCo, Inc annual financial statements for 2007. These can be easily obtained through the internet, should you have any difficulty please let me know.

1) What were the accounts receivable (net) for Coca-Cola and PepsiCo at the end of 2007? Which company reports the greater allowance for doubtful accounts receivable (amount and percentage of gross receivable) at the end of 2007?

2) What is the amount of inventory reported by Coca-Cola at December 31, 2007, and by PepsiCo at December 29, 2007? What percent of total assets is invested in inventory by each company?

3) Compute and compare the inventory turnover ratios and days to sell inventory for Coca-Cola and PepsiCo for 2007. Indicate why there might be a significant difference between the two companies.

4) What amount is reported in the balance sheets as property, plant, and equipment (net) of Coca-Cola at December 31, 2007, and of PepsiCo at December 29, 2007? What percentage of total assets is invested in property, plant, and equipment by each company?

5) Compute and compare the following ratios for Coca-Cola and PepsiCo for 2007: Asset turnover, Profit margin on sales, and Rate of return on assets.

6) What amounts for intangible assets were reported in their respective balance sheets by Coca-Cola and PepsiCo? What percentage of total assets is each of these reported amounts?

7) What were Coca-Cola's and PepsiCo's net revenues (sales) for the year 2007? Which company increased its revenues more (dollars and percentage) from 2006 to 2007?

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Solution Summary

The solution provides a financial analysis for Pepsico and Coca-Cola.

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Inventory turnover ratio of PepsiCo is higher than that of Coca Cola which implies that PepsiCo has better inventory management policies. A lower ratio of Coca Cola could indicate overstocking which can pose risk of higher cost of holding inventory.
Days to sell inventory is a part of cash conversion cycle and measures how quickly a company can turn raw materials into cash. The shorter the ratio, the better it is. Comparing DSI of PepsiCo and Coca Cola implies that PepsiCo has a quicker inventory cycle than Coca Cola and hence better manages inventory.
From both ratios, it is clear that PepsiCo has better control over its inventory and is quicker in turning its ...

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