- Review the annual reports for PepsiCo, Inc. and The Coca-Cola Company in Appendixes A & B, especially the Consolidated Statements of Income and the Balance Sheets on pp. A4, A6, B1, & B2 of Financial Accounting.
- Write a minimum 1,500 word paper (Your Title Page and Reference Page does not count towards the minimum word count) in APA format with citations and references that provides a financial comparison of the two companies and your recommendations to improve the financial status of each.
Part 1: Complete Financial Reporting Problem BYP15-1 found on p. 743 in your text:
Note that all dollar amounts are in millions.
(Follow the approach in the chapter for rounding numbers.)
(a) Create a 5-year trend analysis, using 2001 as the base year, of (1) net sales and (2) net income. In at least 300 words, comment on the significance of the trend results.
(b) Compute for 2005 and 2004 the (1) profit margin, (2) asset turnover, (3) return on assets, and (4) return on common stockholders’ equity.
In at least 300 words identify how would you evaluate PepsiCo’s profitability?
(c) Compute for 2005 and 2004 the (1) debt to total assets and (2) times interest earned ratio.
In at least 300 words describe how would you evaluate PepsiCo’s long-term solvency?
(d) In a minimum of 200 words describe what information outside the annual report may also be useful to your parents in making a decision about PepsiCo, Inc.?
Part II: Comparative Analysis Problem PepsiCo, Inc. vs. The Coca-Cola Company BYP15-2 found on p. 744 in your text.
(a) Based on the information contained in these financial statements, determine each of the following for each company.
(1) The percentage increase (decrease) in (i) net sales and (ii) net income from 2004 to 2005.
(2) The percentage increase in (i) total assets and (ii) total common stockholders’ (shareholders’) equity from 2004 to 2005.
(3) The basic earnings per share and price-earnings ratio for 2005. (For Coca-Cola, use the basic earnings per share.) Coca-Cola’s common stock had a market price of $43.60 at the end of fiscal-year 2005.
(b) Identify, in a minimum of 400 words, what conclusions concerning the two companies can be drawn from these data?
- You must use in-text citations throughout your paper that match your references on your reference page.