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Structural anaysis, Income Statement,analysis 5. Profitability analysis , Liquidity analysis 18Activity analysis
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JOY Zhou Lin
EVA Xiong Jing
Economic Analysis ----Pepsico & Coca-Cola
Final Report
2009-2010
REPORT CONTENTS
2
1.Introduction 3
1.1. General Introduction 3
1.2.Short Description 3
2.Data from Internet 4
2.1.Pepisco 4
2.2.Coca-Cola 5
3.Structural anaysis 10
3.1. Total assets structure 10
3.2 Total liabilities structure 11
3.3 Mixed structure 13
4. Income Statement analysis 14
5. Profitability analysis 16
6. Liquidity analysis 18
7.Activity analysis 20
8.Summary 22
1. Introduction
1.1 General Introduction:
3
This report is connected with our class: Economic Analysis. We were
learning some knowledge about how to analysis the company’s economic
situation. And we used our knowledge which we have learned during our
lecturer to analysis two companies(They are competitors).What’s more, we
use the company’s income statement, balance sheet, liabilities to calculate
Structural analysis, Income Statement analysis, Profitability analysis, Liquidity
analysis, Activity analysis. we made many conclusions about those two
companies. Through those conclusions, we know about the economic situation
of those companies.
1.2. Short Description:
Pepsi is a carbonated soft drink produced and manufactured by PepsiCo. The drink was first made in the 1890s by pharmacist Caleb Bradham in New Bern,
North Carolina. The brand was trademarked on June 16, 1903. There have
been many Pepsi variants produced over the years since 1898.
Coca-Cola is a carbonated soft drink sold in stores, restaurants, and vending machines internationally. The Coca-Cola Company claims that the
beverage is sold in more than 200 countries. 1
1 http://zh.wikipedia.org/zh-cn/Wikipedia:%E9%A6%96%E9%A1%B5
4
2. Data from Internet:
2.1.Pepisco:
INCOME STATEMENT 2008 2007 2006
Net revenues$43,25
1 $39,47
4 $35,13
7 Cost of sales 20351 18038 15762Selling, general and administrative expenses 15901 14208 12711Amortization of intangible assets 64 58 162Operating Profit 6935 7170 6502Bottling equity income 374 560 553Interest expense -329 -224 -239Interest income 41 125 173Income before Income Taxes 7021 7631 6989Provision for Income Taxes 1879 1973 1347Net Income $5,142 $5,658 $5,642 Net Income per Common Share Basic $3.26 $3.48 $3.42 Diluted $3.21 $3.41 $3.34
BLANCE SHEET 2008 2007 2006ASSETS Cash and Equivalents $2,064 $910 $1,651 Restrictable Cash Marketable Securities 213 1571 1171Receivables 4683 4389 3725Inventories 2522 2290 1926Prepaid Expenses 1324 991 657Current Deferred Income Taxes Other Current Assets Total Current Assets 10,806 10,151 9,130Gross Fixed Assets 22,552 2,290 1926Accumulated Depreciation -10889 -10668 -9371Net Fixed Assets 11663 11228 9687Intangibles 1128 2044 1849Cost in Excess 5124 5169 4594Non-Current Deferred Income Taxes Other Non-Current Assets 7273 6036 4670Total Non-Current Assets 25188 24477 20800Total Assets 35994 34628 29930
5
Liabilities 2008 2007 2006
Accounts Payable 8273 2562 2102Short Term Debt 369 274Notes Payable Accrued Expenses Accrued Liabilities 2894 2587Deferred Revenues Current Deferred Income Taxes Other Current Liabilities 145 2297 1897Total Current Liabilities 8787 7753 6860Long Term Debt 7858 4203 2550Deferred Income Tax 226 646 528Other Non-Current Liabilities 6879 4792 4624Minority Interest Capital Lease Obligations Preferred Securities of Subsidiary Trust Preferred Equity Outside Stock Equity -91 -79Total Non-Current Liabilities 14963 9550 7623Total Liabilities 23750 17303 14483Preferred Stock Equity 41 Common Stock Equity 12203 17325 15447Total Equity 12244 17325 15447Total Liabilities & Stock Equity 35994 34628 29930
2.2 Coca-Cola
2006 2007 2008ASSETS
cash & equivalents 2,440.00 4,701.00
restricted cash 0 0 0
marketable securities 150 215 278
accounts receivable 2,587.00 3,317.00 3,090.00
loans receivable 0 0 0
other receivable 0 0 0
receivables 2,587.00 3,317.00 3,090.00
inventories, raw materials 923 1,199.00 1,191.00
6
inventories, work in progress 0 0 0
inventories, purchased
components0 0 0
inventories, finished goods 548 789 706
inventories, other 170 232 290
inventories, adjustments &
allowances0 0 0
inventories 1,641.00 2,220.00 2,187.00
prepaid expenses 1,623.00 2,260.00 1,920.00
current defered income taxes 0 0 0
other current assets 0 0 0
total current assets 8,441.00 12,105.00 12,176.00
land and improvements 495 731 657
building and improvements 3,020.00 3,539.00 3,408.00
machinery, furniture &
equipment7,889.00 9,752.00 10,335.00
construction in progress 507 422 0
other fixed assets 0 0 0
total fixed assets 11,911.00 14,444.00 14,400.00
gross fixed assets 11,911.00 14,444.00 14,400.00
accumulated depreciation 5,008.00 5,951.00 6,074.00
net fixed assets 6,903.00 8,493.00 8,326.00
intangibles 3,732.00 7,963.00 8,476.00
cost in excess 1,403.00 4,256.00 4,029.00
non-current deferred income
taxes0 0 0
other non-current assets 9,484.00 10,452.00 7,512.00
total non-current assets 21,522.00 31,164.00 28,343.00
total assets 29,963.00 43,269.00 40,519.00
inventory valuation method 8 8 8
EQUITY & LIABILITIESaccounts payable 929 1,380.00 1,370.00
notes payable 3,235.00 0 6,066.00
short-term debt 33 6,052.00 465
accrued expenses 4,126.00 5,535.00 0
accrued liabilities 567 258 4,835.00
deferred revenues 0 0 0
current deferred income taxes 0 0 0
other current liabilities 0 0 252
total current liabilities 8,890.00 13,225.00 12,988.00
7
long-term debt 1,314.00 3,277.00 2,781.00
capital lease obligations 0 0 0
deferred income taxes 608 1,890.00 877
other non-current liabilities 2,231.00 3,133.00 3,401.00
minority interest liability 0 0 0
preferred secur. of subsid. trust 0 0 0
preferred equity outside stock
equity0 0 0
total non-current liabilities 4,153.00 8,300.00 7,059.00
total liabilities 13,043.00 21,525.00 20,047.00
preferred stock equity 0 0 0
common stock equity 16,920.00 21,744.00 20,472.00
common par 878 880 880
additional paid-in capital 5,983.00 7,378.00 7,966.00
cumulative translation
adjustments-984 591 0
retained earnings 33,468.00 36,235.00 38,513.00
treasury stock -22,118.00 -23,375.00 -24,213.00
other equity adjustments -307 35 -2,674.00
total capitalization 18,234.00 25,021.00 23,253.00
total equity 16,920.00 21,744.00 20,472.00
total liabilities & stock equity 29,963.00 43,269.00 40,519.00
2006 2007 2008
INCOME STATEMENT
operating revenue 24,088.00 28,857.00 31,944.00
total revenue 24,088.00 28,857.00 31,944.00
adjustments to revenue 0 0 0
cost of sales 7,226.00 9,243.00 10,146.00
cost of sales with depreciation 8,164.00 10,406.00 11,374.00
gross margin 15,924.00 18,451.00 21,798.00
gross operating profit 16,862.00 19,614.00 21,798.00
Research & Development (R&D)
Expense0 0 0
Selling, General & Administrative
(SG&A) Expense9,616.00 11,199.00 11,774.00
advertising 0 0 0
operating income 6,308.00 7,252.00 8,446.00
EBITDA 7,246.00 8,415.00 10,024.00
8
depreciation 938 1,163.00 1,228.00
depreciation (unrecognized) 0 0 0
amortization 0 0 0
amortization of intangibles 0 0 0
operating profit after
depreciation6,308.00 7,252.00 8,796.00
interest income 193 236 333
earnings from equity interest 102 668 -874
other income net 195 173 -378
income, acquired in process r&a 0 0 0
Income, Restructuring and M&A 0 0 0
other special charges 0 0 0
special income charges 0 0 0
EBIT 6,798.00 8,329.00 7,877.00
interest expense 220 456 438
pre-tax income 6,578.00 7,873.00 7,439.00
income taxes 1,498.00 1,892.00 1,632.00
minority interest 0 0 0
pref. securities of subsid. trust 0 0 0
income before income taxes 6,578.00 7,873.00 7,439.00
net income (continuing
operations)5,080.00 5,981.00 5,807.00
net income (discontinued
operations)0 0 0
net income (total operations) 5,080.00 5,981.00 5,807.00
extraordinary income/losses 0 0 0
income from cum. effect of acct.
change0 0 0
income from tax loss carryforward 0 0 0
other gains/losses 0 0 0
total net income 5,080.00 5,981.00 5,807.00
normalized income 5,080.00 5,981.00 5,807.00
net income available for common 5,080.00 5,981.00 5,807.00
9
preferred dividends 0 0 0
excise taxes 0 0 0
*
Basic EPS (Continuing) 2.16 2.59 2.51
Basic EPS (Discontinued) 0 0 0
Basic EPS from Total
Operations2.16 2.59 2.51
Basic EPS (Extraordinary Items) 0 0 0
Basic EPS (Cum. Effect of Acct.
Change)0 0 0
Basic EPS (Tax Loss Carry
Forward)0 0 0
Basic EPS (Other Gains/Losses) 0 0 0
Basic EPS - Total 2.16 2.59 2.51
Basic EPS - Normalized 2.16 2.59 2.51
*
Diluted EPS (Continuing) 2.16 2.57 2.49
Diluted EPS (Discontinued) 0 0 0
Diluted EPS from Total
Operations2.16 2.57 2.49
Diluted EPS (Extraordinary) 0 0 0
Diluted EPS (Cum. Effect of Acct.
Change)0 0 0
Diluted EPS (Tax Loss Carry
Forward)0 0 0
Diluted EPS (Other Gains/Losses) 0 0 0
Diluted EPS - Total 2.16 2.57 2.49
Diluted EPS - Normalized 2.16 2.57 2.49
Dividends Paid Per Share (DPS) 1.24 1.36 1.52
INCOME STATEMENT (YEAR-TO-DATE)
Revenue (YTD) 24,088.00 28,857.00 31,944.00
Net Income from Total Operations
(YTD)5,080.00 5,981.00 5,807.00
EPS from Total Operations (YTD) 2.16 2.57 2.49
10
Dividends Paid Per Share (YTD) 1.24 1.36 1.52
operation expense 0 0 55
3.Structural analysis
3.1. Total assets structure
2006 2007 20080
10
20
30
40
50
60
70
8069.5 70.69 69.98
39.7533.38 35.54 Pepsico
Coca-Cola
%
Share of fixed assets in total assets
Interpretation: Pepsico:
The share of fixed assets increased from 69.50% to 69.98% ,which is
the increase by 0.48% percentage points .And the share of currents
assets decreased from 30.50% to 30.02%,which is the decrease by
0.48 percentage points.
Coca-Cola: The share of fixed assets decreased from 39.75% to 35.54% ,which is
the increase by 4.21% percentage points .And the share of currents
assets decreased from 28.17% to 30.05%,which is the increase by
1.88 percentage points. The equity increased 29% from 2006 to 2007;
it means the company issued additional stock to finance the growth of
the company. But it was decrease as 6% from 2007 to 2008.
11
2006 2007 200826.5
27
27.5
28
28.5
29
29.5
30
30.5
30.5
29.31
30.02
28.1727.98
30.05
Pepsico Coca-Cola
%
Share of currents assets in total assets
Interpretation: Pepsico:
The fixed assets were increasing faster than current assets.
The structure of total assets shows that the company is
inelastic(inflexible)----they have more fixed assets than current assets.
Coca-Cola: The share of current assets increased from 28.17%to 30.05 % which is
the increase by 1.88 percentage points The reason of above
conclusion is that the The fixed assets were increasing faster than
current assets.
The structure of total assets shows that the company is
inelastic(inflexible)----they have more fixed assets than current assets.
3.2 Total liabilities structure
2006 2007 20080.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
22.29% 22.39% 24.41%
68.16%
56.24%64.79%
PepsicoCoca-Cola
Share of current liabilities in total
12
2006 2007 20080
102030405060708090
41.57
27.58
41.57
31.8438.56
35.21
Coca-ColaPepsico
%
Share of long term in total capital
2006 2007 20080
10
20
30
40
50
60
51.61
50.03
34.02
56.4750.25
50.52
PepsicoCoca-Cola
%Share of equity in total capital
Interpretation: Pepsico:
In 2006 the main source of financing the company was equity(The
share of equity in total capital was 51.61%,and the share of current
liabilities in total capital was 22.92%).
In the last year of analyses ,we can see that the share of equity in
total capital decreased to the level of 34.02%,and the share of long
term in total capital increased to the level of 41.57%.
Comparing the last year to the first year of analyses---the share of
equity in total capital decreased by 18 percentage points ,and the
share of long term in total capital increased by 16 percentage points.
Because the value of credits were increased much faster than value of
equity.
The structure of total liabilities is the optimal structure from the point
13
of view of risk and profit.
Coca-Cola: In 2006 the main source of financing the company was equity(The
share of equity in total capital was 56.47%,and the share of current
liabilities in total capital was 68.16%).
In the last year of analyses ,we can see that the share of equity in
total capital decreased to the level of 50.52%,and the share of long
term in total capital increased to the level of 35.21%.
Comparing the last year to the first year of analyses---the share of
equity in total capital decreased by 28 percentage points ,and the
share of long term in total capital decreased by 5.95 percentage
points. Because the value of credits were increased much faster than
value of equity.
3.3 Mixed structure
Pepsico 2008 2007 2006
Share of current liabilities in current assets 81.32% 76.38% 75.14%Share of equity in fixed assets 48.61% 70.78% 74.26%Share of equity and long term liabilities in fixed assets 108.02% 109.80% 110.91%
Coca-Cola 2008 2007 2006
Share of current liabilities in current assets
106.67% 109.25% 105.32%
Share of equity in fixed assets 142.17% 150.54% 142.05%Share of equity and long term liabilities in fixed assets
191.19% 208.00% 176.92%
Interpretation: Pepsico:
In 2006,the share of equity and long term liabilities in fixed assets was
110.91%.It means we have many equities and long term liabilities in
fixed assets.
Comparing the last year to the first year of analyses—the share of
equity and long term liabilities in fixed assets decreased by 3
percentage points, and the share of equity in fixed assets decreased
by 26 percentage points. The share of current liabilities in current
assets increased by 6 percentage points.
Total assets are increasing. And the company is inelastic(they have
more fixed assets than current assets.
Coca-Cola: In 2006,the share of equity and long term liabilities in fixed assets was
14
176.92%.It means we have many equities and long term liabilities in
fixed assets.
Comparing the last year to the first year of analyses—the share of
equity and long term liabilities in fixed assets decreased by 14.27%,
and the share of equity in fixed assets decreased by 0.12 percentage
points. The share of current liabilities in current assets increased by
1.35 percentage points.
Total assets are increasing. And the company is inelastic(they have
more fixed assets than current assets.
4. Income Statement analysis
Pepsico:
THE
GROWTH
2006 2008 Dolla
r %
I.Net revenues 35137 43251 8114 23.09
II.Operating Profit 6502 6935 433 6.66
III.Income before
Income Taxes 6989 7021 32 0.46
IV.Provision for
Income Taxes 1374 1879 505 36.75
V.Net
Income 5642 5142 -500 -8.86
Interpretation:
15
Pepsico: Net revenues increased by 23.09% between 2006 and 2008.because
the cost of sales, selling, general and administrative expenses ,and
amortization of intangible assets were increasing year by year.
Operating Profit increased by 6.66%. Because the bottling equity
income, Interest expense, Interest income are decreased.
Income before income taxes increased by 0.46%.
Provision for income taxes increased by 36.75%.
Net income decreased by 8.86%.
Coca-Cola:
2006 2008 Dollar %
15,924.00 20,570.004,646.00 29%
6,308.00 8,446.00 2,138.00 34%
I I I .I ncome bef ore I ncome Taxes6,578.00 7,506.00
928.00 14%
I V.Provision f or I ncome Taxes1,498.00 1,632.00
134.00 9%
V.Net I ncome
5,080.00 5,807.00
727.00 14%
I .Net revenues
THE GROWTH
I I .Operating Profit
Interpretation: Coca-Cola:
Operating Profit increase by 34% ,because other operating expenses increased about 55 times while the other operating revenues(income)
increased by bigger than half .
Gross profit from sales increases by 20% between 2006 and 2008.This
increase is smaller than the Net sales 33%.
Profit from sales increased 29%which gross operating profit increase
the same because Selling, General & Administrative (SG&A) Expense
increase in the same level.
Net revenues increased by 33% between 2006 and 2008.because the
cost of sales, selling, general and administrative expenses ,and
amortization of intangible assets were increasing.
16
5. Profitability analysis
ROE ROA ROS ROS20.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
21.65%
14.29%16.03% 16.21%
32.70%
16.34%18.16%
19.33%
38.96%
18.85%18.50% 19.89%
200820072006
Interpretation: Pepsico:
ROE=38.96% which means that each 100 dollar of equity generated
38.96 dollar of net profit. So this is profitability of our own
capital(equity).
ROA=18.85% which means that each 100 dollar of total assets
generated 18.85 dollar of net profits. So this ratio is telling about the
ability of total assets to generate the profits.
ROS=18.50% which means that from each 100 dollar of operational
revenues the company received 18.50 dollar of operational profits. So
this ratio is telling about the profitability of the production(operational
part of the company)
ROS2=19.89% which means that from each 100 dollar of total
revenues the company received 19.89 dollar of gross profits. So this
ratio is telling about the profitability of operational and financial
activities of the company.
ROS2 is bigger than ROS by 1.39 percentage point because the
financial revenuse is bigger financial expenses. So the financial
activites increased the profitability of the company.
ROS3=3.83% which means that from each 100 dollar of total
17
revenues the company received 3.83 dollar of net profits. The
difference between ROS3 is the taxes the company has to pay.
ROS decreases from 18.50% to 16.03% because:
a) the operating expenses are
increasing
faster than other operating
income.
b)cost of sales increased fast as
the cost
c）net revenues were increasing not of products were
increasing
ROS2 decreases from 19.89% to 16.21% because: a) The interest income
decreased about 4 times-from 173 thousands of dollar to the leavel of 41
thousands of dollar. Interest expense it is the interest rate which they
need to pay from taken bank credits.
ROE decreased from 38.96% to 21.65% because net profits decreased and
the equity increased (formula for ROE=net profits/equity). Why the net
profits decreased = the answer is in the conclusions number 7 and 8 in
this analysis.
ROA decreased from 18.85% to 14.29% because total assets increased
and net profits decreased (formula for ROA=net profits/total assets). Why
the net profits decreased = the answer is in the conclusions number 7 and
8 in this analysis.
ROE
ROA
ROS
ROS2
0.00% 10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%
28.37%
14.33%
27.54%
68.24%
27.51%
13.82%
25.13%
67.97%
30.02%
16.95%
26.19%
70.00%
200620072008
Interpretation: Coca-Cola:
ROE=30.2% which means that each 100Dollars of equity generated
18
30.2 Dollars of net profit .So this is profitability of our own capital.
ROA=16.95% which means that each 100Dollars of total assets
generated 16.95 Dollars of net profit .So this ratio is telling about.the
ability of total assets to generate the profits.
ROS1=26.19% which means that each 100Dollars of operational
revenues the company received 26.19 Dollars of optional profits.So
this ratio is telling about.the profiability of the production.
ROS2=70.00% which means that each 100Dollars of total revenues
the company received 70 Dollars of gross profits.So this ratio is telling
about.the profiability of operational and financial activities of the
company.
ROS2 is bigger than ROS1 by 43.81 percentage point because the
financial revenues is bigger than financial expenses.So the financial
activities increase d the profitability of the company.
ROS3=21.09% which means that each 100Dollars of total revenues
the company received 20.09 Dollars of net profits.The difference
between ROS3 and ROS2 is the taxes the company has to pay.
ROS1 increase from 26.19% to 27.54% because
other operating income are increasing much faster than other
operating expense net revenues were increased by 33%,cost of sales
increase increased almost 2times.
ROS2 decreases from 70% to 68.24% because gross profit increase
less than total revenue
ROE decreases from 30.2% to 28.37% because total revenue increase
two times bigger than net profit.
ROA decreases from 16.95% to 14.33% because total assets increased
bigger than net profit
The increase in the gross profit margin was attributable to favorable
price and product mix across the majority of our operating segments.
6. Liquidity analysis
P2008 C2008 P2007 C2007 P2006 C2006
Current ratio 0.33 0.94 0.92 0.29 0.95
Quick ratio 0.26 0.77 0.75 0.22 0.76
Cash ratio 0.12 0.53 0.5 0.09 0.47
Table Chart
19
Current ratio
Quick ratio
Cash ratio
0.00 0.20 0.40 0.60 0.80 1.00
P2006C2006
P2007C2007
P2008C2008
P2006C2006P2007C2007P2008C2008
Bar chart
Interpretation: Pepsico:
In 2006 the overall liquidity is optimal for all three ratios. So it means
that in 2006 the company had optimal level of all current assets and
short term liabilities.
In 2006 and 2008,the Current ratio ,Quick ratio and Cash ratio are too
big. It means that they have too much current assets liquid current
assets comparing to short term credits.
In the last year of analysis, the overall liquidity of the company
decreased. They did not have enough current assets to cover short
term credits. They also did not have enough cash resources to cover
short term obligations. It is negative and dangerous.
Coca-Cola: In 2006 the overall liquidity is optional for all three ratios.So it means
that that in 2006 the company had optional level of all current assets
and short-term liabilities.
In 2008 quick ratio and cash ratio is optional but current ratio was
little. So it means the company does not have enough resources to
cover short-term liabilities.
Coca-cola’s Current Ratio is below 2for those years but its ratio
increased from 2007 to 2008. They are more able to pay back their
short term debts.
In the last year of analysis, the overall liquidity of the company
increase. Means they not have liquid current assets to cover short-
term credits. They also have cash resources to cover short-term
obligations. It is negative but not dangerous.
7.Activity analysis
20
P06 C06 P07 C07 P08 CO8
Inventori
es
turnover
18.24 14.68 17.24 13.00 17.15 14.61
Days'
inventori
es
20.01 24.87 21.17 28.08 21.28 24.99
Trade
Receivabl
es
Turnover
9.43 9.31 8.99 8.70 9.24 10.34
Days'
receivabl
es
38.69 39.20 40.58 41.96 39.52 35.31
Trade
Payable
Turnover
2.3 0.81 2.33 0.70 2.32 0.78
Days'
Payables
158.8
6
449.0
5 156.88 522.25 157.6 467.24
Table chart
21
Inve
ntor
ies t
urno
ver
Days' in
vent
ories
Trad
e Re
ceiv
able
s Tu
rnov
er
Days' re
ceiv
able
s
0
15
30
45
P06C06
P07
P06C06P07
%
Bar chartInterpretation: Pepsico:
Days’ inventories=20 days(in 2006) which means that every 20 days
that company was renewing the inventories. In the next years they
made similar with this cycle. In 2007 this ratios equals 21 days. So it
means non- improvement for the company. The renew the inventories
are the same. For the Pepsico company it is general result.
Days ’receivables=39 days (in 2006) which means that every 39 days
the company is collecting short term receivables(they collect
cash).But in the next year it got much longer. In 2008 it take them 40
days .It almost the same as 2006.
Days ’payables=158 days (in 2006) which means that every 158 days
the company paid back the short term credits .But in the next it got
shorter, in 2007 it took 157 days and 2008 it took 158 days for the
company to pay back the short term credits. It is general trend.
Days’ payables got similar in the process. Because the company have
similar day with collecting receivables (days receivables about 38
days during 2006~2008).So they will not have problem with paying
back the credits.
In general it is said that its better first to collect money and then to
repay back the credits(so days’ receivables< days’ payables)As we
can see that this company as it said. It’s a good result for the
company.
Coca-Cola: Inventory Turnover in 2008 decreased slightly compared to 2007,but
is still the industry’s leader.
22
Day’s inventories=25which means that every 25days that company was
renewing the inventories. In the next year they made faster this cycle in 2007.However
in 2008 return in 25.
Day’s receivable=40 days ( in 2006) which means that every 40day the
company is collecting short-term receivables(They collect cash),but in the next
year it got much longer 42day.In 2008 it took them 40 again.
Receivable Turnover : 2006:9.31 times ,2008:10.34 times There is a
small difference in turnover, an increase means it takes less time for
the company to collect outstanding payments.
These averages are related to Receivable turnover, the company can
collect payments every 35.31 days on average.
Day’s payables=449(in 2006) which means that every 449days the
company is paid back short-term credits but in the next two year it
got much longer 465day.It negative trend.
Day’s payables got longer in the process because the company
started to have problems with collecting receivables(days receivables
increased to42 but later back to 40 again).
In general it is said that it’s better first to collect money and then to
repay back the credits(so days receivables<days payable)
8.SummaryAs that it should be said that both companies seem to be well management.
While Pepsico is in all ratios worse than Coca-Cola but still a suitable and safe
company .
In Pepsico the company is inelastic(they have more fixed assets than current
assets.
ConclusionsThis conclusions made by interpreting and financial data and ratios in the
previous parts of this report and summarized in following 3 conclusive
statements:
I.Pepsico is less profitable than its direct competitor Coca-Cola
II.Coca-Cola is more liquid than Pepsico.
III.Both companies have very safe financial structures and both are not facing
bankruptcy problems.
