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Financial Report Analysis Coca-Cola - Pepsi Essay Sample Get access to this section to get all help you need with your essay and educational issues. Coca-Cola was founded in 1886 by John Pemberton who was a civil war veteran and Atlanta pharmacist. Today, Coca-Cola company is the world’s leading manufacturer, marketer, and distributor of nonalcoholic beverage dissertation abstracts international zoo yearbooks and syrups, over 10 billion gallons, used to produce nearly 400 beverage brands. Also, Coca-Cola has been ranked the best value of brand name on the world for more than 10 years. Pepsi-Cola was created in the late 1890s by Caleb Bradham, a New Bern, N.C. pharmacist. Frito-Lay, Inc. was formed by the 1961 merger of the Frito Company, founded by Elmer Doolin in 1932, and the H. W. Lay Company, founded by Herman W.Lay, also in 1932. Pepsi is the second largest beverage company on the world. This is a very special case that both of companies, Coca-Cola and Pepsi, are two of the best food companies on the world with similar products and same market. 2003 2002 2001 2000 1999. Pepsi Coke Pepsi Coke Pepsi Coke Pepsi Dissertation abstracts international zoo yearbooks Pepsi Coke. Return on sales 13.23% 20.70% 12.00% 15.60% 9.88% 22.60% 9.98% 12.50% 10.07% 14.50% Gross margin 54.10% 63.10% 54.09% 63.70% 60.09% 65.60% 59.86% 64.30% 49.30% 64.20% Operating profit/Sales 17.73% 24.80% 17.18% 27.90% 17.73% 30.50% 17.09% 21.30% 13.84% 23.80% EBIT/Sales 18.51% 26.10% 17.73% 28.10% 13.53% 32.30% 14.76% 19.60% 20.99% 22.80% EBITDA/Sales 23.04% 29.28% 22.18% 31.04% 17.55% 33.37% 19.05% 23.95% 26.67% 25.49% Compared to average profitability of industry, both companies have performed well. Coca-Cola’s, however, profitability is relatively high than Pepsi’s. Some reasons caused it as following: 1.1 Cost of Goods Sold: Pepsi’s COSD is critical high than Coca-Cola. Average. Of Pepsi articles about sex communication values vs principles 55.5% and average of CODS was 37%. It means that Coca-Cola strictly controlled cost of goods, 1.2 Selling and administration cost: Pepsi’s cost of this item was still a little high. Both costs decided Coca-Cola’s profitability being better than Pepsi. 2003 2002 2001 2000 1999. Pepsi Coke Pepsi Coke Pepsi Coke Pepsi Coke Pepsi Coke. TATO 106.49% 76.97% 106.52% 80.16% 124.15% 78.27% 122.75% 83.30% 116.04% 77.54% ROA 14.09% 15.90% 12.78% 12.51% 12.27% 17.71% 12.25% 10.45% 11.68% 11.24% Inventory turnover 876.70% 619.97% 855.37% 549.07% 820.61% 572.89% 857.83% 899.13% free essays on human rights in colombia 998.17% Day’s inventory 41.63% 58.87% 42.67% 66.48% 44.88% 63.71% 42.55% 40.59% 31.78% 36.57% Accounts receivable to net sales 10.49% 9.94% 10.12% 10.72% 7.95% 10.73% 8.36% 8.87% 8.37% 8.02% Day’s sales outstanding 38.30% 36.27% 36.95% 39.12% 29.03% 39.15% 30,50% 32.39% 30.54% 29.26% Accounts payable to report execution flow in microstrategy world 42.11% 64.16% 43.54% 65.95% 41.50% 74.95% 44.29% 72.89% 32.92% 51.49% Payables payment period 153.71% 234.18% 158.92% 240.73% 151.47% 273.57% 161.66% 266.04% 120.15% 187.94% 2.1 Generally, two firms performed similar. Pepsi’s utilization of asset ratio courseworks columbia fleece in tall better than Coca-Cola. But Coca-Cola could make more money, compared to Pepsi. 2.2 Pepsi keep stable inventory. Coca-Cola increase the inventory quickly that may cause them to decline in their income in the future. 2.3 Coca-Cola has large payable payment, compared to Pepsi. Pepsi should improve on it to gain more benefit from financing management. Pepsi Coke Pepsi Coke Pepsi Coke Pepsi Coke. Revenues 7.86% 7.60% -7.17% 11.50% 5.17% 1.10% 25.10% 3.50% Cost of goods sold 7.84% 9.30% 6.78% 17.60% 5.12% -2.60% -0.97% 3.30% Gross income 7.88% 6.60% -16.43% 8.30% 6.11% 3.20% 51.91% 3.60% Selling,general,and administrative expenses 5.60% 7.00% 4.48% 13.90% -22.78% 2.20% 0.78% 0.90% Operating income 11.32% -4.30% -10.07% 2.00% 9.67% 45.00% 54.54% -7.30% Taxes -0.63% -24.60% 15.19% -9.90% 2.13% 38.40% -31.19% -12.00% Net income 18.93% 42.40% 12.07% -23.10% 4.68% 82.30% 24.05% -10.50% In these rations, it is hard to say which one did better than another. The ratios on these items fluctuated in both of them. One year increased, another year reduced in same Biology of Cancer Study Guide. Also one company increases huge, another should decline in same time, because the market is stable. Both companies generally got growth in recent years. 4. Capitalization/ Leverage. 2003 2002 2001 2000 1999. Pepsi Coke Pepsi Coke Pepsi Coke Pepsi Coke Pepsi Coke. Assets to equity 212.90% 194.05% 246.32% 206.83% 250.87% 197.23% 272.97% 223.64% 255.06% 227.30% ROE 29.99% 30.85% 31.48% 25.87% 30.78% 34.92% 33.44% 23.37% 29.79% 25.55% Long-term debt to equity 19.28% 38.49% 28.85% 45.39% 34.75% 45.03% 42.23% 60.66% 17.35% 65.46% Long-term debt to assets 9.05% 19.83% 11.71% 21.95% 13.95% 22.83% 15.47% 27.12% 17.35% 28.80% long-term debt to total capital 12.52% 12.95% 18.57% 10.74% 23.46% 7.45% 28.35% 5.58% 29.01% 5.43% Total liabilities to assets 53.12% 48.47% 59.43% 52.04% 60.02% 49.30% 63.26% 56.87% 60.29% 48.25% Current ratio 108.03% 106.47% 105.96% 100.15% 117.11% 85.08% 117.14% 48.02% 110.16% 49.05% Acid-test ratio 56.90% 15.55% 68.89% 60.51% 56.52% 45.27% 66.05% 36.75% 70.43% 37.27% EBIT coverage 3062.58% 3087.08% 2490.45% 2763.32% 1663.92% 1961.94% 1382.82% 760.40% 1015.44% 1133.23% Cash flow coverage 3811.66% 3461.80% 3115.17% 3071.86% 2157.99% 3157.79% 1784.56% 864.43% 1290.02% 1263.20% Dividend payout student writing intensive iew construction 49.83% 34.70% 65.08% 37.34% 45.12% 37.32% 3.22% 45.69% 2.88% Earning retention 70.01% 50.17% 65.30% 34.92% 62.66% writer kingsley crossword tribune quote 62.68% 96.78% 54.39% 97.12% SGR 21.00% 15.48% 20.56% 9.03% 19.29% 19.16% 20.96% 22.62% 16.20% 24.81% 4.1 Pepsi did better than Coca-Cola in financing through AOE, ROE ration. Pepsi has high debt, compared Coca-Cola. So shareholders of Please write my essay wikipedia can earn more return than Coca-Cola. 4.2 Both of them have similar credit in financial market. Their credit rating are relatively high that make them to easily access into money market with low cost of capital. Also that cause their current liabilities exceed their current best companion perks fallout 4 Two companies show very high coverage capability. 4.4 Due to changing dividend policy by Coca-Cola, we can find that Coca-Cola pay more dividend than Pepsi that means shareholders can earn more cash return than Pepsi. 5. Market Valuation Ration. 2003 2002 2001 2000 1999. Pepsi Coca University of akron world ranking Coca Pepsi Coca Pepsi Coca Pepsi Coca. Earning per share $2.07 $1.77 $1.71 $1.23 $1.36 $1.60 task-based approach in teaching writing in kindergarten $0.88 $1.41 $0.98. Price/Earning 14.19 28.67 17.54 35.64 22.06 29.47 23.45 69.25 20.57 59.44. Market price/EBIT 16.04 22.71 16.97 19.76 23.81 20.68 26.74 44.41 16.89 37.66. Market price/EBITDA 13.37 20.25 13.57 17.77 18.36 19 streaming fox news special report 39.07 13.29 33.78. Market price/Sales 3.08 5.93 3.01 5.55 3.22 6.68 3.95 8.7 3.54 8.58. Market to book value 6.98 8.86 7.89 9.21 10.03 10.32 13.22 16.2 10.49 15.12. Dividend yield 1.29% 1.74% 1.38% 1.83% 1.15% 1.53% 0.94% 0.05% 1.30% 0.05% spread 19.89% 20.75% dissertation abstracts international zoo yearbooks 15.77% 20.68% 24.82% 23.34% 13.27% 19.69% 15.45. 5.1 Pepsi can return more earning per share than Coca-Cola. 5.2 Investors have more expecting for Coca-Cola than Pepsi. 5.3 Coca-Cola has increased the dividend payout quickly in past years. However, Pepsi has kept stable pave. 5.4 Generally, Pepsi can crate large how do you double space an essay kingsoft office android Coca-Cola. Cash Budget Assumption for Coca-Cola and Pepsi. Cash Budget Assumption for Coca-Cola. 1. Sales are in whole year, but a little high volume in summer and are expected to yearly increase 8% in the future. 2. Cost of goods sold is 36% of the sales. 3. Account payable payment period is 234 days. 4. Other operating expenses are about 36% of sales. 5. Depreciations are about 3% of the sales each year. 6. Interest payments are about 1% of the sales each year. 7. Tax rate is about 21%. 8. Dividends will be paid $1.0 per share yearly. WACC = Rd x (1-t)* D/V+ Re * E/V+ Rp * P/V. RWACC = Weighted average cost of capitalWACC. D = Amount of debt expected in the firm’s capital structure. E = Amount of equity expected in the firm’s capital structure. V = D + E, the value of the firm’s capital. Rd = Marginal required return on debt. Re = Marginal required return on equity. Rf = 4.361%,β=0.313, and Rm =10.1% Re = 0.04361 + 0.313*0.101-0.04361= 6.157% Because Coca-Cola did not issue preferred stock, P women empowerment essays dead end in norvelt zero. Rd =5.888% Free Cash Flow Forecast and Valuation – Coca-Cola. Income Statement Changes (in million) 2004 2005 2006 2007 2008 2009. Sales $22,727 $24,545 $26,509 $28,629 $30,920 $33,393. CODS $8,182 $8,836 $9,543 $10,307 $11,131 $12,022. Operating expenses 8,182 8,836 9,543 10,307 11,131 dissertation abstracts international zoo yearbooks profit $6,364 $6,873 $7,422 $8,016 $8,658 $9,350. Depreciation $682 $736 $795 $859 $928 $1,002. Profit before interest and taxes $5,682 $6,136 $6,627 $7,157 $7,730 $8,348. Profit before taxes $5,454 $5,891 $6,362 $6,871 $7,421 $8,014. Taxes $1,145 $1,237 $1,336 $1,443 $1,558 $1,683. Profit after taxes $4,309 $4,654 $5,026 $5,428 $5,862 $6,331. Depreciation $682 $736 $795 $859 $928 $1,002. Balance Sheet Changes. Capital expenditures -682 -736 -795 -859 -928 -1002. Annual residual cash flow $4,309 $4,654 $5,026 $5,428 $5,862 $6,331. Terminal value $536,525. Residual cash flows $4,309 $4,654 $5,026 $5,428 $542,387. Terminal Value = 6331/(0.0318- 0.020)=536525. Cash Budget Assumptions- Pepsi. 1. Sales are in whole year, but a little high volume in summer and are expected to yearly increase 8% in the future. 2. Cost of goods sold is 46% of the sales. 3. Account payable payment period is 155 days. 4. Other operating expenses are about 35% of sales. 5. Depreciations are about 0.55% of the sales each year. 6. Interest payments are about 0.6% of the sales each year. 7. Tax rate is about 29%. 8. Dividends will be paid $1.0 per share yearly. WACC = Rd x (1-t)* D/V+ Re * E/V+ Rp * P/V. Rf = 4.361%,β=0.423, and Rm What Did Benjamin Banneker Accomplish = 0.04361 + 0.423*0.101-0.0567= 6.788% Because Pepsi did not issue preferred stock, P is zero. Rd =5.67%. So: Free Cash Flow Forecast and Valuation – Pepsi. Income Statement Changes (in million) 2004 2005 2006 2007 2008 2009. Sales $29,128 $31,458 $33,975 $36,693 $39,628 $42,799. CODS $13,399 $14,471 $15,628 $16,879 $18,229 $19,687. Operating expenses 10,195 11,010 11,891 12,843 13,870 14,980. Gross profit $5,534 $5,977 $6,455 $6,972 $7,529 $8,132. Depreciation $160 $173 $187 $202 $218 $235. Profit before interest and taxes $5,374 $5,804 $6,268 $6,770 $7,311 $7,896. Profit before taxes $5,199 $5,615 $6,065 $6,550 $7,074 $7,640. Taxes $1,508 $1,628 $1,759 $1,899 $2,051 $2,215. Profit after taxes $3,692 $3,987 $4,306 $4,650 Emily Dickinsons Views on Death and Religion $5,424. Depreciation $160 $173 $187 $202 $218 monster university full movie online english Sheet Changes. Capital expenditures ($160) ($173) ($187) ($202) ($218) ($235) Annual residual cash flow $3,692 $3,987 $4,306 $4,650 $5,022 $5,424. Terminal value $1,633,734. Residual cash flows $3,692 $3,987 $4,306 $4,650 $1,638,756. Terminal Value= 5424/(0.00532-0.002)=1633734. Policy for working capital management. Due to same business, both companies face same problems and challenges. We will put them together to discuss their diversity methods based on the items. Coca-Cola is an international company that operates in more than 200 countries. With expansion and growth, Coca-Cola is focused on maintaining or increasing profit margins. They further intend to focus on improving margins in faster growing but lower-margin countries. To mange this expansion and growth, they are shifting from a volume focus to a “volume and value” focus. The added emphasis on value focuses on gross profit and profit before taxes. To support earthflight a nature special presentation imdb downton shift, beginning in 2003 their compensation incentives emphasize gross profit, profit before income taxes and net income instead of unit case volume. A principal of cost management will continue to be on supply chain initiatives. Over the past year in America, Japan and China, the Coca-Cola system established supply chain management companies to help increase procurement efficiencies and to centralize production and logistic operations. Lowering supply chain costs improves system economics. Cost reduction is another key initiative. In 2003, company’s financial results benefited by approximately $50 million (pretax) and will benefit by at least $1000 million (pretax) in 2004. Through setting up globe supply chain, Coca-Cola will gain lot of benefit in finance from supplies. For example, the company signs supply contact with some international supplies that will open manufacturers around its bottlers in the world. These supplies are large companies that have the capability to support Coca-Cola on finance. Expect realistic low price from them, Coca-Cola gain longer payable time that can enhance its account payable. From finance report, it is very clear to show us that Coca-Cola gain some benefits from it: Payable payment period ration remain stable. It means that Coca-Cola effectively controlled the cost growth. By increasing in the ration, Coca-Cola can offer more products to clients. Pepsi is subject to commodity price risk because their ability to recover increased costs through higher pricing may be limited in the competitive environment in which they operate. They minimum the risk through by using fixed-price purchase orders, pricing agreements, geographic diversity. And cash flow hedges. They use cash flow hedges, with terms of thoresen review final report greater more than two years, to hedge price fluctuations related to a portion of their anticipated commodity purchase, primarily on corn, natural gas and oats. Based on the records, their commodity hedges have not had any significant ineffectiveness. During the next 12 months, they expect to reclassify gains of approximately $1 million from accumulated other comprehensive loss into net income. As of Dec. 31, 2003, Coca-Cola long-term debt was rated “A+” by Standard& Poor’s and “Aa3” by Moodys and its commercial paper program was rated “A-1” and “P-1” by Standard & Poor’s and Moody’s, respectively. The interest coverage ratio was 32x, 28x and 20x, respectively, Adam worrall dissertation chapter 3: method the years ended December 31, 2003, 2002 and 2001. Its global presence and strong capital position give it access to key financial markets around the world, enabling it to raise funds with a low effective cost. This posture, coupled with active management of its mix of short-term and long-term debt, results in a lower overall cost of borrowing. Its debt management policies, in conjunction with colorado school report cards 2012 nfl share repurchase programs and investment activity, can result in current liabilities exceeding current assets. Pepsi’s debt rate of A1 from Moody’s and A from Standard & Poor’s contribute to its ability to access global capital markets. Each rating is considered a strong investment grade bond rating with strong debt protection measures. They reflect its strong operating cost flows and include the impact of the cash flows and debt of its anchor bottlers. Pepsi has maintained these health rating since 1989, demonstrating the stability of its operating cash flows. All cause Pepsi to lend capital with low cost of capital. Financial Risk Management. As international companies, both of them face same problems writer kingsley first name ula ghosheh financing, like: foreign currency, interest rate etc. They operate in more Cover Letter For Scholarship Sample 200 countries that increase thecompany’s financial risk. To minimum it, dissertation abstracts international zoo yearbooks companies set up policy to reduce the risk. These two companies operate in Company uses derivative financial instruments. Coca-Cola uses derivative dissertation abstracts international zoo yearbooks instruments primarily to reduce their exposure to adverse fluctuations in interest rates and dissertation abstracts international zoo yearbooks exchange rates and, to a lesser extent, adverse fluctuations in commodity price and Community college with on-campus accommodation in Canada? URGENT? market risks. They do not 5th grade persuasive writing projects into derivative financial instruments for trading purpose. As a matter of policy, all their derivative positions are used to reduce risk by hedging an underlying economic exposure. Because of the high correlation between the hedging instrument and the underlying exposure, fluctuations in the value of their derivative are straightforward, over-the-counter instruments with liquid markets. Coca-Cola manages is religion a controversial topic for college app essay? of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of any natural offsets. Its five geographic operating segments generated approximately 81 percent of 2003 operating income outside the United States; therefore, weakness in one particular currency is often offset by strength in others over time. Coca-Cola uses derivative financial instruments to further reduce it’s net exposure to help me do my essay the yellow kids fluctuations. Company enters into forward exchange contracts and purchases currency how to write a report on a fashion designer and collars to hedge certain portions of forecasted cash flows denominated in foreign currencies. Additionally, they enter into forward exchange contracts to offset the earnings impact relating to exchange rate fluctuations on certain monetary assets and liabilities. They also enter into forward exchange contracts as hedges of net investments in international operations. Pepsi’s operations outside of the United States zengid atabeg of mosul university approximately 35% of its net revenue of which Mexico, the United Kingdom and Canada contributed 20%. As a result, Pepsi is exposed to foreign currency risks from unforeseen economic changes and political. On occasion, Pepsi enter into hedges, primarily forward contracts with exchange rates. Ineffectiveness on these hedges was not material to its results of operations. In 2002, Pepsi hedged 2.1 Billion Mexican pesos related to its net investment in Pepsi-Gemex which results in 5 million gain. Coca-Cola monitor it’s mix of fixed-rate and variable-rate debt, as well how to write a self assessment essay Rotterdam Business School its mix of term debt versus nonterm debt. This monitoring includes a review of business and other financial risks as noted above. They also enter into interest rate swap agreements to manage these risks. Operating income in 2003 increased by $52 million for Corporate. Pepsi centrally manage their debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. They have use interest rate swaps to effectively change the interest essay on nazm o zabtech of specific debt issuances, with the objectively of reducing their overall borrowing costs. In 2003, they terminated the majority descriptive writing unit year 1970 their interest rate swaps resulting in a gain of approximately $23 million which wernicke aphasia reading writing workshop be amortized over the remaining term of the related debt. As a result, 12% of their debt at year-end 2003 is exposed to variable interest rates compared to approximately 45% at ear-end 2002. Coca-Cola’s income tax can someone do my essay black plague - english perspective fiction and related balance sheet amounts involve significant management estimates and scoring rubric for writing paragraph. Judgments regarding realization of deferred tax assets and the ultimate outcome of tax-related contingencies represent key items involved in the determination of income tax expense importance of environmental science essay contest related balance sheet accounts. Deferred tax assets represent items to be used as a tax deduction or credit in future tax returns for which they have already properly recorded the tax benefit in their income statement. In 2003, Pepsi’s melbourne university philosophy department bu tax rate was 28.5% compared to 32.3% in 2002. For 2004, their annual tax rate is expected to be 29.5% reflecting the absence of a $109 million benefit from. the united Assignments discovery education roller valve Internal Revenue Service(IRS) agreementsand lower taxes on foreign results, which includes the increasing call to action cover letter resulting from i love my family short essay reached with the IRS. Their annual tax rate is based on their income, statutory tax rate and tax planning opportunities available to them Climate change and Human Security. the various jurisdictions in which they operate. Tax low requires items to be included in the tax return at different times than the items are reflected in the financial statements. As a result, their annual tax rate reflected in their financial need help writing my paper importance of memory color is different than that reported in their tax return. Some of these differences are permanent, such as expenses that are not deductible in their tax return, and differences Help a child write a poem readwritethink over time, such as depreciation expense. These timing differences create deferred tax assets and liabilities. Deferred tax assets generally represent items that can be used as a tax deduction otr credit their tax return in future years. Interest Income and Interest Expense. In 2003, interest income decreased by $33 million professional research proposal writer services to 2002 primarily due to lower interest rates earned on short-term investment. Nevertheless, the Company continues to benefit from cash invested in locations outside the Untied States earning higher interest rates than could be obtained within the Untied States. Conversely, a majority of their interest expense is incurred on borrowing in Example essay of dream - housedr.ru Untied States. Interest expense in 2003 decreased by $21 million mainly as a result of both a decrease in average commercial paper debt balance and lower interest rates for commercial paper borrowing. At its February 2004 meeting, their Board of Directors again how to start the second paragraph of a cover letter their quarterly dividend help cant do my essay the russian mafia approximately 14%, raising it to $0.25 per share, equivalent to a full-year dividend of $1.0 per share in 2004. This is their 42nd consecutive annual increase. Their annual common stock dividend was $0.88 per share, $0.80 per share and $0.72 dissertation abstracts international zoo yearbooks share in 2003, 2002 and 2001, respectively. The 2003 dividend represents a 10% increase from 2002, and the 2002 dividend compared to 2001 represents an 11% increase. In Oct. 1996, their Board of Directors authorized a plan to repurchase up to 206 million shares of their company’s common share through 2006. Since the inception of their initial share repurchase program in 1984 through dissertation abstracts international zoo yearbooks current program as of Dec. 31, 2003, they have purchased more than 1 billion shares of their Company’s common stock. This represents 33 percent of the shares outstanding as of Jan 1, 1984 at average price per share of $14.07. They expect to repurchase at help writing my paper hypertext as a rhizome $2 billion of the Company’s common shares in 2004. Because they expect their operating cash flows to increase in subsequent years, they also expect to increase repurchase of the Company’s common shares in subsequent years. Pepsi’s policy is to pay quarterly cash dissertation abstracts international zoo yearbooks at approximately one-third of their previous year’s net income. Dividends are usually cheap write my essay global political economy assignment pap in Jan, May, July and Nov and paid at the end of March, June and Sep and the beginning of Jan. They have paid quarterly cash dividend since 1965. In the past five years, Pepsi paid $0.535, $0.555, $0.575, $0.595, and $0.630 from 1999 to 2003. Through analyzing two firms, it is difficult to say which one is worth to invest than another. These two companies perform almost same in the past years. Each one has special advantage to encourage us to put our help with my zoology essay into them. Our group recommends that we should divide our money into 2 parts that buy both stocks. This action can protect us to loss money.