Coca-Cola and PepsiCo companies are the two major competitors at the world market of soft drinks. Let us examine these companies in terms of financial figures using the data provided by the companies in 2004 and 2005. Conducting vertical financial analysis, we will be able to verify the differences in the companies’ finances. Reviewing the income statements and balance sheets of the companies will be helpful.
Vertical analysis is used to compare the asset and liability account categories, as well as the reports on liability accounts against asset accounts on the balance sheet. In 2004, PepsiCo’s total assets were $27,987, and next year they summed up to $31,727. Coca-Cola’s assets were $31,441 in 2004 and $29,427 in 2005.
As for the balance sheets of each corporation, we can see that in 2004 Coca-Cola’s cost of merchandise sold was $7,674. This equals a ratio percentage of 24.4% of their total assets. In 2005 this cost was $8,195, or 27.8% of the total assets. PepsiCo’s cost of merchandise sold totaled up to $12,674, which equaled to 45.3% in 2004, and $14,176 which made 44.7% in 2005. Within a year the results of PepsiCo increased by 5%, while Coca-Cola had an increase by 3.4%. These are not necessarily positive results, since the single figure does not show if the increase is a positive measure.
Net income of PepsiCo in 2004 was $4,212, or 15.1% of total assets. In 2005, the corporation’s net income was $4,078, or 13.2% of their total assets. This reveals the decrease in the company’s net income by 1.9% between 2004 and 2005. Within the same period PepsiCo also showed a decrease in sales. Meanwhile, Coca-Cola had a net income of $4,847 in 2004, or a ratio percentage of 15.4%. In 2005 the company’s net income was $4,872, or a ratio of 16.6% of their total assets. This shows an increase of 1.2% between 2004 and 2005. Despite of this increase, the cost of merchandise sold increased by 3.4%, making this a negative indication for Coca-Cola.
Speaking of current liabilities, in 2004 PepsiCo’s total was $6,752 which equaled to 24.1%, and in 2005 the liabilities were $9,406, or 29.9%. This shows that PepsiCo’s assets increased by 2% due to the company taking on more liabilities. Coca-Cola’s current liabilities were $11,133, or 35.4% in 2004, and $9,836, or 33.4% in 2005. This shows a decrease of their liabilities by 1%. These figures show that both companies had a larger percentage of liabilities to assets in 2005 compared to 2004.
Coca-Cola and PepsiCo companies are the two major competitors at the world market of soft drinks. Let us examine these companies in terms of financial figures using the data provided by the companies in 2004 and 2005. Conducting vertical financial analysis, we will be able to verify the differences in the companies’ finances.