Based upon my knowledge learned on financial reporting, I had compared to companies reporting statistics. The two companies in comparison are PepsiCo Incorperated and The Coca-Cola Company in which both have reported annual statistics for 2004 and 2005. During my comparison of net incomes, gross expenses, stock statistics, and assets accumulations, I have suggested some strategies for each business to take into consideration for better future results.
As an accountant in training, I will be giving specific details of my analysis and recommendations, as these are my opinions for financial success. As an investor both of these companies are up for consideration according to increasing revenue numbers. On the inside, this evaluation will give a determination of my opinion on rather to invest in either company and in what manners one outweighs the other and reasoning for my opinion. Investing one’s hard-earned money into a company is a risky decision to make, but in return, every investor hopes for the best possible outcome in risk taken.
Given financial information to evaluate before decision-making this is the best possible plan to making a positive call on an investment. Word of mouth is not enough for me to want to trust a company with my investments. Still being new at this type of research analysis and I still feel very confident in my judgments and determinations to decide if a company will be successful in return. Keeping in mind that no business is of any guarantee, anything can happen at any given time. Prior to investing regardless of prior statistics, it is important not to move forward with too many expectations in mind.
Investing is gambling. Beginning with PepsiCo I have calculated some ratios gathered form financial statements provided by my XACC-280 class Axia College. Further examination and evaluation of these ratios then led to the support of my suggestions given for future financial success. Comparing both companies are current ratio in which equals assets divided by liabilities. Vertical analysis is the current totals divided by the total equaling the percentage of sustainability. Furthermore, the horizontal analysis comparison increases or decreases from year to year. PepsiCo Inc
Current Ratio = Current Assets ? Current Liabilities 20052004 31,727= 1. 82:1 27,987 = 1. 93:1 17,47614,464 Vertical Analysis Horizontal Analysis 2005 2004 Assets 2005 2004 10,454 = . 33%8,639 = . 31% 10,454 – 8,639 ? 8,639 . 21% 31,72727,987 Liabilities 2005 2004 9,406 — 6,752 ? 6,752 = . 39% Current ratio explains that assets divided by liabilities meaning in 2005 current assets are 1. 2 times the liability obligation, and in 2004, 1. 93 times the liability owed. Statistics is the current assets are more than liability owed and the liability has lowered as of prior year. This is a positive trend. Vertical Analysis is current physical assets divided by total assets attained per physical year. Determination is in 2005 the current physical assets are 33% of total assets and in 2004 31% of the total assets is obtained. This is a positive outcome to have a higher percentage of physical assets. Horizontal Analysis is the percentage difference in compared years.
Indication in 2005 PepsiCo’s assets have increased 21% from the prior year, and liabilities have increased 39% from prior year. Increase in assets is a positive successful outcome; however, an increase in liabilities is not a positive unless the company has expanded or upgraded. Regardless, that the assets grew the liabilities increased they are still under asset accumulation but not leaving much net profit, and the liabilities gained too much too fast without explanation. Not a positive for investors and stockholders because liabilities are priority before net is to be paid to council.
Investors and creditors will want to see the increases in the assets and net profits but in return do not want to see the liabilities rise. Of course, liabilities will be expected to increase at one point or another but a 39% increase in just one physical year is not a good business move without proper acknowledgement of the plan in place or reasoning of actions. Much documented short-term liabilities are listed or as other with no detail, as the financial advisor I would definitely be asking more questions or proof of liabilities. PepsiCo’s revenue has increased dramatically per prior year stated about five thousand higher.
Price of stock is $2. 39 @ 1,782 shares in which is higher according to shares compared to the industry market however. Price dropped in the prior year, not significantly but for the revenue increase; this is not good for investors or for future investment opportunities. Continuing operations revenue has decreased slightly; exploring this avenue could result in larger net revenue for future success. As prior acknowledgement of horizontal analysis, my only major suggestion for this company is to reassess the liability obligations and work on decreasing this avenue.
Reevaluating the stockholders shares and payout would be the next good business thing to do for the partners and council involved. If liabilities are of necessity, then plan and provide the information for the determination to be, considering of proper evaluation of the financial assessment review. PepsiCo is still acquiring higher revenue than prior years so this indicates that their business in sales and product is something not to change. Trend analysis for the prior years does not indicate that this was the most positive year for this company.
Liabilities and stock decrease is not saying that they are providing for their investors much and liability decisions should be reviewed more before acting upon any future debit. Investors and banks want to see the liability decline and the profitability increase; this is a successful business trait. However, this company is still in the green with the future potential; just in need of some financial support for positive decisions. Suggesting board member meetings for decision approval may be a successful way to lead this operation for the future year to notice any changes in financial analysis.
Coca-Cola Current Ratio = Assets ? Liabilities 20052004 10,250 = 1. 04:112,281 = 1. 10:1 9,83611,133 Vertical Analysis Horizontal Analysis 2005 2004 Assets 2005 2004 10,250 = . 35% 12,281 = . 39% 10,250 – 12,281 ? 12,281 = (. 16)% 29,427 31,441 Liabilities 2005 2004 ,836 — 11,133 ? 11,133 = (. 12)% Current ratio explains that assets divided by liabilities meaning in 2005 current assets are 1. 04 times the liability obligated, and in 2004, 1. 10 times the liability owed. Statistics are showing that the assets have lowered slightly from the prior year, but the assets still out way the liabilities. Not necessarily, a negative approach because of a slight steady decrease and not very positive, but is levitating. Vertical Analysis is current physical assets divided by total assets attained per physical year.
Determination is in 2005 the current physical assets are 35% of total assets, and in 2004, 39% of the total assets is obtained. This is a negative outcome to have a lower percentage of physical assets. However, this is still a slight change and showing that total assets decreased from prior year makes this seem not as of huge importance. Horizontal Analysis is the percentage difference in compared years. Indication in 2005 Coca Cola’s assets have decreased 16% from the prior year, and the liabilities also have decreased 12% from the prior year.
Decrease in assets is not a positive outcome; however, a decrease in the liabilities adjusts the dramatic change in fluxion, the decrease in liabilities almost matches the decrease in assets obtained so compared they both indicate equal changes. Regardless that the assets and liabilities are decreased over time there is still net profit because the assets are still exceeding the liabilities. Net profit, is still a positive outcome for investors and stockholders; however, the company and profit is not growing quickly, but it is a steady positive trend.
According to Coca-Cola’s financial statements of cash flows reports that in one year the companies financing and investing activity cost have almost tripled in one short year. Furthermore, the net income from the operating activities is of similar amount as prior year the over cost and retained earnings are not matching amounts for payout. In return, this is simply to define the outcome of net profit. This company should examine financing activities such as purchases of stock for treasury, payments of debits, and the total decrease in cash flows.
Stock price per share is of value $2. 04 up from prior year and on a steady increase trend. Accumulative amount of shares sold is well higher than compared to the industry norm, and still slightly lower than the prior year, but nearly a thousand more shares than PepsiCo incorporated. Yearly cost of supplies and merchandise have increased; but is still extremely within margin of market retail to make the necessary net income. Coca-Cola’s operating income has risen but then so does the taxes in which makes for the yearly increase so it is if nothing controllable is at question.
Concluding suggestions for Coca-Cola Company my research indicated for them to be more aware of the budgeting for the operating, financing, and investing activities. Board members and partners are not easily being happy about the negative increases in assets and profits. However, this company is still making money and maintaining manageable liabilities. Some consumer suggestions would be to explore possible upgrades and advertising, examining other new ideas to spice up the current trend.
Both companies are profitable however; with minor adjustments and some good advice, they will become much more profitable and successful. If I were to invest in one of these companies, I would choose Coca-Cola. Furthermore, a profitable company with manageable liabilities and considerable concern about stockholders equity and value. Steady analysis is the key to my decision no sudden dramatic changes with steady increase ability. Within the next five-year trend, I believe that the Coca-Cola investment would be the most positive move for any investor. PepsiCo Company is not at risk or at a loss currently.
Nevertheless, as an investor concluding that a company is accumulating more debits rapidly in a short amount of time, this will deter my decision for investment. Furthermore, the fact of the financial obligations not being better explained makes me unsure of the integrity of this companies reporting’s’ and their decisions made. I am extremely certain that this will not pass by a creditor, and future credit will sustain ability.
References Axia College Week 7 Supplement Document Ch15, Retrieved from class: XACC/280 . (2010). Financial Statement Analysis .