Pepsico vs. Coca-Cola
PepsiCo vs. Coca-Cola – A Financial Comparison
June 13, 2007
AC550 May 2007 Executive Summary The purpose of this comparative analysis is to provide a summary of financial and accounting information to a potential investor who is looking to invest in either Coca-Cola or PepsiCo. This research will cover some facts from the financial statements of both companies for the year of 2004.
There are many factors to review when comparing these two companies. They are two of the top manufacturers of CSDs (carbonated soft drinks) in the world. Coke’s portfolio is weighted more heavily in the soft drink beverage industry, whereas PepsiCo has tried to diversify itself by merging with companies such as Quaker, Tropicana, and Gatorade.
As one reads the data below, one may keep in mind these calculations and summaries. From the analysis, PepsiCo turns its inventory into sales faster than Coke, 40 days and 64 days respectively. More sales mean more receivables and theoretically, more cash into the company. Additionally, PepsiCo is slightly better at managing its receivables. Once those inventories are turned into sales, PepsiCo receives cash on accounts receivables five days more quickly than Coke.
PepsiCo is also beating Coke in Working Capital (Current Ratio) as well as the Current Cash Debt Coverage Ratio. Liquidity ratios provide insight as to how easily a company can pay off its short-term obligations without having to obtain additional financing.
Coke on the other hand has a smaller amount of sales, but generates a larger amount of net income. Net income for Coke grew by about 60% over the three years ending in 2004, whereas PepsiCo’s net income only grew about 40%. A concern for PepsiCo may be their cost of goods sold as it continues to be approximately 10% higher than Coke’s cost of goods sold. Another factor for PepsiCo was the restructuring and impairment charge incurred during 2004 due to Frito Lay North America consolidating its
June 13, 2007
AC550 May 2007 Executive Summary The purpose of this comparative analysis is to provide a summary of financial and accounting information to a potential investor who is looking to invest in either Coca-Cola or PepsiCo. This research will cover some facts from the financial statements of both companies for the year of 2004.
There are many factors to review when comparing these two companies. They are two of the top manufacturers of CSDs (carbonated soft drinks) in the world. Coke’s portfolio is weighted more heavily in the soft drink beverage industry, whereas PepsiCo has tried to diversify itself by merging with companies such as Quaker, Tropicana, and Gatorade.
As one reads the data below, one may keep in mind these calculations and summaries. From the analysis, PepsiCo turns its inventory into sales faster than Coke, 40 days and 64 days respectively. More sales mean more receivables and theoretically, more cash into the company. Additionally, PepsiCo is slightly better at managing its receivables. Once those inventories are turned into sales, PepsiCo receives cash on accounts receivables five days more quickly than Coke.
PepsiCo is also beating Coke in Working Capital (Current Ratio) as well as the Current Cash Debt Coverage Ratio. Liquidity ratios provide insight as to how easily a company can pay off its short-term obligations without having to obtain additional financing.
Coke on the other hand has a smaller amount of sales, but generates a larger amount of net income. Net income for Coke grew by about 60% over the three years ending in 2004, whereas PepsiCo’s net income only grew about 40%. A concern for PepsiCo may be their cost of goods sold as it continues to be approximately 10% higher than Coke’s cost of goods sold. Another factor for PepsiCo was the restructuring and impairment charge incurred during 2004 due to Frito Lay North America consolidating its