Xacc 280 Final: Coke/Pepsi
Financial Analysis
Edward Kowalski
XACC/280
22July12
Dr. Edward Walden
University of Phoenix a) PEPSICO, INC. Trend Analysis of Net Sales and Net Income For the Five Years Ended 2005
Base Period 2001—(in millions) | | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | | | | | | | | | | | | | (1) | ------------------------------------------------- Net sales Trend | | $32562 | | $29261 | | $26971 | | $25112 | | $23512 | | | | +38.5% | | +24.5% | | +14.7% | | +6.8% | | 0% | | | | | | | | | | | | | (2) | ------------------------------------------------- Net income Trend | | $4078 | | $4212 | | $3568 | | $3000 | | $2400 | | | | +69.9% | | +75.5% | | +48.7% | | +25% | | 0% |
Significance of Results
The significance of the trend analyses on net sales and net income is that PepsiCo has been steadily increasing its sales over the past 5 years (for a total increase of $9 billion), since 2001. Clearly, they must have sound marketing and advertising strategies, in order to not just maintain their sales figures, but to maintain a growing increase each year. Up until 2005, they were performing equally admirably at increasing their net income as well. While their net income for 2005 is still an impressive 69.9% higher than in 2001, they went from 3 years of massive increases, to a slight decrease. Since the sales figures increased from 2004-2005, it’s not a question of having a “sales slump”. This means they must have increased expenses dramatically during 2005. We know this because net income is tabulated from the income statement, which consists of revenues and expenses. Logically, if sales have continued to increase, yet net income has fallen slightly, then there must have been a substantial
Edward Kowalski
XACC/280
22July12
Dr. Edward Walden
University of Phoenix a) PEPSICO, INC. Trend Analysis of Net Sales and Net Income For the Five Years Ended 2005
Base Period 2001—(in millions) | | | 2005 | | 2004 | | 2003 | | 2002 | | 2001 | | | | | | | | | | | | | (1) | ------------------------------------------------- Net sales Trend | | $32562 | | $29261 | | $26971 | | $25112 | | $23512 | | | | +38.5% | | +24.5% | | +14.7% | | +6.8% | | 0% | | | | | | | | | | | | | (2) | ------------------------------------------------- Net income Trend | | $4078 | | $4212 | | $3568 | | $3000 | | $2400 | | | | +69.9% | | +75.5% | | +48.7% | | +25% | | 0% |
Significance of Results
The significance of the trend analyses on net sales and net income is that PepsiCo has been steadily increasing its sales over the past 5 years (for a total increase of $9 billion), since 2001. Clearly, they must have sound marketing and advertising strategies, in order to not just maintain their sales figures, but to maintain a growing increase each year. Up until 2005, they were performing equally admirably at increasing their net income as well. While their net income for 2005 is still an impressive 69.9% higher than in 2001, they went from 3 years of massive increases, to a slight decrease. Since the sales figures increased from 2004-2005, it’s not a question of having a “sales slump”. This means they must have increased expenses dramatically during 2005. We know this because net income is tabulated from the income statement, which consists of revenues and expenses. Logically, if sales have continued to increase, yet net income has fallen slightly, then there must have been a substantial
References: Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2008). Financial accounting (6th ed.). Hoboken, NJ: Wiley.