Report
Introduction
Pepsi is a well-recognized, American soft drinks and fast food producer; its officially known as PepsiCo Inc. It is among the top beverage producers in the world, moreover its main headquarters are in New York, PepsiCo Inc. .The Company was established in 1965, and this was after Frito-Lay Inc. accepted to join together with Pepsi-Cola Company therefore increasing the types of products being produced in food and beverages. Its main products are such as Pepsi, Quaker Oats and Tropicana, it is also known as the closest competitor of Coca cola Co. The company is also listed at the NYSE with its stock symbol being PEP; its stock price is around $1000 by the end of 2018 fiscal year.
On the other hand when it comes to the Coca cola Company, it is, an American Beverage corporation, which has its main headquarters located in Atlanta of the state of Georgia. This corporation is a, multinational marketer, retailer and also manufacturer of soft non-alcoholic drinks and syrups. The company is a franchising type of entity whereby bottling is carried out by other companies all over the world. Coca-Cola Company has products such as Coke which is rated as, the bestselling soft drink. However there is also Fanta, Dasani, vitamin water, Minute Maid, Diet Coke, and Coca-Cola zero among others. The company has over 500 non-alcoholic beverage brands; furthermore they also sell beverage concentrates. Coca cola Company has a stock symbol which is KO and is also part of the NYSE. (Glazer, 2012)
RATIO ANALYSIS
Liquidity Ratios
Liquidity is generally, the situation whereby assets are able to be turned into cash by a given entity in investment. When it comes to business, it is applied according to how a company is able to finish its short debts in the required time. It is done through, getting the percentage of the liabilities, as a current ratio or as a liquidity ratio. The current ratios for Coca cola Company are 0.83 while the sales ratio is 7.15. However when it comes to Pepsi Company in the similar year the ratio was 0.95.However, the debt equity ratio for Pepsi, was 2.10, while for Coca-Cola was 1.61.According to this current ratios, Coca-Cola and PepsiCo companies have enough current assets to make the necessary payments of current liabilities in each business.
Solvency Ratios
Liquidity ratios are opposite since they measure whether the company is able to pay off its short-term debts in time. However, Solvency ratios however deal in studying the capacity to pay of long-term debts furthermore increasing an interest when paying the debt. Solvency ratios play significant roles in saving companies from going bankrupt. The current debt equity ratio for Pepsi was 2.10 however Coca-Cola had the debt equity as 1.61.The debt/asset ratio plays a major role in influencing whether either of the companies will go bankrupt.
Profitability Ratios
These are monetary metrics which are necessary in evaluating how the business is able to produce earnings effectively. The profitability ratios comprise of, return on equity, return on assets and also return on capital. The gross margins on profit for PepsiCo were 54.57, while the average Gross margin 5-year Annual Average was 54.36.
Returns(5 year average)
PepsiCo (%)
Coca-Cola Co (%)
Return on equity
94.13
39.86
Return on assets
15.27
8.15
Return on Capital
20.77
12.74
Return on equity is supposed to show how the business is able to get returns from its shareholders input; this is in terms of investment. In the case of Pepsi it has higher returns hence it seems investors prefer it because money is being properly used. However return on equity for Coca-Cola Company is lower hence investors are not very much interested. Return on Assets ratio, measures net income accrued on total assets for a certain period while comparing average total assets to net income. In both cases Pepsi and Coca-Cola have positive returns on their assets hence the company is making profits continuously. However Pepsi seems to be performing much better in utilizing its assets. Moreover on return on capital Pepsi had high returns while for coca cola were lower, a higher return on capital ratio, demonstrates there are more returns on each unit of capital employed. (Alfaro, 2017)
Growth ratios
The growth ratios are able to compute how the firm is growing. The ratios that can be mentioned in regards to growth are profit margin or fixed asset. The Sales revenue for PepsiCo as per last year were 4.26 while the net income was 69.79.However when it comes to the Coca-Cola company the sales revenue was 6.11 while the net income was 40.70. The growth ratios are determined according to the higher growth however its financing is done externally.
Conclusion
The Coca Cola Company has been known as a beverage industry for a long period of time, with little competition, it has had steady profit for a period of ten years or more. However PepsiCo is a company which began almost 15 years ago however it has managed to become a fierce competitor of the Coca-Cola Company. Coca cola according to the above ratios it shows it has weaknesses managerial strategies and also in investing. However PepsiCo has a lot of investment hence its risking going through bankruptcy. However Pepsi has its strength in, making future profitability and sustainability. (Yoffie, 2011)
References
Glazer, A. S., Stevens, G. L., & Tax Management Inc. (2012). Financial statement analysis–quantitative techniques: Analyzing solvency, price multiples, and cash flow. Arlington, VA: Tax Management.
Alfaro, L., Asis, G., Chari, A., & Panizza, U. (2017). Lessons Unlearned?: Corporate Debt in Emerging Markets.
Yoffie, D. B., Kim, R., & Harvard Graduate School of Business Administration.,. (2011). Cola Wars continue: Coke and Pepsi in 2010.
