4. Calculate the gross margin percentage, net profit margin percentage, and return on assets for both companies for 2020 and 2021. Explain in a paragraph what these ratios show about each company's profitability compared to the year before and compared to each other. Indicate which company shows the best prospects for future profits and explain in detail why you think the ratios support your observations. 5. Prepare a vertical analysis on the income statement and the balance sheet for Pepsi and Coca Cola for 2020 and 2021. Write a paragraph highlighting what you have learned from the percentages of sales or total assets calculated from the financial statements. Write also about the comparison between 2020 and 2021 and between Coke and Pepsi. \begin{tabular}{|c|c|c|c|} \hline \multirow{2}{*}{\begin{tabular}{c} PEPSICO \\ Consolidated Balance Sheet - $ in Millions \end{tabular}} & \multicolumn{3}{|c|}{ As of the end of } \\ \hline & 2021 & 2020 & 2019 \\ \hline \multicolumn{4}{|l|}{ ASSETS } \\ \hline Cash and cash equivalents & $5,596 & $8,185 & $5,509 \\ \hline Short-term Investments & 392 & 1,366 & 229 \\ \hline Accounts and notes receivable, net & 8,680 & 8,404 & 7,822 \\ \hline Inventories & 4,347 & 4,172 & 3,338 \\ \hline Prepaid expenses and other current assets & 980 & 874 & 747 \\ \hline Disposal Group, Including Discontinued Operation, Assets & 1,788 & 0 & 0 \\ \hline Assets, Current & 21,783 & 23,001 & 17,645 \\ \hline Property, Plant and Equipment, net & 22,407 & 21,369 & 19,305 \\ \hline Amortizable Intangible Assets, net & 1,538 & 1,703 & 1,433 \\ \hline Goodwill & 18,381 & 18,757 & 15,501 \\ \hline Indefinite-lived Intangible Assets (Excluding Goodwill) & 17,127 & 17,612 & 14,610 \\ \hline Equity Method Investments & 2,627 & 2,792 & 2,683 \\ \hline Deferred Income Tax Assets, Net & 4,310 & 4,372 & 4,359 \\ \hline Other Assets & 4,204 & 3,312 & 3,011 \\ \hline Total Assets & 92,377 & 92,918 & 78,547 \\ \hline \multicolumn{4}{|l|}{ LIABILITIES AND EQUITY } \\ \hline Short-term debt obligations & 4,308 & 3,780 & 2,920 \\ \hline Accounts payable and other current liabilities & 21,159 & 19,592 & 17,541 \\ \hline Disposal Group, Including Discontinued Operation, Liabilities & 753 & 0 & 0 \\ \hline Liabilities, Current & 26,220 & 23,372 & 20,461 \\ \hline Long-Term Debt Obligations & 36,026 & 40,370 & 29,148 \\ \hline Deferred Income Tax Liabilities, Net & 4,826 & 4,284 & 4,091 \\ \hline Other Liabilities, Noncurrent & 9,154 & 11,340 & 9,979 \\ \hline Liabilities & 76,226 & 79,366 & 63,679 \\ \hline \multicolumn{4}{|l|}{ Commitments and contingencies } \\ \hline Common stock, authorized & 3,600 & 3,600 & 3,600 \\ \hline Common stock, issued & 1,383 & 1,380 & 1,391 \\ \hline \multicolumn{4}{|l|}{ PepsiCo Common Shareholders' Equity } \\ \hline Common stock, par value 12/3C per share (authorized 3,600 shares, issued, net of & $23 & $23 & $23 \\ \hline Additional Paid in Capital, Common Stock & 4,001 & 3,910 & $3,886 \\ \hline Retained Earnings (Accumulated Deficit) & 65,165 & 63,443 & 61,946 \\ \hline Accumulated Other Comprehensive Income (Loss), Net of Tax & $(14,898) & $(15,476) & $(14,300) \\ \hline Repurchased common stock, shares & 484 & 487 & 476 \\ \hline Treasury Stock, Value & $(38,248) & $(38,446) & (36,769) \\ \hline Stockholders' Equity Attributable to Parent & 16,043 & 13,454 & $14,786 \\ \hline Stockholders' Equity Attributable to Noncontrolling Interest & 108 & 98 & 82 \\ \hline Total Equity & 16,151 & 13,552 & 14,868 \\ \hline Liabilities and Equity & $92,377 & $92,918 & $78,547 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline PEPSICO & \multicolumn{3}{|c|}{12 Months Ended } \\ \hline Consolidated Statement of Income - USD (\$) shares in Millions, \$ in Millions & 2021 & 2020 & 2019 \\ \hline \multicolumn{4}{|l|}{ Income Statement [Abstract] } \\ \hline Net Revenue & $79,474 & $70,372 & $67,161 \\ \hline Cost of sales & 37,075 & 31,797 & 30,132 \\ \hline Gross profit & 42,399 & 38,575 & 37,029 \\ \hline Selling, general and administrative expenses & 31,237 & 28,495 & 26,738 \\ \hline Operating Profit & 11,162 & 10,080 & 10,291 \\ \hline Other pension and retiree medical benefits income/(expense) & 522 & 117 & (44) \\ \hline Net interest expense and other & (1,863) & (1,128) & (935) \\ \hline Income before income taxes & 9,821 & 9,069 & 9,312 \\ \hline Provision for income taxes & 2,142 & 1,894 & 1,959 \\ \hline Net income & 7,679 & 7,175 & 7,353 \\ \hline Less: Net income attributable to noncontrolling interests & 61 & 55 & 39 \\ \hline Net Income Attributable to Pepsico & $7,618 & $7,120 & $7,314 \\ \hline \multicolumn{4}{|l|}{ Net Income Attributable to PepsiCo per Common Share } \\ \hline Basic & $5.51 & $5.14 & $5.23 \\ \hline Diluted & $5.49 & $5.12 & $5.20 \\ \hline \multicolumn{4}{|l|}{ Weighted-average common shares outstanding } \\ \hline Basic & 1,382 & 1,385 & 1,399 \\ \hline Diluted & 1,389 & 1,392 & 1,407 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline \multirow{2}{*}{\begin{tabular}{l} COCA-COLA \\ CONSOLIDATED BALANCE SHEETS - USD (\$) \$ in Millions \end{tabular}} & \multicolumn{3}{|c|}{ As of the end of } \\ \hline & 2021 & 2020 & 2019 \\ \hline \multicolumn{4}{|l|}{ CURRENT ASSETS } \\ \hline Cash and cash equivalents & $9,684 & $6,795 & $6,480 \\ \hline Short-term investments & 1,242 & 1,771 & 1,467 \\ \hline Total Cash, Cash Equivalents and Short-Term Investments & 10,926 & 8,566 & 7,947 \\ \hline Marketable securities & 1,699 & 2,348 & 3,228 \\ \hline \begin{tabular}{l} Trade accounts receivable, less allowances of $516 and \\ $526, respectively \end{tabular} & 3,512 & 3,144 & 3,971 \\ \hline Inventories & 3,414 & 3,266 & 3,379 \\ \hline Prepaid expenses and other current assets & 2,994 & 1,916 & 1,886 \\ \hline Total Current Assets & 22,545 & 19,240 & 20,411 \\ \hline Equity method investments & 17,598 & 19,273 & 19,025 \\ \hline Other investments & 818 & 812 & 854 \\ \hline Other noncurrent assets & 6,731 & 6,184 & 6,075 \\ \hline Deferred income tax assets & 2,129 & 2,460 & 2,412 \\ \hline Property, plant and equipment - net & 9,920 & 10,777 & 10,838 \\ \hline Trademarks with indefinite lives & 14,465 & 10,395 & 9,266 \\ \hline Goodwill & 19,363 & 17,506 & 16,764 \\ \hline Other intangible assets & 785 & 649 & 736 \\ \hline Total Assets & 94,354 & 87,296 & 86,381 \\ \hline \multicolumn{4}{|l|}{ CURRENT LIABILITIES } \\ \hline Accounts payable and accrued expenses & 14,619 & 11,145 & 11,312 \\ \hline Loans and notes payable & 3,307 & 2,183 & 10,994 \\ \hline Current maturities of long-term debt & 1,338 & 485 & 4,253 \\ \hline Accrued income taxes & 686 & 788 & 414 \\ \hline Total Current Liabilities & 19,950 & 14,601 & 26,973 \\ \hline Long-term debt & 38,116 & 40,125 & 27,516 \\ \hline Other noncurrent liabilities & 8,607 & 9,453 & 8,510 \\ \hline Deferred income tax liabilities & 2,821 & 1,833 & 2,284 \\ \hline Total Liabilities & 69,494 & 66,012 & 65,283 \\ \hline \multicolumn{4}{|l|}{ THE COCA-COLA COMPANY SHAREOWNERS' EQUITY } \\ \hline Common stock, $0.25 par value; authorized - & 1,760 & 1,760 & 1,760 \\ \hline Capital surplus & 18,116 & 17,601 & 17,154 \\ \hline Reinvested earnings & 69,094 & 66,555 & 65,855 \\ \hline Accumulated other comprehensive income (loss) & (14,330) & (14,601) & (13,544) \\ \hline Treasury stock, at cost 2,715 and 2,738 shares, & (51,641) & (52,016) & (52,244) \\ \hline Equity Attributable to Shareowners of The Coca-Cola & 22,999 & 19,299 & 18,981 \\ \hline Equity attributable to noncontrolling interests & 1,861 & 1,985 & 2,117 \\ \hline Total Equity & 24,860 & 21,284 & 21,098 \\ \hline Total Liabilities and Equity & $94,354 & $87,296 & $86,381 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline COCA-COLA & \multicolumn{3}{|c|}{12 Months Ended } \\ \hline CONSOLIDATED STATEMENTS OF INCOME - USD (\$) shares in Millions, \$ in Millions & 2021 & 2020 & 2019 \\ \hline Net Operating Revenues & $38,655 & $33,014 & $37,266 \\ \hline Cost of goods sold & 15,357 & 13,433 & 14,619 \\ \hline Gross Profit & 23,298 & 19,581 & 22,647 \\ \hline Selling, general and administrative expenses & 12,144 & 9,731 & 12,103 \\ \hline Other operating charges & 846 & 853 & 458 \\ \hline Operating Income & 10,308 & 8,997 & 10,086 \\ \hline Interest income & 276 & 370 & 563 \\ \hline Interest expense & 1,597 & 1,437 & 946 \\ \hline Equity income (loss) - net & 1,438 & 978 & 1,049 \\ \hline Other income (loss) - net & 2,000 & 841 & 34 \\ \hline Income Before Income Taxes & 12,425 & 9,749 & 10,786 \\ \hline Income taxes & 2,621 & 1,981 & 1,801 \\ \hline Consolidated Net Income & 9,804 & 7,768 & 8,985 \\ \hline Less: Net income (loss) attributable to noncontrolling interests & 33 & 21 & 65 \\ \hline Net Income Attributable to Shareowners of The Coca-Cola Company & $9,771 & $7,747 & $8,920 \\ \hline Basic Net Income Per Share1 & $2.26 & $1.80 & $2.09 \\ \hline Diluted Net Income Per Share1 & $2.25 & $1.79 & $2.07 \\ \hline Average Shares Outstanding - Basic & 4,315 & 4,295 & 4,276 \\ \hline Effect of dilutive securities & 25 & 28 & 38 \\ \hline Average Shares Outstanding - Diluted & 4,340 & 4,323 & 4,314 \\ \hline \end{tabular} 4. Calculate the gross margin percentage, net profit margin percentage, and return on assets for both companies for 2020 and 2021. Explain in a paragraph what these ratios show about each company's profitability compared to the year before and compared to each other. Indicate which company shows the best prospects for future profits and explain in detail why you think the ratios support your observations. 5. Prepare a vertical analysis on the income statement and the balance sheet for Pepsi and Coca Cola for 2020 and 2021. Write a paragraph highlighting what you have learned from the percentages of sales or total assets calculated from the financial statements. Write also about the comparison between 2020 and 2021 and between Coke and Pepsi. \begin{tabular}{|c|c|c|c|} \hline \multirow{2}{*}{\begin{tabular}{c} PEPSICO \\ Consolidated Balance Sheet - $ in Millions \end{tabular}} & \multicolumn{3}{|c|}{ As of the end of } \\ \hline & 2021 & 2020 & 2019 \\ \hline \multicolumn{4}{|l|}{ ASSETS } \\ \hline Cash and cash equivalents & $5,596 & $8,185 & $5,509 \\ \hline Short-term Investments & 392 & 1,366 & 229 \\ \hline Accounts and notes receivable, net & 8,680 & 8,404 & 7,822 \\ \hline Inventories & 4,347 & 4,172 & 3,338 \\ \hline Prepaid expenses and other current assets & 980 & 874 & 747 \\ \hline Disposal Group, Including Discontinued Operation, Assets & 1,788 & 0 & 0 \\ \hline Assets, Current & 21,783 & 23,001 & 17,645 \\ \hline Property, Plant and Equipment, net & 22,407 & 21,369 & 19,305 \\ \hline Amortizable Intangible Assets, net & 1,538 & 1,703 & 1,433 \\ \hline Goodwill & 18,381 & 18,757 & 15,501 \\ \hline Indefinite-lived Intangible Assets (Excluding Goodwill) & 17,127 & 17,612 & 14,610 \\ \hline Equity Method Investments & 2,627 & 2,792 & 2,683 \\ \hline Deferred Income Tax Assets, Net & 4,310 & 4,372 & 4,359 \\ \hline Other Assets & 4,204 & 3,312 & 3,011 \\ \hline Total Assets & 92,377 & 92,918 & 78,547 \\ \hline \multicolumn{4}{|l|}{ LIABILITIES AND EQUITY } \\ \hline Short-term debt obligations & 4,308 & 3,780 & 2,920 \\ \hline Accounts payable and other current liabilities & 21,159 & 19,592 & 17,541 \\ \hline Disposal Group, Including Discontinued Operation, Liabilities & 753 & 0 & 0 \\ \hline Liabilities, Current & 26,220 & 23,372 & 20,461 \\ \hline Long-Term Debt Obligations & 36,026 & 40,370 & 29,148 \\ \hline Deferred Income Tax Liabilities, Net & 4,826 & 4,284 & 4,091 \\ \hline Other Liabilities, Noncurrent & 9,154 & 11,340 & 9,979 \\ \hline Liabilities & 76,226 & 79,366 & 63,679 \\ \hline \multicolumn{4}{|l|}{ Commitments and contingencies } \\ \hline Common stock, authorized & 3,600 & 3,600 & 3,600 \\ \hline Common stock, issued & 1,383 & 1,380 & 1,391 \\ \hline \multicolumn{4}{|l|}{ PepsiCo Common Shareholders' Equity } \\ \hline Common stock, par value 12/3C per share (authorized 3,600 shares, issued, net of & $23 & $23 & $23 \\ \hline Additional Paid in Capital, Common Stock & 4,001 & 3,910 & $3,886 \\ \hline Retained Earnings (Accumulated Deficit) & 65,165 & 63,443 & 61,946 \\ \hline Accumulated Other Comprehensive Income (Loss), Net of Tax & $(14,898) & $(15,476) & $(14,300) \\ \hline Repurchased common stock, shares & 484 & 487 & 476 \\ \hline Treasury Stock, Value & $(38,248) & $(38,446) & (36,769) \\ \hline Stockholders' Equity Attributable to Parent & 16,043 & 13,454 & $14,786 \\ \hline Stockholders' Equity Attributable to Noncontrolling Interest & 108 & 98 & 82 \\ \hline Total Equity & 16,151 & 13,552 & 14,868 \\ \hline Liabilities and Equity & $92,377 & $92,918 & $78,547 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline PEPSICO & \multicolumn{3}{|c|}{12 Months Ended } \\ \hline Consolidated Statement of Income - USD (\$) shares in Millions, \$ in Millions & 2021 & 2020 & 2019 \\ \hline \multicolumn{4}{|l|}{ Income Statement [Abstract] } \\ \hline Net Revenue & $79,474 & $70,372 & $67,161 \\ \hline Cost of sales & 37,075 & 31,797 & 30,132 \\ \hline Gross profit & 42,399 & 38,575 & 37,029 \\ \hline Selling, general and administrative expenses & 31,237 & 28,495 & 26,738 \\ \hline Operating Profit & 11,162 & 10,080 & 10,291 \\ \hline Other pension and retiree medical benefits income/(expense) & 522 & 117 & (44) \\ \hline Net interest expense and other & (1,863) & (1,128) & (935) \\ \hline Income before income taxes & 9,821 & 9,069 & 9,312 \\ \hline Provision for income taxes & 2,142 & 1,894 & 1,959 \\ \hline Net income & 7,679 & 7,175 & 7,353 \\ \hline Less: Net income attributable to noncontrolling interests & 61 & 55 & 39 \\ \hline Net Income Attributable to Pepsico & $7,618 & $7,120 & $7,314 \\ \hline \multicolumn{4}{|l|}{ Net Income Attributable to PepsiCo per Common Share } \\ \hline Basic & $5.51 & $5.14 & $5.23 \\ \hline Diluted & $5.49 & $5.12 & $5.20 \\ \hline \multicolumn{4}{|l|}{ Weighted-average common shares outstanding } \\ \hline Basic & 1,382 & 1,385 & 1,399 \\ \hline Diluted & 1,389 & 1,392 & 1,407 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline \multirow{2}{*}{\begin{tabular}{l} COCA-COLA \\ CONSOLIDATED BALANCE SHEETS - USD (\$) \$ in Millions \end{tabular}} & \multicolumn{3}{|c|}{ As of the end of } \\ \hline & 2021 & 2020 & 2019 \\ \hline \multicolumn{4}{|l|}{ CURRENT ASSETS } \\ \hline Cash and cash equivalents & $9,684 & $6,795 & $6,480 \\ \hline Short-term investments & 1,242 & 1,771 & 1,467 \\ \hline Total Cash, Cash Equivalents and Short-Term Investments & 10,926 & 8,566 & 7,947 \\ \hline Marketable securities & 1,699 & 2,348 & 3,228 \\ \hline \begin{tabular}{l} Trade accounts receivable, less allowances of $516 and \\ $526, respectively \end{tabular} & 3,512 & 3,144 & 3,971 \\ \hline Inventories & 3,414 & 3,266 & 3,379 \\ \hline Prepaid expenses and other current assets & 2,994 & 1,916 & 1,886 \\ \hline Total Current Assets & 22,545 & 19,240 & 20,411 \\ \hline Equity method investments & 17,598 & 19,273 & 19,025 \\ \hline Other investments & 818 & 812 & 854 \\ \hline Other noncurrent assets & 6,731 & 6,184 & 6,075 \\ \hline Deferred income tax assets & 2,129 & 2,460 & 2,412 \\ \hline Property, plant and equipment - net & 9,920 & 10,777 & 10,838 \\ \hline Trademarks with indefinite lives & 14,465 & 10,395 & 9,266 \\ \hline Goodwill & 19,363 & 17,506 & 16,764 \\ \hline Other intangible assets & 785 & 649 & 736 \\ \hline Total Assets & 94,354 & 87,296 & 86,381 \\ \hline \multicolumn{4}{|l|}{ CURRENT LIABILITIES } \\ \hline Accounts payable and accrued expenses & 14,619 & 11,145 & 11,312 \\ \hline Loans and notes payable & 3,307 & 2,183 & 10,994 \\ \hline Current maturities of long-term debt & 1,338 & 485 & 4,253 \\ \hline Accrued income taxes & 686 & 788 & 414 \\ \hline Total Current Liabilities & 19,950 & 14,601 & 26,973 \\ \hline Long-term debt & 38,116 & 40,125 & 27,516 \\ \hline Other noncurrent liabilities & 8,607 & 9,453 & 8,510 \\ \hline Deferred income tax liabilities & 2,821 & 1,833 & 2,284 \\ \hline Total Liabilities & 69,494 & 66,012 & 65,283 \\ \hline \multicolumn{4}{|l|}{ THE COCA-COLA COMPANY SHAREOWNERS' EQUITY } \\ \hline Common stock, $0.25 par value; authorized - & 1,760 & 1,760 & 1,760 \\ \hline Capital surplus & 18,116 & 17,601 & 17,154 \\ \hline Reinvested earnings & 69,094 & 66,555 & 65,855 \\ \hline Accumulated other comprehensive income (loss) & (14,330) & (14,601) & (13,544) \\ \hline Treasury stock, at cost 2,715 and 2,738 shares, & (51,641) & (52,016) & (52,244) \\ \hline Equity Attributable to Shareowners of The Coca-Cola & 22,999 & 19,299 & 18,981 \\ \hline Equity attributable to noncontrolling interests & 1,861 & 1,985 & 2,117 \\ \hline Total Equity & 24,860 & 21,284 & 21,098 \\ \hline Total Liabilities and Equity & $94,354 & $87,296 & $86,381 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline COCA-COLA & \multicolumn{3}{|c|}{12 Months Ended } \\ \hline CONSOLIDATED STATEMENTS OF INCOME - USD (\$) shares in Millions, \$ in Millions & 2021 & 2020 & 2019 \\ \hline Net Operating Revenues & $38,655 & $33,014 & $37,266 \\ \hline Cost of goods sold & 15,357 & 13,433 & 14,619 \\ \hline Gross Profit & 23,298 & 19,581 & 22,647 \\ \hline Selling, general and administrative expenses & 12,144 & 9,731 & 12,103 \\ \hline Other operating charges & 846 & 853 & 458 \\ \hline Operating Income & 10,308 & 8,997 & 10,086 \\ \hline Interest income & 276 & 370 & 563 \\ \hline Interest expense & 1,597 & 1,437 & 946 \\ \hline Equity income (loss) - net & 1,438 & 978 & 1,049 \\ \hline Other income (loss) - net & 2,000 & 841 & 34 \\ \hline Income Before Income Taxes & 12,425 & 9,749 & 10,786 \\ \hline Income taxes & 2,621 & 1,981 & 1,801 \\ \hline Consolidated Net Income & 9,804 & 7,768 & 8,985 \\ \hline Less: Net income (loss) attributable to noncontrolling interests & 33 & 21 & 65 \\ \hline Net Income Attributable to Shareowners of The Coca-Cola Company & $9,771 & $7,747 & $8,920 \\ \hline Basic Net Income Per Share1 & $2.26 & $1.80 & $2.09 \\ \hline Diluted Net Income Per Share1 & $2.25 & $1.79 & $2.07 \\ \hline Average Shares Outstanding - Basic & 4,315 & 4,295 & 4,276 \\ \hline Effect of dilutive securities & 25 & 28 & 38 \\ \hline Average Shares Outstanding - Diluted & 4,340 & 4,323 & 4,314 \\ \hline \end{tabular}