Financial Analysis Project

Requirements:

You will use the Financial Statements for

Coke

and

Pepsi

as provided on their websites to

complete the following analysis:

1.

Calculate the current ratio and quick ratio for both companies for 2016 and 2017. Write

a paragraph describing what these ratios indicate about the liquidity of Pepsi and Coke

in 2016 compared to 2017. Write a paragraph describing what these ratios indicate

about the liquidity of Pepsi compared to Coke for both years. Which company seems to

be more liquid? What are the advantages and disadvantages of liquidity?

2.

Calculate the accounts receivable turnover and days sales in receivables for both

companies for 2016 and 2017. Write a paragraph comparing 2016 with 2017 and Coke

with Pepsi using these two ratios to indicate the effectiveness of their accounts

receivable collection. Which of the two seems to be doing a better job with receivables?

How does this collection process affect the overall success of the company.

3.

Calculate inventory turnover and days in inventory for both companies for 2016 and

2017. Write a paragraph comparing 2016 with 2017 and Coke with Pepsi using these

two ratios to indicate how they manage their inventory. Which one of the two companies

has a better approach to inventory management? Why? What are the problems that

come with poor inventory management?

4.

Calculate the gross margin, profit margin and return on investment for both companies

for 2016 and 2017. Explain in a paragraph what these ratios show about each

companys 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 observation.

5.

Prepare a vertical analysis or same size income statement and balance sheet for Pepsi

and Coca Cola for 2016 and 2017. Write a paragraph highlighting what you learn from

the percentages of sales or total assets calculated from the financial statements. Write

also about the comparison between 2016 and 2017 and between Coke and Pepsi.

6.

Compare Pepsis income statement for 2016 with their income statement for 2017

calculate the change in dollars and percent for all of the revenues and expenses. What

do the changes indicate about Pepsis success in 2016 relative to 2017? Do the same

comparison for Cokes income statement. What do the changes indicate about Cokes

improvement or lack thereof between 2016 and 2017? With this comparison of both

companies over time now compare Coke vs. Pepsi and explain why one company is

better than the other.

7.

Based on all of your calculations and observations described above, make a

recommendation as to which company would be a better investment. Give the reasons

for your conclusion.