Finance pepsi coca ratio equity income statementsfinacial analysis
In this paper we will compare to famous corporation from the Soft drinks Industry: Pepsi Co Inc. and The Coca Cola Company. These two companies that have been into a tough competition for years are the leader of this industry. But the soft drinks industry progressively change and trends shows a shift toward health consciousness of consumers in western countries while new markets are emerging in continents such as Asia and South America. As a result we will try to watch through the financial statements of both companies if one more than another could better overcome those changes in the industry.
[...] The higher this ratio is, the most profitable is the investment for stockholders . ROE Ratio = (Net Income Preferred Dividends) / Average Common Shareholders Equity Here for the Average Common Shareholders Equity we will use the average between 2008 and Pepsi: . ROE Ratio = (5,946 41) / ((16,763 + 12,203) / = 0.41 Coca: . ROE Ratio = (6,824 / ((24,799 + 20,472) / = Pepsi has the greatest ROE Coca Cola ROE is fair enough with 30% but far from the profitability Pepsi is able to offers to its investor. [...]
[...] Debt to Assets Ratio = 23,044 / 39,848 = 0.59 Coca 2009: Debt to Assets Ratio = 23,872 / 48,671 = Pepsi‘s assets are financed at 59% with debts whereas Coca Cola's assets are financed at 49% with debts. Pepsi here clearly hold a riskier financial position . However looks to be still reasonable for a large corporation such as Pepsi . Time Interest Earned Ratio The Time Interest Earned ratio measures the company's ability to fulfill its interest payment obligation when they come. If the rate fall under it means that the company no longer produce enough income to meet its obligation and it is a critical situation . [...]
[...] However, both companies are relatively a sure investment but if we had to choose one it would be The Coca Cola Company . [...]
[...] Moreover, government regulations are also becoming stricter concerning health and many western countries have undertaken a war against junk food, especially in the US . As the result of this trend toward health consciousness within western countries, the actors of the soft drinks industry have to diversify deeply their ranges of products in these countries, which lead to a growing segmentation of the industry (Merrett, 2009) . Within the soft drinks industry, the Coca Cola Company remains the solid leader of this market and Pepsi Co keeps being the main competitor . [...]
[...] And, this can be due to the fact that Pepsi manufactures snacks while Coca Cola only manufactures sodas that are probably easier to keep for a while before being sold than food products are . Receivables Turnover Ratio: Receivables Turnover Ratio indicates how liquid the company's receivables are, it assess the rate at which the company collect the payments from its customer . We will complete this ratio by the calculation of the “Average Collection Period” which tells us after how many days on average the company is paid by its customers. [...]
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