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 companiesfor 2016 and 2017. Write

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

in 2016 compared to 2017. Write a paragraph describing whatthese 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 ofliquidity?

2.

Calculate the accounts receivable turnover and days sales inreceivables for both

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

with Pepsi using these two ratios to indicate the effectivenessof their accounts

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

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

3.

Calculate inventory turnover and days in inventory for bothcompanies for 2016 and

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

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

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

come with poor inventory management?

4.

Calculate the gross margin, profit margin and return oninvestment for both companies

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

company’s profitability compared to the year before and comparedto each other.

Indicate which company shows the best prospects for futureprofits and explain in detail

why you think the ratios support your observation.

5.

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

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

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

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

6.

Compare Pepsi’s income statement for 2016 with their incomestatement for 2017 –

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

do the changes indicate about Pepsi’s success in 2016 relativeto 2017? Do the same

comparison for Coke’s income statement. What do the changesindicate about Coke’s

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

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

better than the other.

7.

Based on all of your calculations and observations describedabove, make a

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

for your conclusion.