In this final assignment we are going to analyze the financial statement of two historic competitors on the drinks market. The case will be organized as followed: at first before each calculation we are going to define the ratio and then see the general formula we used during the course. Then we will have the case of each company Pepsi Co and Coca Cola Co with a little conclusion for each firm and then the comparison of the two firms.
Working capital, definition: working capital measures how much in liquid assets a company has available to build its business. The number can be positive or negative, depending on how much debt the company is carrying.
Inventory turnover ratio :
Definition: this ratio is showing how many times a company's inventory is sold and replaced over a period.
[...] Investors have to be careful because both firms are using more and more debts to finance assets especially for the case of Pepsi Co during the year 2010. They have to follow carefully the evolution of the situation. Debt to total assets ratio Definition: this ratio indicates in what proportion the company's assets are being financed through debt. The case of Pepsi Co 2009: 2010: With our calculation, we are able to say that the Pepsi Co is financing its assets through equity. [...]
[...] The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets. The case of Pepsi Co 2009: 2010: The increase between 2009 and 2010 explains that Pepsi Co has been more efficient by collecting the debts they have to its customers which is a good thing. The case of Coca Cola Co 2009: 2010: Here we have exactly the same way of thinking for the Coca Cola Company. They have collected more efficiently their debts to customers in 2010 than in 2009. [...]
[...] The main advantage is that by keeping the same level of stocks, they are able to sell more and more goods. Profit margin Definition: profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. The case of Pepsi Co 2009: 2010: By comparing the two years we can say that Pepsi Co increased its sales but decrease its profit margin. [...]
[...] The main difference between the two firms is that Pepsi Co is more capable to finance itself by its assets than Coca Cola Co. Sales to inventory ratio Definition: the sales to inventory ratio measures the percentage of inventory the company currently has on hand to support the current amount of sales. The case of Pepsi Co 2009: 2010: Here we can easily say that the situation of Pepsi Co is rather good because they have increased sales but they kept the same average inventory. [...]
[...] They have sold 4.43 times their inventory during the year 2009 and 5.07 times during the year 2010. We can say that this is quite efficient too. By comparing the firms we can conclude that Pepsi Co is more efficient when we consider the turnover ratio. They are selling more times the turnover than Coca Cola Co that means they are managing it better. Days in inventory Definition: this is a measure of performance, calculated by average inventory divided by average daily cost of sales. [...]
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