In that report, we will analyze two major American companies principally functioning in the beverage market: Coca Cola and PepsiCo Incorporation. Even if sodas are now considerate as non healthy products, people do consume them. As Coca Cola's activity shows, more than 35% of their revenues arise from the United States market. The situation of PepsiCo is quite different because even if Coca Cola is the leader on the beverage market, PepsiCo decided to diversify its activity to food and especially, the snacks market. So even if these two companies are quite similar, this difference makes the analysis quite skewed.
In this document, we will analyze these two companies acting on the beverage and snacks markets. In order to cover this analysis, we will describe each company, their market their establishments and their background. Then we will try to evaluate their performances and analyze the evolution on the past five years. As a conclusion of this analysis on the two companies' results, we will try to give recommendations to improve these results for each company. Regarding their performances, we will position these companies on their market; and analyze their strengths and weaknesses. To conclude, we will give recommendations to potential investors and potential financial establishments to allow a bank loan for them.
[...] Comparative strategic analysis Strengths & weaknesses In order to analyze the strengths and weaknesses of these two companies, we will build a table comparing the two companies Coca Cola Company Pepsico Incorporation Strengths Weaknesses Strengths Weaknesses Liquidity & Efficiency Liquidity & Efficiency A decreasing working Working capital is capital which is getting higher and now negative higher Using the immediate Capacity to pay cash would not be their short term enough to pay obligations their short term obligations Too much stock A little too much stock Solvency Solvency Low in debt ratio A little to in which could be debt but a useful in case reducing policy of quick need of seems to be cash conducted Profitability Profitability Profit margin is High rate of quite profit margin low, Pepsico and gross margin should try to cut the cost of goods sold RoA is quite good but should be Gross margin is looked at decreasing carefully because it is decreasing slightly year on the last two years after year RoA is high and could be valuable when looking for investors Market Prospects Market Prospects increasing which Pepsico value: very means people are interesting for trustful in Coca investors and Cola value on people looking for the stock market fast cash. [...]
[...] Pepsico employs more people than Coca Cola; around 185,000 people in many countries, and its capitalization is about $ 107 billion. Financial ratios & evolution LIQUIDITY & EFFICIENCY As we have seen before, working capital measures the efficiency, and the short term financial health. Pepsico Incorporation results reveal that this ratio is very well oriented: it increased by 365%, which is almost 4 times, between 2003 and 2007. This result is very favorable and shows that Pepsico is very healthy on a short term. [...]
[...] The net debt of Coca Cola for the financial year 2007 is $ million, which is not excessive considering its equity. Coca Cola is a solvable company but the situation will get worse if results of the liquidity ratios are not better in the future. Because of the financial crisis we are currently facing, loan approval is much more difficult than it was 2 or 3 years ago, so the board of Coca Cola should be careful. PROFITABILITY From the ratios, we could immediately establish that Coca Cola is profitable. [...]
[...] Finally, the Coca Cola Company is definitely profitable, and they should try to maintain such level of margin and ROA. Pepsico incorporation Description Pepsi Incorporation is another major actor on the beverage market. But besides its market, Pepsico has diversified its activity to become a strong actor on the food market especially snacks. The company was founded in 1965 in New York where its headquarters are still based. Beside their traditional products like Pepsi and Diet Pepsi, Pepsico also distributes Tropicana's products, Lay's chips and other food brands such as Doritos, Fritos and Quaker Oats. [...]
[...] While Coca Cola Company is the leader on the market, Pepsico Incorporation has succeeded in diversifying their activities in order to keep their challenger's position. The choice is easier with respect to the dividend yield. You would choose to invest in Coca Cola, if you would like to make fast money, and PepsiCo would be a better choice if you are looking for a longer investment as they are reducing their long-term debt, they are able to finance their activity (current assets > current liabilities) and their RoA is quite interesting too. [...]
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