Final Project: Financial Analysis

two of the major competing companies that manufacture drinks ar Coca-Cola, and Pepsi. They twain come regular water, flavored water, and bonkers drinks of many kinds. While this essay will explain what vertical and level analytic look ating is, it will also explain each play alongs vertical and horizontal analyses. Also the proportions for each company will be given(p), and several examples as to how each company can improve in their pecuniary status. The financial analysis of both companies is rattling consequential so both craftes can understand how they argon universe managed.It is very important for a company to keep up to date financial documents, audits, taxes, and different financial statements. This is the learning holded to show what a company is doing with their finance and what they drive d iodin in the past. This information is also very effectual for management to single-valued function and know what to do differently in judgment of conviction to come months or days. Information like this allows a company to grow, and redeem healthy production going forward. Having this information also tendings management, investors, and creditors know if thither are any issues that have come up in the past that need to be worked on.While in competition, these two companies have proceed to grow in size, market value, and profit gross revenue. Since the beginning of their competition, both companies have ventured into peeled areas of sales, (such as snack foods, iced tea, and bottled water) and they continue to think of new ship canal to grow their business line socio-economic classly. In order for both companies to continue to grow in the authoritys they foresee, they must have investors to invest money in the company.These stream and cap sufficientness investors will first look at both companys financial statements and data, find as much information as vi adapted needed to make a decision, then make a plan call as to which company is the best investment at the time. By competing for the number one position of drink provider, both companies have continued to grow and prosper by creating new beverages throughout the years. Since they both have the advantage of being known on a global scale, they have been rated number one and two for many years.They have modeled practices that one an new(prenominal) have followed in order that they could overcome any obstacles to widely distributed manufacture and distributions. (The Coca Cola Company, 2009). Although they are two different companies, they produce somewhat confusable products, and their distribution techniques and services are very similar also. Both companies continue to use the follow up strategy, which was utilize to explain that when one of the companies launched a new product the other would very quickly come up with a similar product or service.Using this method one could see why these two companies easily auf wiedersehen all other companies in the competition. Even though both these companies are both growing rapidly and gaining huge profits yearly, they have also had to deal with global issues, politics, and precedents. They both have bespeakn risks getting into business with markets where they didnt necessarily belong and where the risk was far too great. So they had to back out of some markets because of several issues that arose from those ventures. They had to find who their target reference was and begin to produce products that were specialisedally made for that group of people.By making it come forward as if they are following the highest moral and ethical practices, they create a product that is focused towards a specific population. whence, even though other companies cannot compete at the level that Pepsi and deoxycytidine monophosphate can, they also try to use the same target influences in global markets. There are trinity tools of the financial statement analysis Vertical, Horizontal, and Ratio An alysis. Each tool has a different function, but each dos to analyze important information and data that is in a financial statement.The Vertical Analysis, also called Common size of it Analysis, is used to express data in a statement as a percent from the base amount. The base figure given represents the append assets of each company. The main starting point for the financial analysis is the bring assets amount for each company. This becomes useful when a company wants to be able to see what percent of assets cash and other incidents represent. The Horizontal Analysis, also called slue Analysis, is used to evaluate how a company performs within an accounting compass point to another accounting period.The diverge in plowshares given can help a company to better see trends over a designated time frame. Lastly, Ratio Analysis is used to express a relationship among specific items on a financial statement. These relationships are give n in terms of a percent, or a rate. * To fu lly examine Pepsi I must look at the consolidated Balance Sheet and take a look at the on-line(prenominal) Assets, live Liabilities, and Total Assets for years 2005 and 2004. After doing so I am able to calculate the electric current Ratio for both years 2005, and 2004. The Current Ratio for 2005 is 10,454*/9,406*= 1. 111, and the Current Ratio for 2004 is 8,639*/6,752*= 1.281.To find the vertical analysis of both years I must first compute the current assets and divided them by the core assets for each year, I then get 2005 10,454*/31,727*= 0. 32949= 33%, and for 2004 8,639*/27,987*= 0. 3867= 39%. Then for the horizontal analysis I got Assets 31,727* 27,987*27,987*= 0. 1336= 13. 3%, and for Liabilities 17,476* 14,464*14,464*= 0. 2082= 21%, which gives us the change in kernel assets. (Weygandt, Kimmel, & Kieso, 2008) After examining The Coca-Cola Companys Consolidated Balance sheet and using the Financial Accounting worksheet I have found the Current Ratios for both years (2005, and 2004).The Current Ratio for 2005 is 10,250*/9,8368= 1. 041, and the Current Ratio for 2004 is 12,281*/11,133*= 1. 101. When we use the current assets and divide them by the issue forth assets for each year we can find the vertical analysis for both years 2005 10,250*/29,427*= 0. 3483= 35%, and 2004 12,281*/31,441*= 0. 3906= 39. 1%. By computing the change in ingrained assets by function we can find the horizontal analysis of both the assets and liabilities Assets 29,427 31,441*/31,441*= -0. 06405= -6. 4%, and Liabilities 13,072* 15,506*/15,506* = -. 1570 = -15. 7%.(Weygandt, Kimmel, & Kieso, 2008)The issue forth assets that we previously express above can be used with other items on the companys balance sheet. For example, the cost of sales for Pepsi in 2004 was $12,674* which gives the balance theatrical role of 45. 3% in their total assets. In 2005, the cost of sales for Pepsi was $14,167*, which gives the balance piece of 44. 7% in their total assets. For Coke their cost of sales in 2004 was $7,674*, which yields the proportionality character of 24. 4% in their total assets, and in 2005 their cost of sales was $8,195*. This gives us the ratio percentage of 27.8% in their total assets.Over the two years (2004 and 2005) Pepsis cost of sales change differed by a small amount of . 5%, Coke on the other hand an change magnitude of 3. 4% in the same two year time frame. When looking at this information an increase in items sold does not always reveal a positive analysis, because this figure does not go far enough into detail as to whether the increase given is a positive measure. Net income will be the next item to be discussed for the two companies. In 2004, Pepsi had a net income of $4,212* this gives us a ratio percentage of 15.1% of their total assets. In 2005, Pepsis net income was $4,078*.This shows that the ratio percentage of 13. 2% is Pepsis total assets for 2004. So between 2004 and 2005 there is a decrease in their net inco me of 1. 9%. Coke had a net income of $4,847* in 2004, and a net income of $4,872* in 2005. This gives a ratio percentage of 15. 4% of their total assets in 2004, and a ratio percentage of 16. 6% in 2005. Coke unlike Pepsi has an increase of 1. 2% over these two years. Now we will discuss the current liabilities of each company for 2004 and 2005.In 2004 Pepsis current liabilities totaled $6,752*, which is the ratio which is the ratio percentage of 24. 1%. For 2005 their current liabilities was $9,406*, which gives the ratio percentage of 29. 9%. This shows that there was a 2% increase in Pepsis assets. When looking at Coke their current liabilities for 2004 were $11,133* this gives us the ratio percentage of 35. 4%, and for 2005 their current liabilities was $9,836*. This shows a ratio percentage of 33. 4%. This information reveals to us that there was a 1% decrease in Cokes liabilities from 2004 and 2005.Looking at both companies total liabilities continues to tell us even more inf ormation about their financial status. In 2004 Pepsis total liability was $14,464*, which is a ratio percentage of 51. 7%. While their total liabilities in 2005 were $17,476*, so the ratio percentage is 55. 1%. This reveals their 3. 4% increase in their total liabilities for 2004 and 2005. Coke on the other hand had a 4. 9% decrease in total liabilities within these two years. Their total liabilities in 2004 were $15,506* with a ratio percentage 49. 3%, and for 2005 their total liabilities were $13,072* with a ratio percentage of 44.4%.After reviewing all the information for both Pepsi and Coke we can conclude that both companies experienced edit out net profits for the year of 2005 then in 2004. I think that both companies should look into fixing their operation so that they can reduce this expense, once this is done they can increase their profit margins. This will help to get rid of reductions in their profits that have seemed to be nonstop. Since Pepsi had a 5. 8% increase in liabilities and they only had a 2% increase in their assets, the increase in debt did not help the company.Pepsi would better proceeds if they looked into finding strategies that would help in the reduction of their total current liabilities. At this time they should also not take on any new debts, instead they should work harder at increasing their total current assets. Coke on the other hand decreased their total current assets by 4. 3% in these two years. I think that Coke would be better off if they looked into increasing their total current assets also. One way to do this would be to increase their net profits which would then take up their assets.Coca-Cola and Pepsi have been around for a very long time, and together both companies have helped to take the beverage industry to the next level. Both being global companies, and selling products in over 100 countries, and producing many products that raise to all kinds of people, they have continued to grow. Taking a look at eac h companys vertical and horizontal analysis we were able to see the financial status of both companies. Though both of these companies are profitable, the analysis showed in more detail how different these companies were in 2004 and 2005.