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Coca Cola vs. Pepsi
Transcript of Coca Cola vs. Pepsi
Uses straight line depreciation
Buildings and improvements - 15 to 44 years
Land and improvements - 10 to 34 years
Machinery and equipment - 5 to 15 years Financial Statements Balance Sheet Net book values: 2011- $14,939,000,000 2010 - $14,727,000,000.
Uses straight line depreciation
Building and improvement - 40 years or less
Machinery, equipment, and vehicle fleet - 20 years or less
Cold-drink equipment - 13 years or less
Containers - 12 years or less Intangible Assets Four main categories
acquired franchise rights with a definite life of 56 to 60 years
reacquired franchise rights with a definite life of 1 to 14 years
brands with 5 to 40 years
catch all account for other intangibles with definite lives of 10 to 24 years
No impairment on intangible assets in the past two years Accounts Receivable % Change = [ (Old Balance- New Balance) / Old Balance ] * 100
Net Account Receivables % Change = ($4,920,000-$4,430,000/4,430,000)*100
% Change =11.06%
Revenue % Change = ($46,542,000-$35,119,000/ 35,119,000)*100
% Change = 35.52% Statement of Cash Flows Intangible Assets Three main categories:
intangible assets with definite lives
intangible assets with indefinite lives
No impairments in the last two yearss Inventories (in millions) Inventories (in millions)
Inventory growth: 2010-2011 is 13.49%Sales growth: 2010- 2011 is 18.98%Pepsi values their inventory at the lower cost or market value. Cost is determined by using FIFO or LIFO methods.Inventory growth: 2010-2011 is 16.8%
Sales growth: 2010- 2011 is 44.55%
Coca-Cola values it inventory at the lower cost or market value Inventories (in millions) Inventory growth: 2010-2011 is 13.49%
Sales growth: 2010- 2011 is 18.98%
Pepsi values their inventory at the lower cost or market value. Cost is determined by using FIFO or LIFO methods. Targets The Coca-Cola Company and PepsiCo are the world's leading competitors in the beverage industry since the 19th Century.
Both companies are famous for soft drinks
Both companies have similar products but different marketing strategies. Coca-Cola created a program to increase productivity and global marketing and in the process save $ 500 million in the next four years.
Coca- Cola Audit Committee (2011)- 9 meetings, 5 members Pepsi plans to increase advertising and marketing support by $500 to $600 million, specifically focusing on North America
PepsiCo Audit Committee (2011)- 10 meetings, 6 members Both companies have projections regarding their futures
Pepsi has a multi-year productivity program which will generate $1.5 billion of cost savings by 2014.
Coca-Cola plans to drive growth through innovation and productivity, maximizing volume and investing activities.
Both companies will strive to reach their long-term goals. Liabilities Assets Stockholder's Equity Financial Statements Balance Sheet Liabilities Assets Stockholder's Equity Statement of Cash Flows Accounts Receivable % Change = [ (Old Balance- New Balance) / Old Balance ] * 100
Net Accounts Receivables % Change = ($6,912,000-$6,323,000 / 6,323,000)*100
% Change = 9.32%
Revenue % Change = ($66,504,000 -$57,838,000/57,838,000)*100
% Change = 14.98% Accounting An investor used these percent changes to directly compare companies. An investor is focusing on the percent basis of the cash brought in by the company. If revenue increases in a percent basis then accounts receivables should also increase on a percent basis. As long as the company’s uncollectibles does not also increase, cash should be increased.Pepsi's information for uncollectables was not listed.
In 2011, Coca-Cola listed that 25% of their allowance for doubtful accounts were write offs, while in 2010 37% were right offs.
The estimation of uncollectible accounts as a percent of gross accounts receivable is important to an analyst because the higher the percentage that uncollectible accounts is of gross accounts receivable means the company is not collecting all of its accounts. Therefore less cash is brought in. Inventory An analyst would want to compare the inventory and sales growth rates to see how much purchasing of inventory is being bought versus the total amount that they are selling. Uses the direct method Uses the indirect method Recommendation Continue operating as is because their sales and inventories are strong. Pepsi has also be consistent with its income statement, however it could also think of ways to increase income. Recommendation Coca-Cola should continue to operate how it is operating, however it should consider how it produced more income in 2010.