My analysis on this paper was derived from this year’s numbers of both companies because I wasn’t able to get their averages because of data limitations. My paper contains information about the attempt I made in analyzing the biggest corporation in the beverage industry and these are PepsiCo, Inc. and The Coca-Cola Company. The type of analysis I did was vertical analysis which others may know of as a common-size analysis. Using this technique means that every item in the financial statement is expressed as one part of another base figure. The equations used in my analysis include the assets account and its base account which was Total Assets, liabilities and stockholder’s equity had its base as their stockholder’s
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In the inventories account for Pepsi Cola, an increase was recorded from 2004 to 2005 which showed $1,541 to $1,693, it is a good sign for the company because it shows that they are improving in terms of their turnover ratio and the days their inventories last. Many times, a high inventory number would be a bad thing for a company to have, but there are cases where it could be beneficial to them especially when they try to meet the demands of their customers. The Coca-Cola Company also had an increase in their inventory figures in the years 2004 and 2005, $1,420 and $1,424, respectively. The figures tell us that the management of this company doesn’t expect more than their industry counterpart. In the cash and cash equivalents account of PepsiCo, it showed an increase in the years 2004-2005 at $1,280 to $1,716 increasing 34.06%. Their accounts receivable also increased in the same years they were at $2,999 to $3,261. The same increase result happened to their sales from the year 2004-2005 which had figures of $29,261 to $32,562 showing an 11.28% increase. All the figures in the PepsiCo inventory account tells us that the demand for their product has increased and this is their way to cope with this increase. The reason behind the increase in their cash and cash equivalents account can be attributed to the strict credit policy that they have recently applied.