Vertical Analysis of PepsiCo and Coca Cola Essay

1868 Words 8 Pages
All companies use financial documents to record and journalize their business transactions. These financial documents are not only used internally by company executives, but the financial documents are also used by outside sources to evaluate the strengths and weaknesses of a company. The purpose of this paper is to provide financial analysis of PepsiCo and Coca Cola, provide examples that explain which company is more financially sound, and to provide recommendations on how to improve each company financially. The first item that I will discuss is a vertical analysis of both companies.
Vertical analysis is used to evaluate data and express the items of a financial statement as a percentage of a base amount listed. For the vertical
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PepsiCo was able increase their assets 2% while Coca Cola’s assets decreased 5% from 2004 to 2005. Perhaps this is one area of improvement that Coca Cola could look into when searching for ways to increase profitability. The next topic that I will discuss for PepsiCo and Coca Cola is a horizontal analysis.
Horizontal analysis is used to evaluate financial data for a company over a specific period of time. It is useful when measuring the percentage changes from year to year in assets, liabilities, and retained earnings. For PepsiCo and Coca Cola I used the data from the balance sheet for change in year from 2004 to 2005. I believe that horizontal analysis is essential for investors, creditors, and company executives to look at in order to get a full perspective on how the company is performing, the further a person goes back in the horizontal analysis the greater the picture of the company that the person is going to be able to get. The table below illustrates my

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