COMPARING THE ACCOUNTS OF THE COLA GIANTS How can stakeholders in PepsiCo and Coca-Cola, the world's...
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COMPARING THE ACCOUNTS OF THE COLA GIANTS How can stakeholders in PepsiCo and Coca-Cola, the world's two best-known soft drink businesses, compare their performance? One way is to analyse their accounting results. Ratio analysis is widely used by shareholders, banks and creditors - as well as the management of the business - to assess and compare company performance. Here are extracts from both companies' 2012 (end of December, in $ million) published accounts: PepsiCo Coca-Cola Sales revenue 65492 48017 Cost of goods sold 31291 19053 Operating Current profit assets 9112 10779 18720 30328 The liquidity of both companies can be assessed by using the current ratio and acid-test ratio. The gross and operating profit margin ratios can be calculated from using the data above. This would be a good starting point in comparing the performance of these two businesses. But these ratios do not give us the complete picture. Which company is making more profitable use of the capital invested in it? Which one seems to handle inventories more effectively? Does Coca-Cola or PepsiCo manage its trade receivables more efficiently? If a potential shareholder was planning to buy shares in just one of these companies, which one might be the better investment? These and other questions can be answered by further analysis of published accounts. Current Inventories liabilities 17089 27821 3581 3264 Capital Trade accounts employed receivable 7041 4759 57549 58353 Points to think about: Would it be sensible to compare these two companies' accounts with those of a construction company? Explain your answer. Do you think a high level of inventories compared with the total cost of sales is a sign of good management or not? Explain your answer. Why would it be useful for stakeholders to make a comparison between profit and capital invested into a business? Use the extracts from the accounts of Coca-Cola and PepsiCo to calculate, for 2012: 1 Gross profit margin for both companies. 2 Operating profit margin for both companies. 3 Comment on your results. COMPARING THE ACCOUNTS OF THE COLA GIANTS How can stakeholders in PepsiCo and Coca-Cola, the world's two best-known soft drink businesses, compare their performance? One way is to analyse their accounting results. Ratio analysis is widely used by shareholders, banks and creditors - as well as the management of the business - to assess and compare company performance. Here are extracts from both companies' 2012 (end of December, in $ million) published accounts: PepsiCo Coca-Cola Sales revenue 65492 48017 Cost of goods sold 31291 19053 Operating Current profit assets 9112 10779 18720 30328 The liquidity of both companies can be assessed by using the current ratio and acid-test ratio. The gross and operating profit margin ratios can be calculated from using the data above. This would be a good starting point in comparing the performance of these two businesses. But these ratios do not give us the complete picture. Which company is making more profitable use of the capital invested in it? Which one seems to handle inventories more effectively? Does Coca-Cola or PepsiCo manage its trade receivables more efficiently? If a potential shareholder was planning to buy shares in just one of these companies, which one might be the better investment? These and other questions can be answered by further analysis of published accounts. Current Inventories liabilities 17089 27821 3581 3264 Capital Trade accounts employed receivable 7041 4759 57549 58353 Points to think about: Would it be sensible to compare these two companies' accounts with those of a construction company? Explain your answer. Do you think a high level of inventories compared with the total cost of sales is a sign of good management or not? Explain your answer. Why would it be useful for stakeholders to make a comparison between profit and capital invested into a business? Use the extracts from the accounts of Coca-Cola and PepsiCo to calculate, for 2012: 1 Gross profit margin for both companies. 2 Operating profit margin for both companies. 3 Comment on your results.
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To compare the performance of PepsiCo and CocaCola stakeholders can analyze their accounting results using ratio analysis The following calculations c... View the full answer
Related Book For
Global Marketing management
ISBN: 978-0470505748
5th edition
Authors: Masaaki Kotabe, Kristiaan Helsen
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