Financial Analysis Project

Requirements:

Use the provided Financial Data $($Excel file$)$ for Coke and Pepsi to complete the following analysis:

$1.$ Calculate the current ratio and quick ratio for both companies for $2020$ and $2021.$ Write a paragraph describing what these ratios indicate about the liquidity of each company in $2021$ compared to $2020.$ Write a paragraph describing what these ratios indicate about the liquidity of Pepsi compared to Coke for both years. Which company seems to be more liquid? What are the advantages and disadvantages of liquidity?

$2.$ Calculate the accounts receivable turnover and the average collection period for both companies for $2020$ and $2021.$ Write a paragraph comparing $2021$ with $2020$ and Coke with Pepsi using these two ratios to indicate the effectiveness of their accounts receivable collections. Which of the two companies seem to be doing a better job with receivables? How does this collection process affect the overall success of the company?

$3.$ Calculate the inventory turnover and the average sales period for both companies for $2020$ and $2021.$ Write a paragraph comparing $2021$ with $2020$ and Coke with Pepsi using these two ratios to indicate how they manage their inventory. Which one of the two companies has a better approach to inventory management? Why? What are the problems that come with poor inventory management?

$4.$ Calculate the gross margin percentage, net profit margin percentage, and return on assets for both companies for $2020$ and $2021.$ Explain in a paragraph what these ratios show about each company's profitability compared to the year before and compared to each other. Indicate which company shows the best prospects for future profits and explain in detail why you think the ratios support your observations.

$5.$ Prepare a vertical analysis on the income statement and the balance sheet for Pepsi and Coca Cola for $2020$ and $2021.$ Write a paragraph highlighting what you have learned from the percentages of sales or total assets calculated from the financial statements. Write also about the comparison between $2020$ and $2021$ and between Coke and Pepsi.

$6.$ Prepare a horizontal analysis on the income statement and the balance sheet for Pepsi and Coca Cola for $2020$ and $2021.$ Be sure to calculate the change in dollars and percentages for all of the revenues and

expenses. What do the changes indicate about Pepsi's success in $2021$ relative to $2020?$ Do the same comparison for Coke's income statement. What do the changes indicate about Coke's improvement or lack thereof between $2021$ and $2020?$ With this comparison of both companies over time now compare Coke vs$.$ Pepsi and explain why one company seems to do better than the other, financially speaking.

$7.$ Based on all of your calculations and observations described above, make a recommendation as to which company would be a better investment. Give the reasons for your conclusion.

Submit your Analysis in a Word Document showing ALL of your work by Sunday of Lesson $7$ in the Dropbox. Remember to include References$/$Works Cited.

Your Word document should include the following in either APA or MLA format:

$-$ Cover Page $($Include your name, the course name and number, professor's name, assignment name, and date of submission$)$

$-$ Introduction $($One to two paragraphs briefly introducing the assignment and what your work will be comprised of$)$

$-$ Body $($This is likely several pages answering ALL questions, show your work, explain your analysis$)$ NOTE: If you use Excel for your calculations, copy$/$paste your work in this section where appropriate.

$-$ Conclusion $($One to two paragraphs summarizing your analysis and conclusions$)$

$-$ Reference Page or Works Cited

See the Grading Rubric for this assignment on the next page.

Maximum points for this assignment $\backslash (=115\backslash )$ points

Hints$/$notes:

$-$ All sales are on credit. Therefore, net sales or net revenue, or net operating revenue are considered Credit Sales.

$-$ Average Collections Period and Average Sales Period are $"$in days". Therefore, round up to the next full day. Example, a calculated average collections period of $12\mathrm{.}47,$ should be rounded up to $13$ days.

$-$ Gross Profit percentage, net profit percentage, and ROA must be presented as a percentage. Example, ROA is $\mathrm{.}4742,$ show it as a percentage, $\backslash (47\mathrm{.}42\backslash \%\backslash ),$ rounded to $2$ decimal places if needed.

$-$ All other ratios are times ratios. That is$,\backslash ($ X $\backslash )$ to $1.$ Example, a calculated current ratio of $1\mathrm{.}32$ means $1\mathrm{.}32$ to $1.$ There is no need to add the $"$to $\backslash (1^\{\backslash$prime $\backslash$prime$\}\backslash )$ in your presentation of these ratios, however.