Interpreting Financial Results Determining trends and benchmarking are vital areas use in measuring the success of a
Question:
Interpreting Financial Results
Determining trends and benchmarking are vital areas use in measuring the success of a company. Pepsi is not the leader in the industry, but it does stay competitive with the leader who is Coca-Cola. The comparison of Pepsi, Coca-Cola, and Dr. Pepper financial statements will be discussed. There are some similarities in the reports of all three companies. Each company had a stable sales trend over the last couple of years. There was not much of a change from year to year for each company.
The current ratio for Pepsi since 2012 to 2014 in that order was 1.14, 1.24, and 1.10. These numbers showed real promise for the company. The company has a profitability of .09, .10 and .10 between 2012 and 2014. Pepsi also had a debt ratio of .70, .69 and .75 from 2012 to 2014. Looking at these numbers there was a slight fluctuation between the two years in the current ratio and the debt ratio, but the profitability ratio stayed the same, for the most part.
The current ratio for Coca-Cola from 2012 to 2014 was 1.09, 1.13 and 1.02. There was a slight increase and then a slight decrease. The profitability ratio for Coca-Cola during this time was .19, .18 and .15. The profitability declined a little each year. The debt ratio for this period was .72, .63, and .67. The debt ratio increased a little over each year.
The current ratio for Dr. Pepper was 1.17, 1.09 and 1.08 for the last few years. The profitability was .09, .10 and .10 over those years. The profitability had little change for the company. The debt ratio for Dr. Pepper was .70, .69 and .75. There was a slight increase from 2012 to 2014.
The current ratio for each company insists that the companies can pay off its obligation if they become due. Looking at the numbers none of the companies has any danger of going into bankruptcy. Pepsi has a better current ratio than the other two companies. If judging by the current ratio, Pepsi would set the standard for operations. Pepsi has led this category since 2012. There are adjustments that the other companies must make to cut cost and raise the current ratio.
Profitability for Pepsi and Dr. Pepper were quite similar, but Coca-Cola is the benchmark in this category. Pepsi has a better current ratio that Coca-Cola but falls way behind in the profitability category. Coca-Cola has done an impressive job staying ahead in the industry of making money.
The debt ratios for each of the three selected companies are good. Each company has a debt ratio less than 1%. Once again, Coca-Cola has benchmarked this because of the company’s ongoing success and ability to keep its costs low. Although each company does have a low financial risk, Coca-Cola has kept this trend going over the years and continued to stay in the lead. To stay competitive, it would be beneficial to keep the debt ratio below in comparison with Coca-Cola that has set the standard in this area.
Coca-Cola: 2012
Current Assets Net Income Total Liability
Current Liability Net Sales Total Assets
1,119,000 =1.09 624,000 =.10 5,924,000 =.72
1,030,000 5,997,000 8,201,000
Pepsi: 2012
18,720,000 =1.10 6,178000 =.09 52,344,000 =.70
17,089,000 65,492,000 74,638,000
Dr. Pepper: 2012
1,335,000 =1.08 629,000 =.10 6,648,000 =.74
1,232,000 5,995,000 8,928,000
Coca-Cola: 2013
32,996,000 =1.02 7,098,000 =.15 61,703,000 =.67
32,374,000 46,854,000 92,023,000
Pepsi: 2013
22,203,000 =1.24 6,740,000 =.10 53,199,000 =.69
17,839,000 66,415,000 77,478,000
Dr. Pepper: 2013
1,119,000 =1.09 624,000 = .10 5,924,000 =.72
1,030,000 5,997,000 8,201,000
Coca-Cola: 2014
32,986,000 =1.02 7,098,000 =.15 61,703,000 =.67
32,374,000 45,998,000 92,023,000
Pepsi: 2014
20,663,000 =1.14 6,513,000 =.10 53,071,000 =.75
18,092,000 66,683,000 70,509,000
Dr. Pepper: 2014
1,211,000 =1.17 703,000 =.11 5,979,000 =.72
1,038,000 6,121,000 8,273,000
Review the assigned company's financial statements from the past three years. calculate the financial ratios for the assigned company's financial statements, and then interpret those results against company historical data as well as industry benchmarks: •compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013 with 2012; and 2012 with 2011). •compare the calculated financial ratios against the industry benchmarks for the industry of your assigned company. write a 500 to 750 word summary of your analysis. show financial calculations where appropriate
Principles of Managerial Finance
ISBN: 978-0134476315
15th edition
Authors: Chad J. Zutter, Scott B. Smart