cessary Qualitative analysis ality of the Presentation ieneral presentation styl
ID: 2566549 • Letter: C
Question
cessary Qualitative analysis ality of the Presentation ieneral presentation style and professionalism Effectiveness of visuals and exhibits Case 9 PepsiCo's Diversification Strategy in 2015 38 EXHIBIT 3 PepsiCo, Inc.'s Consolidated Statements of income, 2012-2014 (in millions, except per share data) 2014 $ 66,683 35,799 2012 $ 65,492 34,201 2013 66,415 Net Revenue Cost of sales Gross Profit Selling. general and administrative expenses Amortization of intangible assets Operating Profit Interest expense Interest income and other Income before income taxes Provision for income taxes Net Income (Loss), Including Portion Attributable to 35,172 25,357 110 9,705 (911) 26,126 24,970 9,581 9,112 8,757 8,891 8,304 6,558 6,787 6,214 Noncontrolling Interest Less: Net income attributable to noncontrolling interests Net Income Attributable to PepsiCo Net Income Attributable to PepsiCo per Common Share Basic Diluted Weighted-average common shares outstanding Basic Diluted Cash dividends declared per common share $ 6,513 $ 6,740 $ 6,178 $ 4.31 $ 4.27 $4.37 $4.32 $3.96 $3.92 1,509 1,527 2.5325 1,541(1 1,560 $ 2.24 1,557 1,575 2.1275 Source: PepsiCo, Inc,.2014 10-K report EXHIBIT 4 PepsiCo, Inc.'s Consolidated Balance Sheets, 2013-2014 (in millions, except per share data) Dec. 28, 2013 $ 9,375 6,954 Dec. 27,2014 $ 6,134 2,592 ASSETS Cash and cash equivalents Short-term Investments 6,651 3,143 3.409Explanation / Answer
As we can see from the above table that Pepsi’s net revenue has been increasing in absolute terms on a year-on-year (y-o-y) basis. The percentage increase is very small and Pepsi’s revenue grew by 1.41% in 2013 (compared to 2012) and a meager 0.40% in 2014 (compared to 2013).
The growth in the company’s gross profit is healthier than its revenue growth. Pepsi’s gross profit grew by 2.84% in 2013 (compared to 2012) and 1.78% in 2014 (compared to 2013).
Gross margin = gross profit/revenues. Pepsi’s gross margin has been increasing on a y-o-y basis and grew from 52.22% in 2012 to 52.96% in 2013 and 53.69% in 2014.
In terms of expenses Pepsi’s SG&A expenses has been increasing at a rate which is more than the growth rate of its revenues and gross profit. SG&A expenses grew at 1.55% in 2013 and 3.03% in 2014 on a y-o-y basis. SG&A expenses as a percentage of revenue is also increasing annually.
Working capital = Current assets - current liabilities
As we can see the company’s working capital declined by 20.92% on a y-o-y basis in 2014. This decline indicates a declining liquidity for Pepsi as working capital is nothing but the ability to pay off current liabilities with current assets.
Recommendations for improvement and strategies are that Pepsi should look at ways to giving further strength to its revenue growth. This can be done by launching new products and entering new categories which are more relevant to today’s consumers. In terms of dealing with declining liquidity the company should look at ways to strengthen its current assets cycle. The events that it needs to examine are related to the following cycles – purchase of raw materials, payment of raw materials, sale of finished goods and collection of cash for sales.
2014 2013 2012 Net revenue 66,683.00 66,415.00 65,492.00 Year on year increase 0.40% 1.41% Gross profit 35,799.00 35,172.00 34,201.00 Year on year increase 1.78% 2.84% Gross margin 53.69% 52.96% 52.22% Selling, general and adminsitrative expenses (SG&A) 26,126.00 25,357.00 24,970.00 Year on year increase 3.03% 1.55% SG&A as a % of revenue 39.18% 38.18% 38.13%Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.