Evaluate the financial performance of Coca-Cola; ( KO ) and Pepsi ( PEP ) for th

Question

Evaluate the financial performance of Coca-Cola; (KO) and Pepsi (PEP) for the year ended December 31, 2016. Follow the instructions below to access each company’s information and perform a financial analysis based on the financial measures we have learned in this course.

Select   Http://www.yahoo.com/ and then select Finance. In the Search section at the top of the screen select KO for Coca-Cola and PEP for Pepsi

Select “Financials” and select Income Statement when accessing the Income Statement

Select “Financials” and select Balance Sheet when accessing the Balance Sheet

Do the following for KO and PEP for the year ended 12/31/16 only

Perform a vertical analysis of the Income Statement for KO and PEP for the year ended 12/31/16.

Include in your vertical analysis all of following as a % of total revenue:

Cost of Revenue as a % of Total Revenue

Gross Profit as a % of Total Revenue

Selling, gen and administrative expenses as a % of Total Revenue

Operating Income as a % of Total Revenue

Net Income as a % of Total Revenue

Current Ratio

Accounts Receivable turnover. Assume the total revenue on the income statement represents all sales on account for the year

Average collection period

Merchandise Inventory turnover. Assume the Cost of Revenue on the Income Statement is the same as the Cost of Goods Sold

Debt to Asset Ratio

Return on Assets Ratio

Asset Turnover

In preparing the vertical analysis and other financial analysis above; define each measure and identify the strengths and weaknesses of KO and PEP as related to each other. Below is an example of you should set it up.

Working Capital

KO

PEP

Current Assets

$ 34,010,000

$ 27,089,000

- Current Liabilities

$ 26,532,000

$ 21,135,000

Net Working Capital =

$ 7,478,000

$ 5,954,000

Strength or Weakness

Working Capital measures the ability of a company to meet its short-term obligations with current assets. Pepsi is and Coke are performing at about the same level. Cokes working capital is a little higher because they have higher current assets and current liabilities.

Requirements for Each Group

1.The vertical analysis prepared in 4 A above.

2.All of your computations for the financial analysis. (4 B through 4 H)

3.Identification of strengths and weaknesses. (Include a definition of each financial measure, a description of which company is doing better in each financial measure including the vertical analysis and explain why)

4.All group members must submit the Report Project Team Assessment

5.If the requirements above are not met, points will be deducted from Parts of the group projects.

Enter all requirements on the Group Project Problem 4 Tab.

Submit one set of answers per group for all four problems. Make sure to include each group members name at the top of each spreadsheet.

Each group member should download the Group Team Assessment and evaluate themselves and everyone else in their group. This evaluation should be submitted anonymously.

Working Capital

KO

PEP

Current Assets

$ 34,010,000

$ 27,089,000

- Current Liabilities

$ 26,532,000

$ 21,135,000

Net Working Capital =

$ 7,478,000

$ 5,954,000

Explanation / Answer

Pepsi Coca Cola Ratio Ratio a) Cost of Revenue as a % of Total Revenue (Cost of Revenue/Total Revenue) (28,209,000/62,799,000) 0.45 (16,465,000/41,863,000) 0.39 b) Gross Profit as a % of Total Revenue (Gross Profit/Total Revenue) (34,590,000/62,799,000) 0.55 (25,398,000/41,863,000) 0.61 c) Selling, gen and administrative expenses as a % of Total Revenue (Selling, gen and administrative expenses/Total Revenue) (24,735,000/62,799,000) 0.39 (16,772,000/41,863,000) 0.40 d) Operating Income as a % of Total Revenue (Operating Income /Total Revenue) (9,785,000/62,799,000) 0.16 (8,626,000/41,863,000) 0.21 e) Net Income as a % of Total Revenue (Net Income/Total Revenue) (6,329,000/62,799,000) 0.10 (6,527,000/41,863,000) 0.16 f) Current Ratio (Total current assets/Total current liability) (27,089,000/21,135,000) 1.28 (34,010,000/26,532,000) 1.28 g) Accounts Receivable turnover (Net Credit Sales/Average Accounts Receivable) (62,799,000/6,694,000) 9.38 (41,863,000/3,856,000) 10.86 h) Average collection period (Days) (365/Accounts Receivable turnover) (365/9.38) 38.91 (365/10.86) 33.61 i) Merchandise Inventory turnover (Cost of Goods Sold/Average Inventory) (28,209,000/2,721,500) 10.37 (16,465,000/2,788,500) 5.90 j) Debt to Asset Ratio (Total Debt/Total Asset (36,945,000/74,129,000) 0.50 (45,709,000/87,270,000) 0.52 k) Return on Assets Ratio (Net Income/Total Asset) (6,329,000/74,129,000) 0.09 (6,527,000/87,270,000) 0.07 l) Asset Turnover (Sales/ Total Average Asset) (62,799,000/143,796,002) 0.44 (41,863,000/88,633,000) 0.47

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