Using the 2014 annual report for Coca-Cola and Pepsi answer the following questi

Question

Using the 2014 annual report for Coca-Cola and Pepsi answer the following questions.

http://www.pepsico.com/docs/album/default-document-library/pepsico-2014-annual-report_final.pdf

http://www.coca-colacompany.com/content/dam/journey/us/en/private/fileassets/pdf/2015/02/2014-annual-report-on-form-10-k.pdf

A. What type of income format(s) is used by these two companies? Identify an differences in income statement format between these two companies.

B. What are the gross profits, operatings profits, net incomes and net income attributes to noncontrolling interests for these two companies ovder the 3-year period 2012-2014? Which company has had a better finanical results over this period of time?

C. What income statement format do these companies use to report comprehensive income?

Explanation / Answer

A. Both companies used multi-step Income statement which is classified by function (salaries, depreciation etc is split between cost of sales, selling administrative, general etc). A multi step Income statement shows detail subtraction of items to reach Net income as in the case of these 2 companies

The only diffrence in the format of the income statement for the 2 companies is with respect to classification. For example Pepsi co clubs Interest and other income while Coco-cola shows them seperately

2. Pepsico

Coca-cola

Though the margins are much higher for Coco cola than Pepsico, there has been a decline in opearying and net income margins for Coco cola. But for pepsico, margins are stable or have increased. We can say that Pepsico has had better resukts over the years (opearting profit margin declines for Coca Cola from 37% to 21% from 2012-2014, it is stable at 14% for Pepsico. NI marginsreduces for Coca Cola from 19 to 15% during the period while it increased from 9% in 2012 to 10% in 2014 for Pepsico.

3. Both companies show a statement of other comprehensive income that includes items that impacts equity but is not included in Income statment: unrealised Forex losses, loss/income on available for sale securities, Pension remeasurement and reclassificationand derivative income/losses. Pepsico shows all items in detail while Coca cola gives a comprehensive idea of the items. For example, pension is shown as a single line item in Coco Cola but Pepsico breaks it into remeasurement and reclassification

(USDm) 2012 2013 2014 Gross profit 34,201 35,172 35,799 Operating profit 9,112 9,705 9,581 Net Income (total) 6,214 6,787 6,558 Net Income to Minority 36 47 45

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