Financial Analysis of PepsiCo Company

Financial Analysis of PepsiCo Company

Introduction

The PepsiCo is the leader in the whole for the distribution and production foods, snacks, and beverages which has the total revenue of billion as well as having the total employees of 185, 000 employees. The company consists of PepsiCo Americas Beverage, PepsiCo Americas Foods, and PepsiCo International (PepsiCo Corporate Website, 2008).

The PepsiCo’s measurement for its financial statement is the aide of the significant relationships as well as the identification for the changes and the existing trends. Most of the broadly used techniques which adopted by the company are dollar and percentage changes, the ration as it expresses to the relationship f the financial statement for the competitor, the components percentage and the trend percentage. There is also the accompaniment for the comparison of the company’s past performance and to the industry standard (Williams, et. al, 2008, p.632).

 

 

Ratios

The financial ratios are significant in the analyzation of the financial statement because of the permission in comparing the information and the financial statement for the other company’s financial statement. In this case, the PepsiCo Company’s Ratios are interpreted in the benchmark for its ultimate competitor which is the Coca Cola Company.

            The PepsiCo has the ratio of 89.80 percent for the current liabilities as was compared to its current assets. The company has also the 22.3 % P/E ratio for 2007 with 18.7% in the year 2006 which signifies that is profitable this year as compared to the last year. The company has also the Price/Book ratio of 7.1 in the year 2007 and 6.7 for the previous year. Its price/sales ration had reached for 3.2% as compared to last years’ 3.0 which signifies huge sales. It cash flow sales to its prices is 18.2 as compared to 17.2 which only reflects that the company is doing its best to allocate much resources and achieve its goal (Quick Take, 2008). It has also the PE ratio of 16.2 for the current year with the dividend yield of 2.5 %. The company also has the 4.34B increase for the year 2007 to previous year which reflects the 10.99% of the net sales/revenue ratio. This signifies that it has the huge gross profit of 10.13% for the two consecutive years (Google Finance, 2008).

            In order to compare the financial ratio of PepsiCo to its competitor, it is only important to use one of its major competitors as the Coca Coca Company. The Coca Cola Company has the current asset and the current liabilities estimated ratio of 0.91 or 91 percent higher in its current liabilities vs. the current asset for the year 2007 vs. 2006. This figure only signifies that the Coca-Cola is still a little bit profitable for having 25.1% as the operating margin which is better as compared to the Pepsi which has only 18.2%. The company also has the 0.94 or the 94% higher to its liabilities as it compared to current assets. Additionally, the company also has the earnings per share of 19 percent vs. the .16 for the year 2006 and to the .57 for the year 2007. On the price to earnings ratio analysis, the company has the actual PE Ratio of 19.72 and the previous year was recorded of having 19. The dividend yield of the company is 2.58% for the year 2007 (Coca-Cola Corporate Website, 2008).

 

Trend Percentage

The trend percentage is commonly use fro analyzing the changes in the items in the financial statement that starts from the base year and to the upcoming year so that it can show the direction of the changes (Williams, et. al, 2008, p. 634). The trend percentage for PepsiCo is given below:

The PepsiCo (In million $)

2007

2006

2005

Sales

39,474

35,137

32,562

Net Income

5,658

5,642

4,212

Trend Percentages

 

 

Sales

121.23%

107.91%

100%

Net Income

134.33%

133.95%

100%

                    Source: PepsiCo. Website, 2008

 

The trend percentages for PepsiCo in the year 2005-2007 implies the humble growth in the sales for the past two years which also reflects its accelerations that is happening in the growth for the past two years with 2005 as the base year. With regards to the net income, it shows the significant increase in the growth trend for the past two years with the sudden increase for the year 2006. Generally, the trend for the percentages will give for the broader picture for the growing yet profitable company.

 

 

Dollar and Percentage Changes

The dollar change is useful sue to the measure for the value of currency into the other. On the other hand, the percentage change can be value of the foreign currency. 

This dollar and percentage changes is given below:

 

 

 

 

Increase or (Decrease)

 

 

 

 

 

2007 over 2006

2006 over 2007

The PepsiCo. (In million $)

2007

2006

2005

Amount

%

Amount

%

Sales

39,474

35,137

32,562

4,337

10.99

2,575

7.91

Net Income

5,658

5,642

4,212

16

0.28

1,430

33.95

Source: PepsiCo Website, 2008

            The positive changes for the percentage trend of the company signify that the PepsiCo indicates that it is appreciated in the past two years. The increase for the percentage in the year 2007 can be due to the inflation rate. It also reflects that the company had been successful in the past two years upon the increase in its operating income.

Component Percentages

The components percentages are the relative sizes that are included as the total.

 

 

 

 

Components Percentage

The PepsiCo (In million $)

2007

2006

2005

2007

2006

Net Sales

39,474

35,137

32,562

100%

100%

Cost of Goods Sales

18,038

15,762

13,406

45.70

44.86

Expenses

14,208

12,774

10,299

35.99

36.34

Net Income

5,658

5,642

4,212

14.33%

16.05%

Source: PepsiCo. Website, 2008

 

In the component percentages, there is huge evidence for the increase in the sold cost of goods which are primarily 44.86 to 45.70 which was part of the offset only to the partial decrease of expenses of 0.35% into the net sales which was the result for the decrease of the net income for about 1.72%.

 

Bibliography

Williams, J et al 2008, Financial Accounting, McGraw Hill/Irwin, New York.

Financial Ratios of PepsiCo, Inc 2008, Quick Take, viewed 17 September, 2008,

http://quicktake.morningstar.com/stocknet/Valuation10.aspx?Country=USA&Symbol=PEP.

Pepsi Co. Inc. 2008, Google Finance, viewed 17 September, 2008, http://finance.google.com/finance?q=NYSE%3APEP.

Coca-Cola Corporate Website 2008, Coca Cola, viewed 17 September, 2008, http://www.thecoca-colacompany.com/ourcompany/index.html.

PepsiCo Corporate Website 2008, Pepsi Co, viewed 17 September, 2008, http://www.pepsico.com/

 

 

Credit:ivythesis.typepad.com