MAHEEN KAMRAN

BBA-1Z

ASSIGNMENT#1

ENRLMNT: - 01-111152-075

PRINCIPLES OF ACCOUNTING
 INTRODUCTION

PepsiCo and Coca Cola are both companies that are known around the world for their goods. For
decades now, these companies have been competitive against each other to “do better than” the
other one, what some would call the “cola wars”. They individually offer an assortment of soft
drinks; regular, diet, caffeine free and many other options for the public to choose from. Both of
the companies also have quite a few different entities (or off springs) of their company, such as
bottled water, energy drinks, and juices. Individually both PepsiCo and Coca Cola; better known
as Pepsi and Coke, have produced goods for every income bracket. The soft drink industry is one
of the largest and assorted industries in the world; consumption in the United States alone is rated
at 95%. Together Pepsi and Coke have dominated the soft drink industry, staying higher than any
other competition for decades. Not only have they dominated the national market, but also have
dominated the global market. Pepsi and Coke have triumphed over many obstacles, so that they
may produce and distribute products in most countries around the globe. Both employ a strategy
called “the follow up strategy”. When one launches a new product or service, the other is not far
behind with a similar product or service. This strategy has been so effective within these two
companies that it leaves other would be competitors oblivious to what just happened. Because of
global success, both PepsiCo and Coca Cola have paid a price in one way or another regarding
legal issues, precedents, and political opinions. Both of these companies are great examples that
the power of influence is leadership. Since their influence is so powerful, they easily shut down
competitors in the market as well as keep their moral and ethical values at a soaring level.
 BALANCE SHEET OF THE COCA COLA COMPANY AND
PEPSI CO

COCA PEPSI
COLA CO
Cash 7.31 9.1
Marketable Securities 12.59 2.91
Receivables 10.4 10.03
Inventory 5.77 9.83
Notes Receivable -
Other Current Assets 6.65 1.87
Coca Cola Total Current Assets/Pepsi Current 33.4 23.03
Assets
Accumulated Depreciation -
Deposits & Other Assets 4.21 750
Coca Cola/Pepsi Total Assets 90.09 69.67
Notes Payable 13.13 4.07
Accounts Payable 9.66 13.51
Income Taxes Payable 331 -
Other Current Liabilities 1.13 -
Coca Cola Total Current Liability/Pepsi Total 26.93 17.58
current liability
Long-Term Debt 28.41 29.21
Coca Cola/Pepsi Total Liabilities 64.33 57.64
Retained Earnings 65.02 50.47
Other Liabilities -9.96 -13.21
Coca Cola/Pepsi Capital stock 75.16 25.94
Coca Cola/Pepsi Total Liabilities & 90.05 69.67
Shareholders’ Equity
 INCOME STATEMENT OF COCA COLA COMPANY AND
PEPSI CO

COCA PEPSI
COLA CO

Coca Cola/Pepsi Net Sales or Revenues 7.01 63.06

Cost Of Goods Sold (COGS) 4.44 28.38

Coca Cola/Pepsi Gross Profit 2.57 34.67
Research & Development Expense - -
Selling General & Admin Expense 1.7 26.24
Income Before Depreciation Depletion 866 8.43
Amortization
Depreciation Depletion Amortization - 75
Interest Expense 118 970
Provision for Income Taxes 148 1.94
Minority Interest - 49
Coca Cola/Pepsi Net Income (Profit/Loss) 596 5.45
Income Before Nonrecurring Items - -
Income from Nonrecurring Items - -
Preferred Dividends Acc Pd - -
Dividends Common - -
Dividend Per Share Common - -
FINANCIAL ANALYSIS OF THE COCA COLA COMPANY AND
PEPSI CO

Short term analysis of the Coca cola Company in comparison with

the Pepsi Co.

Ratio Coca cola Pepsi

Inventory turnover 5.77 9.83
Receivables turnover 10.4 10.03
Payable turnover 13.13 4.07
Working Capital turnover 75.16 25.94

After thorough calculating, Coca Cola hold the Inventory Turnover Ratio of 5.77, which is a quite
ideal ratio compared with that of 9.83 of PepsiCo. The low ratio of Coca Cola could indicate the
insufficiency in poor merchandising and overstocking due to inadequate organizational planning
process or overestimated customer demand. Apart from the low Inventory Turnover Ratio, the
Receivables Turnover Ratio of Coca Cola is approximately 10.4, which was slightly higher than
that of PepsiCo calculated roughly 10.03. The figure shows that Coca Cola had been managing its
current assets more effectively than PepsiCo through collecting credit sales from the customers.
However, with the higher Receivables Turnover Ratio, Coca Cola appears to have stringent
financial managers controlling its account receivable closely, which may prevent customers who
intend to pay their credits in a longer term. Payable Turnover Ratio is also a major advantage of
Coca Cola when it is calculated approximately 13.13 as compare to 4.07 of PepsiCo. The high
ratio illustrates the effective way that the company control and pay its suppliers, which enhance
the partner relationship between the two sides resulting in deep connection in the future. Coca Cola
had the Working Capital Turnover Ratio of about 75.16, compared with that of 25.94 in PepsiCo,
about nearly three times. The ratio not only points out how efficiently the company utilized its
working capital in doing business, but also states how effectively the assets and liabilities are used
to support the company’s sales. Again, the high ratio has re-stated the magnificent management
systems of Coca Cola to exploit completely its potential assets and liabilities.
 CONCLUSION

In conclusion, Coca Cola has proved its high position in the soft drink industry over its direct
competitor – PepsiCo. With the magnificent Shareholder’s equity Turnover Ratio of 25.76, Coca
Cola has using its assets and liabilities effectively and efficiently. Moreover, its reliability has
improved considerably due to the Payable Turnover Ratio with its suppliers and other partners,
creating more and more opportunities in the future prospects. However, it is fair to suggest the
company’s departments to estimate and evaluate the customer demand as well as to improve the
merchandising process to increase its Inventory Turnover Ratio in order to attract more profitable
investments from current and potential shareholders and investors.