Financial Ratio Analysis for PepsiCo during the past 2 years

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PunyyratrLbheGnyragf

Business Finance

Description

1. Calculate and analyze these ratios listed for PepsiCo for the last 2 years from the SEC Form 10-K (Cannot use the Annual Report that is sent to shareholders):

a. Current Ratio

b. Inventory Turnover

c. Debt Ratio

d. Time Interest Earned

e. Gross Profit Margin

f. Equity Multiplier

g. Return on Assets

h. Net Profit Margin

i. Return on Equity (use three ratio DuPont method)

(It would be helpful if you can place this data in tables, preferably Microsoft Word tables.)

2. Compare and contrast PepsiCo's ratios to industry ratios obtained from Yahoo Finance, Morningstar, MotleyFool, Macroaxis, or other internet sources and analyze why PepsiCo's ratios are different than the industry's standards.

3. Compare and contrast PepsiCo's ratios to CocaCola's ratios obtained from Yahoo Finance, Morningstar, MotleyFool, Macroaxis, or other internet sources and analyze why PepsiCo's ratios are different than this competitor's standards.

4. Cite the source(s) of the industry/competitor ratio information.

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Explanation & Answer

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Running head: PEPSICO INC. FINANCIAL ANALYSIS

PepsiCo Inc. financial analysis
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Institution
Date

PEPSICO INC. FINANCIAL ANALYSIS
Background
PepsiCo Inc. is a multinational company with key interests in production, distribution and
marketing of grain-based foods, snacks, beverages and other various products. As of 2015, its
main products in terms of revenue generation comprised of 53% foods and 47% beverages. The
PepsiCo Inc subsidiaries are spread globally with more concentration in the continental America.
In the fiscal year 2016, the company recorded net sales of $62,799 million which was a slight
drop from 2015 net sales by $257 million. However, in 2016 the company recorded a higher net
income of $6,329 million compared to the 2015 figure of $5452 million in net income which
could be attributed to a decrease in total expenses ("PEP Profile | PepsiCo, Inc. Common Stock Stock Yahoo Finance", 2017) . The company’s most fierce competitors include the Coca-Cola Company

and red bull. The following is a ration analysis of the company’s last 2 year financial statements;

a.

Current Ratio – it’s a liquidity ratio that determines the organization

ability to pay its debt obligations. the formula for evaluating current ratio is as below;

𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒓𝒂𝒕𝒊𝒐 =

Total assets
Total liabilities
Current ratio

𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔
𝒕𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔

FY 2016
$ 74,129,000,000
$ 62,930,000,000
1.18

FY 2015
$ 69,667,000,000
$ 57,637,000,000
1.21

As observed from the table above, the company recorded a lower current ratio in year
2016 of 1.18 as compared to the year 2015 figure of 1.21. This could be attributed to increase in
debt financing in the year 2016 of 9.2% from the previous year. Overall, the company is able to
meet its debt obligation which is implied by a current ratio greater than 1 in both years.

PEPSICO INC. FINANCIAL ANALYSIS
b.

Inventory Turnover- measures the number of times a business’ inventory

is sold and substituted over a given time period. The formula of inventory turnover is as
below;

...


Anonymous
I was having a hard time with this subject, and this was a great help.

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