Accounting, financial

Financial Analysis Project

Requirements:

Use the provided Annual Reports/Financial Statements for Coke and Pepsi to complete the following analysis:

1. Calculate the current ratio and quick ratio for both companies for 2016 and 2017. Write a paragraph describing what these ratios indicate about the liquidity of Pepsi and Coke in 2016 compared to 2017. Write a paragraph describing what these ratios indicate about the liquidity of Pepsi compared to Coke for both years. Which company seems to be more liquid? What are the advantages and disadvantages of liquidity?

1. Calculate the accounts receivable turnover and days sales in receivables for both companies for 2016 and 2017. Write a paragraph comparing 2016 with 2017 and Coke with Pepsi using these two ratios to indicate the effectiveness of their accounts receivable collection. Which of the two seems to be doing a better job with receivables? How does this collection process affect the overall success of the company?

1. Calculate inventory turnover and days in inventory for both companies for 2016 and 2017. Write a paragraph comparing 2016 with 2017 and Coke with Pepsi using these two ratios to indicate how they manage their inventory. Which one of the two companies has a better approach to inventory management? Why? What are the problems that come with poor inventory management?

1. Calculate the gross margin, profit margin and return on investment for both companies for 2016 and 2017. Explain in a paragraph what these ratios show about each company’s profitability compared to the year before and compared to each other. Indicate which company shows the best prospects for future profits and explain in detail why you think the ratios support your observation.

1. Prepare a vertical analysis or same size income statement and balance sheet for Pepsi and Coca Cola for 2016 and 2017. Write a paragraph highlighting what you learn from the percentages of sales or total assets calculated from the financial statements. Write also about the comparison between 2016 and 2017 and between Coke and Pepsi.

1. Compare Pepsi’s income statement for 2016 with their income statement for 2017 – calculate the change in dollars and percent for all of the revenues and expenses. What do the changes indicate about Pepsi’s success in 2016 relative to 2017? Do the same comparison for Coke’s income statement. What do the changes indicate about Coke’s improvement or lack thereof between 2016 and 2017? With this comparison of both companies over time now compare Coke vs. Pepsi and explain why one company is better than the other.

1. Based on all of your calculations and observations described above, make a recommendation as to which company would be a better investment. Give the reasons for your conclusion.

	Poor	Fair	Good	Excellent
Ratios	Some ratios are calculated and shown correctly	Most ratios are calculated and shown correctly	All but one or two ratios are calculated and shown correctly	All ratios calculated and shown correctly
Vertical Analysis	Same size income statement was omitted or done incorrectly	Same size income statement is only partially done	Same size income is produced but one or two items are left out or done incorrectly	Same size income statement is produced without error
Horizontal Analysis	Only some comparisons were included.	One or more of the overall comparisons were left out or done incorrectly	One or two comparisons were not calculated and shown or additional ones were added	Correct comparisons for balance sheet, income statement and cash flow were calculated and shown
Content – Ratios –comparison between years	Understanding of the ratios is weak given the lack of valid comparisons between years.	Some comparisons are omitted or are not reasonable given the trend or the calculations	Used all but a couple of ratios to make reasonable comparisons between last year and the current year for each company	Used ratios to make valid comparisons between last year and the current year for each company – noting improvement or lack thereof
Content – Ratios – Comparison between companies	Comparisons hard to understand or even backwards. Some comparisons not included.	Made comparisons but some were not valid or did not properly explain the strengths and weaknesses.	Used most ratios to compare strengths and weaknesses between companies.	Used ratios to make valid comparisons between companies for the years considered – noting the strengths and weaknesses
Content - Vertical	Missed the trends in the vertical analysis or improperly explained them.	Noted some trends and tried to explain them.	Noted the interesting trends illustrated by the vertical analysis and explained them	Noted and explained properly the interesting trends illustrated by the vertical analysis
Content - Horizontal	Missed the important trends or left out any comparison between companies.	Noted with limited explanation the trends shown by the horizontal analysis with limited comparison.	Noted and explained the trends shown by the horizontal analysis including some comparison between companies.	Noted and explained clearly the trends shown by the horizontal analysis including the comparison between companies and the strengths and weaknesses illustrated
Professional writing	Poor grammar, spelling, punctuation, transitions and lacking conclusion	Several grammars, spelling, punctuation, transition mistakes and unclear conclusion	Good grammar, spelling, punctuation, transition between ideas and conclusion	Excellent grammar, spelling, punctuation, transition between ideas and conclusion