Essay on Financial Statement Comparison

Financial Statement Comparison

Coca-Cola and PepsiCo are the two corporations selected for financial analysis. These are two giant competitors in the food and beverage industry. Coca-Cola is a U.S-based global beverage Corporations whose headquarters are in Atlanta Georgia. The company manufactures, retails, and markets non-alcoholic drink concentrates along with syrups. Coca-Cola Company was started during 1886. With over 2800 goods accessible inside more than 200 nations, Coca-Cola is the biggest beverage producer as well as distributor globally and among the leading companies in the (U.S Encyclopedia Britannica, 2020). PepsiCo is also a U.S-based corporation with interests in producing beverage, snack and food whose headquarters are in Harrison, New York. Its business includes all kinds of beverage and food marketplace. It operates and manages manufacturing, distribution, as well as selling of its goods. Th organization was established during 1965. PepsiCo operates worldwide and its merchandize is distributed in over 200 nations, leading to yearly net revenue of $78B (LinkedIn, 2020).

In this paper, we will provide a detailed analysis Coca-Cola and Wal-Mart, comparing their financial performance based upon their income statement and financial statements.

Income Statement Comparison

Income statements are financial statements that show companies’ expenditures and income. They as well show whether companies are earning profits or losses for a specific time frame. The income statements help to understand companies’ financial health. They assist business owners into deciding whether they are able to earn profits through increasing the revenues, through reducing costs, or doing both. The income statements as well show the efficacy of strategies along with tactics which an organization establish at the start of fiscal year. A business owner may refer to these documents to identify whether their strategies and tactics have paid off. On the basis of their assessment, the owner can make the finest as well as most effective solutions for yielding more profits (Tarantino, 2021). The three elements on the income statement that I believe are the most important for comparing Coca-Cola and PepsiCo’s performance includes revenues, expenses and total income. The following table provides a summary of these three elements which were obtained from annual reports of the two companies.

Source: SEC

Based on the above table, PepsiCo has an upper hand in total revenues as its revenues exceed those generated by Coca-Cola in the year 2020. PepsiCo’s operating expenses are also lower than those of Coca-Cola Company. This means that PepsiCo has in place actions and strategies that aim to minimize its expenses, such as proper budgeting, improved process efficiency, and not investing in unprofitable projects. But, Coca-Cola seems to overpower PepsiCo in terms of total net income. This increase in net income of Coca-Cola could be due to increased investment in more viable project, which are cause the company generate more net income.

Balance Sheet Comparison

Balance sheets alongside income statements are crucial tools for investors to gain insights into an organization alongside its business operations. It’s a summary of a single point in time of the organization’s accounts- including liabilities, shareholders’ equity, and total assets. A balance sheet is an important document as it keeps business owners up to date with the financial position and standing of the company. Numerous owners fail to realize their organizations are in difficulty situations until it is too late. That’s due to the fact that several owners are not optimizing their balance sheet. Generally, when ratio of an organization’s assets to liabilities is below one to one, the organization is at risk of becoming insolvent, and the owners will require making a number of strategic moves with the end goal of improving its financial health (Pepple & Ejiogu, 2021).

A balance sheet is as well crucial as it lets lenders and other financial institutions know whether the organization is eligible for extra credit or loans. A balance sheet assists potential and current investors into better understanding where their financing will go as well as what they may anticipate to get in future. An investor appreciates a business that has high cash assets, because this implies the organization will expand and become successful. The three most important balance sheet aspects for comparing between the two organizations include total assets, total liabilities and shareholders’ equity (Pepple & Ejiogu, 2021). Coca-Cola and PepsiCo’s assets, liabilities and equity are presented in the table below.

Source: SEC

Based on the above table, Pepsico has more assets that Coca-Cola. The huge number of assets is a clear indication that PepsiCo invests more in longer term assets which ensures sustained profitability of the organization. Regarding liabilities, Coca-Cola has a huge debt which implies that the organization relies more on borrowing to finance its business activities. However, this too much debt could be risky for the organization as it may be unable to pay resulting in bankruptcy. In terms of shareholder equity, Coca-Cola leads followed by PepsiCo. This implies that Coca-Cola will be able to pay more dividends to its owner relative to PepsiCo.

Overall performance of the two companies

In general, this analysis shows that the two organizations are in tight completion regarding financial performance. On one hand, PepsiCo has an upper hand in terms total revenues compare to Coca-Cola. On the other hand, Coca-Cola has an upper hand in terms total net income relative to PepsiCo. Coca-Cola has also excellent cost management system because its operating expenses are lower than PepsiCo’s. PepsiCo on the hand has a healthy balance sheet as its assets are far more than those of PepsiCo. However, PepsiCo’s shareholders will have nothing to smile about because they will receive fewer dividends as demonstrated by its lower shareholders’ equity compared to Coca-Cola Company.

References

Coca-Cola. (2020). Form 10K. SEC. https://investors.coca-colacompany.com/filings-reports/annual-filings-10-k/content/0000021344-20-000006/0000021344-20-000006.pdf

Encyclopedia Britannica. (2020). The Coca-Cola Company: American company. https://www.britannica.com/topic/The-Coca-Cola-Company

LinkedIn. (2020). PepsiCo Inc. https://www.linkedin.com/company/pepsico/

Pepple, D., & Ejiogu, C. (2021). Income Statement and Balance Sheet. In Financial and Managerial Aspects in Human Resource Management: A Practical Guide. Emerald Publishing Limited.

PepsiCo. (2020). Form 10K. SEC. https://www.pepsico.com/docs/album/annual-reports/pepsico-inc-2020-annual-report.pdf?sfvrsn=d25439e4_4

Tarantino, D. P. (2021). Understanding financial statements. Physician executive, 27(5), 72-72..

(PepsiCo, 2020).

(Coca-Cola, 2020).

(Coca-Cola, 2020).

(PepsiCo, 2020).