JustAnswer
a. What are the primary lines of business of these two companies as shown in their notes to the financial statements?
The COKE is the largest manufacturer of nonalcoholic soft drinks, while the PEPIS has various businesses which include the nonalcoholic soft drink, food and snacks.
b. Which company has the dominant position in beverage sales?
The Coca Cola has the dominant position in beverage sale with an amount of $29 billion in 2007.
c. Which company has the greater percentage increase in total assets from 2006 to 2007?
Coke total assets increased by around 44% as compared to 15% of PEPSI in 2007 from 2006
|In $ in billions |2007 |2006 |Difference |% Change |
|Pepsi |34.6 |30 |4.6 |15% |
|Coke |43.3 |30 |13.3 |44% |
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d. Which company had more depreciation and amortization expense for 2007? Provide a rationale as to why there is a difference in these amounts between the two companies.
The COKE is showing $1.2 billion and PEPSI is showing $1.4 billion. The difference in not very significant, but it may be due to difference in useful lives of the total fixed assets.
e. What type of income format(s) is used by these two companies? Identify any differences in income statement format between these two companies.
Both companies have used the multiple income statement formats showing profit at different levels of activities such as gross profit, operating profit, and earnings before taxes and net income.
f. What are the gross profits, operating profits, and net incomes for these two companies over the three-year period 2005-2007? Which company has had better financial results over this period of time?
All figures are in $ in billions
|Coke |2007 |2006 |2005 |PEPSI |
|Fixed Assets |31.2 |72% |24.4 |71% |
The COKE has around 28% of current assets out of total assets while the PEPSI has 29% of current assets out of total assets; therefore there is no significant change in structure of the two companies.
j. What were the two companies’ trends in net cash provided by operating activities over the period 2005 to 2007?
| All figures in billions in $ |COKE | |PEPSI |
| |2007 |2006 |2005 |
| |2007 |2006 |
|Assets Turnover |67% |114% |
|Profit Margin |21% |14% |
|Return on Assets |14% |16% |
The PEPSI has higher return on total assets which shows that PEPSI has used its assets effectively and efficiently than COKE.
s. What amounts for intangible assets were reported in their respective balance sheets by Coca-Cola and PepsiCo? What percentage of total assets is each of these reported amounts?
The COKE is showing $12.3 billion and PEPSI is showing $7.2 billion. It is around 28% for COKE and 21% for PEPSI.
t. On what basis and over what periods of time did Coca-Cola and PepsiCo amortize their intangible assets?
All intangible assets of both with definite lives are amortized using the straight line method with a life ranging from 1 to 20 years for COKE and 3-40 years for PEPSI, but the goodwill and other intangible asset with indefinite lives are not amortized.
u. What were Coca-Cola’s and PepsiCo’s net revenues (sales) for the year 2007? Which company increased its revenues more (dollars and percentage) from 2006 to 2007?
| In $ in |2007 |2006 |Difference |% Change |
|billions | | | | |
|COKE |29 |24 |5 |21% |
|PEPSI |39.5 |35.1 |4.4 |13% |
The COKE has shown higher in both terms in dollars and in percentage
v. Are the revenue recognition policies of Coca-Cola and PepsiCo similar? Explain.
Both companies recognize revenues when products are delivered to the location of bottling partner, resellers or other customers and its collectability is reasonably assured.
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