Revenue Recognition

Financial Report Analysis – Coca-Cola and PepsiCo

View the 2015 Annual Reports for the Coca-Cola Company and PepsiCo, Inc. ( PDFs Attached). Using these reports, answer the following questions:

  1. What are the primary lines of business of these two companies as shown in their notes to the financial statements?
  2. Which company has the dominant position in beverage sales?
  3. Which company has the greater percentage increase in total assets from 2014 to 2015?
  4. Which company had more depreciation and amortization expense for 2015? Provide a rationale as to why there is a difference in these amounts between the two companies.
  5. What type of income format(s) do these two companies use? Identify any differences in income statement format between these two companies.
  6. What are the gross profits, operating profits, and net incomes for these two companies over the three-year period 2013-2015? Which company has had better financial results over this period?
  7. What format(s) did these companies use to present their balance sheets?
  8. How much working capital did each of these companies have at the end of 2015? Speculate as to their rationale for the amount of working capital they maintain.
  9. What is the most significant difference in the asset structure of the two companies? What causes this difference?
  10. What were the two companies’ trends in net cash provided by operating activities over the period 2013 to 2015?
  11. What were the cash and cash equivalents reported by Coca-Cola and PepsiCo at the end of 2015? What does each company classify as cash equivalents?
  12. What were the accounts receivable (net) for Coca-Cola and PepsiCo at the end of 2015? Which company reports the greater allowance for doubtful accounts receivable (amount and percentage of gross receivable) at the end of 2015?
  13. What is the amount of inventory reported by Coca-Cola at the end of 2015? What percent of total assets does each company invest in inventory?
  14. What inventory costing methods do Coca-Cola and PepsiCo use? How does each company value its inventories?
  15. Compute and compare the inventory turnover ratios and days to sell inventory for Coca-Cola and PepsiCo for 2015. Indicate why there might be a significant difference between the two companies.
  16. What amount is reported in the balance sheets as property, plant, and equipment (net) of Coca-Cola at the end of 2015? What percentage of total assets does each company invest in property, plant, and equipment?
  17. What depreciation methods do Coca-Cola and PepsiCo use for property, plant, and equipment? How much depreciation did Coca-Cola and PepsiCo report in 2015, 2014, and 2013?
  18. Compute and compare the following ratios for Coca-Cola and PepsiCo for 2015: Asset turnover, Profit margin on sales, and Rate of return on assets.
  19. What amounts for intangible assets did Coca-Cola and PepsiCo report in their respective balance sheets? What percentage of total assets is each of these reported amounts?
  20. On what basis and over what periods of time did Coca-Cola and PepsiCo amortize their intangible assets?
  21. What were Coca-Cola’s and PepsiCo’s net revenues (sales) for the year 2015? Which company increased its revenues more (dollars and percentage) from 2014 to 2015?
  22. Are the revenue recognition policies of Coca-Cola and PepsiCo similar? Explain.

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