Horizontal and Vertical Financial Analysis - PepsiCo vs Coca-Cola Essay

Horizontal and Vertical Financial Analysis - PepsiCo vs Coca-Cola - Essay ExampleThe social system of this article is framed in such a manner that firstly income statements of both the companies atomic number 18 analyzed on horizontal and then on steep basis. Next section is based on the analysis of balance sheets for the two companies on horizontal basis and then followed by vertical analysis. The major components of income statements be analyzed for both the companies in respect of cost of goods sold, operating income, income onward taxes and finally net income. Cost of sales for PepsiCo is around 43% of the sales whereas the comparable for Coca-Cola is around 35% of the sales which is substantially lower than that of PepsiCo. In respect of operating profits, Coca-Cola has also an edge over PepsiCo such that its operating income is around 26% of the sales whereas PepsiCo remained behind and has the operating profit of just around 18%. Coca-Cola remained successful in maintain ing a healthy position in respect of its income before taxes such that it managed to earn income before taxes around 28% of the sales whereas PepsiCo hardly managed to earn income before taxes of around hardly 19% of the sales. Net income for Coca-Cola has remained on a stronger side pursuing around 21% of its sales. On the other hand, PepsiCo just managed to earn net income of 13% of its sales in the three years. Following are the attached tables for percentage change on horizontal basis for two companies.... s 19.60 18.95 18.51 Provision for Income Taxes 7.08 4.69 5.28 Income from Continuing trading operations 12.52 14.26 13.23 Tax Benefit from Discontinued Operations 0.00 0.13 0.00 Net Income 12.52 14.39 13.23 Coca Cola Inc. Income Statement Horizontal Analysis 2005 2004 2003 Net Operating Revenues 100.00 100.00 100.00 Cost of Goods Sold 35.47 35.30 37.28 GROSS PROFIT 64.53 64.70 62.72 Selling, general and administrative expenses 37.82 36.29 34.94 separate operating c harges 0.37 2.21 2.75 OPERATING INCOME 26.34 26.21 25.03 Interest income 1.02 0.72 0.84 Interest expense 1.04 0.90 0.85 Equity income net 2.94 2.86 1.95 Other loss net (0.40) (0.38) (0.66) Gains on issuances of stock by equity investees 0.10 0.11 0.04 INCOME sooner INCOME TAXES 28.96 28.62 26.35 Income taxes 7.87 6.32 5.50 NET INCOME 21.09 22.29 20.84 Income Statement Analysis on Vertical Basis In respect of vertical analysis, PepsiCo is found to have earned much more reaping as compared to Coca-Cola such that PepsiCos revenues increased by 8% and 11% respectively as compared to previous years whereas Coca-Colas revenues increased with 4% and 6% during the same periods. Operating profits of PepsiCo increased by around 10% and 12% as compared to previous years, however, only 9% and 7% increase in operating income for Coca-Cola can be observed. Net income of PepsiCo decreased by 3.18% as compared to previous year but Coca-Cola managed to increase its net income by 0.52 %. Following tables bring out the comparative vertical analysis for both companies. PepsiCo Inc. Income Statement Vertical Analysis 2005 2004 Net Revenue 11.28 8.49 Cost of sales 11.85 8.41 Selling, general and administrative expenses 11.63 8.70 Amortization of intangible