XACC 280 Final Project

Financial Analysis

**Your Name**

XACC/280

**Date**

INSTRUCTIONS – The following are your instructions and some tips on how to complete the final.  The actual final template starts on page 3.

 

Part I:

 

Your parents are considering investing in

PepsiCo

, Inc. common stock. They ask you, as an accounting expert, to make an analysis of the company for them. Fortunately, excerpts from a current annual report of PepsiCo are presented in Appendix A of the textbook.

 

(a)

    Make a 5-year trend analysis, using

2001

as the base year, of

(1)

net sales and

(2)

net income.

 

(The

Trend

should be reported in percentages…See Illustration 15-4 on page 700 of the textbook). 

 

Use the information found on page A30 of Appendix A.

 

In at least 300 words, comment on the significance of the trend results.

 (b) Compute for

2005

and

2004

the (1) profit margin, (2) asset turnover,

(3)

return on assets, and (4) return on common stockholders’ equity. How would you evaluate PepsiCo’s profitability?

 

Total assets at December 27,

2003

, were $25,327, and total stockholders’ equity at December 27, 2003, was $11,896.

 

In at least 200 words identify how would you evaluate PepsiCo’s profitability?

(c)    Compute for 2005 and 2004 the (1) debt to total assets and (2) times interest earned ratio.

 

In at least 200 words identify how would you evaluate PepsiCo’s long-term solvency?

(d)    In a minimum of 200 words describe what information outside the annual report may also be useful to your parents in making a decision about PepsiCo, Inc.?

Part II:

PepsiCo’s financial statements are presented in Appendix A. The

Coca-Cola Company

’s financial statements are presented in Appendix B.

 

(a)    Based on the information contained in these financial statements, determine each of the following for each company.

 

(1) The percentage increase (decrease) in

(i)

net sales and

(ii)

net income from 2004 to 2005.

 

(2) The percentage increase in (i) total assets and (ii) total common stockholders’ (shareholders’) equity from 2004 to 2005.

 

(3) The basic earnings per share and price-earnings ratio for 2005. (For Coca-Cola, use the basic earnings per share.) Coca-Cola’s common stock had a market price of $43.60 at the end of fiscal-year 2005.

(b) Identify, in a minimum of 300 words, what conclusions concerning the two companies can be drawn from these data?

  

a)

     

                

                    

                                PEPSICO, INC.

Trend Analysis of Net Sales and Net Income

For the Five Years Ended 2005

                                                                                                                                                           

 

Base Period 2001—(in millions)

 

   2005 2004 2003 

 2001

            

(1)

          

                 

(2)

          

     

2002

Net salesTrend

Net incomeTrend

Significance of Results

In at least 300 words, comment on the significance of the trend results. 

b)  Profitability

Compute for 2005 and 2004 the (1) profit margin, (2) asset turnover, (3) return on assets,

and (4) return on common stockholders’ equity for Pepsi Co:

 

1) Profit Margin

2005:  

$_____

÷ $ _____= ____%

2004:  $_____ ÷ $_____ = ____%

 

2)  Asset Turnover

2005:  $_____ ÷ $ _____= ____ times

2004:  $_____ ÷ $_____ = ____ times

 

3)  Return on Assets

2005:  $_____ ÷ $ _____= ____%2004:  $_____ ÷ $_____ = ____% 

4)  Return on Common Stockholder’s Equity

2005:  $_____ ÷ $ _____= ____%2004:  $_____ ÷ $_____ = ____% 

Evaluation

In at least 200 words identify how would you evaluate PepsiCo’s profitability?

c)  Compute for 2005 and 2004 the (1) debt to total assets and (2) times interest earned ratio.

 

1) Debt to Total Assets

2005:  $_____ ÷ $ _____= ____%2004:  $_____ ÷ $_____ = ____% 

2)  Times Interest Earned Ratio

2005:  $_____ ÷ $ _____= ____ times2004:  $_____ ÷ $_____ = ____ times EvaluationIn at least 200 words identify how would you evaluate PepsiCo’s long-term solvency?

(d) In a minimum of 200 words describe what information outside the annual report may also be useful to your parents in making a decision about PepsiCo, Inc.?

      Part II:

(a) Based on the information contained in these financial statements, determine each of the following for each company.

(a)    PepsiCo Coca-Cola Company

        

 (1)(i)

 

 

 = ___%

$        

  (ii)

 $ – $

 $      –  $

$        

 (2)(i)

 

 

$        

  (ii)

 $ – $ = ____% $ – $ = ___%

$        

 (3)

 $_____ 

        

  

 $

 $ = ____ times

$               

Percentage increasein net sales				$ – $			= ___%		$      –  $
Percentage increase(decrease) in net income	= (___%)		= ____%
Percentage increase(decrease) in total assets	$  – $	=  ___%	$   – $	= (__%)
Percentage increase(decrease) in total common stockholders’ equity
Basic earnings per share	$_____
Price-earnings ratio		= ____ times

 

(b) Identify, in a minimum of 300 words, what conclusions concerning the two companies can be drawn from these data?

    

References

Weygandt, J.J., Kimmel, P.D., & Kieso, D.E. (2008). Financial accounting (6th ed.). Hoboken,

 

NJ: Wiley.