Vertical Analysis of Coca Cola and PepsiCo Inc.

In the global consumer consumption of soft drinks, two global leaders that need no

introduction to young and old, are Coca Cola and PepsiCo Inc. However, these cola drinks are

also called "Pop" or "soda" most people just order Coke or Pepsi, please. For over the past 100

years both companies have competed against each other to bring a new twist to the consumer, by

introducing new soft drink, offer public taste test to the consumer and doing the unthinkable as

Coke tried to change the core formula. Coke learned a valuable lesson from their dedicated

consumers that they will not support a radical change in a product that they love so well. In this

paper, we will explore the financial comparison of each company, a vertical and horizontal

analysis of each company and finally, recommendations to improve the financial status of each

company.

I will start with the Vertical Analysis but first, what does Vertical Analysis mean?

Vertical analysis is a method of financial analysis in which each entry for each of the three major

categories of accounts (assets, liabilities and equities) in a balance sheet is represented as a

proportion of the total account. The main advantages of analyzing a balance sheet in this manner

are that the balance sheets of businesses of all sizes can easily be compared. It also makes it easy

to see relative annual changes in one business (Weygandlt, Kimmel & Kieso 2008). The vertical

analysis is correlated to the base amount in percentage, and the base amount is the total assets for

each company at the end of the fiscal year. To obtain the percentage amount, one needs to refer

back to the balance sheet and divide these by the total assets for each company. The total asset of

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...r metal cans, that can supply the soft drink facilities on site, instead of

shipping cans or plastic bottles great distances. The abilities to have a plastic / can manufacture

on site, would eliminate the need for transportation cost and warehouse space to store empty cans

or bottles on site. One-step further; I would look at eliminating warehouse operations and

outsource the warehouse operations totally to a company that specializes in this field. In making,

these hard and unpopular decisions you need to look at your core business and question if you

are in the business to package soft drinks and what value/profit these operations bring to the

Financial Analysis 7

stakeholders. These are a few recommendations that I would make from my knowledge of the

filling/packaging/ warehouse operation that I feel could help both, PepsiCo Inc and Coca Cola.