Using these 2007 annual reports for The Coca-Cola Company and PepsiCo, Inc., answer the following questions. Write these up in a Word document, clearly identifying your response to each lettered item. Show supporting calculations for the items lettered c, f, h, l, m, o, p, r, s and u.
a. What are the primary lines of business of these two companies as shown in their notes to the financial statements?
b. Which company has the dominant position in beverage sales?
c. Which company has the greater percentage increase in total assets from 2006 to 2007?
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.
e. What type of income format(s) is used by these two companies? Identify any differences in income statement format between these two companies.
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?
g. What format(s) did these companies use to present their balance sheets?
h. How much working capital did each of these companies have at the end of 2007? Speculate as to their rationale for the amount of working capital they maintain.
i. What is the most significant difference in the asset structure of the two companies? What causes this difference?
j. What were the two companies’ trends in net cash provided by operating activities over the period 2005 to 2007?
k. What were the cash and cash equivalents reported by Coca-Cola and PepsiCo at the end of 2007? What does each company classify as cash equivalents?
l. What were the accounts receivable (net) for Coca-Cola and PepsiCo at the end of 2007? Which company reports the greater allowance for doubtful accounts receivable (amount and percentage of gross receivable) at the end of 2007?
m. What is the amount of inventory reported by Coca-Cola at December 31, 2007, and by PepsiCo at December 29, 2007? What percent of total assets is invested in inventory by each company?
n. What inventory costing methods are used by Coca-Cola and PepsiCo? How does each company value its inventories?
o. Compute and compare the inventory turnover ratios and days to sell inventory for Coca-Cola and PepsiCo for 2007. Indicate why there might be a significant difference between the two companies.
p. What amount is reported in the balance sheets as property, plant, and equipment (net) of Coca- Cola at December 31, 2007, and of PepsiCo at December 29, 2007? What percentage of total assets is invested in property, plant, and equipment by each company?
q. What depreciation methods are used by Coca-Cola and PepsiCo for property, plant, and equipment? How much depreciation was reported by Coca-Cola and PepsiCo in 2007, 2006, and 2005?
r. Compute and compare the following ratios for Coca-Cola and PepsiCo for 2007: Asset turnover, Profit margin on sales, and Rate of return on assets.
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?
t. On what basis and over what periods of time did Coca-Cola and PepsiCo amortize their intangible assets?
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?
v. Are the revenue recognition policies of Coca-Cola and PepsiCo similar? Explain.