1. CheckPoint: Ratio, Vertical, and Horizontal Analyses ...

1. CheckPoint: Ratio, Vertical, and Horizontal Analyses

The calculations you perform for this CheckPoint form the basis of your analysis of your capstone project.

• Write in 100 to 200 words an explanation of the three tools of financial statement analysis and the function of each.

• Examine PepsiCo, Inc.’s Consolidated Balance Sheet on p. A6 in Appendix A of Financial Accounting, especially its Current Assets, Current Liabilities, and Total Assets for years 2005 and 2004.

• Calculate the following for PepsiCo, Inc. and show your work:

o The Current Ratio for 2005

o The Current Ratio for 2004

o Two measures of vertical analysis—for example, compute the current assets divided by total assets for each year, and express your result as a percentage

o Two measures of horizontal analysis—for example, compute the total change in assets by percentage, by dividing current assets in 2005 by current assets in 2004. Compute a similar percentage for current liabilities

• Examine TheCoca-Cola Company’s Consolidated Balance sheet on p. B2 in Appendix B of Financial Accounting, especially its Current Assets, Current Liabilities, and Total Assets for years 2005 and 2004.

• Calculate the following for Coca-Cola and show your work:

o The Current Ratio for 2005

o The Current Ratio for 2004

o Two measures of vertical analysis—for example, compute the current assets divided by total assets for each year, and express your result as a percentage

o Two measures of horizontal analysis—for example, compute the total change in assets by percentage, by dividing current assets in 2005 by current assets in 2004. Compute a similar percentage for current liabilities

• Post your explanation and calculations.

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