1. The three tools of a financial statement analysis are horizontal, vertical, and ratio
analysis. A horizontal analysis also called trend analysis evaluates a series of financial
statement data over a time period. A vertical analysis also called common-size analysis
evaluates financial statement data by expressing each item in a financial statement as a
percent of base amount. A ratio analysis expresses the relationship among selected items
of financial data. Horizontal analysis is to determine the increase or decrease change and
this can be done in either an amount or percentage. Vertical analysis can be found by
dividing each individual item on a balance sheet by a business’s total assets. Ratio
analysis is expressed by the mathematical relationship between one quantity or another. It
can then be expressed as a percentage, a rate, or a simple proportion.
PepsiCo
The current ratio for 2005:
10,454 = 1.11
9,406
Current ratio for 2005 is 1.11
The Current ratio for 2004:
8,639= 1.28
6,752
Current ratio for 2004 is 1.28
Two Vertical analysis:
(2005)Current assets- 10,454 = 33%
Total assets- 31,727
(2004)Current assets- 8,639= 31%
Total assets- 27,987
(2005)Short-term Obligations = 2,889= 9%
Total liabilities with shareholders equity 31,727
(2004)Short-term obligations = 1,054 = 3%
Total liabilities with shareholders equity 27,987
Two horizontal analysis:
Current assets (2005) = 10,454= 121% or a 21% increase in assets from 2004 to 2005
Current assets (2004) 8,639

2. Current Liabilities (2004) = 9,406 = 139% or a 39% increase in liabilities from 2004 to
2005
Current Liabilities (2005) 6,752
Coco-Cola Company
Current ratio for 2005: Current Assets
Current Liabilities
10,250 = 1.04:1
9,836
Current ratio for 2004:
12,281= 1.10: 1
11,133
Two Vertical analysis:
(2005) current assets = 10,250 = 35%
Total assets 29,427
(2004) Current assets = 12,281 = 39%
Total assets 31,441
(2005) Loans and Notes Payable = 4,518 = 15%
Total liabilities with shareholders equity 29,427
(2004) Loans and Notes Payable = 4,534 = 14%
Total liabilities with shareholders equity 31,441
Two Horizontal analysis:
Current assets (2005) = 10,250 = 83.5% or a 16.5% decrease from 2004 to 2005
Current assets (2004) 12,281
Current Liabilities (2004) =9,836 88.4% or a 11.6% decrease in liabilities from 2004 to
2005
Current Liabilities (2005) 11,133