Running head: FINANCIAL ANALYSIS OF PEPSICO’S FINANCIAL STATEMENTS 1
FINANCIAL ANALYSIS OF PEPSICO’S FINANCIAL STATEMENTS 4
Financial Analysis of PepsiCo's Financial Statements
XACC/290
January 18, 2015
Jennifer Weske
Financial Analysis of PepsiCo’s Financial Statements
PepsiCo is one of the publicly traded companies that operate in the beverage and food industry. Based on the financial statements in the appendix section of this paper, there is much that can be said on the company’s financial position and performance for the last three years ranging from 2011 to 2013. The income statement of the company indicates that the revenue levels remain flat despite the growth in net income from $ 6.2 billion to $ 6.7 billion. There was a reduction in the level of sales which was mainly attributed to the decline in the cost of goods sold. Based on the balance sheet, it is evident that operating profits can sufficiently service the company’s debt despite the reduction in the value of the current liquid assets (Businessweek, 2014).
At the end of 2013, the value of the company’s total assets was $ 77, 478, 000 million. This represented an increase in the value of the total assets in the last two years (Businessweek, 2014). An increase in value of total assets indicates that the company is effectively managing its expenditure and can sufficiently fund its operations. The figure also shows that the company’s book value has increased.
The total assets at the end of the previous reporting period were $ 74, 638,000. The value was lower than the one recorded in 2013. Nonetheless, the organization had recorded lower values in the other previous years. For instance, in 2010 the value of the total assets was $ 68, 153,000, while that of 2011 was $ 72, 882, 000. These trends indicate possible expansion, effective control of expenditure, and increased capital base.
At the end of most recent trading period, which was 2013, the value of cash and cash equivalents was $ 22, 203, 000 million (PepsiCo, 2013). This included elements such as accounts receivable, inventory, deferred taxes, and other current assets. The components constitute the list of items that can be easily converted into cash to meet the urgent financial needs of the business.
The amount of accounts receivable at the end of 2013 was $ 4, 874,000 million. This value was relatively higher than those of the previous years (Businessweek, 2014). While an increase in the level of accounts payable is mainly associated with increasing debt, it is a good indicator of the increasing level of operations. Nonetheless, the company should take into account effective cost management strategies to counter the increasing debt.
The amount of the accounts payable at the end of 2012 was $ 4, 451,000 million. This value was relatively lower compared to that of 2013. It implies that in 2013 the company had less debt, but the volume of operations was low. It is also indi.
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Running head FINANCIAL ANALYSIS OF PEPSICO’S FINANCIAL STATEMENTS.docx
1. Running head: FINANCIAL ANALYSIS OF PEPSICO’S
FINANCIAL STATEMENTS 1
FINANCIAL ANALYSIS OF PEPSICO’S FINANCIAL
STATEMENTS 4
Financial Analysis of PepsiCo's Financial Statements
XACC/290
January 18, 2015
Jennifer Weske
Financial Analysis of PepsiCo’s Financial Statements
PepsiCo is one of the publicly traded companies that
operate in the beverage and food industry. Based on the
financial statements in the appendix section of this paper, there
is much that can be said on the company’s financial position
and performance for the last three years ranging from 2011 to
2013. The income statement of the company indicates that the
revenue levels remain flat despite the growth in net income
from $ 6.2 billion to $ 6.7 billion. There was a reduction in the
level of sales which was mainly attributed to the decline in the
cost of goods sold. Based on the balance sheet, it is evident that
operating profits can sufficiently service the company’s debt
despite the reduction in the value of the current liquid assets
(Businessweek, 2014).
At the end of 2013, the value of the company’s total assets
was $ 77, 478, 000 million. This represented an increase in the
value of the total assets in the last two years (Businessweek,
2014). An increase in value of total assets indicates that the
company is effectively managing its expenditure and can
sufficiently fund its operations. The figure also shows that the
2. company’s book value has increased.
The total assets at the end of the previous reporting period
were $ 74, 638,000. The value was lower than the one recorded
in 2013. Nonetheless, the organization had recorded lower
values in the other previous years. For instance, in 2010 the
value of the total assets was $ 68, 153,000, while that of 2011
was $ 72, 882, 000. These trends indicate possible expansion,
effective control of expenditure, and increased capital base.
At the end of most recent trading period, which was 2013,
the value of cash and cash equivalents was $ 22, 203, 000
million (PepsiCo, 2013). This included elements such as
accounts receivable, inventory, deferred taxes, and other current
assets. The components constitute the list of items that can be
easily converted into cash to meet the urgent financial needs of
the business.
The amount of accounts receivable at the end of 2013 was
$ 4, 874,000 million. This value was relatively higher than
those of the previous years (Businessweek, 2014). While an
increase in the level of accounts payable is mainly associated
with increasing debt, it is a good indicator of the increasing
level of operations. Nonetheless, the company should take into
account effective cost management strategies to counter the
increasing debt.
The amount of the accounts payable at the end of 2012 was
$ 4, 451,000 million. This value was relatively lower compared
to that of 2013. It implies that in 2013 the company had less
debt, but the volume of operations was low. It is also indicates
that the higher the value of the accounts payable, the higher
cash inflow and the number of operations.
The net revenue for the last three periods is derived from the
total revenues divided by three.
The revenue in 2013 was 66, 415,000
Revenue in 2012 was 65,592,000
Revenue in 2011 was 66,504,000
Total Revenue for the three years was $ 198, 511, 000 million
Net Revenue for the three years was 198, 511,000/3 = $
3. 66, 170, 000 million. Despite the fact that the organization
recorded the above net revenue, 2012 was the best year for the
company because it recorded the highest revenue than the other
two years.
The change in the company net income between 2013 and 2012
can be calculated by finding the different the two values. In
2013, the company’s net income was $ 6, 740, 000. In 2012, the
company recorded a net income of $ 6, 171,000. The difference
between the values is 6, 740, 000 – 6, 171,000 = $ 569,000. An
increase in the net income as indicated by the amount reveals
that PepsiCo is a highly efficient company that can generate
income to pay for its debts and expenses.
The value of the total current assets at the end of 2013 was
$ 22, 203, 000 million. The figure was relatively higher than
those of previous years. An increase in the value of the current
assets means that the liquidity of the company has increased
(PepsiCo, 2013).
At the end of the previous period in 2012, the value of the
company’s current assets was $ 18, 720,000. The amount of the
total current assets in 2012 was lower than that of 2013, but
higher than 2011. It is evident that the company’s current assets
have increased for the three years.
The information from above analysis is very important for
the shareholders, employees, and potential investors of the
organization. For instance, the increase in the value of the net
income assures the employees that the organization is
financially healthy and can easily manage to pay their wages.
The increase in the level of cash and cash equivalents also
confirms to the employees that the company is in a better
position to meet all the expenditures (PepsiCo, 2013). The
increasing value of the current accounts indicates to the
shareholders and the potential investors that PepsiCo is
experiencing a continuous growth.
Investors will be very optimistic to purchase the
company’s shares because of the increase in the value of the net
income and the total current assets. With such a positive trend,
4. the investors will be confidence that the business will enable
them recover more dividends from their investments. The
company’s financial position will attract more investors, hence
increasing its capital base. Even though the increase in the
value of the accounts payable indicate that the organization
experiences increased level of operation, the situation may
trigger anxiety among debt sensitive-investors. They may be
worried about the company’s debt management approaches. It is
crucial that the organization implements effective debt
management strategies (PepsiCo, 2013).
References
Businessweek. (2014). Pepsico Incorporation.
BloombergBusinessweek. Retrieved from
<http://investing.businessweek.com/research/stocks/financi
als/financials.asp?ticker=PEP >
PepsiCo. (2011). The power of PepsiCo: 2011 annual report.
Retrieved from
<http://www.pepsico.com/annual11/downloads/PEP_AR11
_2011_Annual_Report.pdf>
PepsiCo. (2013). PepsiCo 2013 annual report. Retrieved from
<http://www.pepsico.com/Assets/Download/PEP_Annual_
Report_2013.pdf>
Appendix
PespiCo’s Balance Sheet
Currency in
Millions of US Dollars
As of:
Dec 25
2010
Dec 31
2011
Dec 29
2012
Dec 28
5. 2013
4 Year
Trend
Assets
Cash And Equivalents
5,943.0
4,067.0
6,297.0
9,375.0
Short-Term Investments
426.0
358.0
322.0
303.0
TOTAL CASH AND SHORT TERM INVESTMENTS
6,369.0
4,425.0
6,619.0
9,678.0
Accounts Receivable
5,370.0
5,879.0
6,058.0
6,033.0
Other Receivables
953.0
1,033.0
13. PepsiCo’s Income Statement
Currency in
Millions of US Dollars
As of:
Dec 25
2010
Dec 31
2011
Dec 29
2012
Dec 28
2013
4 Year
Trend
Revenues
57,838.0
66,504.0
65,492.0
66,415.0
TOTAL REVENUES
57,838.0
66,504.0
65,492.0
66,415.0
Cost Of Goods Sold
26,177.0
31,547.0
31,291.0
31,243.0
GROSS PROFIT
31,661.0
34,957.0
14. 34,201.0
35,172.0
Selling General & Admin Expenses, Total
22,045.0
24,449.0
24,680.0
25,184.0
Depreciation & Amortization, Total
117.0
133.0
119.0
110.0
OTHER OPERATING EXPENSES, TOTAL
22,162.0
24,582.0
24,799.0
25,294.0
OPERATING INCOME
9,499.0
10,375.0
9,402.0
9,878.0
Interest Expense
-903.0
-856.0
-899.0
-911.0
Interest And Investment Income
68.0
57.0
15. 91.0
97.0
NET INTEREST EXPENSE
-835.0
-799.0
-808.0
-814.0
Income (Loss) On Equity Investments
735.0
--
--
--
EBT, EXCLUDING UNUSUAL ITEMS
9,399.0
9,576.0
8,594.0
9,064.0
Merger & Restructuring Charges
-1,167.0
-742.0
-290.0
-173.0
EBT, INCLUDING UNUSUAL ITEMS
8,232.0
8,834.0
8,304.0
8,891.0
Income Tax Expense
1,894.0
2,372.0
16. 2,090.0
2,104.0
Minority Interest In Earnings
-18.0
-19.0
-36.0
-47.0
Earnings From Continuing Operations
6,338.0
6,462.0
6,214.0
6,787.0
NET INCOME
6,320.0
6,443.0
6,178.0
6,740.0
NET INCOME TO COMMON INCLUDING EXTRA ITEMS
6,314.0
6,436.0
6,171.0
6,732.0
NET INCOME TO COMMON EXCLUDING EXTRA ITEMS
6,314.0
6,436.0
6,171.0
6,732.0
