Making a company financial analysis of entails comparing a minimum of two consecutive years of financial data, contrasted with a competent and capable competitor in the same industry and with similar characteristics. In this example, the analysis is focused on Coca-Cola Company and PepsiCo, and their financial pictures for the years 2004 and 2005. This paper will show that Coca-Cola is a more preferable investment option.
The two companies, side by side, are relatively similar - vying against each other in the world-wide market of carbonated beverages. PepsiCo has had the ability to diversify its portfolio a bit more than Coca-Cola, creating a partnership with companies in other food and beverage fields, including Gatorade and Quaker. PepsiCo also has a faster production to sales ability, something that should translate into more money coming into the company and thereby faster receivables coming in to enhance production. Coca-Cola, though, has a more compact sales amount, doing what seems to be less business, but with a greater net income. Also, their income is growing at a faster rate, 20% more so in 2004. The cost of goods between the two companies also varies, with PepsiCo spending around 10% more then Coca-Cola, every year. .
In terms of financial data, liquidity, profitability, and solvency are the most useful of ratios and characteristics capable of showing the ability of success for a company. Using these three in tandem and against themselves for congruent years will help show the stability of a business. This is integral for investors and persons of the company to get a deeper and longer look as to the trends that the business will take over time, creating a company's vertical analysis and horizontal analysis. With the use of a ratio analysis can be determined using aspects of the liquidity, profitability, and solvency with the use of this data. Using all these points of data allows a broader perspective of the company and creates an ability to hypothetically view where a company's financial situation might end up in the future, helpful for all parties who might either be attempting to invest money or time with a company.