Joshua Gamboa
AC 3050
LP 4.2

1. Both companies have consolidated balances sheets for years prior for comparison. 2. Both companies use a comparative report format, that list the sections one above the other on the same page to present their balance sheets.
Pepsi and Coke have a similar amount of working capital. These two companies have enough sales to generate enough cash and receivables to cover the cost of operating the business in the short run. If their working capital was in the negative, the companies would not be able to pay off their short-term obligations with current operations. Each would have to borrow more debt or issue more stock to cover costs. This could be detrimental if sales slowed and receivables dropped. 3. Coke has a much higher amount of cash than Pepsi. Pepsi’s current assets are split more evenly between the cash, AR, and short-term investments. A large portion of Coke’s non-current assets are in investments in subsidiaries. Coke has large ownership positions in its major bottlers. Pepsi’s non-current assets are more equally weighted between affiliate investments and goodwill. With the recent purchase of Quaker foods in 2002, Pepsi spent a lot of cash and gained goodwill. Also, they gained PPE in the acquisition which gave their balance sheet 33% more assets up in PPE than Coke. 4. Annual and 4-year growth in assets
Pepsi: 2000 2001 2002 2003 2004
$20,757 $ 21,695 $ 23,474 $ 25,327 $ 27,987
2000-01 2001-02 2002-03 2003-04 4-year
+4.5% +8.2% +7.9% +10.5% +34.8%
Coke 2000 2001 2002 2003 2004
$20,834 $22,417 $24,406 $27,342 $31,327
2000-01 2001-02 2002-03 2003-04
+7.6% +8.9% +12.0% +14.6% +50.4%
Annual and 4-year growth in long-term debt
Pepsi: 2000 2001 2002 2003 2004
$3,009 $2,651 $2,187 $1,702 $2,397
2000-01 2001-02 2002-03 2003-04 4-year
-11.9% -17.5% -22.2% +40.08 -20.3%
Coke 2000 2001 2002 2003 2004
$ 835 $ 1,219 $2,701 $2,517 $ 1,157
2000-01 2001-02 2002-03 2003-04 4-year
+46.0% +121.6% -6.8% -54.0% +38.6% 5. Net cash provided by operating activities
2002 2003 2004
Pepsi $4,627 $4,328 $5,054
Coke $ 4,472 $ 5,456 $ 5,968

Coke’s net cash appears to grow consistently; Pepsi’s net cash position fluctuates from year to year. Net income for Coke grew by about 60% over the three years; Pepsi only grew about 40%. Even though Pepsi has about 30% more net revenues than Coke, the net income levels of Coke continue to beat Pepsi. COGS as a percentage of sales for Pepsi continues to be about 10% higher than Coke. Therefore, even though Pepsi has higher sales, they are generating far less profit which may explain part of the lower net cash flows. 6. Current cash debt coverage: net cash from operating activities/avg. current liabilities
Pepsi $5054/$6583.50=76.8%
Coke $5986/9428.5=63.3%

Cash debt coverage: net cash from operating activities/average total liabilities