A COMPARATIVE FINANCIAL ANALYSIS OF SOFTDRINK INDUSTRY With reference to pepsi co.

and cocacola enterprise incorporation

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INDEX

EXECUTIVE SUMMARY
The primary purpose of this report is to identify and analyze the two

Sr. 1 2 3 4 5 6 7 8 9 10 11 12

Topic Executive summary Industry profile Company profile of pepsi Company profile of cocacola Balancesheet analysis Cashflow analysis Income statement analysis Weighted average cost of capital Ratio analysis Conclusion Annexure Bibliography

Page 1 3 8 21 26 32 45 48 50 61 62 70

dominant companies in the soft drink industry and determine the strongest performer as an investment opportunity. Coca-Cola and PepsiCo have been competing in the soft drink sector for over a century and both companies enjoy a high degree of brand consciousness globally. Coca-Cola has, until recently, outpaced its number two rival considerably, both in the U.S. and overseas. I will compare the two companies using the following criteria: (a) comparative statistics (b) key ratios, and (c) the weighted average cost of capital (WACC). For the purpose of my report, all relevant financial data on both Coca-Cola and PepsiCo was derived from the reliable Yahoo Finance and Morningstar

website and the accompanying 10-k reports. Coca-Cola's revenues have been generally outpaced by PepsiCo's revenues with notable exception in 2000 when both companies approached parity in terms of revenue. The Financial Times reveals that Coca-Cola has made minimal gains which may be attributed to the slow growth in the soft drink sector. Coca-Cola's income is derived from 80% of its soft drink products, while PepsiCo's soft drinks are responsible for only 20% of its income. Clearly, PepsiCo's wide range of snack products serves to cushion the company from changing consumer preferences. This is illustrated by the explosive growth of the bottled water sector-a lucrative sector for both companies (i.e., Coca-Cola's Dasani and PepsiCo's AquaFina). Consumers are quickly drawing a connection between high-fructose corn syrup beverages (e.g., most soft drinks) and obesity and are gradually shying away from them. The combined market share of PepsiCo's soft drink brands increased to 49.1% in early 2005, outpacing Coca-Cola for the first time since Pepsi entered Thailand 52 years ago. Thailand is one of a handful of world markets where Pepsi is ahead of Coke in cola sales alone (Thai Press Reports, 2007). Recently, PepsiCo announced its plans to boost its presence in the Turkish market, with the goal of overtaking Coca-Cola. In order to achieve this goal, the company will invest $30 to $40 million a year to strengthen its presence. PepsiCo has the largest market share in the Middle Eastern region, but faces strong competition in Turkey from Coca-Cola and Ulker, producer of Cola Turka.

INTRODUCTION

The FMCG sector represents consumer goods required for daily or frequent use. The main segments of this sector are personal care (oral care, hair care, soaps, cosmetics, toiletries), household care (fabric wash and household cleaners), branded and packaged food, beverages (health beverages, soft drinks, staples, cereals, dairy products, chocolates, bakery products) and tobacco. The Indian FMCG sector is an important contributor to the country's GDP. It is the fourth largest sector in the economy and is responsible for 5% of the total factory employment in India. The industry also creates employment for 3 m people in downstream activities, much of which is disbursed in small towns and rural India. This industry has witnessed strong growth in the past decade. This has been due to liberalization, urbanization, increase in the disposable incomes and altered lifestyle. Furthermore, the boom has also been fuelled by the reduction in excise duties, de-reservation from the small-scale sector and the concerted efforts of personal care companies to attract the burgeoning affluent segment in the middle-class through product and packaging innovations.

Unlike the perception that the FMCG sector is a producer of luxury items targeted at the elite, in reality, the sector meets the every day needs of the masses. The lower-middle income group accounts for over 60% of the sector's sales. Rural markets account for 56% of the total domestic FMCG demand.

Many of the global FMCG majors have been present in the country for many decades. But

in the last ten years, many of the smaller rung Indian FMCG companies have gained in scale. As a result, the unorganized and regional players have witnessed erosion in market share. History of FMCG in India In India, companies like ITC, HLL, Colgate, Cadbury and Nestle have been a dominant force in the FMCG sector well supported by relatively less competition and high entry barriers (import duty was high). These companies were, therefore, able to charge a premium for their products. In this context, the margins were also on the higher side. With the gradual opening up of the economy over the last decade, FMCG companies have been forced to fight for a market share. In the process, margins have been compromised, more so in the last six years (FMCG sector witnessed decline in demand.

Current Scenario The growth potential for FMCG companies looks promising over the long-term horizon, as the per-capita consumption of almost all products in the country is amongst the lowest in the world. As per the Consumer Survey by KSA-Technopak, of the total consumption expenditure, almost 40% and 8% was accounted by groceries and personal care products respectively. Rapid urbanization, increased literacy and rising per capita income are the key growth drivers for the sector. Around 45% of the population in India is below 20 years of age and the proportion of the young population is expected to increase in the next five years. Aspiration levels in this age group have been fuelled by greater media exposure, unleashing a latent demand with more money and a new mindset. In this backdrop, industry estimates suggest that the industry could triple in value by 2015 (by some estimates, the industry could double in size by 2010). In our view, testing times for the FMCG sector are over and driving rural penetration will be the key going forward. Due to infrastructure constraints (this influences the costeffectiveness of the supply chain), companies were unable to grow faster. Although

companies like HLL and ITC have dedicated initiatives targeted at the rural market, these are still at a relatively nascent stage. The bottlenecks of the conventional distribution system are likely to be removed once organized retailing gains in scale. Currently, organized retailing accounts for just 3% of total retail sales and is likely to touch 10% over the next 3-5 years. In our view, organized retailing results in discounted prices, forced-buying by offering many choices and also opens up new avenues for growth for the FMCG sector. Given the aggressive expansion plans of players like Pantaloon, Trent, Shoppers Stop and Shoprite, we are confident that the FMCG sector has a bright future. Budget Measures to Promote FMCG Sector 2% education cess corporation tax, excise duties and custom duties Concessional rate of 5% custom duty on tea and coffee plantation machinery

Budget Impact The education cess will add marginally to the tax burden of all FMCG companies The dividend distribution tax on debt funds is likely to adversely effect the other income components of companies like Britannia, Nestle and HLL The measure to abolish excise duty on dairy machinery is a positive for companies like Nestle Concessional rate for tea and coffee plantation machinery is a positive for Tata Tea, HLL, Tata Coffee and other such companies Duty reduction in food grade hexane will have a marginally positive impact on companies like Marico and HLL Area specific excise exemptions for North East, J&K, Himachal Pradesh will continue to encourage FMCG companies to relocate to these areas. India offers a large and growing market of 1 billion people of which 300 million are middle class consumers. India offers a vibrant market of youth and vigor with 54% of population below the age of 25 years. These young people work harder, earn more, spend more and demand more from the market, making India a dynamic and aspirational society.

Domestic demand is expected to double over the ten-year period from 1999 to 2008. The number of households with "high income" is expected to increase by 60% in the next four years to 44 million households. India is rated as the fifth most attractive emerging retail market. It has been ranked second in a Global Retail Development Index of 30 developing countries drawn up by A T Kearney. A.T. Kearney has estimated India's total retail market at $202.6 billion, is expected to grow at a compounded 30r5 per cent over the next five years. The share of modern retail is likely to grow from its current 2 per cent to 15-20 percent over the next decade, analysts feel. The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. The FMCG market is set to treble US$ 33.4 billion in 2015. Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. India is one of the worlds largest producers for a number of FMCG products but its FMCG exports are languishing at around Rs 1,000 crore only. There is significant potential for increasing exports but there are certain factors inhibiting this. Small-scale sector reservations limit ability to invest in technology and quality up gradation to achieve economies of scale. Moreover, lower volume of higher value added products reduce scope for export to developing countries. The FMCG sector has traditionally grown at a very fast rate and has generally out performed the rest of the industry. Over the last one year, however the rate of growth has slowed down and the sector has recorded sales growth of just five per cent in the last four quarters. The outlook in the short term does not appear to be very positive for the sector. Rural demand is on the decline and the Centre for Monitoring Indian Economy (CMIE)

has already downscaled its projection for agriculture growth in the current fiscal. Poor monsoon in some states, too, is unlikely to help matters. Moreover, the general slowdown in the economy is also likely to have an adverse impact on disposable income and purchasing power as a whole. The growth of imports constitutes another problem area and while so far imports in this sector have been confined to the premium segment, FMCG companies estimate they have already cornered a four to six per cent market share. The high burden of local taxes is another reason attributed for the slowdown in the industry At the same time, the long term outlook for revenue growth is positive. Give the large market and the requirement for continuous repurchase of these product.

Type

Public (NYSE: PEP)

 Founded Headquarters Key people Industry Products: Pepsi

1965 New York, USA Indra Nooyi, Food and beverage

Chairwoman, President & CEO

Tropicana Products Gatorade Lay's Doritos Frappuccino (for Starbucks) Mountain Dew Operating income $6.44 billion USD (2006) Net income profit margin Employees GROUP OF COMPANIES Frito-Lay North America PepsiCo Beverages North America, PepsiCo International Quaker Foods North America $5.64 billion USD (2006) 16.06% 153,000(2005)

Mission

The main objective of the company is to provide best quality products to its consumer. Another objective is to provide healthy rewards to its investor, good reward to its employee and other investor and partners who financially help the company

Vision

The vision of the company is to improve in all aspects in which they operate. By improving in social and economical environment, they want to make tomorrow better than today.

A Brief Pepsi History

In 1893, Caleb Bradham,a young pharmacist from New Bern, North Carolina, begins experimenting with many different soft drink concoctions. Like many pharmacists at the turn of the century he had a soda fountain in his drugstore, where he served his customers refreshing drinks, that he created himself. His most popular beverage was something he called "Brad's drink" made of carbonated water, sugar, vanilla, rare oils, pepsin and cola nuts. 10

One of Caleb's formulations, known as "Brad's drink", created in the summer of 1893, was later renamed Pepsi Cola after the pepsin and cola nuts used in the recipe. In 1898, Caleb Bradham wisely bought the trade name "Pep Cola" for $100 from a competitor from Newark, New Jersey that had gone broke. The new name was trademarked on June 16th, 1903. Bradham's neighbor, an artist designed the first Pepsi logo and ninety-seven shares of stock for Bradham's new company were issued. 1898 - One of Caleb's formulations, known as "Brad's Drink," a combination of carbonated water, sugar, vanilla, rare oils and cola nuts, is renamed "Pepsi-Cola" on August 28, 1898. Pepsi-Cola receives its first logo. 1905 - Pepsi-Cola's first bottling franchises are established in Charlotte and Durham, North Carolina. Pepsi receives its new logo, its first change since 1898. 1906 - Pepsi gets another logo change, the third in eight years. The modified script logo is created with the slogan, "The Original Pure Food Drink." 1908 - Pepsi-Cola becomes one of the first companies to modernize delivery from horse drawn carts to motor vehicles. Two hundred fifty bottlers in 24 states are under contract to make and sell PepsiCola. 1910 - The first Pepsi-Cola bottlers' convention is held in New Bern, North Carolina.

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1920 - Pepsi theme line speaks to the consumer with "Drink Pepsi-Cola, it will satisfy you." 1928 - After five continuous losing years, Megargel reorganizes his company as the National Pepsi-Cola Company, becoming the fourth parent company to own the Pepsi trademark. 1934 - A landmark year for Pepsi-Cola. The drink is a hit and to attract even more sales, the company begins selling its 12-ounce drink for five cents (the same cost as six ounces of competitive colas). The 12-ounce bottle debuts in Baltimore, where it is an instant success. The cost savings proves irresistible to Depression-worn Americans and sales skyrocket nationally. Caleb Bradham, the founder of Pepsi-Cola and "Brad's Drink," dies at 66 (May 27th, 1867-February 19th, 1934). 1935 - Guth moves the entire Pepsi-Cola operation to Long Island City, New York, and sets up national territorial boundaries for the Pepsi bottler franchise system. 1936 - Pepsi grants 94 new U.S. franchises and year-end profits reach $2,100,000. In 1940, the Pepsi Cola company made history when the first advertising jingle was broadcast nationally on the radio. The jingle was "Nickel Nickel" an advertisement for Pepsi Cola that referred to the price of Pepsi and the quantity for that price "Nickel Nickel" became a hit record and was recorded into fifty-five languages. 1941 - The New York Stock Exchange trades Pepsi's stock for the first time. In support of the war effort, Pepsi's bottle crown colors change to red, white, and blue.

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1942 - One on many company sponsored efforts to allow soldiers to communicate with friends or family. This record was made in New York City but often booths would be set up with mobile recording equipment that was bought to where the soldiers were. Shell material on solid core. 78 rpm. 1943 - Pepsi's theme line becomes "Bigger Drink, Better Taste." 1948 - Corporate headquarters moves from Long Island City, New York, to midtown Manhattan. 1950 - Alfred N. Steele becomes President and CEO of Pepsi-Cola. Mr. Steele's wife, Hollywood movie star Joan Crawford, is instrumental in promoting the company's product line. Pepsi receives its new logo, which incorporates the "bottle cap" look. The new logo is the fifth in Pepsi history. 1953 - "The Light Refreshment" campaign capitalizes on a change in the product's formula that reduces caloric content. 1955 - Herbert Barnet is named President of Pepsi-Cola. 1959 - Pepsi debuts at the Moscow Fair. Soviet Premier Khrushchev and U.S. Vice President Nixon share a Pepsi. 1960 - Young adults become the target consumers and Pepsi's advertising keeps pace with "Now it's Pepsi, for those who think young." 1962 - Pepsi receives its new logo, the sixth in Pepsi history. The 'serrated' bottle cap logo debuts, accompanying the brand's groundbreaking "Pepsi Generation" ad campaign.

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1963 - After climbing the Pepsi ladder from fountain syrup salesman, Donald M. Kendall is named CEO of Pepsi-Cola Company. Pepsi-Cola continues to lead the soft drink industry in packaging innovations, when the 12-ounce bottle gives way to the 16-ounce size. Twelve-ounce Pepsi cans are first introduced to the military to transport soft drinks all over the world. 1964 - Diet Pepsi, introduced as America's first national diet soft drink. Pepsi-Cola acquires Mountain Dew from the Tip Corporation. 1965 - Expansion outside the soft drink industry begins. Frito-Lay of Dallas, Texas, and Pepsi-Cola merge, forming PepsiCo, Inc. Military 12-ounce cans are such a success that full-scale commercial distribution begins. Mountain Dew launches its first campaign, "Yahoo Mountain Dew...It'll tickle your innards." 1970 - Pepsi leads the way into metrics by introducing the industry's first two-liter bottles. Pepsi is also the first company to respond to consumer preference with lightweight, recyclable, plastic bottles. Vic Bonomo is named President of Pepsi-Cola. The Pepsi World Headquarters moves from Manhattan to Purchase, NY. 1974 - First Pepsi plant opens in the U.S.S.R. Television ads introduce the new theme line, "Hello, Sunshine, Hello Mountain Dew." 1976 - Pepsi becomes the single largest soft drink brand sold in American supermarkets. The campaign is "Have a Pepsi Day!" and a classic commercial, "Puppies," becomes one

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of America's best-loved ads. As people get back to basics, Pepsi is there as one of the simple things in life. 1977 - At 37, marketing genius John Sculley is named President of Pepsi-Cola. 1978 - The company experiments with new flavors. Twelve-pack cans are introduced. 1980 - Pepsi becomes number one in sales in the take home market. 1981 - PepsiCo and China reach agreement to manufacture soft drinks, with production beginning next year. 1982 - Pepsi Free, a caffeine-free cola, is introduced nationwide. Pepsi Challenge activity has penetrated 75% of the U.S. market. 1984 - Pepsi advertising takes a dramatic turn as Pepsi becomes "the choice of a New Generation." Lemon Lime Slice, the first major soft drink with real fruit juice, is introduced, creating a new soft drink category, "juice added." In subsequent line of extensions, Mandarin Orange Slice goes on to become the number one orange soft drink in the U.S. Diet Pepsi is reformulated with NutraSweet (aspertame) brand sweetener. 1985 - After responding to years of decline, Coke loses to Pepsi in preference tests by reformulating. However, the new formula is met with widespread consumer rejection, forcing there-introduction of the original formulation as "Coca-Cola Classic." The cola war takes "one giant sip for mankind," when a Pepsi "space can" is successfully tested aboard the space shuttle. By the end of 1985, the New Generation campaign earns more than 58 major advertising and film-related awards. Pepsi's campaign featuring Lional Richie is the most remembered in the country, according to consumer preference polls.. 1987 - Pepsi-Cola President Roger Enrico is named President/CEO of PepsiCo Worldwide Beverages. Pepsi-Cola World Headquarters moves from Purchase to Somers, New York.

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After a 27 year absence, Pepsi returns to Broadway with the lighting of a spectacular new neon sign in Times Square. 1988 - Craig Weatherup is appointed President/CEO of Pepsi-Cola Company. 1989 - Pepsi lunges into the next decade by declaring Pepsi lovers "A Generation Ahead." Chris Sinclair is named President of Pepsi-Cola International. Pepsi-Cola introduces an exciting new flavor, Wild Cherry Pepsi. 1990 - American Music Award and Grammy winner rap artist Young MC writes and performs songs exclusively for national radio ads for Pepsi. Ray Charles joins the Pepsi family by endorsing Diet Pepsi. The slogan is "You Got The Right One Baby." 1991 - Craig E. Weatherup is named CEO of Pepsi-Cola North America, as Canada becomes part of the company's North American operations. Pepsi introduces the first beverage bottles containing recycled polyethylene terephthalate (or PET) into the marketplace. The development marks the first time recycled plastic is used in direct contact with food in packaging. 1992--Pepsi-Cola launches the "Gotta Have It" theme which supplants the longstanding "Choice of a New Generation." 1993 - Brand Pepsi introduces its slogan, "Be Young. Have Fun. Drink Pepsi." Pepsi-Cola profits surpass $1 billion. Pepsi introduces an innovative 24-can multipack that satisfies growing consumer demand for convenient large-size soft drink packaging. "The Cube" is easier to carry than the traditional 24-pack and it fits in the refrigerator. 1994 - New advertising introducing Diet Pepsi's freshness dating initiative features Pepsi CEO Craig Weatherup explaining the relationship between freshness and superior taste to consumers. Pepsi Foods International and Pepsi-Cola International merge, creating the PepsiCo Foods and Beverages Company.

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1995 - In a new campaign, the company declares "Nothing else is a Pepsi" and takes top honors in the year's national advertising championship. 1996 - In February of this year, Pepsi makes history once again, by launching one of the most ambitious entertainment sites on the World Wide Web. Pepsi World eventually surpasses all expectations, and becomes one of the most landed, and copied, sites in this new media, firmly establishing Pepsi's presence on the Internet. 1997 - In the early part of the year, Pepsi pushes into a new era with the unveiling of the GeneratioNext campaign. GeneratioNext is about everything that is young and fresh; a celebration of the creative spirit. It is about the kind of attitude that challenges the norm with new ideas, at every step of the way. PepsiCo. announces that, effective October 6th, it will spin off its restaurant division to form Tricon Global Restaurants, Inc. Including Pizza Hut, Taco Bell, & KFC, it will be the largest restaurant company in the world in units and second-largest in sales. 1998 - Pepsi celebrates its 100th anniversary. PepsiCo. Chairman and CEO Roger A. Enrico donates his salary to provide scholarships for children of PepsiCo employees. Pepsi introduces PepsiOne - the first one calorie drink without that diet taste! 2000 - Although Pepsi is a great place to work, Steven Truitt (aka 'struitt') takes his skills and hard work elsewhere (for more money of course!), therefore putting an end to his Pepsi page! For more information about Pepsi, choose a search engine and search for 'Pepsi' or visit www.pepsi.com or www.pepsico.com. 2005 - Pepsi invited to introduce new brand cola

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PEPSICO IN INDIA
PepsiCo gained entry to India in 1988 by creating a joint venture with the Punjab government-owned Punjab Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture marketed and sold Lehar Pepsi until 1991, when the use of foreign brands was allowed; PepsiCo bought out its partners and ended the joint venture in 1994. Others claim that firstly Pepsi was banned from import in India, in 1970, for having refused to release the list of its ingredients and in 1993, the ban was lifted, with Pepsi arriving on the market shortly afterwards. These controversies are a reminder of "India's sometimes acrimonious relationship with huge multinational companies." Indeed, some argue that PepsiCo and The Coca-Cola Company have "been major targets in part because they are well-known foreign companies that draw plenty of attention." In 2003, the Centre for Science and Environment (CSE), a non-governmental organization in New Delhi, said aerated waters produced by soft drinks manufacturers in India, including multinational giants PepsiCo and The Coca-Cola Company, contained toxins, including lindane, DDT, malathion and chlorpyrifos pesticides that can contribute to cancer, a breakdown of the immune system and cause birth defects. Tested products included Coke, Pepsi, 7 Up, Mirinda, Fanta, Thums Up, Limca, and Sprite. CSE found that the Indian-produced Pepsi's soft drink products had 36 times the level of pesticide residues permitted under European Union regulations; Coca Cola's 30 times. CSE said it had tested the same products in the US and found no such residues. However, this was the European standard for water, not for other drinks. No law bans the presence of pesticides in drinks in India. The Coca-Cola Company and PepsiCo angrily denied allegations that their products manufactured in India contained toxin levels far above the norms permitted in the developed world. But an Indian parliamentary committee, in 2004, backed up CSE's findings and a government-appointed committee, is now trying to develop the world's first pesticides standards for soft drinks. Coke and PepsiCo opposed the move, arguing that lab tests aren't reliable enough to detect minute traces of pesticides in complex drinks. On December 7, 2004, India's Supreme Court ruled that both PepsiCo and competitor.

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The Coca-Cola Company must label all cans and bottles of the respective soft drinks with a consumer warning after tests showed unacceptable levels of residual pesticides.[citation needed] Both companies continue to maintain that their products meet all international safety standards without yet implementing the Supreme Court ruling.[citation needed] As of 2005, The Coca-Cola Company and PepsiCo together hold 95% market share of soft-drink sales in India. PepsiCo has also been alleged[attribution needed] to practice "water piracy" due to its role in exploitation of ground water resources resulting in scarcity of drinking water for the natives of Puthussery panchayat in the Palakkad district in Kerala, India. Local residents have been pressuring the government to close down the PepsiCo unit in the village. In 2006, the CSE again found that soda drinks, including both Pepsi and Coca-Cola, had high levels of pesticides in their drinks. Both PepsiCo and The Coca-Cola Company maintain that their drinks are safe for consumption and have published newspaper advertisements that say pesticide levels in their products are less than those in other foods such as tea, fruit and dairy products. In the Indian state of Kerala, sale and production of Pepsi-Cola, along with other soft drinks, has been banned. Five other Indian states have announced partial bans on the drinks in schools, colleges and hospitals. 3.1 Highlights of PepsiCo in India: World leader - Convenient Foods and Beverages Revenues of more than $35 billion More than 1,68,000 employees Available in nearly 200 countries and territories Groups 37 bottling plants in India 16 are company owned and 21 are franchisee owned

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Tropicana was acquired in 1998 and PepsiCo merged with The Quaker Oats Company in 2001

Generates direct employment for more than 4000 people in India and indirect employment for 60,000 people

Set up 8 greenfield sites in backward regions of different states. PepsiCo intends to expand its operations and is planning an investment of approximately US$ 150 million in the next two-three years.

Annual exports from India are worth over U.S$60 million PepsiCo Founded in 1965 through the merger of Pepsi-Cola and Frito-Lay PepsiCo entered India in 1989

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Cocacola
HISTORY OF COCA COLA Coca-Cola originated as a soda fountain beverage in 1886 selling for five cents a glass. Early growth was impressive, but it was only when a strong bottling system developed that Coca-Cola became the world-famous brand it is today. 1894 A modest start for a Bold Idea In a candy store in Vicksburg, Mississippi, brisk sales of the new fountain beverage called Coca-Cola impressed the store's owner, Joseph A. Biedenharn. He began bottling CocaCola to sell, using a common glass bottle called a Hutchinson. Biedenharn sent a case to Asa Griggs Candler, who owned the Company. Candler thanked him but took no action. One of his nephews already had urged that Coca-Cola be bottled, but Candler focused on fountain sales. 1899 The first bottling agreement Two young attorneys from Chattanooga, Tennessee believed they could build a business around bottling Coca-Cola. In a meeting with Candler, Benjamin F. Thomas and Joseph B. Whitehead obtained exclusive rights to bottle Coca-Cola across most of the United States (specifically excluding Vicksburg) -- for the sum of one dollar. A third Chattanooga lawyer, John T. Lupton, soon joined their venture. 1900-1909 Rapid growth The three pioneer bottlers divided the country into territories and sold bottling rights to local entrepreneurs. Their efforts were boosted by major progress in bottling technology, which improved efficiency and product quality. By 1909, nearly 400 Coca-Cola bottling plants were operating, most of them family-owned businesses. Some were open only during hot-weather months when demand was high. 1916 Birth of the contour bottle Bottlers worried that the straight-sided bottle for CocaCola was easily confused with imitators. A group representing the Company and bottlers asked glass manufacturers to offer ideas for a distinctive bottle. A design from the Root Glass Company of Terre Haute, Indiana won enthusiastic approval in 1915 and was introduced in 1916. The contour bottle became one of the

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few packages ever granted trademark status by the U.S. Patent Office. Today, it's one of the most recognized icons in the world - even in the dark! 1920s Bottling overtakes fountain sales As the 1920s dawned, more than 1,000 Coca-Cola bottlers were operating in the U.S. Their ideas and zeal fueled steady growth. Six-bottle cartons were a huge hit after their 1923 introduction. A few years later, open-top metal coolers became the forerunners of automated vending machines. By the end of the 1920s, bottle sales of Coca-Cola exceeded fountain sales. 1920s and 30s International expansion Led by longtime Company leader Robert W. Woodruff, chief executive officer and chairman of the Board, the Company began a major push to establish bottling operations outside the U.S. Plants were opened in France, Guatemala, Honduras, Mexico, Belgium, Italy, Peru, Spain, Australia and South Africa. By the time World War II began, Coca-Cola was being bottled in 44 countries. 1940s Post-war growth During the war, 64 bottling plants were set up around the world to supply the troops. This followed an urgent request for bottling equipment and materials from General Eisenhower's base in North Africa. Many of these war-time plants were later converted to civilian use, permanently enlarging the bottling system and accelerating the growth of the Company's worldwide business. 1950s Packaging innovations For the first time, consumers had choices of Coca-Cola package size and type -- the traditional 6.5-ounce contour bottle, or larger servings including 10-, 12- and 26-ounce versions. Cans were also introduced, becoming generally available in 1960. 1960s New brands introduced Following Fanta in the 1950s, Sprite, Minute Maid, Fresca and TaB joined brand Coca-Cola in the 1960s. Mr. Pibb and Mello Yello were added in the 1970s. The 1980s brought diet Coke and Cherry Coke, followed by POWERADE and DASANI in the 1990s. Today hundreds of other brands are offered to meet consumer preferences in local markets around the world. 1970s and 80s Consolidation to serve customers As technology led to a global economy, the retailers who sold Coca-Cola merged and evolved into international mega-chains. Such customers required a new approach. In response, many small and medium-size bottlers consolidated to better serve giant

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international customers. The Company encouraged and invested in a number of bottler consolidations to assure that its largest bottling partners would have capacity to lead the system in working with global retailers. 1990s New and growing markets Political and economic changes opened vast markets that were closed or underdeveloped for decades. After the fall of the Berlin Wall, the Company invested heavily to build plants in Eastern Europe. And as the century closed, more than $1.5 billion was committed to new bottling facilities in Africa. 21st Century The Coca-Cola bottling system grew up with roots deeply planted in local communities. This heritage serves the Company well today as people seek brands that honor local identity and the distinctiveness of local markets. As was true a century ago, strong locally based relationships between Coca-Cola bottlers, customers and communities are the foundation on which the entire business grows. BRANDS OF COCA COLA

Coca-Cola Zero has been one of the most successful product launch hes in Coca Colas history. In 2007, Coca Colas sold nearly 450 million cases globally. Put into perspective, that's roughly the same size as Coca Colas total business in the Philippines, one of our top 15 markets. As of September 2008, Coca-Cola Zero is available in more than 100 countries.

Energy Drinks For those with a high-intensity approach to life, Coca Colas brands of Energy Drinks contain ingredients such as ginseng extract, guarana extract, caffeine and B vitamins.

Juices/Juice Drinks We bring innovation to the goodness of juice in Coca Colas more than 20 juice and

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juice drink brands, offering both adults and children nutritious, refreshing and flavorful beverages.

Soft Drinks Coca Colas dozens of soft drink brands provide flavor and refreshment in a variety of choices. From the original Coca-Cola to most recent introductions, soft drinks from The Coca-Cola Company are both icons and innovators in the beverage industry. Sports Drinks Carbohydrates, fluids, and electrolytes team together in Coca Colas Sports Drinks, providing rapid hydration and terrific taste for fitness-seekers at any level Tea and Coffee Bottled and canned teas and coffees provide consumers' favorite drinks in convenient take-anywhere packaging, satisfying both traditional tea drinkers and today's growing coffee culture. Water Smooth and essential, our Waters and Water Beverages offer hydration in its purest form.

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Other Drinks So much more than soft drinks. Coca Colas brands also include milk products, soup, and more so you can choose a Coca Cola Company product anytime, anywhere for nutrition, refreshment or other needs.

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ANALYSIS

26

Balancesheet analysis
PERIOD ENDING( Assets CURRENT ASSETS Cash and cash equivalents Short term investments Net receivables Inventory Other current assets TOTAL CURRENT ASSETS long term investments Property plants and equipments Goodwill Intangible assets Accumulated amortization Other assets deffered long term charges TOTAL ASSETS Liabilities CURRENT LIABILITIES Accounts payable Short/long term debt Other current liabilities TOTAL CURRENT LIABILITES Long term debt Other liabilities deffered long term liabiity charges minority interest Negative goodwill TOTAL LIABILITIES 5622000 3268000 0 8890000 1,314,000 1,873,000 608,000 3,58,000 0 12685000 2152500 0 20047000 7173000 6052000 0 1322500 0 3,277,00 0 3,133,00 0 1,890,00 0 0 6152000 6531000 305,000.0 0 12988000 2,781,000 3,401,000 877,000 0 6315667 5283667 101667 1170100 0 2457333 2802333 1125000 0 0 1808566 7 6546889 5955556 135556 1263800 0 2838444 3112111 1297333 0 0 1988588 9 6338185 5923407 180741 1244233 3 2692259 3105148 1099778 0 0 1933951 9 6400247 5720877 139321 1226044 4 2662679 3006531 1174037 0 0 1910369 1 6428440 5866613 151872.4 12446926 2731128 3074597 1190383 0 0 19443033 2440000 150000 2704000 1614000 1506000 8414000 6783000 6903000 1403000 3732000 0 2533000 168000 29936000 4326900 0 40519000 4093000 215000 3317000 2220000 2260000 1210500 0 7777000 8493000 4256000 7963000 0 2675000 4701000 278000 3090000 2187000 1920000 12176000 5779000 8326000 4029000 8476000 0 1733000 3744667 214333 3037000 2007000 1895333 1089833 3 6779667 7907333 3229333 6723667 0 2313667 168000 3802000 0 4179556 235778 3148000 2138000 2025111 1172644 4 6778556 8242111 3838111 7720889 0 2240556 168000 4071466 7 4208407 242704 3091667 2110667 1946815 1160025 9 6445741 8158481 3698815 7640185 0 2095741 168000 3980722 2 4044210 230938 3092222 2085222 1955753 1140834 6 6667988 8102642 3588753 7361580 0 2216654 168000 3951396 3 4144058 236473.3 3110630 2111296 1975893 11578350 6630761 8167745 3708560 7574218 0 2184317 168000 40011951

cocacola

31-Dec06

31-Dec07

31-Dec-08

31-Dec09

31-Dec10

31-Dec11

31-Dec12

31-Dec13

SHARE HOLDER'S EQUITY prefered stocks common stocks Retain earnings 0 807000 33468000 22118000 5983000 -1291000 880000 3623500 0 2337500 0 7378000 626000 2174400 0 9525000 880000 38513000 0 855667 3607200 0 2323533 3 7109000 -1113000 1852800 0 3366000 0 0 871888.9 3694000 0 2360777 8 7484333 -1053667 1906400 0 4095166 7 0 869185.2 3717500 0 2368537 0 7519778 -1613556 1817066 7 5142722 2 0 865580 3672900 0 2350949 4 7371037 -1260074 0 868884.8 36948000 23600867 7458383 -1309099

treasury stocks capital surplus Other stock holder equity

-24213000 7966000 -2674000

TOTAL STOCKHOLDER EQUITY NET TANGIBLE ASSETS

16920000 11785000

16920000 79670000

1858755 18607407 6 42012962744797284 3

PERIOD ENDING Assets

pepsi

31-Dec-06

31-Dec-07

31-Dec-08

31-Dec-09

31-Dec-10

31-Dec-11

31-Dec-12

31-Dec-13

CURRENT ASSETS Cash and cash equivalents Short term investments Net receivables Inventory other current assets TOTAL CURRENT ASSETS long term investments Property plants and equipments Goodwill Intangible assets Accumulated amortization other assets TOTAL ASSETS Liabilities CURRENT LIABILITIES accounts payable short/long term debt other current liabilities TOTAL CURRENT LIABILITES Long term debt other liabilities deffered long term liabilities minority interest Negative goodwill TOTAL LIABILITIES SHARE HOLDER'S EQUITY prefered stocks common stocks retain earnings treasury stocks capital surplus other stock holder equity TOTAL STOCKHOLDER EQUITY NET TANGIBLE ASSETS 0 3000 2,708,000 -2017000 1751000 (3,61,000) 0 3000 31,24,000 -2269000 1805000 -48,000 0 3000 31,30,000 -2703000 1851000 (9,38,000) 0 3,000 2,708,000 -2,329,667 1,802,333 -48,000 0 3,000 2,708,000 -2,433,889 1,819,444 -48,000 0 3,000 2,708,000 -2,488,852 1,824,259 -48,000 3,000 2,708,000 (2,417,469) 1,815,346 (48,000) 0 3,000 2,708,000 -2,446,737 1,819,683 -48,000 1,375,000 374,000 302,000 2,051,000 4,754,000 1,205,000 1,293,000 540,000 0 7,792,000 1,968,000 247,000 0 2,215,000 4,770,000 1,186,000 1,356,000 973,000 0 8,285,000 1,675,000 1,408,000 0 3,083,000 4,784,000 1,658,000 9,66,000 1,148,000 0 7,590,000 1,672,667 676,333 100,667 2,449,667 4,769,333 1,349,667 1,324,500 887,000 0 8,330,500 1,771,889 777,111 33,556 2,582,556 4,774,444 1,397,889 1,340,250 1,002,667 0 3,740,806 1,706,519 953,815 44,741 2,705,074 4,775,926 1,468,519 1,332,375 1,012,556 0 8,589,375 6,886,894 1,717,025 802,420 59,654 2,579,099 4,773,235 1,405,358 1,332,375 967,407 1,731,811 844,449 45,984 2,622,243 4,774,535 1,423,922 1,335,000 994,210 0 6,405,691 1,332,000 533,000 255000 2,749,000 3,785,000 1,490,000 3,768,000 0 135,000 11,927,00 0 629,00 0 1,520,000 577000 342000 3,086,000 4,080,000 1,533,000 4,181,000 0 235,000 13,115,000 155,000 12,982,000 647,000 1,371,000 528000 276000 3,141,000 619000 3,882,000 1,434,000 3,751,000 1,407,667 546,000 291,000 2,992,000 619,000 3,915,667 1,485,667 3,900,000 0 175,000 13,087,333 1,432,889 550,333 303,000 3,073,000 619,000 3,959,222 1,484,222 3,944,000 0 188,333 13,267,77 8 1,403,852 541,444 290,000 3,068,667 619,000 3,918,963 1,467,963 3,865,000 0 172,778 13,112,37 0 178,704 13,155,827 1,414,802 545,926 294,667 3,044,556 619,000 3,931,284 1,479,284 3,903,000 1,417,181 545,901 295,889 3,062,074 619,000 3,936,490 1,477,156 3,904,000 0 179,938 13,178,658 966,000 747,333 786,778 833,370 789,160 803,103

2,084,000 -3174000

26,15,000 -3099000

13,43,000 -3842000

2,084,000 -3,371,667

2,084,000 -3,437,556

2,084,000 -3,550,407

2,084,000 (3,453,210)

2,084,000 -3,480,391

28

The analysis of three years of balancesheet of pepsi and pepsi has been done and from those data the projected balacesheet for the years of 2009 to 2013 of five years has been counted with the simple average method. ASSETS: Assets are the most important part of the company it provides resources to the company.companys position can be predicted by the assets holding capacity.larger the capacity ,stronger the position of the company.assets includes cash receivables,short term investment ,inventory which will come under title of current assets.other assets like goodwill,plant,intangible assets will also included in the non title of fixed assets As per the projected data the cocacolas last 3 years assets are 29936000(in 06),(in 2007) and 3802000 (in 2008).while the projected assets calculated with simple average method the assets of cocacola is increasing every year than past three years.in 2009 the assets will be 40714667, which is highest for the cocacola.pepsi is having the assets as of half than cocacola. In the year 2006 pepsi is having assets of 11927000,in 2007(13115000)and in year 8 (12982000) that has decreased from the previous year. The main reason for the pepsi is having higher assets is its long term investment and property plant and equity more than pepsi.in 2008 cocacola is having 2% decrease in the assets while pepsi is having 8% decrease in the assets.from the projected data of 10 the assets of pepsi should be increased by 2% but cocacola will increase its assets more 7% in 2010.cocacola is having larger assets than pepsi so we can say that cocacola is very larger firm than pepsi.comparing the cash and cash equivalents cocacola is generating higher cash than pepsi.pepsis cash generation is very small and it will take long time to incease because it is almost 4 time lesser than of cocacola. Othe assets including inventory ,goodwill,intangible assets are more of cocacola than pepsi..

LIABILITIES: Liabilities are the application of the resource of assets.liabilies are the responsibility of the company.company has to pay all its liability with in
29

certain time period.liabilites include two parts one is fixed liabilities and othe is current liabilities.account payabe,short term debt will come under title of current liabilities.long term debt and other liabilities will come under title of fixed liabilities. Pepsi is having less liabilities than cocacola.for the year 2006 it is of 7792000(in thousand) than it increase in 2007 to 8285000 because of increase in the deffered long term liabilitesand interest.than it again reduces to 759000 in 2008 this year company has reduced its deffered long term iabilies.for the year 2009 company had paid the amount of 100667 under title of other current liabilities.which has increased to the total liability for pepsi.cocacola is having more liabilities than pepsi which is almost of 2 times than pepsi. for the year 2006 to 2008 the lianilities are 12685000,21525000,20047000 respectively. Of which 21525000 is the highest even comparing with projected liability of the next five year.there has been consistent stability has been seen in the projected liability of cocacola .for the year 2009 it is of 18085607 it increases in the 2010 to 19885889 than there has not been much change in the liability of the year 2010 to 2013 as seen in the balance sheet above Comparing both companies liabilities The ratio
of the liabilities of the both companies ate of 6:4 in the year of 2006 than the ratio incease to 7:3 in year 2007.in 2008 it remains 7;3.for the projected years the ratio In 2009 the

ratio is of 8:2 which tells how cocacola is having giant liabilities than pepsi.

30

working capital helps the company to maintain the level of cash for the day to day transactions. It helps to cycle of provide adequate cash for the working of firm.Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Working Capital = Current Assets Current Liabilities A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash. Working capital 06 07 08 09 10 11 12 Total in/dec Pepsi 698,000 871,000 58,000 542,333 490,444 363,593 465,457
-

Cocacola 25%in 93%dec 835%in 9.6%dec 26%dec 28%in 753%inc -476000 -1120000 -812000 -802667 -911556 -842074 -852098 135%dec 27.5%in 1.2%in 13.6dec 7.6%in 1.2%dec 115.5dec

As from the table pepsi is having total increase increase in the working capital of 753% .cocacolas working capital is decreasing every year.major change in working capital of pepsi came in 2009 which is projected data.working capital in year 2008 is lowest after a year it will increase to 542333from just 58000.though cocacola is having more assets than pepsi it lack in working capital as importance of working capital mentioned above.

31

Cash flow analysis

The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. The money coming into the business is called cash inflow, and money going out from the business is called cash outflow. Cash flow of cocacola.

PERIOD ENDING NET INCOME

cocacola

31-Dec06 5080000

31-Dec07 5981000

31-Dec08 5807000

Operating activity,cash flow provided by or Used in depriciation adjustments to net income changes in accounts receivables changes in liabilities changes in inventory change in other operating activity TOTAL CASH FLOW FROM OPERATING ACTIVITES investing activities,cash flows provided by or Used in capital expenditure Investmesnt other cash flows from investing activities TOTAL CASH FLOWS FROM INVESTING ACTIVITIES Financing activities ,cash flows provided by or used in dividend paid sale purchase of stock net borrowings other cash flowsfrom financing activities TOTAL CASH FROM FIANACING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES CHANGE IN CASH AND EQUIVALENTS

938000 554000 -214000 -99000 -150000 -152000 5957000 1407000 558000 -851000 1700000 2911000 2268000 1404000 6583000 65000 2261000

1163000 -406000 914000 -258000 -244000 7150000 1648000 349000 5420000 6719000 3149000 -219000 4341000 973000 249000 1653000

1228000 1224000 148000 -734000 -165000 63000 7571000 1968000 -240000 155000 2363000 3521000 -493000 29000 3985000 -615000 608000

32

Projected cash flow of cocacola

PERIOD ENDING cocacola NET INCOME Operating activity,cash flow provided by or Used in Depriciatio n adjustments to net income changes in accounts receivables changes in liabilities changes in inventory change in other operating activity TOTAL CASH FLOW FROM OPERATING ACTIVITES Investing activities,cash flows provided by or Used in capital expenditure investmesnt 1109667 889000 -157333 27000 -191000 -111000 6892667 1674333 222333 2038667 2018667 1166889 1056500 -138444 69000 -204667 -97333 7204556 1168185 1056500 -49259 -212667 -186889 -48444 7222741 1148247 1000667 -115012 -38889 -194185 -85593 7106654 1746568 121235 1970877 1579025 1161107 1037889 -100905 -60852 -195247 -77123 7177984 31-Dec09 5622667 31-Dec10 5803556 31-Dec11 5744407 31-Dec12 5723543 31-Dec13 5757169

-1763444 110444

-1801926 30926

-1770646 87535

other cash flows from investing activities TOTAL CASH FLOWS FROM INVESTING ACTIVITIES Financing activities ,cash flows provided by or used in Dividend paid sale purchase of stock net borrowings other cash flowsfrom financing activities TOTAL CASH FROM FIANACING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES CHANGE IN CASH AND EQUIVALENTS

-2434556 -2124889

-1439407 -593519

-1948280 -1432477

3193667 -993333 988667 3198333 -100333 0

-3287889 -568444 1786222

-3334185 -684926 934630

3271914 -748901 1236506 2784309 -182012 402519

-3297996 -667424 1319119

-2070111 -155444 753667

-3084481 -290259 453889

-2646300 -209239 536691

33

Cash flow of pepsi

PERIOD ENDING pepsi NET INCOME Operating activity,cash flow provided by or Used in depriciation adjustments to net income changes in accounts receivables changes in liabilities changes in inventory TOTAL CASH FLOW FROM OPERATING ACTIVITES investing activities,cash flows provided by or Used in capital expenditure Investmesnt other cash flows from investing activities TOTAL CASH FLOWS FROM INVESTING ACTIVITIES Financing activities ,cash flows provided by or used in dividend paid sale purchase of stock net borrowings other cash flowsfrom financing activities TOTAL CASH FROM FIANACING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES CHANGE IN CASH AND EQUIVALENTS

31-Dec06 522000

31-Dec07 532000

31-Dec08 162000

649000 329000 -120000 86000 -57000 1228000

669000 404000 -110000 194000 -19000 1437000

673000 516000 40000 -120000 3000 1284000

-725000 -6000 -731000

-854000 -29000 -883000

-760000 -998000 1758000

-109000 -385000 104000 19000 -371000 1000 127000

-130000 -280000 -168000 14000 -564000 28000 18000

-208000 -139000 1198000 -1000 850000 -57000 319000

34

Projected cash flow of pepsi

PERIOD ENDING NET INCOME Operating activity,cash flow provided by or Used in depriciation Adjustments to net income changes in accounts receivables changes in liabilities changes in inventory TOTAL CASH FLOW FROM OPERATING ACTIVITES investing activities,cash flows provided by or Used in capital expenditure Investmesnt other cash flows from investing activities TOTAL CASH FLOWS FROM INVESTING ACTIVITIES Financing activities ,cash flows provided by or used in dividend paid Sale purchase of stock net borrowings other cash flowsfrom financing activities TOTAL CASH FROM FIANACING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES CHANGE IN CASH AND EQUIVALENTS

31-Dec09 405333

31-Dec10 366444

31-Dec11 311259

31-Dec-12 361012

31-Dec13 346239

663667 416333 -63333 53333 -24333 1316333

668556 445444 -44444 42444 -13444 1345778

668407 459259 -22593 -8074 -11593 1315370

666877 440346 -43457 29235 -16457 1325827

667947 448350 -36831 21202 -13831 1328992

-779667 -344333 1124000

-797889 -457111 1255000

-779185 -599815 1379000

-785580 -467086 -1252667

-787551 -508004 -1295556

-149000 -268000 378000 10667 -28333 -9333 154666.7

162333.3 -229000 469333.3 7889 85889 -12778 163888.9

-173111 -212000 681777.8 5852 302519 -26370 212518.5

-161481.5 -236333.3 509703.7 8136 120025 -16160 177024.69

-165642 225777.8 553604.9 7292 169477 -18436 184477.4

35

Operating activities

Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product. Under IAS 7, operating cash flows include:

Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP)

Items which are added back to [or subtracted from, as appropriate the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include:

Depreciation (loss of tangible asset value over time) Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement)

As cocacolas investment in the long term assets increasing its depreciation is also increasing .i has been increased 1163000 in 2007 from 938000 in 2006and it increase more in 2008 of 1228000,for the year 06 and 07 the amount receivable has been in negative.2008 has account receivable has been positive which is 148000.liabilites has been increased of 99000 in 2006.then it is decreased of 914000 in 2007 but then again increased of 734000.total cash flow from operating activities has been increased over year. Cocacolas operating cash flow is more than pepsi.which shows that cocacola handles its cash operations more effectively. pepsis operating activity cashflow for the year 2008 is 1284000.while the projected amount is much more higher than 20008 and previous years.it increases of 29445 than decreases in 2011 of 30408.again increase in 2012 and in 2013. the projected data of cocacola is very
36

stable there has been not much change from 2010 to 2013.which remains around 7106654 to 7222741. Investing activities: Cocacola has purchased more assets in 2007 .the other investment has been decreasing evry year it remarks sharp decrease in 2008.projected investment is also decreasing .total cash flow from investing activities of cocacola is decreasing which tells total investment of company is reducing .pepsis capital expenditure includes the purchasing and selling of assets while there is no investment .total cash flow is positive in 2008 then it came neagative in 2012.

Financing activities: Cocacolas dividend distribution increases every year.in 2007 cocacola has paid 8% more dividend than 2006.while pepsi has reatained earnings for all years. Retain earning is increasing in the projected years. Coca-Cola has paid uninterrupted dividends on its common stock since 1893 and increased payments to common shareholders every year for 47 years. rom the end of 1998 up until December 2009 this dividend growth stock has delivered a egative annual average total return of 2.10% to its shareholders. The stock has largely raded between $65 and $40 over the past decade.

37

Source:big charts.com

The company has managed to deliver a 10.90% average annual increase in its EPS between 1999 and 2009. Analysts are expecting an increase in EPS to $3.05-$3.10 for 2010 and $3.25-$3.30 by 2011. This would be a nice increase from the 2009 earnings per share of $2.49. Future drivers for earnings could be the companys tea, coffee and water perations. Cost savings initiatives could also add to the bottom line over time.

Source: morning star.com

Some analysts believe that Coca Cola could follow arch rival Pepsi Cos moves to acquire its own bottlers in an effort to gain more control over the production and
38

distribution of its beverages in key markets. Coke holds a 35% interest in its largest manufacturer and distributor of Coca Cola products, Coca-Cola Enterprises In. . Cocaola Enterprises Inc. accounts for about 40% of Cokes concentrate sales and 16% of the companys worldwide volume, which makes it a likely target of acquisition, The Return on Equity has been in a decline after hitting a high in 2001. Rather than focus on absolute values for this indicator, Investors generally want to see at least a stable return on equity over time.

Source: morning star.com

Annual dividends have increased by an average of 10.10% annually since 1999, which is slightly lower than the growth in EPS. The company last raised its dividend by 8% in February 2009, for the 47th year in a row.

39

Source: morning star.com

A 10 % growth in dividends translates into the dividend payment doubling every seven years. If we look at historical data, going as far back as 1969, The Coca Cola Company has indeed managed to double its dividend payment every seven years on average. The dividend payout ratio remained above 50% for the majority of the past decade. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Source: morning star.com

40

Currently Coca Cola is trading at 20 times earnings and yields 3.30%. In comparison arch rival in the cola wars Pepsi Co trades at a P/E multiple of 15 and yields 3.50%. thus,The Coca Cola Company is not as attractively valued at the moment as Pepsi Co Dividend stock analysis of pepsi PepsiCo has been consistently increasing its dividends for 36 consecutive years. From the end of 1998 up until December 2009 this dividend growth stock has delivered a 4.70% annual average total return to its shareholders.

source:big charts.com

At the same time company has managed to deliver a 9.90% average annual increase in its EPS since 1999.

41

Source: morning star.com

The ROE has remained largely between 31% and 38%, with the exception of 2004, when it fell to as low as 22%.

Source: morning star.com

Annual dividend payments have increased by an average of 13.50% annually since 1999, which is much higher than the growth in EPS. Analysts are expecting slight increase in EPS for 2009 compared to 2008; given the sluggish state of North American economies. The strong US dollar could potentially hurt sales, as over 44% of PepsiCos revenues are derived internationally. A 13.50 % growth in dividends translates into the dividend payment doubling almost

42

every five years. Since 1978 PepsiCo has actually managed to double its dividend payment every six years on average.

Source: morning star.com

The dividend payout has remained in a range between 31% and 42%. In 2008 the dividend payout ratio has surged to 51%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. The slow growth in earnings could put future dividend increases at risk.

Source: morning star.com

43

PepsiCo is currently attractively valued. The stock trades at a price/earnings multiple of 15, has an adequately covered dividend payout and the current dividend yield at 3.50%,

44

Income statement analysis

Cocacolas income statement
Cocacola
NET Oin revenuePerat cost of goods sold gross profit SELLING GENERAL AND administrative exp other operating chareges Operating income interst income interest exp. equity income(loss) other income loss Pbt income tax NET INCOME 2006 24088 8164 15924 9431 185 6308 193 220 102 195 6578 1498 5080 2007 28857 10406 18451 10945 254 7252 236 456 668 173 7873 1892 5981 2008 31944 11374 20570 11774 350 8446 333 438 -874 -28 7439 1632 5807

Projected income statement for cocacola

2009 28296 9981 2010 29699 10587 2011 29980 10647 2012 29325 10405 2013 29668 10547

NET Operating revenue cost of goods sold

45

gross profit SELLING GENERAL AND administrative exp other operating chareges operating income interst income interest exp. equity income(loss) other income loss Pbt income tax NET INCOME

18315

19112 10717 289 7678 274 422 -80 86 7536 1733 5804

19332 11145 301 7820 287 410 -330 57 7424 1680 5744

18920 11212 284 7611 272 401 -148 86 7419 1695 5724

19121 11025 291 7703 278 411 -186 76 7460 1703 5757

263 7335 254 371 -35 113 7297 1674 5623

46

Income statement of pepsi.

Pepsi net revenue Cogs selling,general exp. amortazation of intangible assets operating profit bottaling equit incomr int.exp int.income PBT Tax net income 2006 43251 20351 15901 64 6935 374 -329 41 7021 1879 5142 2007 39474 18038 14208 58 7170 560 -224 125 7631 1973 5658 2008 35137 15762 12711 162 6502 553 -239 173 6989 1347 5642

Projected income statement for pepsi.

net revenue Cogs selling,general exp. amortazation of intangible assets operating profit bottaling equit incomr int.exp int.income PBT 2009 39287 18050 14273 95 6869 496 -264 113 7214 2010 37966 17283 13731 105 6847 536 -242 137 7278 2011 37463 17032 13572 121 6739 528 -248 141 7160 2012 38239 17455 13859 107 6818 520 -252 130 7217 2013 37890 17257 13720 111 6802 528 -247 136 7218

47

Tax net income

1733 5481

1684 5594

1588 5572

1668 5549

1647 5571

Opearintg profit : For the year 2008 operating profit for the cocacola is more than pepsi.cocacolas profit is increasing every year but there has not been any major change in the profit of pepsi.profit for cocacola in year 2008 is 8446 $ mill.pepsis profit in the same year is 6502.there has been defference of 7% in the profit of both companies.

Net income: Cocacola is earning 165 mill $ more profit than pepsi which in % term 1.44 % more than pepsi. We can say that pepsi is earning very good profit though the assets of the pepsi is less than cocacola, pepsi is having almost similar profit.

48

Weighted Average Cost of Capital

All the financial figures utilized in the weighted average cost of capital computation were derived from the companies 10-K reports and from Yahoo Finance, unless otherwise noted Common Equity: 10-Year T-bond=6.27% S&P 500 return=12% PepsiCo beta =0.5 Coca-Cola beta=0.63 CAPM Equation: Rs=Rrf +(RPm)b PepsiCo: Rs=6.27+(12-6.27)0.5 =9.135 Coca-Cola: Rs=6.27+(12-6.27)0.63 =9.89 Long-Term Debt: PepsiCo debt: 4,203,000,000 = 3.5% Common stock: 115,360,876,600 =96.5% 119,563,876,600 =100% Coca-Cola debt: 3,277,000,000 = 2.4% Common stock: 135,513,142,200 =97.6% 138,790,142,200 =100% PepsiCo WACC: WdRd + WceRs =.035(7.0%) + .965(9.135%) =9.045%

49

Coca-Cola WACC: WdRd + WceRs = .024(7.1%) + .976(9.89) = 9.87% Its important to note here that neither PepsiCo nor Coca-Cola issue preferred stock, so that component was not utilized in the WACC computation. A surprising discovery was the low tax rate for both of these corporations: 26% for PepsiCo and 22% for Coca-Cola. This may be attributed to lower tax rates overseas, where these companies derive a significant portion of their revenues from. PepsiCos lower WACC (9.135%) versus Coca-Colas (9.89%) gives it greater latitude in selecting investment projects. PepsiCos lower WACC will also result in greater valuation for its stock. This has happened within the last 10 years: Its stock price has climbed in value from $40.81 in 1998 to its most recent price of $68.20. Coca-Cola, meanwhile, seems to have suffered a reversal of fortune in the same time frame. Its stock price has declined from $78.38 to its most recent price of $58.72. Conclusion and Recommendation My research reveals that the strongest candidate as an investment opportunity is PepsiCo. The WACC computation MAde the choice easier. Nevertheless, Coca-Cola is a strong performer and is poised for a comeback. PepsiCo cannot rest on its laurels, if it neglects any aspect of its core business it is bound to be overtaken by its eternal rival.

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Ratio analysis
Financial Ratios

Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy. Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

Liquidity ratios Asset turnover ratios Financial leverage ratios Profitability ratios Dividend policy ratios

Liquidity Ratios
Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio. The current ratio is the ratio of current assets to current liabilities:

Current Assets Current Ratio = Current Liabilities Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. Typical values for the current ratio vary by firm and industry. For example, firms in cyclical industries may maintain a higher current ratio in order to remain solvent during downturns. One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is

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an alternative measure of liquidity that does not include inventory in the current assets. The quick ratio is defined as follows:

Current Assets - Inventory Quick Ratio = Current Liabilities The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test. Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid: cash and cash equivalents. The cash ratio is defined as follows:

Cash + Marketable Securities Cash Ratio = Current Liabilities The cash ratio is an indication of the firm's ability to pay off its current liabilities if for some reason immediate payment were demanded.

Asset Turnover Ratios

Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two commonly used asset turnover ratios are receivables turnover and inventory turnover. Receivables turnover is an indication of how quickly the firm collects its accounts receivables and is defined as follows:

Annual Credit Sales Receivables Turnover = Accounts Receivable

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The receivables turnover often is reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. This number is known as the collection period. It is the accounts receivable balance divided by the average daily credit sales, calculated as follows:

Accounts Receivable = Average Collection Period Annual Credit Sales / 365

The collection period also can be written as:

365 Average Collection Period = Receivables Turnover Another major asset turnover ratio is inventory turnover. It is the cost of goods sold in a time period divided by the average inventory level during that period:

Cost of Goods Sold Inventory Turnover = Average Inventory The inventory turnover often is reported as the inventory period, which is the number of days worth of inventory on hand, calculated by dividing the inventory by the average daily cost of goods sold:

Average Inventory Inventory Period = Annual Cost of Goods Sold / 365

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The inventory period also can be written as:

365 Inventory Period = Inventory Turnover Other asset turnover ratios include fixed asset turnover and total asset turnover.

Financial Leverage Ratios

Financial leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt. The debt ratio is defined as total debt divided by total assets:

Total Debt = Debt Ratio Total Assets

The debt-to-equity ratio is total debt divided by total equity:

Total Debt Debt-to-Equity Ratio = Total Equity Debt ratios depend on the classification of long-term leases and on the classification of some items as long-term debt or equity.

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The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt. This ratio also is known as the interest coverage and is calculated as follows:

EBIT Interest Coverage = Interest Charges where EBIT = Earnings Before Interest and Taxes

Profitability Ratios
Profitability ratios offer several different measures of the success of the firm at generating profits. The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. It is defined as follows:

Sales - Cost of Goods Sold Gross Profit Margin = Sales Return on assets is a measure of how effectively the firm's assets are being used to generate profits. It is defined as:

Net Income Return on Assets = Total Assets

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Return on equity is the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm's stock. Return on equity is defined as follows:

Net Income Return on Equity = Shareholder Equity

Dividend Policy Ratios

Dividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth. Two commonly used ratios are the dividend yield and payout ratio. The dividend yield is defined as follows:

Dividends Per Share Dividend Yield = Share Price A high dividend yield does not necessarily translate into a high future rate of return. It is important to consider the prospects for continuing and increasing the dividend in the future. The dividend payout ratio is helpful in this regard, and is defined as follows:

Dividends Per Share Payout Ratio = Earnings Per Share

Use and Limitations of Financial Ratios

Attention should be given to the following issues when using financial ratios:

A reference point is needed. To to be meaningful, most ratios must be compared to historical values of the same firm, the firm's forecasts, or ratios of similar firms. Most ratios by themselves are not highly meaningful. They should be viewed as indicators, with several of them combined to paint a picture of the firm's situation.

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Year-end values may not be representative. Certain account balances that are used to calculate ratios may increase or decrease at the end of the accounting period because of seasonal factors. Such changes may distort the value of the ratio. Average values should be used when they are available.

Ratios are subject to the limitations of accounting methods. Different accounting choices may result in significantly different ratio value

Ratio Analysis To illustrate efficiency as a good investment choice, we will use data from the annual reports of PepsiCo, Coca-Cola, for the fiscal year 2008, in order to form comparative ratios. To realize the values of the ratios, it is necessary to compare them with benchmark values. One benchmark consists of similar firms in the same industry. Liquidity: Liquidity refers to a company's ability to meet its requirements for cash. Liquidity is necessary to meet both expected and unexpected cash demands. All businesses need liquidity to operate. Inadequate liquidity can stunt growth and ultimately lead to bankruptcy if debts cannot be repaid. However, too much liquidity can detract from profits because liquid assets are low returning investments. The standard measure of liquidity is the current ratio, calculated by dividing "current assets" by "current liabilities. The current ratio for PepsiCo of 1.1 indicates it is the more liquid of coke, and also performing better than the beverage industry with a 1.00 figure. The ratios for Coca-Coca is close to 1.00. However, this is not the norm for high quality company with easy access to capital markets to finance unexpected cash requirements. Current ratio Profitability: Two common measures of profitability are the net profit margin and the return on assets ratios. Each provides a different perspective about the firm's profits. To measure the profitability of a company's operations, you calculate
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Pepsi 1.1

Cocacola 1

industry 1

the net profit margin (NPM) by dividing "net income" with "sales. Both entries come from the income statement. Net profit margin indicates the percentage of each dollar of sales that the firm is able to flow to the bottom line as profit. NPM is a function of the price of the product (which produces sales revenue) and efficiency of operations (cost of goods sold). A firm selling a unique product to a captive market may be able to charge a premium price and thus generate greater NPM. Conversely, a firm selling a generic product in a highly competitive market will have a low NPM. It must be a very efficient company, or it will not survive. The net profit margins of our 2 sample firms illustrate these concepts. Coca-Colas NPM of 8.8 percent is low compared with PepsiCos NPM of 16.6 percent.This is due primarily to its proprietary product and monopolies in certain foreign markets. PepsiCo derives the majority of its income from lower margin snack foods and restaurants. Less than half its sales come from soft drinks. The Return on Assets ratio (ROA), which is also known as the Return on Investment ratio, is calculated by dividing "net profit" by "total assets. It indicates the rate of return provided by the book value of the company's assets. The higher the ROA, the more profitable the company is. Consistent with the NPM, PepsiCo has the highest ROA with 15.81 percent, making Coca-Cola's 14.46 percent second. This reflects PepsiCos ability to generate significant sales volume from its asset base. Pepsi Net profit margin 10.6 Return on assets 15.81 Total asset turn 2 over Inventory turn 7.9 over Total Asset Turnover Ratio: Another indicator of a company's ability to generate profits is the total asset turnover ratio, calculated by dividing "sales" by "total assets. It indicates how effectively the company generates sales from its asset base. The more effective the company is in generating sales revenue, the higher the asset turnover ratio will be. However, PepsiCo and Coca-Cola's ratios are, 2.00 and 1.81 respectively. these are driven primarily by their high inventory turnover, and efficient use of fixed assets. Thus, cokes low NPM is offset to some
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Cocacola 9.8 14.46 1.81 5.4

Industry 8.05 10.97 2.30 2.19

extent by its ability to generate sales from its asset base (the company is a high volume, low overhead producer). Inventory Turnover Ratio: For companies that have a large investment in inventory, it is useful to calculate the Inventory turnover ratio, which is the "cost of goods sold" from the income statement divided by the "inventory" shown on the balance sheet. A low turnover ratio indicates too much investment in inventory. Whereas a high turnover ratio could cause lost sales due to lack of merchandise to meet customer demand. PepsiCo's is higher,This reflects differences in their distribution methods, with Pepsi's snack foods driving the ratio higher than for typical merchandisers. Financial Leverage: Financial leverage is the use of fixed cost funds such as debt or preferred stock to increase the common stockholder's return. Using debt in the firm produces a stream of earnings that has greater volatility (risk) than would occur in the same firm if it had less debt. One major factor is management's willingness to accept financial risk. A second factor is earnings predictability. Two debt ratios that were computed are the debt to total assets ratio, or the "debt ratio," and the equity multiplier. Debt Ratio: The Debt ratio is calculated as the sum of all the liability accounts divided by "total assets." For our four sample firms, the numerator is the sum of everything on the right side of the balance sheet from "current liabilities" through "deferred income taxes. As you can see for our firms, their debt ratios vary from PepsiCos 71.2 percent. We can conclude that Pepsi is using more financial leverage in the firm and thus is exposed to more financial risk than cocacola. Debt ratio Equity multiplier Pepsi 71.2 1.87 Cocacola 64.2 1.62 Industry 52 1.55

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The Equity multiplier is a similar calculation, determined by dividing "total assets" by the "common equity" account. If a firm is totally financed by equity, the equity multiplier will equal 1.00. The larger the number, the more highly leveraged is the firm. Consistent with the "debt ratio," the equity multipliers of the 2 firms display that Pepsi has the greatest amount of leverage, and cocacola has lower. Return on Equity: Many would argue that the most important ratio to calculate for a company is its return on equity (ROE), which is "net income available to common stockholders" divided by "common equity. ROE represents the rate of return the company earned on the book value of its equity investment. The higher the number, the greater the return the company is earning for its shareholders. For our companies, PepsiCo has the greatest ROE, 39.84 percent, which is an exceptionally high number. Coca-Colas is 28.73 percent. Both are relatively high compared with industry, which is extremely low compared to the industrys 28.69% consensus. Return on equity Pepsi 39.84 Cocacola 28.73 Industry 28.69

PepsiCo has an excellent ROE. It is a result of its high profit margin, effective asset utilization, and use of leverage. PepsiCo probably is pursuing an aggressive debt strategy because of the lower profitability of some of its product lines. Return equity 39.64 28.73 on Net profit Total margin over 10.6 2 9.8 1.81 turn Equity muliplier 1.86 1.62

Pepsi Cocacola

Price/Earnings Ratio: The Price/ Earnings Ratio is used to gauge the relative value of a security in the light of current market conditions. It is determined by dividing the price of a share of stock by its earnings per share for a 12-month period.
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Sometimes the P/E is referred to as the "multiple because it shows how much investors are willing to pay per dollar of earnings. PepsiCo has a high P/E, which means high projected earnings in the future, in comparison to its competitors in the beverage industry. p/e Price/Cash Flow: The Price/ Cash Flow is calculated by dividing the closing price with the cash flow per share from the last 12 months. An alternative to the P/E ratio, this ratio removes depreciation and other non-cash charges from the equation. Another advantage of the Price/Cash Flow ratio is that it makes it easier to analyze various companies across the board. As displayed above, Coca-Cola has the most efficient Price/Cash Flow ratio than PepsiCos 17.28 ratio, which displays that three of the four companies have ample money available to spend on research and development, to expand operations, and to pay dividends to investors. Price/cash flow Pepsi 17.28 Cocacola 21.14 Industry 12.5 Pepsi 22.16 Cocacola 21.72 Industry 23.24

Gross Profit Margin Ratio: The Gross Profit Margin ratio indicates how efficiently a business is using its materials and labor in the production process. In other words, gross margin is equal to gross income divided by net sales, and is expressed as a percentage. Coca- Cola and PepsiCo have the highest gross profit margin values of 63.68 and 53.67. Both are outperforming the industry, which indicates that the companies can make a reasonable profit on sales, as long as it keeps overhead costs in control. Gross margin Pepsi 53.67 Cocacola 63.68 Industry 43

Total Debt-Equity Ratio: Total debt-equity ratio is the ratio of a company's long-term liabilities to its equity. cocacola has the higher level of debt, making it very important for the
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company to have positive earnings and steady cash flow. Debt in and of itself is not harmful, but it does require the timely payout of interest to debt holders. PepsiCo has the chances of defaulting on debt. Pepsi Cocacola Industry Debt to equity .3 .45 .63 Long term debt .23 .24 .76 to total equity Earnings per Share: Earnings per share is the proportionate amount of a company's profit, or earnings, for each outstanding share of common stock. It is calculated as net income minus dividends divided by average outstanding shares. This is the single most popular variable in dictating a share's price. EPS indicates the profitability of a company. PepsiCo, Coca- Cola are outperforming the industry average of 1.52. EPS Pepsi 1.85 Cocacola 1.6 Industry 1.52

Return on Sales: This ratio is a measure of profitability expressed as a percent of sales. It is the usual definition of percent profit. The calculation is net income divided by net sales. It can help you determine if you are making enough of a return on your sales effort. If your company is experiencing a cash flow crunch, it could be because its mark-up is not enough to cover expenses. Return on sales can help point this out, and allow you to adjust prices for an adequate profit. Also, be sure to look for trends in this figure. If it appears to be dropping over time, it could be a signal that you will soon be experiencing financial problems. Coca-Cola has the highest Return on Sales ratio, 20.32, detecting operational efficiency, accompanied by PepsiCos 13.19 ratio. Return on sales Pepsi 13.19 Cocacola 20.32 Industry 10.51

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Conclusion
Pepsi Co.: - current ratio is high short-term solvency is favorable - greater volatility in ratios - greatly reduces D/E ratio - increases TIE ratio solvency - shorter days sales of inventory period better inventory management - increases slightly asset turnover - capital intensity increases better capital utilization to realize sales - profit margin increases significantly - both ROA and ROE increase significantly and even exceed those of Coca Cola Co. Coca Cola Co.: - current ratio is slightly increasing, under that of Pepsi Co. - low volatility in ratios - stable Debt ratios - decreases TIE ratio lowers ability to cover interest expenses - significantly high inventory turnover not as good inventory management as Pepsi Co. - improvement in asset turnover - capital intensity increases slightly - profit margin decreases sharply - both ROA and ROE decrease greatly, starting around 1998 and reach a stage below those of Pepsi Co. In conclusion, the ratios of Pepsi Co. significantly improve and lose their worrisome volatility with time. They reach levels as high, if not higher, than those of their main competitor, Coca Cola Co. These changes are evidence for the stable positioning of Pepsi Co. and their increase in market share compared to that of Coca Cola Co. Therefore, the comparative ratio analysis of the two competing companies supports the conclusion that Pepsi Co. is doing better within its internal operations and market penetration. Thus, Pepsi Co. would be the more profitable investment

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Annexure
Balncesheet of cocacola.
PERIOD ENDING 31-Dec-08 Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges Total Assets Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Minority Interest Negative Goodwill Total Liabilities 6,152,000 6,531,000 305,000 12,988,000 2,781,000 3,401,000 877,000 20,047,000 7,173,000 6,052,000 13,225,000 3,277,000 3,133,000 1,890,000 21,525,000 5,622,000 3,268,000 8,890,000 1,314,000 1,873,000 608,000 358,000 13,043,000 4,701,000 278,000 3,090,000 2,187,000 1,920,000 12,176,000 5,779,000 8,326,000 4,029,000 8,476,000 1,733,000 40,519,000 4,093,000 215,000 3,317,000 2,220,000 2,260,000 12,105,000 7,777,000 8,493,000 4,256,000 7,963,000 2,675,000 43,269,000 2,440,000 150,000 2,704,000 1,641,000 1,506,000 8,441,000 6,783,000 6,903,000 1,403,000 3,732,000 2,533,000 168,000 29,963,000 31-Dec-07 31-Dec-06

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Cashflow of cocacola
PERIOD ENDING Net Income 31-Dec-08 5,807,000 31-Dec-07 5,981,000 31-Dec-06 5,080,000

Operating Activities, Cash Flows Provided By or Used In Depreciation Adjustments To Net Income Changes In Accounts Receivables Changes In Liabilities Changes In Inventories Changes In Other Operating Activities Total Cash Flow From Operating Activities 1,228,000 1,224,000 148,000 (734,000) (165,000) 63,000 7,571,000 1,163,000 (406,000) 914,000 (258,000) (244,000) 7,150,000 938,000 554,000 (214,000) (99,000) (150,000) (152,000) 5,957,000

Investing Activities, Cash Flows Provided By or Used In Capital Expenditures Investments Other Cashflows from Investing Activities (1,968,000) (240,000) (155,000) (1,648,000) 349,000 (5,420,000) (6,719,000) (1,407,000) 558,000 (851,000) (1,700,000)

Total Cash Flows From Investing Activities (2,363,000)

Financing Activities, Cash Flows Provided By or Used In Dividends Paid Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities (3,521,000) (493,000) 29,000 (3,149,000) (219,000) 4,341,000 973,000 249,000 $1,653,000 (2,911,000) (2,268,000) (1,404,000) (6,583,000) 65,000 ($2,261,000)

Total Cash Flows From Financing Activities (3,985,000) Effect Of Exchange Rate Changes Change In Cash and Cash Equivalents (615,000) $608,000

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Income statement of cocacola Cocacola NET Oin revenuePerat cost of goods sold Gross profit SELLING GENERAL AND administrative exp Other operating chareges operating income interst income interest exp. equity income(loss) Other income loss Pbt Income tax NET INCOME 2006 2007 2008 24088 28857 31944 8164 10406 11374 15924 18451 20570 9431 10945 11774 185 254 350 6308 7252 8446 193 220 102 195 6578 1498 5080 236 456 668 173 7873 1892 5981 333 438 -874 -28 7439 1632 5807

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Equity of cocacola
Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity Total Stockholder Equity 880,000 38,513,000 (24,213,000) 7,966,000 (2,674,000) 20,472,000 880,000 36,235,000 (23,375,000) 7,378,000 626,000 21,744,000 878,000 33,468,000 (22,118,000) 5,983,000 (1,291,000) 16,920,000

Net Tangible Assets Balancesheet of pepsi co.

$7,967,000

$9,525,000

$11,785,000

Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets 966,000 1,371,000 528,000 276,000 3,141,000 619,000 3,882,000 1,434,000 3,751,000 155,000 647,000 1,520,000 577,000 342,000 3,086,000 4,080,000 1,533,000 4,181,000 235,000 629,000 1,332,000 533,000 255,000 2,749,000 3,785,000 1,490,000 3,768,000 135,000

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Deferred Long Term Asset Charges Total Assets

12,982,000

13,115,000

11,927,000

Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Minority Interest Negative Goodwill Total Liabilities 1,675,000 1,408,000 3,083,000 4,784,000 1,658,000 966,000 1,148,000 11,639,000 1,968,000 247,000 2,215,000 4,770,000 1,186,000 1,356,000 973,000 10,500,000 1,375,000 374,000 302,000 2,051,000 4,754,000 1,205,000 1,293,000 540,000 9,843,000

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Cash flow of pepsi.

View: Annual DataQuarterly Data PERIOD ENDING Net Income All numbers in thousands 27-Dec-08 29-Dec-07 162,000 532,000 30-Dec-06 522,000

Operating Activities, Cash Flows Provided By or Used In Depreciation Adjustments To Net Income Changes In Accounts Receivables Changes In Liabilities Changes In Inventories Changes In Other Operating Activities Total Cash Flow From Operating Activities 673,000 516,000 40,000 (120,000) 3,000 10,000 1,284,000 669,000 404,000 (110,000) 194,000 (19,000) (233,000) 1,437,000 649,000 329,000 (120,000) 86,000 (57,000) (181,000) 1,228,000

Investing Activities, Cash Flows Provided By or Used In Capital Expenditures Investments Other Cashflows from Investing Activities Total Cash Flows From Investing Activities (760,000) (998,000) (1,758,000) (854,000) (29,000) (883,000) (725,000) (6,000) (731,000)

Financing Activities, Cash Flows Provided By or Used In Dividends Paid Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities Total Cash Flows From Financing Activities Effect Of Exchange Rate Changes Change In Cash and Cash Equivalents (208,000) (139,000) 1,198,000 (1,000) 850,000 (57,000) $319,000 (130,000) (280,000) (168,000) 14,000 (564,000) 28,000 $18,000 (109,000) (385,000) 104,000 19,000 (371,000) 1,000 $127,000

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Incomestatement of pepsi. Pepsi net revenue Cogs selling,general exp. amortazation of intangible assets operating profit Bottaling equit incomr int.exp int.income PBT Tax net income 2006 2007 43251 39474 20351 18038 15901 14208 64 6935 374 -329 41 7021 1879 5142 58 7170 560 -224 125 7631 1973 5658 2008 35137 15762 12711 162 6502 553 -239 173 6989 1347 5642

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Equity of pepsi.

Key ratios Current ratio Net profit margin Return on assets 15.81 14.46 10.97 Stockholders' Equity Total asset turn 2 1.81 2.30 overMisc Stocks Options Inventory Warrants turn 7.9 5.4 2.19 over Redeemable Preferred Stock Debt ratio 71.2 64.2 52 Equity Preferred Stock 1.87 1.62 1.55 Common Stock 3,000 3,000 3,000 multiplier Return on 39.84 28.73 28.69 2,708,000 Retained Earnings 3,130,000 3,124,000 equity Treasury Stock (2,703,000) (2,269,000) (2,017,000) p/e 22.16 21.72 23.24 Capital Surplus 1,851,000 1,805,000 Price/cash flow 17.28 21.14 12.5 1,751,000 Gross margin 53.67 63.68 43 Other Stockholder Equity (938,000) (48,000) (361,000) Debt to equity .3 .45 .63 Long term debt .23 .24 .76 Total Stockholder Equity 1,343,000 2,615,000 2,084,000 to total equity EPS 1.85 1.6 1.52 Net Tangible Assets ($3,842,000) ($3,099,000) ($3,174,000)
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Pepsi 1.1 10.6

cocacola 1 9.8

Industry 1 8.05

Return on sales

13.19

20.32

10.51

Bibliography
PEPSICO WEBSITE,www.pepsico.com COCACOLA WEBSITE,WWW.COCACOLA.COM WWW.YAHOOFINANCE.COM WWW.MORNINGSTAR.COM

WWW.BIGCHARTS.COM

COCACOL INTERNATIONAL INTERNAL REPORT PEPSICO INTERNATIONAL INTERNAL REPORT WWW.SCRIBD.COM WWW.AUTHORSTREAM.COM

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