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Final Project
Hospitality Management Accounting

Preparing for my final project, I choose two big Food and Beverage Companies. Those
are Pepsi Co Inc. and Coca Cola Company. As you know, two brand world-famous drink CocaCola and Pepsi had a confrontation lasted more than a century. In fact, this is one of the
legendary confrontations of the business world. The story began in 1886 when a man named
John S. Pemberton discovered the first formula for soda water; and with name was Coke (Coca
Cola abbreviation). And 13 years later, the main rival of Coca appeared when a pharmacist
named Caleb Bradham created Pepsi Cola formula. When Coca started to built their factories in
Paris, Bordeaux and other cities in Europe (1919), Pepsi declared bankruptcy in 1923 by the
limit of distribution under the First World War. In 1928, Pepsi cola was bought by Craven
Holding Corporation that has headquarters in Virginia (USA) purchased. However, in 1931,
Pepsi declared bankruptcy one more time, and was sold to the chairman of candy chain stores,
Charles G. Guth. Meanwhile, Coke continuously expanded to Australia, Austria, and South
Africa. Until 1938, when Walter S. Mack took over the chairman position, Pepsi officially
became the main competitor of Coke.
Environmental Analysis:
PepsiCo Inc SWOT Analysis:
- Strength: PepsiCo is one of the most popular brands in Food and Beverages. Moreover,
Pepsi has located over 200 countries, with around 300,000 employees. Besides that, advertising
strategy is so excellent with global celebrity as brand ambassadors.
- Weakness: strong competition brand is Coca Cola.
- Opportunity: increase its product by under other brand names, and developing their market
in more new countries.

- Threats: economy is slow down nowadays. Moreover, healthy is also much considered.
Coca-Cola SWOT Analysis:
- Strength: the first company of food and beverages in the world, and located in 200 countries
over the world. Coca-Cola has many different brand names, such as: Sprite, Diet Coke, Fanta,
etc. Besides that, Coca-Cola has the largest distribution network with high market presence.
- Weakness: PepsiCo is the big competitor.
- Opportunity: Coca-Colas supply chain has lots of improvement, and has lots of
- Threats: water is the only threat to Coca-Cola.
Market Segmentation:
- PepsiCo divides the market into different groups, such as locations, resources, region, and
wants. Moreover, PepsiCo also focused on population; and market can be divided on some areas
like age, gender, education, etc.
- Different than PepsiCo, Coca-Cola focused on some several types of attitudes, perceptions,
and lifestyles.

Financial Analysis:

Net Profit Margin:

- In 2013, Coca-Cola Comp. has a net profit margin at 18.3%, whereas PepsiCo Inc has a
margin at 10.1%.
- The profit margin is determined by dividing net income by total revenue, and it tells you
how much profit a company makes for every $1 it generates in revenue or sales. It is an overall
measurement of managements ability to generate sales and control expense, thus yielding the
bottom line. In this ratio, net income is the income remaining after all expenses have been
deducted, both those controllable by management and those directly related to decisions made by
the board of directors. If the profit margin is lower than expected, then expenses and other areas
should be reviewed. Poor pricing and low sales volume could be contributing to the low ratio. To
identify the problem area, management should analyze both the overall profit margin and

operated departmental margins. If the operated departmental margins are satisfactory, the
problems would appear to be with over head expense.
- Looking to the chart, in 2013, Coca-Cola performed better than PepsiCo by net profit
margin standard. And obviously, Coca-Cola has reached a greater net profit margin than PepsiCo
Inc for the last 5 years.
Debt to Equity Ratio:
- In 2013, Coca-Colas debt to equity ratio is 1.12 and PepsiCo Inc is 2.2.
- The Debt to Equity Ratio compares the hospitality establishments debt to its net worth.
This ratio indicates the establishments ability to withstand adversity and meet its long-term debt
obligations. Creditors generally would favor a lower debt-equity ratio because their risk is
reduced as net worth increases relative to debt. Management prefers a middle position between
creditors and owners.
- PepsiCo has a much bigger debt to equity than Coca-Cola.
Return on Equity:
- In 2013, Coca-Cola had a 26% return on equity ratio. PepsiCo had a return on equity ratio
of 28.8%. This means that for every $1 of owners equity, 26 cents was earned for Coca-Cola.
PepsiCo earned 28.8 cents for every $1 of owners equity.
- The ROE ratio compares the profits of the hospitality enterprise to the owners investment.
It is calculated by dividing net income by average owners equity. Included in the denominator
are all capital stock and retained earnings. Moreover, a business that has a high return on equity

is more likely to be one that is capable of generating cash internally. Usually the higher a
companys return on equity compared to its industry, the better.
Return on Assets:
- In a chart, Coca-Colas ROA for 2013 is 9.7% and PepsiCos ratio is 8.9%
- The ROA ratio is a general indicator of the profitability of the hospitality enterprises assets.
Unlike the two preceding profitability ratios drawn only from income statement date, this ratio
compares bottom line profits to the total investment, to the total assets. This ratio is used by
several large conglomerates to measure the performances of their subsidiary corporations
operating in the hospitality industry.
- A very low ROA may result from inadequate profits or excessive assets. A very high ROA
may suggest that older assets require replacement in the near future or that additional assets need
to be added to support growth in revenues. The determination of low and high is usually based
on industry averages.
Asset Turnover Ratio:
- In 2013, Coca-Cola had a ratio is 0.52 and PepsiCo had a ratio is 0.86.
- The asset turnover examines the use of total assets in relation to total revenue. Limitations
of the property equipment make up total assets. For most hospitality establishments, especially
lodging businesses, property and equipment constitute the majority of the operations total assets.
Both the property and equipment turnover and the asset turnover ratios are relatively low for
most hospitality segments, especially for hotels and motels. The relatively love ratios are due to

the hospitality industrys high dependence on fixed assets and its inability to quickly increase
output to meet maximum demand. The higher number of ration is always better.
Inventory Turnover Ratio:
- Coca-Cola has a turnover ratio is 5.62, and PepsiCo has a ratio is 9.16
- The inventory turnover shows how quickly the inventory is being used. Inventory turnovers
should generally be calculated separated for food supplies and for beverages. Some food service
operations will calculate several beverage turnovers based on the types of beverages available.
- All parties (owners, creditors, and management) prefer high inventory turnovers to low
ones, as long as stockouts are avoided.
Receivable Turnover Ratio:
- In 2013, Coca-Colas turnover ratio at 9.62, and PepsiCo Inc at 9.55.
- Owners prefer a high receivable turnover ratio as this reflects a lower investment in
nonproductive accounts receivable.
- This ratio is determined by dividing revenue by average accounts receivable. Long-term
creditors also see a high accounts receivable turnover as a positive reflection of management. .
Management desires to maximize the sales of the hospitality operation. Offering credit helps
maximize sales.
Current Ratio:
- In 2013, every $1 of current liabilities, Coca-Cola has $1.13 of current assets. And PepsiCo,
every $1 of current liabilities they have $1.24 of current assets.

- Current ratio shows the firms ability to cover its current liabilities with its current assets.
Owners/stockholders normally prefer a low current ratio to a high one, because stockholders
view investments in most current assets as less productive than investments in noncurrent assets.
Since stockholders are primarily concerned with profits, they prefer a relatively low current ratio.
- Creditors normally prefer a relatively high current ratio, as this provides assurance that
they will receive timely payments.
- Therefore, PepsiCo has more of a room to breath than the current debt of Coca-Cola.
- In 2013, PepsiCos sales were $66,415.0 million. Coca-Colas sales were $46,854.0 million
- There is $19,561.0 million dollar difference in sales for these companies.
Net Income:
- In 2013, net income for Coca-Cola was $8,584.0 million and PepsiCo was $6,740.0 million.