Financial Statement Analysis

Write a five- to seven-page comparative financial statement analysis of the three companies listed below;

1. https://investors.coca-colacompany.com/filings-reports/annual-filings-10-k/content/0000021344-18-000008/0000021344-18-000008.pdf
   • The Coca-Cola Company: Form 10-K - Financial statements and notes start on page 60.
   o Accounts receivable, page 81
   o Inventories, page 82
   o Depreciation, page 96
   o Goodwill, page 83
2. https://investors.keurigdrpepper.com/annual-reports
   • Keurig Dr Pepper Annual Report (Links to an external site.)
   o Click on the 2018 Annual Report
   o Accounts receivable, page 72
   o Inventories, page 72
   o Depreciation, page 73
   o Goodwill, page 74
3. https://www.pepsico.com/docs/album/annual-reports/pepsico-inc-2016-annual-report.pdf?sfvrsn=0
   • PepsiCo Annual Report (Links to an external site.) - Financial statements and notes start on page 79.
   o Accounts receivable, page 124
   o Inventories, page 89
   o Depreciation, page 95
   o Goodwill, page 88

Ratio Analysis
• Calculate the current ratio, quick ratio, gross profit percentage, inventory turnover, accounts receivable turnover and asset turnover ratios for all three companies for the current year.
• Note: Cash includes cash and cash equivalents and short term investments.
• Explain how the ratio is calculated and discuss and interpret the ratios that you calculated.
• Discuss potential liquidity issues based on your calculations of the current and quick ratios.
• Are there any factors that could be erroneously influencing the results of the ratios?
• Discuss liquidity issues of the three companies.

Comparison of Accounting Methods
In your paper, ascertain from the notes of the financial statements the following:
• Explain the difference between the allowance method and the direct write off method for accounts receivable. Document the method used for each of the three companies.
• Explain the difference between the straight line, double declining balance and the unit-of-production depreciation methods. Document the method used for each of the three companies.
• Explain the difference between LIFO and FIFO and document the method used for each of the three companies.
• Explain the different categories of intangible assets and document the method used for each of the three companies.

Sample Solution