An abundance of information is available from a company's publicly released financial reports, but is only useful if interpreted correctly. The Coca-Cola Company and PepsiCo are two companies competing in the same industry, and in order to compare the two properly the data from their financial statements has to be understood. This paper will examine the financial statements released by the two companies. This paper will explain the inter-relationships between the provided data. The paper will also explain where the inputs for the basic accounting equation can be found and what issues are revealed in the various financial reports.
Inter-relationships among the data providedThe three primary financial statements that Coca Cola and Pepsi report on in their 2006 and 2007 annual reports are the balance sheet, the income statement, and the statement of cash flows. The balance sheet reports the assets, the liabilities and Coca Cola and Pepsi's equity. The income sheet reports the amount of net income earned by Coca Cola and Pepsi during the annual reporting period.
The statement of cash flows reports the amount of cash collected and paid out by Coca Cola and Pepsi.
The relationships between Coca Cola's and Pepsi's operating statements (the income statements and the statement of cash flows) and their comparative balance sheets is referred to as articulation and items on the operating statements help explain the change of items on the balance sheets from 2006 to 2007.
The interrelationships of Coca Cola's 2006 and 2007 financial statements are as follows:THE COCA-COLA COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDecember 31, 20072006(In millions except par value)ASSETSCURRENT ASSETSCash and cash equivalents $ 4,093 $ 2,440Marketable securities 215 150Trade accounts receivable, less allowances of $56 and $63, respectively 3,317 2,587Inventories 2,220 1,641Prepaid expenses and other assets 2,260 1,623TOTAL CURRENT ASSETS 12,105 8,441INVESTMENTSEquity method investments:Coca-Cola Enterprises Inc. 1,637...