Financial Review and Comparison - Research Paper Example

For the purpose of this assignment I have chosen PepsiCo Inc and the Coca-Cola Company. Both are globally well recognized brands in beverage industry. Besides beverage brands, both the companies are offering additional products. Pepsi incorporation has established itself as a supplier of quality snacks products such as Lays and Cheetos on the other hand the Coca-Cola Company is offering brand in mineral water such as Kinley in competition to Aquafina, a mineral water product by Pepsi, fruit juices such as Pulpy Orange, coffee and other alcohol-free beverages.

The performance of both competitors in the year 2012 has been analyzed with the help of the key ratios. Net profit margin is computed as net profit to sales, and sometimes also profit after tax to sales. It is always measured in terms of percentage. This ratio represents the ability of the management to provide the investors with a reasonable return on their investments (Mohapatra). A higher net profit ratio indicates the efficiency of the management to control the cost. When comparing both the companies on the basis of net profit ratio the Coca-Cola Company has generated 2.

64% addition net profit than Pepsi which indicate better slightly tight control over costs. Gross profit can be defined as the profit remaining after all the directly related cost of sales or services have been deducted from the revenue. Directly attributable cost include only those cost which are necessary to produce the goods. It is also represented in terms of percentage. The higher the ratio the better is for the company (Gildersleeve). It is an important profitability ratio which indicates the margin between the revenue and the cost of the product.

On the basis of gross profit margin Pepsi is much better than Coca-Cola. The GP ratio of Pepsi is 52.49% in comparison to the 44.09% in case of Coca-Cola. This reveals an important fact that the Pepsi Company is better in controlling manufacturing cost and the Coca-Cola Company