1. Chris Johnson ACG2021 Sec.002

2. Executive Summary
PepsiCo, Inc. is one of the largest and most successful consumer product companies in the world. In the year 2004, PepsiCo generated $78 billion in retail sales and has maintained excellence since the corporation was founded in 1965.
For more information about PepsiCo’s annual reports, visit:
For more information about PepsiCo’s products, click the icons on the front page.

3. Part A. Introduction Chief Executive Officer: Steve Reinemund
Home Office: 700 Anderson Hill Rd.
Purchase, NY,
Ending date of last fiscal year: December 25, 2004
Consumer products: this company provides foods and
beverages. The principal brands include: Frito-Lay,
Pepsi-Cola, Tropicana, Gatorade, and Quaker.
Main geographic area of activity: PepsiCo is an
international company that provides its products to
about 175 countries.

4. Part A. Audit Report Independent Auditor: KPMG LLP
All of the financial reports were fair and accurate assessments as to where the company stands financially.

5. Part A. Stock Market Information
Price and Volume
Recent price of stock: $59.11
52 week trading range:
High- $60.34 Low- $51.75
Dividend per share: 1.04
All information above was
retrieved on: Feb.28, 2006
In my opinion, investors in this company’s stock should hold. PepsiCo is a valuable stock to have, but the price is too high if you do not already own stock in this company.

6. Part B. Industry Situation and Company Plans
PepsiCo is considered a premier consumer products company in a billion dollar industry. In an effort to raise snack sales in Europe, PepsiCo has stated that it will acquire “Star Foods,” which is one of Poland’s leading snack makers. PepsiCo has also made a commitment to provide families with plans to live healthier lives. According to PepsiCo, “the S.M.A.R.T. program, a program designed by PepsiCo, complements PepsiCo’s efforts to introduce energy balanced lesson plans in schools nationwide.”
Resources:

7. Part C. Income Statement
Format: Single-step format
I believe that the data from the table above, as it relates to the income statement, reflects a successful year in This conclusion is due to the increases in all areas.
*All data are dollar amounts
2003
2004
Gross Profit
14,592,000
15,855,000
Income from Operations
9,810,000
10,596,000
Net Income
3,568,000
4,212,000

8. Part C. Balance Sheet Year Liabilities + Stockholder’s Equity = Assets
2003
13,453, ,896,000 = 25,327,000
2004
14,464, ,572,000 = 27,987,000
All three balance sheet accounts increased from 2003 to 2004.
The biggest change is in total assets from 2003 to 2004.
*All data are dollar amounts

9. Part C. Statement of Cash Flows
Cash flow from operations was more than net income for the past two years.
PepsiCo is growing through investing activities.
This company’s primary source of financing is stock sales.
Overall, cash has increased over the past two years.

10. Part D. Accounting Policies
Significant Accounting Policies:
Impairment of investments in unconsolidated affairs.
Impairment of disposal of long-lived assets.
Impairment of goodwill and indefinite-lived intangible assets.
Allowance for franchise and license receivables and contingent liabilities.
Self-insured property and casualty losses.
Income tax valuation allowances and tax reserves.
Part D- Accounting Policies continued on next slide

11. Notes to the Financial Statements:
Summary of significant accounting policies
Unusual items affecting comparability of income from continuing operations
Impairment of long-lived assets
Discontinued operations
Income per share
Inventories
Property, plant & equipment
Intangible assets
Accounts payable and other current liabilities
Long-term debt
Financial instruments
Income taxes
Employee stock options
Post-retirement benefits other than pensions
Pension plans
Contingencies
Business segments (industry segments and geographic areas)
Selected quarterly financial data

12. Part E. Financial Analysis Liquidity Ratios
2003
2004
Working Capital (in millions)
515
1887
Current Ratio
1.08
1.28
Receivable turnover
10.06
10.04
Average days’ sales uncollected
36.28
36.25
Inventory turnover
8.98
9.28
Average days’ inventory on hand
40.64
39.33
Working capital was the only liquidity ratio that showed a significant change from 2003 to This area more than doubled within the year interval.

13. Part E. Financial Analysis Profitability Ratios
2003
2004
Profit Margin
13%
14%
Asset Turnover
1.10
1.09
Return on Assets
15%
Return on Equity
33%
34%
There were no significant changes in profitability ratios from to 2004.

14. Part E. Financial Analysis Solvency Ratio
Debt to equity:
2003= 1.13
2004= 1.06
Although this company’s debt to equity is over 1.0 for both years, meaning that more than half of the company’s assets are financed by creditors, the number has decreased from 2003 to 2004.

15. Part E. Financial Analysis Market Strength Ratios
Price earnings per share:
2003= $2.30
2004= $2.39
Dividend yield:
2003= 1.4
2004= 1.4
PepsiCo’s dividend yield of 1.4% is below the snack company average of 2%.