Pepsico Ratio Analysis

Introduction

PepsiCo, a global food and beverage leader, is the second largest soft drink business in the world. Initially called ‘Brad 's Drink’, Pepsi was created in 1893 by a pharmacist named Caleb Bradham. In 1902, he launched the Pepsi-Cola Company in the back room of his pharmacy, and applied to the U.S. Patent Office for a trademark. On June 16, 1903, ‘Pepsi-Cola’ was officially registered with the U.S. Patent Office. In the 1960’s, PepsiCo was established through the merger of Pepsi-Cola and Frito-Lay. PepsiCo today is a world leader in convenient snacks, foods, and beverages, with more than 280,000 employees and revenue reaching over $60 billion (PepsiCo, n.d.).

To determine the current condition and future prospects of PepsiCo,

Efficiency Ratios PepsiCo’s efficiency ratios are lower than industry average, indicating that the company is not

Debt Ratios PepsiCo’s debt ratio for 2013 is reported at 68.52%, which is lower than the industry average of 75.11%.

Profitability Ratios Profit margins assess the company’s ability to turn revenue into profits. Return on assets measures the ability to use assets to produce net income. Return on equity compares net income to shareholder equity. PepsiCo’s overall profitability ratios are comparable to the industry averages.

Financial Ratios and Industry Averages Financial ratios are often used to compare a company against an industry average or other companies in order to benchmark or measure a company’s performance.

PepsiCo Current Events and Financial Decisions

Industry Current Events and Financial

However, the decline in sugary soda sales has had no significant impact on the beverage industry’s profit margins. “Despite the ongoing decline of soda volume, the broader U.S. beverage industry performed better than in the previous year with growth of 1.7 percent, according to Beverage Digest. That increase was driven by an increase in bottled water sales” (Food, 2015) While Americans are drinking less soda, and other beverage companies are forced to PepsiCo “Although diet crazes come and go, one trend has become clear: Americans are drinking less soda. Per-capita soda consumption has been in decline since 1998, according to the industry publication Beverage Digest. Although the declining soda trend does not look to be reversing anytime soon, PepsiCo, with its great international and product diversification, is poised to be the outperformer” (The Soda Industry, 2015).

“The snacks division, Frito-Lay North America, continued to drive sales and bottom-line expansion for the company, growing net revenues by 3% year-over-year on a 2% rise in volume sales. This division is the most profitable for PepsiCo, and contributed approximately 22% to the net sales last year” (Investing,