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BUS 300FINANCIAL MANAGEMENTEVALUATING AND FORECASTING FINANCIAL PERFORMANCESSUBMITTED BY: SUBMITTED TO: DEEPALI BHATTARAI SUJIT GOPINATHANBISHAL SHERCHAN

INTRODUCTION TO FINANCIAL STATEMENT ANALYSISThe process of reviewing and evaluating a company's financial statements to gain an understanding of the financial health of the company and to enable effective decision making.

Financial statements provide this summary of collected data.

The three primary financial statements include:Income StatementBalance Sheet Cash flow Statement

IMPORTANCE OF FINANCIAL STATEMENT ANALYSISReviewing and analysing financial statements help in making decisions regarding:Holding Of Shares (Shareholders)Extension Of Credit (Creditors)Investment (Prospective Investors)Company plans (Management of the Company)

METHODS FOR ANALYSING FINANCIAL STATEMENTSOne of the most important financial tools for analysis of financial statements is Ratio.

Ratios express a relationship between two or more financial statement totals, and compare to budgets and industry benchmarks.

The various types of Ratios are:Liquidity RatiosAsset Management RatiosFinancial Leverage RatiosProfitability RatiosMarket-based RatiosDividend Policy RatiosLIQUIDITY RATIOSLiquidity ratios analyse the ability of a company to pay off both its current liabilities as they become due as well as their long-term liabilities as they become current.

Two major liquidity ratios used in our calculations are:Current RatioQuick RatioASSET MANAGEMENT RATIOSAsset Management Ratioscompare the assets of a company to its sales revenue. Assetmanagementratios indicate how successfully a company is utilizing its assets to generate revenues.

Major Asset Management Ratios used in our calculations are:Collection Period RatioInventory Turnover RatioFixed Asset Turnover RatioTotal Asset Turnover Ratio

FINANCIAL LEAVARAGE RATIOSAny ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations.

The various types of Leverage Ratios used in our calculations are:Debt RatioDebt-to-Equity RatioTimes Earned RatioPROFITABILITY RATIOSA class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time.

The various types of Profitability Ratios used in our calculations are:Return on Investment RatioReturn on Equity RatioGross Profit Margin RatioNet Profit Margin Ratio

MARKET-BASED RATIOSMarket ratios measure investor response to owning a company's stock and also the cost of issuing stock. These are concerned with the return on investment for shareholders, and with the relationship between return and the value of an investment in companys shares.

Major types of Market-Based Ratios are:P/E RatioMarket to Book Ratio

FINANCIAL ANALYSIS: COMPANY WISECOCA COLA

PEPSICO

BRIEF INTRODUCTION: COCA COLAThe company of Atlanta, Georgia registered on the trademark of the Coca-Cola Company in US since March 27, 1944.

The company has other cola drinks under the brand name of Coke such as Diet Coke, Coca-Cola Zero, Coca-Cola Vanilla, Caffeine Free Coca-Cola, Thums Up, Sprite, Fanta, Limca, Mazza, Pulpy Orange and so on.

Based on the Interbrands best global brand study of 2011, Coca-Cola stood as one of the most valuable brand.

BRIEF INTRODUCTION: PEPSICOPepsiCo is an American multinational food and beverage corporation headquartered in Purchase, New York.

Formed in 1965 with the merger of Pepsi-Cola Company and Frito-Lay, Inc.

As of Jan.26th,2012 the products were distributed across more than 200 countries, resulting in the annual net revenues of $43.3 billion.

Based on net revenue, PepsiCo is the second largest food and beverages business in the world.

The popular products manufactured under the trademark of PepsiCo are 7UP, Aquafina, Cheetos, Lays , Pepsi, Nimbooz, Lehar, Tropicana, Mountain Dew and Kurkure.FINANCIAL STATEMENTS: COCA COLA

FINANCIAL STATEMENTS: COCA COLA

FINANCIAL STATEMENTS: COCA COLA

FINANCIAL STATEMENTS: PEPSICO

FINANCIAL STATEMENTS: PEPSICO

FINANCIAL STATEMENTS: PEPSICO

LIQUIDITY RATIOSCurrent Ratio:

This ratio determines whether or not the company has enough resources to pay its debts over the next 12 months.

Formula = Current Assets / Current Liability Acceptable current ratio for a healthy business is between 1.5 and 3. It indicates good financial strength.

If CR>1(too low) problems meeting its short term obligationIf the current ratio is too high(exceeding 3) the company may not be using its current assets.

Coca-Cola: 31,304/27811= 1.126PepsiCo: 22203/17839=1.245

LIQUIDITY RATIOSQuick Ratio:

This ratio measures the companys ability to use its near cash or quick assets to meet its current liabilities immediately.

Formula of Quick ratio= Current assets-inventory/ current liabilities.

If QR