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Vertical Analysis
Balance sheet:
The company`s long term debt in 2021 is 40.4% of its total liabilities and equity whereas its competitors long term liability is 43.4%. Coca cola has a much narrower margin compared to its major competitor in the market. The data indicates that long-term liability has declined from 45.9% in 2020 to 40.4% in 2021. The 5.5% difference has direct correlation to the composition of other forms of liabilities. The current liabilities such as accounts payable has increased by 31.2% while loans and notes payable increase by 51.5%, current maturities of long term debt by 175% and accrued income taxes by -12.9%. The company has a history of using long term debt to retire its maturing liabilities (Coca Cola 2021 10K Report).
Income statement:
In comparing the company`s performance to its major competitor, Coca cola has a lower command in gross profit margin than PepsiCo, 39.8% and 45.2% respectively. In 2021 Coca Cola`s gross margin slightly increased by 0.9% this is attributable to cost of sales. Despite the increase in sales company`s gross margin is lower than in 2020. The other operating expenses of 2.1% is due to the company`s productivity and reinvestment program (legal, outplacement and consulting fees). The company`s reported earnings is impacted by revaluation and devaluation of currency since all of each individual subsidiary has to be translated into U.S currency. Sales are also affected by consumer health awareness. (Coca Cola 2021 10-K Report)
Horizontal analysis:
Balance sheet:
Certain items in the balance sheet reflect upward trends while other items indicated the opposite. These are the result of the management strategic planning to effectively and efficiently manage limited resources, however some factors not under the control of management can directly and indirectly affect the business. The company cash and cash equivalents increased by 29.8% and short term investments decreased by 42.5%. The company credits its favorable results due to its overall cash management strategy. Other assets increased by 8% and other liabilities decreased by 9.8%. Coca cola did not issue any long-term debts in 2021, however previously issued long-term debts was used to extinguished some of the company`s maturing debts.

Income Statement:

The enterprise`s operating income was affected by sales, structural changes, currency fluctuation and price in each geographic segment of operation. Coca Cola`s operating income increased by 12.7% while Pepsi Co decreased by 2%. This was mainly due to operating cost increases including incremental information technology costs, impact of the charges taken as a result of the COVID-19 pandemic and the organic volume decrease. Coca cola`s increase in operating income is mainly associated with normalization of certain operating expenses such as labor and increased mobility across the operations.
Ratio Analysis:
Valuation Ratios