Business Report based on Ratio Analysis: Pepsi CO
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1
Executive Summary
The report provides a comprehensive analysis of PepsiCo Inc.’s financial performance for the
fiscal years 2022 and 2023, with a focus on key financial indicators such as profitability,
liquidity, efficiency, solvency, and investment potential. The study provides a critical assessment
of PepsiCo's financial health by utilizing ratio analysis methodologies and the company's
publicly available financial statements.
PepsiCo reported $91.47 billion in net revenues in 2023, a 6% rise over the previous year that
demonstrated consistent top-line growth. However, this expansion did not entirely result in
increased profitability. The net profit margin decreased slightly to 9.92%, indicating that there
might be operational inefficiencies or growing expenses at work. Similarly, minor reductions in
Return on assets (ROA) and Operating Profit Margin indicate difficulties in converting revenue
increases into profitable performance.
PepsiCo is still under pressure to maintain liquidity. With a quick ratio of 0.68 and a current ratio
of 0.85, the business is still below the standards suggesting that it may have trouble meeting its
short-term obligations. This might require careful consideration, especially in light of the
unstable economic climate.
In addition, PepsiCo keeps providing stockholders with substantial returns. While earnings per
share increased to $6.56 and dividends per share to $4.94, the return on equity remained
remarkably high at 49.12%. These numbers demonstrate a steady and attractive dividend policy
that enhances the company's value to investors. However, the interest coverage ratio decreased
and the debt-to-equity ratio increased to 2.36, indicating a greater reliance on debt financing and
an increase in financial risk.
PepsiCo is still in a strong position for long-term sustainability in spite of these financial
challenges. PepsiCo remains a desirable choice considering the long term but it's wise to keep a
careful eye on its liquidity and leverage indicators as part of continuous risk management.
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Table of Contents
The Coversheet............................................................................................................................................1
Executive Summary.................................................................................................................................2
1. INTRODUCTION...........................................................................................................................9
2. FINANCIAL ANALYSIS.............................................................................................................10
2.1 Profitability Ratio..................................................................................................................11
a. Net Profit Ratio..........................................................................................................................11
b. Operating Profit.........................................................................................................................11
c. Return on Assets........................................................................................................................12
d. Return on Equity........................................................................................................................12
2.2 Liquidity Ratio...........................................................................................................................14
a. Current ratio...............................................................................................................................14
b. Quick Ratio................................................................................................................................14
2.3 Efficiency Ratio.........................................................................................................................15
a. Assets Turnover Ratio...............................................................................................................15
b. Inventory Turnover Ratio..........................................................................................................16
2.4 Solvency Ratio...........................................................................................................................17
a. Debt to Equity ratio...................................................................................................................17
b. Interest Coverage Ratio.............................................................................................................17
2.5 Investment Ratio........................................................................................................................18
a. Earnings per share......................................................................................................................18
b. Divided per Share......................................................................................................................19
3. CONCLUSION AND RECOMMENDATION.............................................................................20
References.............................................................................................................................................22
Appendix...............................................................................................................................................23
Working Note........................................................................................................................................26
3
List of Figures
Figure 1:Profitability Ratio 10
Figure 2: Liquidity Ratio 11
Figure 3: Efficiency Ratio 13
Figure 4: Solvency Ratio 14
Figure 5: Investment Ratio 16
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1. INTRODUCTION
PepsiCo is one of the renowned food and beverage company in the world . It operates
more than 200 countries and a varied portfolio of well-known brands like Pepsi,
Lay's, Doritos, Quaker, and Gatorade, .With 59% of its net revenues coming from
food and 41% from drinks, the corporation made $91.47 billion in 2023, a 6% rise
from the year before ( PepsiCo Annual Report, 2023) .
PepsiCo has intense rivalry from the companies such as Coca-Cola , Nestlé, and
Mondelez International in a highly saturated market. PepsiCo introduced a new
campaign "Winning with pep+"". Through this campaign, PepsiCo demonstrate
tactical flexibility and successfully retained the market share through innovation and
dedication to sustainability. The major three pillar under this campaign are Positive
Agriculture, focused on sustainable sourcing and regenerative farming; Positive
Value Chain that aimed at building a circular and inclusive value chain; and
Positive Choices, which focus on offering healthier and more sustainable product
options.
The company’s 2023 financial report highlights represent impressive results,
including a 9.5% increment in revenue growth and $91,471 million in net revenue.
The company demonstrated its profitability and growth with core earnings per share
rising to $7.62 and core operating profit reaching $13,875 million.
The report aims to evaluate the five key aspects of PepsiCo's financial performance-
profitability, liquidity, efficiency, solvency, and investment potential. The calculation
and analysis of important ratios will be done using information from the 2023 and
2022 financial statements. The cash flow statement and non-financial disclosures,
such as environmental, social, and governance performance, will also be used to
analyses the company overall performance. Further more ,final recommendation will
be supported by the findings.
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2. FINANCIAL ANALYSIS
Financial analysis involves selection and make interpretation of company’s financial data
. This is done in order to find out operational performance and financial condition during
the particular fiscal year . The key component of the process is the financial reporting that
provides historical and current financial information. (Fabozzi & Drake, 2012). such as
quantitative analysis and ratio analysis is employed to make financial analysis.
2.1 Profitability Ratio
a. Net Profit Ratio
RATIO 2023 2022
Net Profit Margin 9.92% 10.31%
Net profit Margin also known as net margin determines net income generated by the
business in a year. It represents the overall income generated excluding the expenses and
the taxes. The net profit margin of the company dropped by 0.39 percentage points from
10.31% in 2022 to 9.92% in 2023. This decrease indicates that while sales increased
(from 86,392 to 91,471), profitability did not increase in line with the growth, because of
the higher expenses or less effective operations. The cost of goods sold (COGS) during
the year 2022 was 40,576 increased to 41, 881 during the year 2023 .
b. Operating Profit
The operating profit margin represents how much profit the company has earn after paying all
the operating costs. It gives clear pictures of how well the core business is performing.
6
RATIO 2023 2022
Operating Profit Margin 13.10% 13.32 %
PepsiCo's operating profit margin in 2023 is 13.10%, down slightly from 13.33% in [Link]
represents a slight decrease in the percentage of revenue converted into operational income.
Despite this, the company maintained a strong profit, demonstrating its ability to successfully
control operational [Link]'s margin is less than competitors such as Keurig Dr Pepper
(22.32%) and The Coca-Cola Company (24.72%). This indicates that, they need to improve in
operational efficiency.
c. Return on Assets
RATIO 2023 2022
Return On Asset 9.11 % 9.74 %
The ratio shows how well the business uses its assets to increase profit through earnings before
interest and taxes. The better the company does at managing its assets to generate revenue, the
higher the rate of return on [Link] 2023, PepsiCo’s ROA decreased from 9.74% to 9.11%,
indicating a reduction in the company’s ability to efficiently utilise its assets to generate
incomes. This reduction suggests that new asset investments may not be generating into
proportional profits It might be due to increased costs, lower margins, or operational
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inefficiencies. If this trend continues, it could affect long-term profitability and asset
management strategies.
d. Return on Equity
RATIO 2023 2022
Return on Equity 49.12% 51.97%
Return on equity shows how well a business makes use of the money that its shareholders have
invested in order to turn a profit. It acts as a barometer for how well a business manages equity
capital and turns it into net earnings. PepsiCo's return on equity (ROE) decreased from 51.97%
in 2022 to 49.12% in 2023, indicating a minor decrease in the company's ability to use
shareholders' equity to produce profit .A declining ROE indicates that the company is growing
less effective at generating revenue and raising shareholder value.
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Profitability Ratio
60.00%
51.97%
50.00%
49.12%
40.00%
30.00% 13.32%
20.00% 10.31%
13.10% 9.74%
9.92%
10.00% 9.11%
0.00%
2022
Operating Profit
Margin Net Profit
Margin Return on Assets 2023
Return on Equity
2023 2022
Figure 1:Profitability Ratio
2.2 Liquidity Ratio
a. Current ratio
RATIO 2023 2022
Current Ratio 0.85 times 0.80 times
The current ratio measures the company’s abilities to pay its short term obligations with the
current assets. The higher the rate of ratio represent the higher ability of liquidity of the firm.
The calculation represents that there is slightly increased from 0.80 in 2022 to 0.85 in 2023. It
shows that the PepsiCo is showing the small improvement in meeting its short term obligations.
However, it is still below the ideal level of 1 and the industry average 1.2. The ratio suggests that
PepsiCo might face challenges while meeting short term obligations.
b. Quick Ratio
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RATIO 2023 2022
Quick Ratio 0.68 times 0.61 times
The quick ratio indicates a company’s ability to settle its current debts without the need for
further funding or the sale of any goods. It takes the form of money, cash equivalents, or other
assets that can be exchanged for cash. PepsiCo’s quick ratio has improved from 0.61in 2022 to
0.68 in 2023. This indicates the slight improvement in meeting its short term liabilities without
relying on the inventory. However, ratio still remains below the standard of [Link] suggests
liquidity pressure and further strengthen quick assets to ensure better financial flexibility.
Liquidity Rati o
Current Ratio Quick Ratio
0.85
0.8
0.68
0.61
2023 2022
Figure 2: Liquidity Ratio
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2.3 Efficiency Ratio
a. Assets Turnover Ratio
RATIO 2023 2022
Asset Turnover Ratio 0.91 times 0.94 times
Asset turnover ratio is used for indication of how effectively a business uses its assets to generate
income . The Asset Turnover ratio of the PepsiCo has slightly decline from 0.94 times in 2022 to
0.91 times in [Link] implies that the company is using its assets little less efficiently to yield
sales as compared to previous year. This could be suggest either higher investment in assets or
slower growth in sales. The PepsiCo still maintains a good level of efficiency but should monitor
the trend to avoid decline in future.
b. Inventory Turnover Ratio
RATIO 2023 2022
Inventory Turnover Ratio 7.93 times 7.77 times
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The inventory turnover ratio indicates how frequently a business changes its stock over a specific
time [Link] PepsiCo’s inventory turnover ratio has improved slightly from 7.77 times in
2022 to 7.93 times in 2023. It indicates that the company is selling and replacing its inventory
faster than before. This is a good indication as it shows strong sales and good inventory
management .
Efficiency Ratio
7.77
2022
0.94
7.93
2023
0.91
0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5
2023 2022
Assets Turnover 0.91 0.94
Inventory Turn over Ratio 7.93 7.77
Inventory Turn over Ratio Assets Turnover
Figure 3: Efficiency Ratio
2.4 Solvency Ratio
a. Debt to Equity ratio
RATIO 2023 2022
Debt to Equity Ratio 2.36 2.26
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Maguire (2015) defines debt ratios represent an evaluation of a company's capacity to repay its
long-term debt obligations. The Debt to equity ratio has increased from 2.26 in 2022 to 2.36 in
[Link] indicates that the company is using slightly more debt as compared to equity to finance
its assets.A greater ratio indicates that PepsiCo is using debt to expand, but it can also raise
financial risk. The business should exercise cautiously, though, to avoid becoming overly
dependent on borrowing.
b. Interest Coverage Ratio
RATIO 2023 2022
Interest coverage Ratio 8.95 % 10.57 %
ICR decreased from 10.57 % in 2022 to 8.95 % in 2023. It shows the weakening in its stability to
cover on interest expenses. This may be because of the higher borrowing costs, increased debts
level or pressure on earning. Overall, PepsiCo maintains a competitive interest coverage
position, reflecting solid financial health, there is a scope of improvement.
Solvency Ratio
2022
2023
0
2
4
6
8
10
12
Interest coverage ratio Debt to Equity Ratio
Figure 4: Solvency Ratio
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2.5 Investment Ratio
a. Earnings per share
RATIO 2023 2022
Earnings per shares 6.56 6.42
Earnings Per Share (EPS) is the amount of a company’s profit divided by the number of its
shares. It represents how much money each share earns. The EPS has increased from $ 6.42 in
2022 to $6.56 in [Link] indicates that the PepsiCo is generating slightly more profit for each
share as compared to the last year. An increase EPS is a positive sign as it reflects improved
profitability and financial health.
b. Divided per Share
RATIO 2023 2022
Dividend per shares 4.94 4.52
The DPS has increased from $ 4.52 in 2022 to $4.92 in 2023. It indicates that the company is
rewarding the shareholder with the higher returns This shows the confidence in its financial
strength and future earnings.
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Investment Ratio
6.50
4.50 Earning
Per Share
2.50
Dividend
0.50 Per share
2023 2022
Dividend Per share 4.94 4.52
Earning Per Share 6.56 6.42
Dividend Per share Earning Per Share
Figure 5: Investment Ratio
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3. CONCLUSION AND RECOMMENDATION
Overall PepsiCo demonstrate a strong financial position backed by strong sales growth
91.47 B in 2023's, portfolio of globally diversified brands and rising shareholder returns.
The key strength of the investors include a high Return on Equity 49.126 % and
increasing Dividend Per Share ( DPS) $ 4.94 making it an attractive option for income-
Focused investor .Its resilience is demonstrated by the company's capacity to continue
turning a profit in spite of supply chain interruptions and inflationary pressures.
However, there are area if concern. Decrease in the Net Profit Margin down to 9.92%
and efficiency ratios Return on Assets down to 9.11 % indicates rising costs or
operational inefficiencies. Additionally , liquidity remains tight ( Current Ratio at 0.85,
Quick Ratio at 0.68 ). This is a good sign as it can pose challenges in meeting the short
term obligations. The increase in Debt to Equity Ratio (2.36) and decrease in Interest
Coverage Ratio 8.95 % indicates higher financial leverage require careful monitoring .
Despite these risk, PepsiCo's market dominance, Strong Cash flow , and commitment to
sustainability provide a strong foundation for long term stability. The company's appeal
to investors is further enhanced by its capacity for innovation and cost control. For long-
term, dividend ,consistent returns over rapid growth, PepsiCo is a wise choice. Risks of
liquidity and excessive debt can be reduced by monitoring margin trends and debt level in
the upcoming reports .The management can diversify holdings to balance from PepsiCo's
stability with higher growth opportunities.
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References
Almansoori, M.S., Almansoori, M.H., Almansoori, M.M., Almansoori, A.R., Alhammadi, A.A.,
Alnuaimi, S.M. and Nobanee, H. (2021). Financial Analysis of Adnoc. [online] [Link].
Available at: [Link]
Barnes, P., 1987. The analysis and use of financial ratios: A review article. Journal of Business
Finance & Accounting, 14(4). Available at
[Link]
week_5_discussion_1_information_0.pdf
Einstein, B. (2025). How to Use Profitability & Margin Ratios. [online] Business Insights Blog.
Available at: [Link]
Fabozzi, F.J. and Drake, P.2012 . Analysis of financial statements. [ebook] New York: John
Wiley & Sons. Available at: [Link]
hl=en&lr=&id=18GN6rqSJ84C&oi=fnd&pg=PT7&dq=ratio+analysis+of+financial+statements
&ots=PJnxvB_UJw&sig=FKGF4od6q7CDNeYGFDVNj0Q-
7dU&redir_esc=y#v=onepage&q=ratio%20analysis%20of%20financial%20statements&f=false
Hayes, A. (2024). Understanding liquidity ratios: Types and their importance. [online]
Investopedia. Available at: [Link]
Novuna. (2014). What is Current Ratio? Current Ratios Explained. [online] Available at:
[Link]
current-ratio/.
PepsiCo (2023). Annual Report 2023. [online] Available at:
[Link]
sfvrsn=f41a4a17_2.
PepsiCo (2024). PepsiCo ESG Summary. [online] Pepsico. Available at:
[Link]
Perry, N. (2024). PepsiCo: Key Areas of Sustainability Progress in ESG Report. [online]
[Link]. Available at: [Link]
sustainability-progress-in-esg-report
Simply Wall (2018). Financial Insights Based on S&P Global Market Intelligence. [online]
[Link]. Available at:
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[Link]
nasdaqpep-a-financially-sound-company
Appendix
Extract from Annual Report
Income Statement
Earnings per Share
18
Cash Flow
19
20
21
Balance Sheet
22
Working Note
i. Net Profit Margin
RATIO 2023 2022
Net Profit (9,074 / 91,471) × (8,910 / 86,392) × 100 =
Margin 100 = 9.92% 10.31%
ii. Operating Profit
RATIO 2023 2022
Operating (11,986/ 91,471) (11,512/ 86,392) × 100 =13.32
Profit Margin × 100 = 13.10% %
iii. Return on Assets
RATIO 2023 2022
Return On Asset (9,155/100,495)× 100 (8,978 / 92,187) × 100 =
= 9.11 % 9.74 %
iv. Return on Equity
RATIO 2023 2022
Return on Equity (9,155 /18,637) ×100 (8,978/) ×100
= 49.12% = 51.97%
v. Current Ratio
RATIO 2023 2022
Current Ratio (26,950/31,647) (21539/26785)
=0.85 times =0.80 times
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vi. Quick Ratio
RATIO 2023 2022
Quick Ratio (21,616 (16,317/ 26785)
/31,647) =0.61
=0.68
vii. Asset Turnover ratio
RATIO 2023 2022
Asset Turnover (91,471/100,495) (86,392/92,187)
Ratio =0.91 =0.94
viii. Inventory Turn Over Ratio
RATIO 2023 2022
Inventory Turnover (41881/5278) (40,576/5222)
Ratio =7.93 times =7.77
ix. Debt Equity Ratio
RATIO 2023 2022
Debt to (46316/18637 ) 43996/17,273
Equity =2.36 =2.26
Ratio
x. Interest coverage ratio
RATIO 2023 2022
Interest (9,074+81+2,262+1,437)/ (8,910+68+1,727+1,437+1,119)
coverage 1,437 /1,119
Ratio =8.95 =10.57
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xi. Earnings Per Share
RATIO 2023 2022
Earnings per (9,074/1,383) (8,910/1378 )
shares =6.56 = 6.42
xii. Dividend per share
RATIO 2023 2022
Dividend per shares (6839/1,383) (6275/1378 )
=4.94 = 4.52
25