Unit 2 Project

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Description

Unit 2: Financial Analysis Research Project – Step 1

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The objectives/purpose of the financial analysis research project are to enable you to do a comprehensive financial analysis of a publicly-traded corporation, compare it to a benchmark competitor; and provide you with substantial information to make recommendations regarding investing in this corporation.

For a complete description of the project, see Unit 1: Financial Analysis Research Project Introduction

Step 1

Directions

Select a publicly held company and a benchmark firm to compare your company against. The benchmark firm is typically the largest competitor.

Write an initial post (200-250 words)

List the company and benchmark firm you selected.

Provide a brief overview of each company

Read the overviews prepared by your peers. You will take on the role of a shareholder and respond to at least two firms that interest you. Craft a response (of 100 words each) that 

states an interest in following your peer’s research

briefly explains your interest

Due Date

Unit 2 by 11:59 p.m., Sunday, CT.

  1. Here are some examples from the other students to help
  2. Student 1

Assignment 2: Unit Financial Analysis Research Project

  • Coca-Cola v. PepsiCo
  • Current ratio = current assets/current liabilities
  1. ($billions)

Debt-to-equity ratio = debt/equity

  • ($billions)
  • Coca-Cola

22.5/19.7 = 1.14

66.9/25.8 = 2.5

  • PepsiCo

21.539/26.785 = 0.8

74.9/17.2 = 4.5

Financial Ratio Analysis: (PepsiCo, 2023; Coca-Cola Company, 2023)

Coca-Cola is an American multinational and one of the world’s leading soft beverage companies. Some of its signature brands include Coke, Fanta, and Sprite.  PepsiCo, which manufactures soft drinks such as Pepsi-Cola and Mirinda, is Coca-Cola’s main competitor (Yahoo Finance, 2023a; Yahoo Finance, 2023b). My decision to invest and work in Coca-Cola would be informed by the nature of key financial ratios; current ratio and debt-to-equity ratio, and how they compare with those of the industry leader, PepsiCo. On the one hand, the current ratio depicts the company’s ability to meet its short-term obligations using current assets (Berk & Demarzo, 2012). A good-performing and healthy company should meet its current obligations comfortably using its current assets, and this is indicated by current assets exceeding current liabilities (Berk & Demarzo, 2012). Coca-Cola’s current ratio for 2022 was 1.1454, which indicates an excess of current assets over current liabilities. PepsiCo’s current ratio fell slightly below one, indicating some struggle in meeting its current obligations. Struggle to meet current obligations exposes a company to the risk of financial distress. On the other hand, the debt-to-equity ratio indicates the extent to which a company is debt or equity-financed (Berk & Demarzo, 2012). Highly debt-financed companies are exposed to the risk of insolvency, which means the level of leverage exceeds equity (Berk & Demarzo, 2012). The debt-to-equity ratios for Coca-Cola and PepsiCo in 2022 were 2.5 and 4.5, respectively. These ratios indicate Coca-Cola’s lower risk of insolvency than PepsiCo, although both companies utilize more debt than equity financing. Additionally, their comparable ratios indicate an industry normally operating at higher debt levels, hence no cause for alarm. Accordingly, I would invest my financial capital as well as human and intellectual capital in Coca-Cola since it indicates more outstanding financial health, hence promising investment returns, and job security compared to PepsiCo.

References

Berk, J., & DeMarzo, P. (2012). Corporate finance. Person Education Limited.

Coca-Cola Company. (2023). Investor relations. Retrieved March 15, 2023 from https://investors.coca-colacompany.com/filings-reports/all-sec-filings/content/0000021344-23-000011/0000021344-23-000011.pdfLinks to an external site.

PepsiCo. (2023). Annual report.Retrieved March 17, 2023 from https://investors.pepsico.com/docs/default-source/investors/q4-2022/q4-2022-earnings-release_2b9agvkxg6qo4guu.pdfLinks to an external site.

Yahoo Finance. (2023). PepsiCo, Inc. (PEP). Retrieved March 19, 2023 from https://finance.yahoo.com/quote/PEP/profile?p=PEPLinks to an external site.

Yahoo Finance. (2023). The Coca-Cola Company (KO). Retrieved March 20, 2023 from https://finance.yahoo.com/quote/KO/profile?p=KOLinks to an external site.

Student 2

For this project, the main company is going to be the American company Starbucks Corporation with Dunkin’ Donuts as their competitors. Starbucks corporation is a large coffeehouse chain. It was founded in 1971 in Seattle by Jerry Baldwin, Gordon Bowker and Zev Siegl. It’s a specialty coffee retailer. Dunkin’ Donuts was started 20 years before Starbucks, but Starbucks has experienced tremendous growth and is now a far larger organization. (Delventhal, 2022) In the fiscal year 2019, Dunkin’ Brands recorded revenues of more over $1.4 billion, compared to Starbucks’ nearly $26.51 billion in revenue. Approximately 35,711 Starbucks shops exist worldwide, compared to more than 12,900 distribution points for Dunkin’ Brands. Nearly 8,500 Dunkin’ Donuts stores are in the United States, while Starbucks has about 14,600 locations nationwide. While Dunkin’s wanted to add 1,000 net new locations by the end of 2020, Starbucks planed to add 3,400 more stores in the United States by 2021 and focus more on emerging countries like China. (Rothman, 2020)

With 27,339 stores in 75 nations as of the end of 2017, Starbucks has more broadly expanded outside the United States. Although majority of Dunkin’ Brands’ international outlets are Baskin-Robbins ice cream shops rather than Dunkin’ Donuts cafes, the company has a sizable global footprint. The corporation has 8,000 worldwide Baskin-Robbins locations, comparable to its 2,500 U.S. outlets, and has only 5,000 Dunkin’ Donuts facilities outside of the United States.

Delventhal, S. (2022, December 19). Starbucks vs. Dunkin’: What’s the difference? Investopedia. https://www.investopedia.com/articles/markets/1202…

Rothman, M. (2020, May 11). Better buy: Starbucks vs. Dunkin’. Nasdaq. https://www.nasdaq.com/articles/better-buy%3A-star…

Yahoo! (n.d.). Starbucks vs. Dunkin’ brands: Which coffee stock is right for you? Yahoo! Finance. https://cutt.ly/M4PJVKe

Student 3

Publicly held company: eBay

Benchmark Firm: Amazon

eBay

eBay was one of the first companies to create and market an Internet Web Site to match buyers and sellers of goods and services. The company, which caters to individual sellers and small businesses, is a market leader in e-commerce worldwide. eBay is headquartered in San Jose, California (Encyclopedia Britannica, 2023). A key factor in eBay’s growth was its implementation of procedures to promote safe, transparent trading, accessible nearly anywhere to anyone. Paypal, the online automated clearinghouse for payments, has been a cornerstone of eBay’s transaction environment (Encyclopedia Britannica, 2023).

A global commerce leader that connects millions of buyers and sellers around the world, today reported financial results for its fourth quarter and full year ended December 31, 2022 (Financial Information, 2022). I n 2022, eBay generated $4.6 billion in positive economic impact through the sale of pre-loved and refurbished goods. This activity avoided 1.6 million metric tons of carbon emissions and kept 73,000 metric tons of waste from going into landfills (Financial Information, 2022).

Amazon

Online retailer, manufacturer of electronic book readers, and Web services provider that became the iconic example of electronic commerce Its headquarters are in Seattle, Washington (Encyclopedia Britannica, inc. 2023). Amazon.com is a vast Internet-based enterprise that sells books, music, movies, housewares, electronics, toys, and many other goods, either directly or as the middleman between other retailers and Amazon.com’s millions of customers. Its Web services business includes renting data storage and computing resources, so-called “cloud computing” over the Internet (Financial Information, 2022).Net Sales increased 9% to $149.2 billion in the fourth quarter, compared with $137.4 billion in fourth quarter 2021. Excluding the $5.0 billion unfavorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 12% compared with fourth quarter 2021 (Amazon.com , 2023).

The company expanded rapidly in other areas. Its Associates program, where other Web sites could offer merchandise for sale and Amazon.com would fill the order and pay a commission, grew from one such site in 1996 to more than 350,000 by 1999. Following Bezos’s initial strategy, the company quickly began selling more than books. Music and video sales started in 1998. That same year it began international operations with the acquisition of online booksellers in the United Kingdom and Germany By 1999 the company was also selling consumer electronics, video games, software, home-improvement items, toys and games, and much more (Encyclopedia Britannica, inc. 2023).

References:

Financial information. eBay Inc. – Financial Information – Financial Summary. (n.d.). Retrieved March 25, 2023, from https://investors.ebayinc.com/financial-information/financial-summary/default.aspLinks to an external site.

Amazon.com announces Fourth Quarter Results. Amazon.com, Inc. – Amazon.com Announces Fourth Quarter Results. (n.d.). Retrieved March 25, 2023, from https://ir.aboutamazon.com/news-release/news-release-details/2023/Amazon.com-Announces-Fourth-Quarter-Results/default.aspxLinks to an external site.

Encyclopædia Britannica, inc. (2023, March 24). Amazon.com. Encyclopædia Britannica. Retrieved March 25, 2023, from https://www.britannica.com/topic/AmazoncomLinks to an external site.

Encyclopædia Britannica, inc. (n.d.). EBay. Encyclopædia Britannica. Retrieved March 25, 2023, from https://www.britannica.com/topic/eBayLinks to an external site.

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