Abstract Accounting is the process of communicating, recording, and identifies the economic events of a company to interested parties. In order to communicate these economic events, an individual has to know how to analyze and interpret the information that is reported in financial reports such as balance sheets, statement of cash flow, income statement, and retained earnings statement. Every item, in a financial statement whether asset or liability, has a significance part. Generally accepted accounting principles (GAAP) is a set of standards developed by the accounting professionals for companies to follow when reporting economic events. The basic accounting equation is assets equal liabilities plus the stockholder’s equity.
Purpose of Paper The purpose of the following financial analysis between PepsiCo and Coca Cola is to show how the annual numbers are important to stockholders and other individuals that may be interested in buying stocks with a company. Based on the percentages and figures that I come up with, I will decide on which company I would choose to invest in and why. It is important for investors to dig deep in a company’s financial statements and analyze all the numbers. I will discuss three recommendations for each company on how to improve the increase or decrease the current financial situation.
Breakdown of Different Ratio’s Within the financial analysis, I will include a breakdown of the three characteristics when it comes to evaluating a company’s financial statement: liquidity, profitability, and solvency. Banks or short term creditors are interested in a company’s liquidity because the bank needs to know how the company pays obligations when due. A bondholder or long-term creditor looks at the company’s profitability and solvency
