All businesses use financial documents to record and journal their business transactions. These financial documents are not only used internally by company executives, but they are also used by external sources to evaluate a company's strengths and weaknesses. The purpose of this article is to provide a financial analysis of PepsiCo and Coca Cola, provide examples explaining which company is financially stronger, and provide recommendations on how to improve each company financially. The first item I will discuss is a vertical analysis of the two companies. Vertical analysis is used to evaluate data and express the elements of a financial statement as a percentage of a stated base amount. For the vertical analysis of PepsiCo and Coca Cola, I looked at both the balance sheet and the income statement. The valuations I considered for this vertical analysis were Cost of Goods Sold as a Percentage of Net Sales, Net Profit as a Percentage of Net Sales, Current Assets to Total Assets, and Percentage Change of a year over year, and current liabilities relative to total liabilities and the percentage change from year to year. The cost of goods sold percentage shows how much it actually costs to produce and sell the items that make the company money. Net income as a percentage of sales indicates how much money from the sale of an item is actually considered revenue generated by the business. Current assets compared to total assets shows how much of the assets a company has that are actually available at any given time. Current liabilities compared to total liabilities show how much of a company's liabilities reside in a current state for the year. PepsiCo 2004 2005 Percentage C...... middle of paper ...... this would add capital to the reserves and they could in turn grow. With Coca Cola, I would recommend increasing their assets. One way to increase their assets would be to decrease their distribution rate, in my opinion these two things go hand in hand. With an increase in its assets, the company would be able to expand and ultimately increase its profits. In conclusion, all businesses use financial documents to record and journal their business transactions. These financial documents are not only used internally by company executives, but they are also used by external sources to evaluate a company's strengths and weaknesses. The ability to read and understand financial statements and perform financial analysis is a great skill for all business professionals, whether they are investors, creditors or business managers..