Financial Performance
Introduction
The financial performance of an organisation helps in identifying its ability to utilise the primary assets in order to generate expected revenues. Firms’ entire financial health is analysed appropriately for operating in the market situation. Cash flow and financial and managing the debts of the organisation will be demonstrated in the report. The financial performance of the organisation of Coca Cola and Pepsi will be discussed and evaluated in the report. Ratio analysis will be evaluated for the year 2021, which will be shown and enumerated for better understating on behalf of the organisation. The ratio enumeration will be presented with a comparison to the organisation of Coca Cola and Pepsi. As ratio analysis supports the concept of presenting an appropriate comparison for the organisation, which will be comprehended in the report. Moreover, the concept of current ratio, quick ratio, operating ratio, gross profit margin, trade receivables and trade payables will be discussed in the report. The balanced scorecard is one of the significant aspects of accounting standards that will be evaluated in the report. The financial stability is analysed with the help of a balanced scorecard in the specific report. Additionally, growth and internal management are analysed with the support of the balanced scorecard, which will be elaborated in the discussion. On the other side, integrated reporting will be effectively discussed in the particular report. It will show the intention and purpose of preparing the report with the support of integrated reporting of accounting standards which will be discussed below.
Financial Performance by applying the method of Ratio Analysis
Evaluating the financial performance of an organisation helps in figuring out the stability in the competitive market. It shows the liquid status of the firm and how stable it is in the market of competition. It also shows the effective way in which the consumers are being served by good performance. Additionally, management of the firm can be done according to the growing needs and demands of consumers. It reflects the potentiality of the firm for which the evaluation of the financial performance has been done.
Enumerating the ratio analysis of Coca Cola for the year 2021
| Operating Profit Margin | Gross Profit Margin | Current Ratio | Quick Ratio | Trade Receivables | Trade Payables |
| =0.61% | = 61.14% | = 1.33 | = 1.12 | = 152.23 days | = 133.21 days |
Enumerating the ratio analysis of Pepsi for the year 2021
| Operating Profit Margin | Gross Profit Margin | Current Ratio | Quick Ratio | Trade Receivables | Trade Payables |
| = 0.54% | = 54.81% | = 0.98 | = 0.80 | = 43.58 days | = 101.61 days |
Appropriately enumerating the ratio analysis for both the organisation of Pepsi and Coca Cola.
Ratio analysis is generally conducted for figuring out the financial stability in the market where many competitors exist. It is one of the genuine accounting standards which is applied for calculating financial stability. The liquidity and profit proportion of the organisation can be achieved with the support of the ratio enumeration (Hoque, 2014). On the other side, the liquidity can be enhanced by proper enumeration of the ratio analysis. Most significantly, a comparison for the operating organisation can be made by ratio analysis within the existing organisation. It forecasts the effectiveness of the organisation in the competitive market along with its capability and efficiency. Moreover, decision making is enhanced according to the need and requirements of the organisation.
Gross Profit Margin
According to the enumeration of Gross Profit margin for both the organisation of Coca Cola and Pepsi. For the organisation of Coca Cola, the Gross Profit Margin was 61.14%, whereas, for Pepsi, it was 54.81%. It shows that Coca Cola is more stable in the competitive market in comparison to Pepsi. Therefore, it reflects that the sales for the organisation of Coca Cola were highly profitable and adequate compared to Pepsi.
Operating Ratio
The operating ratio for Coca Cola and Pepsi identifies that, again Coca Cola was in a stable position, with 0.61%. On the contrary, Pepsi has an operating ratio of 0.54%. Due to the restricted time period, Pepsi failed to increase the operating profit, and in comparison, Coca Cola performed well in the intense level of competition. It is interpreted for finding out the profitability margin in the competitive environment (Greatbanks and Tapp, 2007). It is one of the most significant accounting methods which helps in showing the higher profit margin, which shows that Coca Cola is leading in this specific matter.
Quick Ratio
As per the enumeration of Quick Ratio for the organisation of Coca Cola and Pepsi in the specific report, hence, 1.12 has been evaluated for Coca Cola whereas 0.80 for Pepsi, respectively. According to the situation, it is again analysed that Coca Cola is leading (Aytac, et al., 2020). Additionally, it reflects that Coca Cola has the ability to pay its short-term expenses in the situation of a competitive market. Hence, the liquidity status of Coca Cola is more stable and ideal in comparison to Pepsi. The quick ratio for Coca Cola states 1.12, which indicates that the organisation’s assets are half its current liabilities in the market situation.
Current Ratio
The current ratio indemnifies the ability to pay the short term loans within the span of one year in the market situation. According to the enumeration for both the chosen organisation of Coca Cola and Pepsi states, 1.33 and 0.98. The enumeration is constantly showing that Coca Cola has deliberately performed far better than Pepsi in a competitive market (Malafronte and Pereira, 2020). Therefore, it can be analysed that performance of Coca Cola company has performed effectively. The quick ratio for Coca Cola has crossed the level of 1.12, which states that the quick ratio is in a healthier position.
Trade Payables
The trade payables enumeration for any organisation shows the amount which it owes to the vendors present in the market. It consists of the loan which is given by the suppliers while lending the goods and other raw materials to the firm. Trade payables for Coca Cola were 133 days. On the flip side, trade payables for Pepsi were 102 days. It shows that the organisation of Pepsi is paying its vendor faster compared to Coca Cola (Kristofik, Slampiakova and Fendekova, 2020). It is a positive sign which has been indicated for the counterpart of Pepsi. The credit ratings from the vendors to the organisation of Pepsi are much higher in accordance with Coca Cola. Therefore, the potentiality of Pepsi paying its vendor regarding the credited materials is at a secure rate than to Coca Cola.
Trade Receivables
According to the enumeration of trade receivables, Coca Cola has performed well more than Pepsi. The performance of Coca Cola has deteriorated with 152 days. On the other side was Pepsi 44 days. It shows that the organisation of Pepsi has the potential of getting the payment from the debtors within 44 days (Nørreklit and Mitchell, 2014). On the other side, Coca Cola has not been able to reach that expected level in the competitive market. The organisation of Pepsi has been able to extract the given amount from the debtors. As the enumerated value which has been obtained reflects that the fund which has been credited for the firm of Coca Cola has not been paid properly, and henceforth, the rate of trade receivables has increased in the market situation. On the same side, it has been observed that the firm Pepsi which the debtors have owed, has been refunded back, for which the rate for trade receivables is less.
Conclusion
The report has elaborated the importance of financial performance in the report. It has shown the importance of managing the financial performance with the help of ratio analysis for the organisation of Coca Cola and Pepsi. The enumeration has presented the analysis for the year 2021, which has been reflected in the report. On the other side, the ratio analysis has majorly shown that the organisation of Coca Cola has performed effectively well in comparison to Pepsi. Trade receivables have been stable in comparison to Coca Cola organisation which has been mentioned and discussed in the report with proper enumeration. Moreover, the presentation of the data has shown that Coca Cola has more potential to perform in comparison to Pepsi or other competitors present in the market situation. Furthermore, the essentiality of balanced scorecard helps in understanding the need and enhancing the relationship with the consumers has been demonstrated in the particular report. The growth and expansion of the business analysed with the support of the balanced scorecard have been elaborated in the report. Additionally, the significance of an integrated report has been elaborated, and an understanding of the importance of creating the financial performance has been effectively discussed. The Principles of an integrated report have been discussed, along with its merits and demerits. Highlighting the importance of an integrated report has been evaluated for clarification in the report, which helps in finding out the effected result on behalf of the organisation.
References
Books & Journals
Greatbanks, R. Tapp, D. (2007). The impact of BSC in a public sector environment: Empirical evidence from Dunedin City Council New Zealand. International Journal of Operations and Production Management, 27(8), 846–873.
Malafronte, I., Pereira, J. (2020). Integrated thinking: measuring the unobservable. Meditari Accountancy Research.
Nørreklit, H., Mitchell, F. (2014). Contemporary issues on the balanced scorecard. Journal of Accounting & Organizational Change, 10(4).
Hoque, Z. (2014). 20 years of studies on the balanced scorecard: Trends, accomplishments, gaps and opportunities for future research. British Accounting Review, 46(1) pp. 33–59.
Kristofik, P., Slampiakova, L. and Fendekova, J., (2020). Do financial systems in Europe converge? Evidence from enterprise financial liabilities comparing Eurozone and non-Eurozone countries. Transformations in business & economics, 19, pp.21-37.
Aytac, B., Hoang, T.H.V., Lahiani, A. and Michel, L., (2020). Working capital management and profitability of wine firms in France: an empirical analysis. International Journal of Entrepreneurship and Small Business, 41(3), pp.368-396.