Comment on the QUALITY OF EARNINGS of this company. Annual Financials for PepsiC

Question

Comment on the QUALITY OF EARNINGS of this company.

Annual Financials for PepsiCo Inc.

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Operating Activities

Investing Activities

Financing Activities

Fiscal year is January-December. All values USD millions. 2011 2012 2013 2014 2015 5-year trend Net Income before Extraordinaries 6.46B 6.21B 6.79B 6.56B 5.5B Depreciation, Depletion & Amortization 2.61B 2.61B 2.66B 2.63B 2.42B Depreciation and Depletion 2.48B 2.49B 2.55B 2.53B 2.34B Amortization of Intangible Assets 133M 119M 110M 92M 75M Deferred Taxes & Investment Tax Credit 495M 321M (1.06B) (19M) 78M Deferred Taxes 495M 321M (1.06B) (19M) 78M Investment Tax Credit - - - - - Other Funds 222M (1.1B) 338M 183M 1.88B Funds from Operations 9.79B 8.05B 8.73B 9.35B 9.87B Extraordinaries - - - - - Changes in Working Capital (844M) 345M 958M 1.16B 707M Receivables (666M) (250M) (88M) (343M) (461M) Accounts Payable 520M 548M 1.01B 1.16B 1.69B Other Assets/Liabilities (27M) - (51M) 80M (335M) Net Operating Cash Flow 8.94B 8.39B 9.69B 10.51B 10.58B

Explanation / Answer

Answer: Quality of earnings ratio 1.85

Quality of earnings ratio =Cash flow from operations/Profit

2015= $10.58 / $5.5 =1.92

2014=10.51B/6.56B=1.602

2013=9.69 B/6.79B=1.43

So, Pepsico quality of earning ratio is in increasing trend.

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