Financial Management and Entrepreneurship Report

Assignment Brief

In this paper, you are required to complete two tasks that are based on the topic of Financial Management and Entrepreneurship (FME). You have to focus on the following aspects of all:

• Focus on the theories, models and framework of financial management
• Find out the primary factors influencing financial management and investment decision making processes
• Critically evaluate financial report and data to form critical judgement and develop effective solutions to solve financial problems within the contexts of business
• Understanding strategic implications underpinning the financial report and formulate
• Explain the concept of entrepreneurship and entrepreneurism
• Critically analyse the relationships between knowledge, entrepreneurship and new venture development and complex factors within different business settings
• Create an effective business plan
• Implement models and theories to the report

Instructions 

Module title: Financial Management and Entrepreneurship (FME)

Tasks

Choose any two competing companies that are listed on a stock exchange around the world (example, the London Stock Exchange) and compare their financial performance for the past five years. Your chosen companies must be comparable in size and operate in one of the following industries:  Food & Beverages, Hotel & Hospitality, Oil & Gas, Pharmaceuticals & Biotech, Telecommunications and Utilities.

Note: Agree on your choice of companies with your Lecturer at least four (4) weeks before the Assignment submission date.

Obtain the annual reports for your chosen companies, for the last FIVE years, from their websites or other credible sources.

1. Write an introductory report on the activities of your chosen companies and their position in the industry.
2. Critically compare and analyse the financial performance of the two companies over the last FIVE years. Relating to each category of ratios, which company has performed better? Overall, which company is better managed. Explain the reasons for those assertions.
3. Based on your analysis, identify any strategic and operational issues that need to be addressed by the companies and make appropriate recommendations with justifications.
4. Explain clearly any problems, limitations and assumptions that you need to make to address the above tasks

Critically evaluate the potential risks for the proposed business idea and how those could be managed.

Sample Answer

Financial Management and Entrepreneurship Report

Introduction

Financial Management and Entrepreneurship (FME) are closely connected in modern business. Strong financial management allows companies to make informed investment decisions, allocate resources effectively, and achieve growth. At the same time, entrepreneurship brings innovation, new venture development, and the ability to respond to changing markets. This report is divided into two tasks.

• Task 1 compares the financial performance of two competing companies in the food and beverages industry over the last five years. The chosen companies are Coca-Cola Company (NYSE: KO) and PepsiCo Inc. (NASDAQ: PEP). Both are global leaders of similar size, competing directly in soft drinks, packaged foods, and snacks. Their annual reports provide valuable data for ratio analysis and financial comparison.

• Task 2 focuses on the internationalisation of a company. For this, Pret A Manger, a UK-based food and coffee chain, is chosen. Pret has already grown internationally but intends to expand further into new markets. The report analyses entry strategies, resources, risks, and positioning for successful global growth.

By addressing both tasks, this report applies theories, models, and frameworks of financial management and entrepreneurship, critically analyses data, and develops solutions that support effective decision-making.

Task 1: Financial Performance Comparison of Coca-Cola and PepsiCo

Company Overviews

Coca-Cola was founded in 1892 and operates as one of the most recognised global beverage companies. It owns more than 500 brands, including sparkling soft drinks, juices, teas, and bottled water. Its business model relies heavily on marketing, franchising bottling rights, and distribution partnerships worldwide.

PepsiCo, formed in 1965 through the merger of Pepsi-Cola and Frito-Lay, operates across both beverages and convenient foods. Its portfolio includes Pepsi soft drinks, Gatorade, Quaker, Tropicana, and Lay’s. Compared with Coca-Cola, PepsiCo is more diversified due to its large snack and packaged food division, which provides stable revenues even when beverage sales fluctuate.

Both companies are direct competitors, similar in size and scale, with worldwide presence. They are also listed on major US stock exchanges and publish annual reports.

Financial Ratio Analysis (2019–2023)

To compare their performance, financial ratios from both companies are examined. Ratios are grouped into profitability, liquidity, efficiency, and leverage.

Profitability Ratios

• Gross Profit Margin: Coca-Cola has consistently achieved gross margins around 58–60%, while PepsiCo’s margins are slightly lower at 53–55%. This shows Coca-Cola benefits more from its high-value beverage portfolio.

• Net Profit Margin: Coca-Cola averages 23–25%, compared with PepsiCo at 10–12%. Coca-Cola’s higher margins reflect its asset-light franchising model.

• Return on Equity (ROE): Coca-Cola reports ROE around 35–40%, while PepsiCo’s is lower at 25–28%. Again, Coca-Cola shows stronger profitability for shareholders.

Liquidity Ratios

• Current Ratio: PepsiCo maintains around 1.1–1.2, while Coca-Cola is slightly lower at 1.0. Both companies have sufficient liquidity, but PepsiCo is marginally better.

• Quick Ratio: PepsiCo again outperforms slightly, showing better short-term financial stability.

Efficiency Ratios

• Asset Turnover: PepsiCo records higher asset turnover (0.8–0.9) compared with Coca-Cola (0.5–0.6). This reflects PepsiCo’s efficient use of assets due to its food operations and distribution networks.

• Inventory Turnover: PepsiCo’s food business ensures faster inventory cycles compared with Coca-Cola, which holds more stock in beverages.

Leverage Ratios

• Debt-to-Equity Ratio: Coca-Cola’s leverage is higher (2.0–2.5) than PepsiCo (1.8–2.0). Coca-Cola relies more on debt financing, which increases financial risk.

• Interest Coverage: Both companies maintain comfortable coverage ratios, but PepsiCo is slightly stronger in meeting interest obligations.

Comparative Evaluation

• Profitability: Coca-Cola outperforms PepsiCo, with higher margins and returns to shareholders.

• Liquidity: PepsiCo has stronger liquidity and short-term financial flexibility.

• Efficiency: PepsiCo makes more efficient use of its assets, thanks to diversification into foods.

• Leverage: PepsiCo carries lower financial risk, while Coca-Cola depends more on debt financing.

Overall: Coca-Cola shows better profitability, while PepsiCo demonstrates stronger operational efficiency and lower risk. From a financial management perspective, Coca-Cola is better at creating shareholder value, but PepsiCo is better managed in balancing profitability with stability.

Continued...