Question

Select two companies Coca-cola company and Pepsi co, Inc and use the recent three years data from annual report (10Kform). Prepare a Statement of cash flows analysis. Determine the size and direction (cash source or use) of cash flows from operation, investing, and financing. One goal is to understand the company’s pattern of cash flows and form an opinion about the general strength of cash flows. Some question to consider:

• What were cash flows from operations? Were they positive?
• Did the company generate from use cash flows from investing activities?
• Did the company generate or use cash flows from financing activities?

Answer 1

1. Cash flow statement of Pepsi co

12 months ended	Dec 28, 2019	Dec 29, 2018	Dec 30, 2017
Net income	7,353	12,559	4,908
Depreciation and amortization	2,432	2,399	2,369
Stock-based compensation expense	237	256	292
Restructuring and impairment charges	370	308	295
Cash payments for restructuring charges	(350)	(255)	(113)
Charges related to the transaction with Tingyi	—	—	—
Venezuela impairment charges	—	—	—
Excess tax benefits from share-based payment arrangements	—	—	—
Pension and retiree medical plan expenses	519	221	221
Pension and retiree medical plan contributions	(716)	(1,708)	(220)
Deferred income taxes and other tax charges and credits	453	(531)	619
Net tax related to the TCJ Act	(8)	(28)	2,451
Tax payments related to the TCJ Act	(423)	(115)	—
Other net tax benefits related to international reorganizations	(2)	(4,347)	—
Accounts and notes receivable	(650)	(253)	(202)
Inventories	(190)	(174)	(168)
Prepaid expenses and other current assets	(87)	9	20
Accounts payable and other current liabilities	735	882	201
Income taxes payable	(287)	448	(338)
Change in assets and liabilities	(479)	912	(487)
Other, net	263	(256)	(341)
Net cash provided by operating activities	9,649	9,415	9,994
Capital spending	(4,232)	(3,282)	(2,969)
Sales of property, plant and equipment	170	134	180
Acquisition of SodaStream, net of cash and cash equivalents acquired	(1,939)	(1,197)	—
Other acquisitions and investments in noncontrolled affiliates	(778)	(299)	(61)
Reduction of cash due to Venezuela deconsolidation	—	—	—
Divestitures	253	505	267
Short-term investments, original maturity more than three months, purchases	—	(5,637)	(18,385)
Short-term investments, original maturity more than three months, maturities	16	12,824	15,744
Short-term investments, original maturity more than three months, sales	62	1,498	790
Short-term investments, original maturity three months or less, net	19	16	2
Other investing, net	(8)	2	29
Net cash (used for) provided by investing activities	(6,437)	4,564	(4,403)
Proceeds from issuances of long-term debt	4,621	—	7,509
Payments of long-term debt	(3,970)	(4,007)	(4,406)
Cash tender and exchange offers/debt redemptions	(1,007)	(1,589)	—
Short-term borrowings, original maturity more than three months, proceeds	6	3	91
Short-term borrowings, original maturity more than three months, payments	(2)	(17)	(128)
Short-term borrowings, original maturity three months or less, net	(3)	(1,352)	(1,016)
Cash dividends paid	(5,304)	(4,930)	(4,472)
Share repurchases, common	(3,000)	(2,000)	(2,000)
Share repurchases, preferred	—	(2)	(5)
Proceeds from exercises of stock options	329	281	462
Withholding tax payments on restricted stock units (RSUs), performance stock units (PSUs) and PepsiCo equity performance units (PEPunits) converted	(114)	(103)	(145)
Excess tax benefits from share-based payment arrangements	—	—	—
Other financing	(45)	(53)	(76)
Net cash used for financing activities	(8,489)	(13,769)	(4,186)
Effect of exchange rate changes on cash and cash equivalents and restricted cash	78	(98)	47
Net increase (decrease) in cash and cash equivalents and restricted cash	(5,199)	112	1,452
Cash and cash equivalents and restricted cash, beginning of year	10,769	10,657	9,158
Cash and cash equivalents and restricted cash, end of year	5,570	10,769	10,610
Based on: 10-K (filing date: 2020-02-13),10-K (filing date: 2019-02-15),10-K (filing date: 2018-02-13), 10-K (filing date: 2017-02-15),10-K (filing date: 2016-02-11).

Net cash provided by operating activities

Amount of cash inflow (outflow) from operating activities, excluding discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.

PepsiCo Inc.’s net cash provided by operating activities decreased from 2017 to 2018 but then slightly increased from 2018 to 2019.

Net cash (used for) provided by investing activities

Amount of cash inflow (outflow) of investing activities, excluding discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.

PepsiCo Inc.’s net cash (used for) provided by investing activities increased from 2017 to 2018 but then decreased significantly from 2018 to 2019.

Net cash used for financing activities

Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.

PepsiCo Inc.’s net cash used for financing activities decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level.

2. Cash flow statement of coco cola

Operating Activities
Fiscal year is January-December. All values USD millions.	2019	2017	2018
Net Income before Extraordinaries	8.99B	1.18B	6.73B
Depreciation, Depletion & Amortization	1.37B	1.26B	1.09B
Depreciation and Depletion	-	-	-
Amortization of Intangible Assets	-	-	-
Deferred Taxes & Investment Tax Credit	(280M)	(1.26B)	(450M)
Deferred Taxes	(280M)	(1.26B)	(450M)
Investment Tax Credit	-	-	-
Other Funds	35M	2.28B	1.16B
Funds from Operations	10.11B	3.47B	8.52B
Extraordinaries	-	-	-
Changes in Working Capital	366M	3.02B	(1.2B)
Receivables	-	(141M)	66M
Accounts Payable	-	(890M)	(289M)
Other Assets/Liabilities	-	4.56B	(796M)
Net Operating Cash Flow	10.47B	6.49B	7.32B
Investing Activities
	2019	2017	2018
Capital Expenditures	(2.05B)	(1.68B)	(1.35B)
Capital Expenditures (Fixed Assets)	(2.05B)	(1.68B)	(1.35B)
Capital Expenditures (Other Assets)	-	-	-
Net Assets from Acquisitions	(5.54B)	(3.81B)	(1.04B)
Sale of Fixed Assets & Businesses	1.41B	3.93B	1.61B
Purchase/Sale of Investments	2.27B	(602M)	7.19B
Purchase of Investments	(4.7B)	(17.3B)	(7.79B)
Sale/Maturity of Investments	6.97B	16.69B	14.98B
Other Uses	(56M)	(93M)	(60M)
Other Sources	-	15M	91M
Net Investing Cash Flow	(3.98B)	(2.24B)	6.44B
Financing Activities
	2019	2017	2018
Cash Dividends Paid - Total	(6.85B)	(6.32B)	(6.64B)
Common Dividends	(6.85B)	(6.32B)	(6.64B)
Preferred Dividends	-	-	-
Change in Capital Stock	(91M)	(2.09B)	(436M)
Repurchase of Common & Preferred Stk.	(1.1B)	(3.68B)	(1.91B)
Sale of Common & Preferred Stock	1.01B	1.6B	1.48B
Proceeds from Stock Options	1.01B	1.6B	1.48B
Other Proceeds from Sale of Stock	-	-	-
Issuance/Reduction of Debt, Net	(1.84B)	1.09B	(3.23B)
Change in Current Debt	-	-	-
Change in Long-Term Debt	-	-	-
Issuance of Long-Term Debt	-	-	-
Reduction in Long-Term Debt	-	-	-
Other Funds	(227M)	(91M)	(243M)
Other Uses	(227M)	(91M)	(243M)
Other Sources	-	-	-
Net Financing Cash Flow	(9B)	(7.41B)	(10.55B)
Exchange Rate Effect	(72M)	241M	(262M)
Miscellaneous Funds	-	445M	-
Net Change in Cash	(2.58B)	(2.48B)	2.95B
Free Cash Flow	8.42B	4.81B	5.97B

Net cash provided by operating activities

Amount of cash inflow (outflow) from operating activities, excluding discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.

Coca-Cola Co.’s net cash provided by operating activities decreased from 2016 to 2017 but then slightly increased from 2017 to 2018.

Net cash (used for) provided by investing activities

Amount of cash inflow (outflow) of investing activities, excluding discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.

Coca-Cola Co.’s net cash (used in) provided by investing activities decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Net cash used for financing activities

Amount of cash inflow (outflow) of financing activities, excluding discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.

Coca-Cola Co.’s net cash used in financing activities decreased from 2016 to 2017 and from 2017 to 2018.