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MBA, PHD
Phoniex
Jul-2007 - Jun-2012
Corportae Manager
ChevronTexaco Corporation
Feb-2009 - Nov-2016
Comparative Analysis Case
The Coca-Cola Company and PepsiCo, Inc.
The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies' complete annual reports, including the notes to the financial statements, are available online.
Instructions
Use the companies' financial information to answer the following questions.
3.What were these two companies' trends in net cash provided by operating activities over the period 2012 to 2014?
4.Where is “depreciation and amortization” reported by Coca-Cola and PepsiCo in their statements of cash flows? What is the amount and why does it appear in that section of the statement of cash flows?
P6-12 (LO5) ETHICS (Pension Funding) Craig Brokaw, newly appointed controller of STL, is considering ways to reduce his company's expenditures on annual pension costs. One way to do this is to switch STL's pension fund assets from First Security to NET Life. STL is a very well-respected computer manufacturer that recently has experienced a sharp decline in its financial performance for the first time in its 25-year history. Despite financial problems, STL still is committed to providing its employees with good pension and postretirement health benefits.
Under its present plan with First Security, STL is obligated to pay $43 million to meet the expected value of future pension benefits that are payable to employees as an annuity upon their retirement from the company. On the other hand, NET Life requires STL to pay only $35 million for identical future pension benefits. First Security is one of the oldest and most reputable insurance companies in North America. NET Life has a much weaker reputation in the insurance industry. In pondering the significant difference in annual pension costs, Brokaw asks himself, “Is this too good to be true?”
Answer the following questions.
(a)Why might NET Life's pension cost requirement be $8 million less than First Security's requirement for the same future value?
(b)What ethical issues should Craig Brokaw consider before switching STL's pension fund assets?
(c)Who are the stakeholders that could be affected by Brokaw's decision?
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