Compute the following liquidity ratios for 2014 for


Problem - Coca-Cola vs. PepsiCo

The Coca-Cola Company and PepsiCo, Inc., provide refreshments to every corner of the world. Selected data from the 2014 consolidated financial statements for the Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions).


Coca-Cola

PepsiCo

Total current assets

$12,551

$12,571

Total current liabilities

13,721

8,756

Net Sales

30,990

43,332

Cost of Goods Sold

11,088

20,099

Net income

6,824

5,946

Average (net) accounts receivable for the year

3,424

4,654

Average inventories for the year

2,271

2,570

Average total assets

44,595

37,921

Average common stockholders' equity

22,636

14,556

Average current liabilities

13,335

8,772

Average total liabilities

21,960

23,466

Total assets

48,671

39,848

Total liabilities

23,872

23,044

Income taxes

2,040

2,100

Interest expense

355

397

Net cash provided by operating activities

8,186

6,796

Capital expenditures

1,993

2,128

Cash dividends

3,800

2,732

Instructions:

1. Compute the following liquidity ratios for 2014 for Coca-Cola and PepsiCo and comment on the relative liquidity of the two competitors.

1. Current ratio

2. Accounts receivable turnover

3. Average collection period

4. Inventory turnover

5. Days in inventory

6. Current cash debt coverage.

2. Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors.

1. Debt to asset ratio

2. Times interest earned

3. Cash debt coverage

4. Free cash flow.

3. Compute the following profitability ratios for the two companies and comment on the relative probability of the two competitors.

1. Profit margin

2. Asset turnover

3. Return on assets

4. Return on common stockholders' equity.

4. Interpret your findings for the ratio comparatives analysis for Coca-Cola and PepsiCo.

5. Evaluate what, if any, options with regard to financial activities should Coca-Cola and PepsiCo consider (i.e., how can these companies improve financial performance)? What impact would each of these have on the above ratios?

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Accounting Basics: Compute the following liquidity ratios for 2014 for
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