Problem: The Coke-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2004 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions).
CocaCola PepsiCo
Total current assets $ 12,094 $ 8,639
Total current liabilities 10,971 6,752
Net sales 21,962 29,261
Cost of goods sold 7,638 13,406
Net income 4,847 4,212
Average (net) receivables for the year 2,131 2,915
Average inventories for the year 1,336 1,477
Average total assets 29,335 26,657
Average common stockholders' equity 15,013 12,734
Average current liabilities 9,429 6,584
Average total liabilities 14,322 27,917
Total assets 31,327 27,987
Total liabilities 15,392 14,464
Income taxes 1,375 1,372
Interest expense 196 167
Cash provided by operating activities 5,968 5,054
Capital expenditures 755 1,387
Cash dividends 2,429 1,329
Instructions;
Question I: Compute the following liquidity ratios for 2004 for Coca-Cola and for PepsiCo and comment on the relative liquidity of the two competitors.
(1) Current ratio.
(2) Receivables turnover.
(3) Average collection period.
(4) Inventory turnover
(5) Days in inventory
(6) Current cash debt coverage.
Question II: Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors.
(1) Debt to total assets ratio.
(2) Times interest earned.
(3) Cash debt coverage ratio.
(4) Free cash flow.
Question III: Compute the following profitability ratios for the two companies and comment on the relative profitability of the two competitors.
(1) Profit margin.
(2) Asset turnover.
(3) Return on assets.
(4) Return on common stockholders' equity.