Question: The Red Soda Company (Red Soda) and The Blue Soda Company (Blue Soda) provide refreshments to every corner of the world. Selected data from the 20X6 consolidated financial statements for Red Soda and Blue Soda are presented here (in millions).
|
Red Soda
|
Blue Soda
|
|
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: 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