INTERPRETING FINANCIAL STATEMENTS
Problem: The Coca-Cola Company and PepsiCo, Inc. provide refreshments to every cor¬ner of the world. Selected data from the 2004 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc., are presented here fin millions).
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Coca-Cola
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PepsiCo
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|
Total current assets
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$ 12,094
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$ 8,639
|
|
Total current liabilities
|
10,971
|
6,752
|
|
Net sales
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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
|
Part I:
(a) 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.
(b) 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.
(c) 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
Part II: Which company’s stock would you purchase? Why? (provide details for a two page powerpoint slide show)