Reference no: EM132056104

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?