Reference no: EM132999029

Pepsico and the financial ratios for Pepsico are:

Return on equity is 0.4946571081,

The current ratio is 0.8623723181,

The cash ratio is 0.2804359513,

Debt Equity Ratio is 2.922900041,

The price to Earnings Ratio is 25.34864643,

The dividend payout ratio is 0.7251845775,

The dividend yield is 0.02860841424,

BVPS is 10.50742049,

And the earnings per share are 5.168904594.

• PepsiCo has increased its earnings annually by 6.8%, per share. While past earnings growth was good, and will generally be expected to have a higher payout ratio to limit future growth prospects if this is not one of the rare companies that can grow without needing additional investment or expenses on marketing, and according, it is worth investing in the company from an Individual Perspective. The current ratio measures a company's capacity with current assets to meet its short-term obligations. The higher the ratio, the higher the company's liquidity. The cash ratio measures a company's ability to pay its current liability by equivalent cash and cash. Briefly, it measures the company's liquidity. The liquidity ratios in total for 2019 were not good. The return on equity measures a company's profitability against equity, i.e. whether to invest in the company or not. It is thus the most important financial ratio for investors. The ratio decreased from 0.86 in 2019 to 0.49, which shows that investing in PepsiCo is not currently worthwhile. The Debt equity ratio measures the leverage capacity of a company, which means the extent to which the assets are needed for the payment of all their current obligations. The small increase for the company increases the leverage capacity of the company. Analysts and investors review the P/E ratio in determining whether the share price accurately reflects the expected income per share. PEP has a good value in comparison to the US industry average PE ratio of 25.34. On the basis of its 10.5-fold BVPS, PEPSICO is overvalued compared to the average American beverage industry.
• The payout ratio of the dividend is 72.52%, which over the years has been stable and gradually increased. The yield share of the dividend is 2.86%, which is smaller than the US market's top payers. The P/BV ratio is interpreted as a market assessment indicator regarding the relationship between the required return rate and the actual rate of return of the company. From 2018 to 2019 and 2019 to 2020, PepsiCo Inc. increased its P/BV ratio. Pepsico's earnings are high! Dividend-paying stocks such as PepsiCo, Inc. are usually popular with investors, but some research suggests that a crucial value of all equity revenues comes from dividend re-investment. Regrettably, investors are often attracted to the apparently attractive return and lose money when their dividend payments have to be reduced. An attractive combination for PepsiCo is having a high yield and long history of dividend payment. We'd imagine many investors bought it for revenue. This year, the company also purchased equivalent stocks of approximately 1% of market capitalization. PepsiCo provided 86% of its cash flow. It generally is a sign of a sustainable dividend, and a low payout ratio generally suggests a larger margin for security before the dividend is reduced. During that time the dividend was stable, which might lead to relatively consistent performance. The 1st annual payment in the last 10 years was 1,9 dollars US, compared with 4,1 dollars U.S. last year in 2011. Although dividend payments were quite reliable, earnings per share (EPS) would also be nice to grow, since it is crucial to maintain the purchasing power of dividends over the long term. Over the last 5 years, PepsiCo has increased its earnings annually by 6.8%, per share. While past earnings growth was good, generally high payout ratio is expected to limit future growth prospects if this is not one of the rare companies that result in growth without the need for additional investment or spending on advertisements. Accordingly, it is worth investing in the company from an Individual Perspective.

Problem 1: Based upon this analysis of the Peqspsilo company, would you say this is a risky investment or a conservative investment? How does this investment risk level fit with your risk tolerance?