4 pages/≈1100 words
Accounting, Finance, SPSS
Coca-Cola vs. Pepsi Cola (Essay Sample)
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). Instructions: Compute the following liquidity ratios for 2014 for Coca-Cola and PepsiCo and comment on the relative liquidity of the two competitors. Current ratio Accounts receivable turnover Average collection period Inventory turnover Days in inventory Current cash debt coverage. Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors. Debt to asset ratio Times interest earned Cash debt coverage Free cash flow. Compute the following profitability ratios for the two companies and comment on the relative probability of the two competitors. Profit margin Asset turnover Return on assets Return on common stockholders' equity. Interpret your findings for the ratio comparatives analysis for Coca-Cola and PepsiCo. 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? source..
ACT- Final- Assignment -3 Name Course Instructor Date Option Choice #2: 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-ColaPepsiCoTotal current assets$12,551$12,571Total current liabilities 13,721 8,756Net Sales 30,990 43,332Cost of Goods Sold 11,088 20,099Net income 6,824 5,946Average (net) accounts receivable for the year 3,424 4,654Average inventories for the year 2,271 2,570Average total assets 44,595 37,921Average common stockholders’ equity 22,636 14,556Average current liabilities 13,335 8,772Average total liabilities 21,960 23,466Total assets 48,671 39,848Total liabilities 23,872 23,044Income taxes 2,040 2,100Interest expense 355 397Net cash provided by operating activities 8,186 6,796Capital expenditures 1,993 2,128Cash dividends 3,800 2,732Instructions: Compute the following liquidity ratios for 2014 for Coca-Cola and PepsiCo and comment on the relative liquidity of the two competitors. Current ratio Current ratio = current assets/ current liabilities Coca-Cola= $12,551/ 13,721= 0.91 PepsiCo = $12,571 / 8,756 = 1.44 Accounts receivable turnover Accounts receivable turnover =Annual credit sales/ Average receivables balance Coca-Cola= 30,990/3,424= 9.05 times PepsiCo= 43,332/ 4,654 = 9.31 times Average collection period Coca-Cola= 365//9.05= 40.3 PepsiCo= 365/9.31=39.2 Inventory turnover Inventory turnover= cost of goods sold/ average inventory Coca-Cola= 11,088/ 2,271= 4. 88 times PepsiCo= 20,099/ 2,570= 7.82 times Days in inventory Days in inventory= Days in year/ Inventory turnover ratio Coca-Cola= 365/4.88= 74.76 days PepsiCo= 365/7.82= 46.67 days Current cash debt coverage. Net cash provided by operating activities/ Average current liabilities Coca-Cola= 8,186/13,335= 0.62 PepsiCo= 6,796/ 8,772= 0.77 The current ratio indicates the ability of a reporting entity to meet its short-term obligations and the current assets in Pepsi were more than the current liabilities unlike Coca-Cola. Additionally, the liquidity position of PepsiCo is better compared to Coca-Cola except the average collection period where there were 40.3 days in Coca-Cola compared to 39.2 days for PepsiCo. Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors. Debt to asset ratio Debt assets ratio= Total liabilities/ Total assets Coca-Cola= 23,872/ 48,671= 49% PepsiCo= 23,044/ 39,848=58% (2) Times interest earned Income before Interest and Taxes or EBIT/ Interest expense Coca-Cola (6,824+2,040+ 355) /355 =25.97 times PepsiCo (5,946+2,100+397) /397= 21.27 times (3)Cash debt coverage Operating cash flow/ Average total liabilities Coca-Cola= 8,186/21,960= 0.37 PepsiCo= 6,796/ 23,466=0.29 (4)Free cash flow Operating cash flow- cash dividend Coca-Cola=8,186- 3,800= $4,386 PepsiCo=6,796-2,732= $...
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