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3 pages/β‰ˆ825 words
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2 Sources
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Other
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Accounting, Finance, SPSS
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English (U.S.)
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Topic:

Inventory Ratio: Coca-Cola versus Pepsi

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The purpose of this assignment is to calculate asset ratios, then analyze and compare them between two competitors in the same industry.
Review the most recent annual reports of The Coca Cola Company and PepsiCo and focus on the balance sheet and inventory note included in the notes to the financial statements. Calculate the following ratios for each company for the last 2 years using Microsoft Excel. Be sure you are utilizing the correct formulas and a separate tab for each ratio:
Inventory turnover
Average days in inventory
In a Microsoft Word file, prepare a memo to the instructor discussing the following. Be sure to include a minimum of one paragraph per company to support your findings.
Explain the meaning of each ratio and what the calculated results tell you about each of the companies. Refer to the calculated ratios in your analysis. Your explanation should consider how the ratios have changed in the last 2 years. Your explanation should include a separate paragraph for each ratio.
Summarize how effective each company is in managing inventory based upon the type(s) of products the company sells and the industry in which it competes. Include discussion about whether the inventory turnover ratio is increasing or decreasing, what is causing the ratio increase/decrease, and whether the total value of inventory is increasing or decreasing on the balance sheet.
General Requirements:
Submit the Excel file that contains your ratios and a separate Word file using an appropriate memo template. Please include a reference page as the last page of the memo document.
Name the Excel file "LastnameFirstinitial.T3Ratios" and name the Word document "LastnameFirstinitial.T3Memo."
While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
You are required to submit this assignment to LopesWrite. A link to the LopesWrite technical support articles is located in Class Resources if you need assistance.
Topic 3 Participation

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Inventory Ratio: Coca-Cola versus Pepsi
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Inventory Ratio: Coca-Cola versus Pepsi
Inventory ratios are manly vital in the calculation of the stock levels held by a company in the sense that they are useful in the estimation of stock level to facilitate the improvement of organizational performance and profitability. Two essential inventory ratios used in finance are inventory turnover ratio and average days in inventory ratio. In the present memo, the two inventory ratios as they apply to Coca-Cola and Pepsi Company are reviewed.
Inventory Turnover Ratio
The inventory turnover ratio measures the number of times that a given company sells and replaces its inventory over a given period. As such, it is calculated by dividing the cost of goods sold by the average inventory. Coca-Cola had a turnover ratio of 4.04 times in the financial year 2020, which improved to a ratio of 4.60 in year 2021. The increase in the inventory turnover ratio in 2021 indicates that the company products experienced an increased demand. The increase in demand can be partly attributed to the signs of economic recovery following the pandemic. Year 2021 saw the government lift most of the restrictions that had been placed following the onset of the pandemic (Cocacola, 2022). Nonetheless, it is essential to note that the inventory turnover ratio recorded by Coca-Cola is considerably low for a company operating in the beverage industry. Its main competitor PepsiCo has an inventory turnover ratio that is twice higher. Coca-Cola should be worried about its inventory turnover ratio given that it is half that of its main competition. Consequently, this means that the company has been experiencing weak sales or has been facing a declining demand for its products within the market. To remedy the situation, it would be advisable for Coca-Cola to consider conducting an inventory analysis that would shed some light on the underperformance of the company’s inventory. Some of the other consideration that could help the company raise its inventory turnover ratio include a review of its pricing, marketing, and purchasing strategies. Notably, the inventory turnover ratio suggests that PepsiCo has to take immediate action intended to lower its inventory turnover ratio.
Comparatively, PepsiCo reported an inventory turnover ratio of 8.47 in 2020, which increased to 8.70 in 2021. Just like Coca-Cola, PepsiCo reported a significant increase in its...
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