Comparing Coca-Cola and PepsiCo The current items, listed in alphabetical order, are taken from the consolidated balance sheets of Coca-Cola and PepsiCo as of December 31, 2006. (All amounts are in millions of dollars.)

Required 1. Compute working capital and the current ratio for both companies.
2. On the basis of your answers to (1), which company appears to be more liquid?
3. As you know, other factors affect a company’s liquidity in addition to its working capital and current ratio. Comment on the composition of each company’s current assets and ways this composition affects the company’s liquidity.

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Coca-Cola Accounts payable and accrued expenses $5,055 Accrued income taxes 567 Cash and cash equivalents 2,440 Current maturities of long-term debt 33 Inventories 1,641 Loans and notes payable 3,235 Marketable securities 150 Prepaid expenses and other assets 1,623 Trade accounts receivable, less allowance of $63 2,587 PepsiCo Accounts and notes receivable, net Accounts payable and other current liabilities $3,725 6,496 Cash and cash equivalents 1,651 Income taxes payable 90 Inventories 1,926 Prepaid expenses and other current assets 657 Short-term investments 1,171 Short-term obligations 274