Comparing Coca-Cola and PepsiCo The current items, listed in alphabetical order, are taken from the consolidated balance sheets of Coca-Cola as of December 31, 2008, and PepsiCo as of December 27, 2008.

(All amounts are in millions of dollars.)

Coca-Cola Accounts payable and accrued expenses $6,205 Accrued income taxes 252 Cash and cash equivalents 4,701 Current maturities of long-term debt 465 Inventories 2,187 Loans and notes payable 6,066 Marketable securities 278 Prepaid expenses and other assets 1,920 Trade accounts receivable, less allowance of $51 3,090.

PepsiCo Accounts and notes receivable, net $ 4,683 Accounts payable and other current liabilities 8,273 Cash and cash equivalents 2,064 Income taxes payable 145 Inventories 2,522 Prepaid expenses and other current assets 1,324 Short-term investments 4,683 Short-term obligations 369 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. Other factors affect a company’s liquidity besides working capital and current ratio. Comment on the composition of each company’s current assets and ways this composition affects liquidity.AppendixLO1