Liquidity Analyses for Coca-Cola and PepsiCo The following information was summarized from the balance sheets of the Coca-Cola Company and Subsidiaries at December 31, 2008, and PepsiCo Inc. and Subsidiaries at December 27, 2008:

(in millions) Coca-Cola PepsiCo Cash and cash equivalents $ 4,701 $ 2,064 Short-term investments/marketable securities 278 213 Accounts and notes receivables, net* 3,090 4,683 Inventories 2,187 2,522 Prepaid expenses and other current assets 1,920 1,324 Total current assets $ 12,176 $10,806 Current liabilities $12,988 $ 8,787

*Described as “trade accounts receivable, less allowances” by Coca-Cola.

Required 1. Using the information provided, compute the following for each company at the end of 2008:

a. Current ratio

b. Quick ratio 2. Coca-Cola reported cash fl ow from operations of $7,571 million during 2008.

PepsiCo reported cash fl ow from operations of $6,999 million. Current liabilities reported by Coca-Cola at December 31, 2007, and PepsiCo at December 29, 2007, were $13,225 million and $7,753 million, respectively. Compute the cash fl ow from operations to current liabilities ratio for each company for 2008.

3. Comment briefl y on the liquidity of each of these two companies. Which appears to be more liquid?

4. What other ratios would help you more fully assess the liquidity of these companies?

AppendixLO1