The Coca-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2004 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions).

Coca-Cola PepsiCo Total current assets $ 12,094 $ 8,639 Total current liabilities 10,971 6,752 Net sales 21,962 29,261 Cosi of goods sold 7,638 13,406 Net income 4,847 4,212 Average (net) receivables for the year 2,131 2915 Average inventories for the year 1,336 1,477 Average total assets 29,335 26,657 Average common stockholders’ equity 15,013 12,734 Average current liabilities 9,429 6,584 Average total liabilities 14,322 27,917 Total assets S132 6 27,987 Total liabilities 15,392 14,464 Income taxes 1,375 eS Interest expense 196 167 Cash provided by operating activities 5,968 5,054 Capital expenditures 155 1,387 Cash dividends 2,429 1,329 Instructions

(a) Compute the following liquidity ratios for 2004 for Coca-Cola and for PepsiCo and comment on the relative liquidity of the two competitors.

(1) Current ratio. (4) Inventory turnover.

(2) Receivables turnover. (5) Days in inventory.

(3) Average collection period. (6) Current cash debt coverage.

(b) Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors.

(1) Debt to total assets ratio.

(2) Times interest earned.

(3) Cash debt coverage ratio.

(4) Free cash flow.

(c). Compute the following profitability ratios for the two companies and comment on the relative profitability of the two competitors.

(1) Profit margin.

(2) Asset turnover.

(3) Return on assets.

(4) Return on common stockholders’ equity.

702 CHAPTER 13 Financial Analysis: The Big Picture FINANCIAL ANALYSIS ON THE WEB