As chief lending officer for a bank, you need to decide whether to make a loan toThe Coca-Cola Company. The current items, listed in alphabetical order, are taken from the consolidated balance sheets of The Coca-Cola Company and its competitor Pepsi Coat the end of 2011 and 2010 (included in the companies€™ Form 10-Ks for the years ended December 31, 2011; all amounts are in millions of dollars):
Required
Part A. The Ratio Analysis Model
A banker must be able to assess a company€™s liquidity before loaning it money. Liquidity is the ability of a company to pay its debts as they come due. Replicate the five steps in the Ratio Analysis Model on page 74 to analyze the current ratios for The Coca-Cola Company and PepsiCo:

1. Formulate the Question
2. Gather the Information from the Financial Statements
3. Calculate the Ratio
4. Compare the Ratio with Other Ratios
5. Interpret the Ratios
Part B. The Business Decision Model
A banker must consider a variety of factors, including financial ratios, before making a loan. Replicate the five steps in the Business Decision Model on page 75 to decide whether to make a loan to The Coca-Cola Company.
1. Formulate the Question
2. Gather Information from the Financial Statements and Other Sources
3. Analyze the Information Gathered
4. Make the Decision
5. Monitor Your Decision

Transcribed Image Text:

The Coca-Cola Company 12/31/11 12/31/10 $ 8,859 $ 9,009 Accounts payable and accrued expenses Accrued income taxes 362 273 Cash and cash equivalents Current maturities of long-term debt 12,803 8,517 2,041 3,092 1,276 Inventories 2,650 Loans and notes payable 12,871 8,100 Marketable securities 144 138 Prepaid expenses and other assets 3,450 3,162 1,088 Short-term investments 2,682 Trade accounts receivable, less allowances 4,920 of $83 and $48, respectively 4,430 12/25/10 Pepsico 12/31/11 $ 6,912 11,757 $ 6,323 10,923 5,943 Accounts and notes receivable, net Accounts payable and other current liabilities Cash and cash equivalents Income taxes payable 4,067 192 71 Inventories 3,827 3,372 Prepaid expenses and other current assets 2,277 358 1,505 Short-term investments 426 Short-term obligations 6,205 4,898