The Coca-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Suppose selected data from recent consolidated fi nancial statements for The Coca-Cola Company and for PepsiCo, Inc. are presented here (in millions).

Coca-Cola PepsiCo Total current assets $17,551 $12,571 Total current liabilities 13,721 8,756 LO15 Net sales 30,990 43,232 Cost of goods sold 11,088 20,099 Net income 6,824 5,946 Average (net) accounts receivable for the year 3,424 4,654 Average inventories for the year 2,271 2,570 Average total assets 44,595 37,921 Average common stockholders’ equity 22,636 14,556 Average current liabilities 13,355 8,772 Average total liabilities 21,960 23,466 Total assets 48,671 39,848 Total liabilities 23,872 23,044 Income taxes 2,040 2,100 Interest expense 355 397 Net cash provided by operating activities 8,186 6,796 Capital expenditures 1,993 2,128 Cash dividends 3,800 2,732 Instructions

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

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

(2) Accounts receivable turnover. (5) Days in inventory.

(3) Average collection period.

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

(1) Debt to assets ratio.

(2) Times interest earned.

(3) Free cash fl ow.

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

(1) Profi t margin.

(2) Asset turnover.

(3) Return on assets.

(4) Return on common stockholders’ equity.

REAL-WORLD FOCUS