1. The financial statements of Coca-Cola and PepsiCo are presented in Appenuices C and D, respectively, of the Kieso textbook. A. Use the companies' financial information and compute the debt ratio and the times interest earned ratio. (Round to four decimals). Coca-Cola PepsiCo Debt Ratio Times interest earned ratio B. Explain what these ratio means and why they are useful from a risk standpoint to a lender C. Which company would you be more likely to lend to and why? I 2017 2016 6,006 $ Q December 31 (In millions except par value) ASSETS CURRENT ASSETS Cash and cash equivalents Short-term investments TOTAL CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Marketable securities Trade accounts receivable, less allowances of $477 and 8466, respectively Inventories Prepaid expenses and other assets Assets beld for sale Assets held for sale - discontinued operations TOTAL CURRENT ASSETS EQUITY METHOD INVESTMENTS OTHER INVESTMENTS OTHER ASSETS PROPERTY, PLANT AND EQUIPMENT - net TRADEMARKS WITH INDEFINITE LIVES BOTTLERS FRANCHISE RIGHTS WITH INDEFINITE LIVES GOODWILL OTHER INTANGIBLE ASSETS TOTAL ASSETS 9,352 15.358 5.317 3,667 2,655 2,000 210 8.555 9,595 18,150 4,061 3.650 2,675 2,481 2,797 2 7.329 36,545 20,856 1,096 4,560 8,203 6,729 138 9.401 368 $ 82,896 34,010 16,260 980 4,248 10,635 0,097 3,076 10,629 926 $ 87,970A C $ 8,748 13,205 3,298 $9.490 12,498 3.527 307 710 410 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses Loans and notes payable Current maturities of long-term debt Accrued income taxes Liabilities held for sale Liabilities held for sale - discontinued operations TOTAL CURRENT LIABILITIES LOTERM DEBT OTHER LIABILITIES DEFEREED INCOME TAXES THE COCA-COLA COMPANY SHAREOWNERS' EQUITY Common stock. $0,25 par value; Authorized - 11.200 shares Issued 7.040 and 7.040 shares, respectively Capital surplus Reinvested earnings Accumulated other comprehensive income (loss) Treasury stock, at cost - 2.781 and 2.752 shares, respectively EQUITY ATTRIBUTABLE TO SHAREOWNERS OF THE COCA-COLA COMPANY EQUITY ATTRIBUTABLE TO NONCONTROLLING INTERESTS TOTAL EQUITY TOTAL LIABILITIES AND FOUITY 37 1,496 27,194 31,182 8,021 2.522 26.532 29,684 4,081 3,753 nd 2 1,760 15,864 60.430 (10,305) (50,67) 17.072 1,005 18,977 $ 8.06 1.760 14,993 65,502 (11,205) (17.988) 03.06 158 ort $89.00 X THE COCA-COLA COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31. 2017 2016 2015 (In millions except per share data) NET OPERATING REVENUES $ 35,410 $ 41,863 $ 44,294 Cost of goods sold 13,256 16,465 17.482 GROSS PROFIT 22,154 25.398 26,812 Selling, general and administrative expenses 12,496 15.262 16,427 Other operating charges 2,157 1.510 1,657 OPERATING INCOME 7.501 8,626 8.728 Interest income 677 642 613 Inte expense 841 733 856 Equity income (loss) - net 1,071 835 489 Other income (loss) - net (1,666) (1.234) 631 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 6.742 8,136 9,605 Income taxes from continuing operations 5.560 1.586 2,239 NET INCOME FROM CONTINUING OPERATIONS 1,182 6.550 7.366 Income from discontinued operations (net of income taxes of $47. $0 and $o, 101 respectively) CONSOLIDATED NET INCOME 1,283 6,550 7.366 Less: Net income attributable to noncontrolling interests 35 15 NET INCOME ATTRIBUTABLE TO SHAREOWNERS OF THE COCA- 1,248 $ 6.527 $ 7.351 COLA COMPANY 23 2016 9 2017 63,525 $ 28.785 34,740 24,231 62.799 $ 28,209 34,590 24,805 Net Revenue Cost of sales Gross profit Selling, general and administrative expenses Venezuela impairment charges Operating Profit In rest expense Interest income and other Income before income taxes Provision for income taxes (See Note 5) Net income Less: Net income attributable to noncontrolling interests Net Income Attributable to PepsiCo Net Income Attributable to PepsiCo per Common Share Basie Diluted Weighted average common shares outstanding Basic Diluted Cash dividends declared per common share 10,509 (1,151) 244 9,602 4,694 4,908 51 4,857 $ 9.785 (1.342) 110 8,553 2,174 6,379 2015 63,056 28.731 34,325 24,613 1.359 8.353 (970) 59 7.442 1,941 5.501 49 5,452 50 S 6,329 $ $ S 3.40 $ 3.38 $ 4.39 S 4-36 $ 3.71 3.67 1,425 1,438 3.1675$ 1.439 1.452 2.96 $ 1,469 1,485 2.7625 S 2017 2016 9,158 3 ASSETS Current Assets Cash and cash equivalents Short-term investments Ancounts and notes receivable, net Inventories Prepaid expenses and other current assets Total Current Assets Property, Plant and Equipment, net Amortizable Intangible Assets, net Goodwill Other nonamortizable intangible assets Nonamortizable Intangible Assets Investments in Noncontrolled Affiliates Other Assets Total Assets 3 $ 10,610 8,900 7,024 2,947 1.546 31.027 17,240 1,268 14,744 12,570 27314 2,042 913 6,967 6,694 2.723 908 26,150 16,591 1,237 14.430 12.196 26,626 1,950 636 $ 173.190 79.804 5,485 15,017 20,502 33,796 11,28 3,242 68,823 6,892 14,243 21,135 30,053 6,669 4.434 62,291 41 (197) 41 (192) Accounts payable and other current liabilities Total Current Liabilities Long-Term Debt Obligations Other Liabilities Deferred Income Taxes Total Liabilities Commitments and contingencies Preferred Stock, no par value Repurchased Preferred Stock PepsiCo Common Shareholders' Equity Common stock, par value 1% per share (authorized 3,600 shares, issued, net of repurchased common stock at par value: 1,420 and 1,428 shares, respectively) Capital in excess of par value Retained earnings Accumulated other comprehensive loss Repurchased common stock, in excess of par value (446 and 438 shares, respectively) Total PepsiCo Common Shareholders' Equity Noncontrolling interests Total Equity Total Liabilities and Equity 24 3,996 52,839 (13,057) (32,757) 11,045 92 10,981 24 4,091 52,518 (13.919) (31,468) 11.246 104 11.109 79,804 773.490