ACT301 MOD 8 portfolio proj.

Option #2: Red Soda Company vs. Blue Soda Company

The Red Soda Company (Red Soda) and The Blue Soda Company (Blue Soda) provide refreshments to every corner of the world. Selected data from the 20X6 consolidated financial statements for Red Soda and Blue Soda are presented here (in millions).

	Red Soda	Blue Soda
Total current assets	$12,551	$12,571
Total current liabilities	13,721	8,756
Net Sales	30,990	43,332
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	13,335	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:

Compute the following liquidity ratios for 20X6 for Red Soda and Blue Soda, comment on the relative liquidity of two competitors.

Current ratio

Accounts receivable turnover

Average collection period

Inventory turnover

Days in inventory

Current cash debt coverage

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

Debt to asset ratio

Times interest earned

Cash debt coverage

Free cash flow

Compute the following profitability ratios for the two companies and comment on the relative probability of the two competitors.

Profit margin

Asset turnover

Return on assets

Return on common stockholders equity.

Interpret your findings for the ratio comparatives analysis for Red Soda and Blue Soda.

Evaluate what, if any, options with regard to financial activities should Red Soda and Blue Soda consider (i.e., how can these companies improve financial performance)? What impact would each of these have on the above ratios?