Compute each of the following ratios for each of the years 2013-2015 using the financial statements for Pepsico, Inc. that are provided on the accompanying spreadsheet file (this is a

very number intensive assignment so it will help if you use Excel):1Liquidity ratios Current ratio

Quick ratio Efficiency ratios Asset turnover Days in inventory Leverage ratios Debt ratio Times interest earned Profitability ratios Net margin Return on beginning equity Growth ratios2Sales (CAGR for the period 2013-2015) EBIT (CAGR for the period 2013-2015) Risk ratios3Fixed to variable costs Sales to fixed cost Contribution margin

2.Using your answers to question 1, identify any deterioration or improvement in the firm?s financial condition related to each of the categories of financial ratios (i.e., liquidity, efficiency, leverage, profitability, etc.)?

1The Harvard course notes frequently use average balances when computing ratios. For example, the total asset

turnover ratio as sales divided by average total assets. For purposes of this assignment you should use sales to ending assets and eschew use of an average as this would preclude your ability to compute the ratio for the first year. Similarly, use ending balances in the denominator of all ratios (rather than an average of beginning and ending balances).

2Note that there is only one growth rate for the period. You can use the geomean function in Excel to perform this

computation, (i.e., CAGR for revenues = geomean(Sales2012/Sales2011, Sales 2013/Sales2012) - 1.

3Judgment is required in the analysis of fixed expenses since we only have access to the firm?s income statement.

For purposes of our analysis you can assume that Selling, General, and Administrative expenses are fixed while the other operating expense category is variable. This is an oversimplification as some or all of selling expense is variable but we have no basis for separating out these expenses from other fixed expenses.

Week 1 Problem Set.docx

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