PA 13-5 Interpreting Profability, Liquidity, Solvency, and P/E Ratios

PA13-5 (Static) Interpreting Profitability, Liquidity, Solvency, and P/E Ratios [LO 13-4, LO 13-5] Coke and Pepsi are well-known international brands. Coca-Cola Co. sells more than $34.5 billion each year while annual sales of PepsiCo products exceed $66 billion. Compare the two companies as a potential investment based on the following ratios as reported by csimarket.com for the twelve months ended September 27, 2019: Ratio Coca-Cola PepsiCo a. Gross profit percentage 61.30% 55.000 22.70% 18.80% b. Net profit margin c. EPS $ 1.66 $ 6.82 d. Inventory turnover ratio 4.20 8.30 e. Current ratio 0.62 0.95 f. Debt-to-assets 0.76 0.82 9. P/E ratio 32.50 15.50 Required: 1. For each ratio listed, indicate whether it would be used to compare profitability, liquidity, or solvency, or whether it is not applicable (NA) to comparing companies. a. Gross profit percentage b. Net profit margin CEPS d. Inventory turnover ratio e. Current ratio f.Debt-to-assets 9. P/E rato 2. Which company appears more profitable? O Coca-Cola O PepsiCo 3. Which company appears more liquid? O Coca-Cola O PepsiCo 4. Which company appears more solvent? O Coca-Cola O PepsiCo