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Coca-Cola vs. PepsiCo

The Coca-Cola Company and PepsiCo, Inc., provide refreshments to every corner of the world. Selected data from the 2014 consolidated financial statements for the Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions).

	Coca-Cola	PepsiCo
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 2014 for Coca-Cola and PepsiCo and comment on the relative liquidity of the 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 Coca-Cola and PepsiCo.

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

Option Choice #2: Coca-Cola vs. PepsiCo The Coca-Cola Company and PepsiCo, Inc., provide refreshments to every corner of the world. Selected data from the 2014 consolidated financial statements for the Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions). Coca-Cola PepsiCo $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 2,040 2,100 Total current assets Income taxes 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: 1. Compute the following liquidity ratios for 2014 for Coca-Cola and PepsiCo and comment on the relative liquidity of the two competitors. 1. Current ratio 2. Accounts receivable turnover 3. Average collection period 4. Inventory turnover 5. Days in inventory 6. Current cash debt coverage. 2. Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors. 1. Debt to asset ratio 2. Times interest earned 3. Cash debt coverage 4. Free cash flow. 3. Compute the following profitability ratios for the two companies and comment on the relative probability of the two competitors. 1. Profit margin 2. Asset turnover 3. Return on assets 4. Return on common stockholders' equity. 4. Interpret your findings for the ratio comparatives analysis for Coca-Cola and PepsiCo. 5. Evaluate what, if any, options with regard to financial activities should Coca-Cola and PepsiCo consider (i.e., how can these companies improve financial performance)? What impact would each of these have on the above ratios? Solution-4 After the comparative analysis my finding is that PepsiCo company is more profitable than Coca-Cola because...... Liquidity RatiosPepsiCo is more liquid than Coca-Cola and PepsiCo better than Coca-Cola in all of the ratios. Solvency RatiosCoca Cola is more solvent than Pepsi Profitability RatiosPepsiCo has a lower profit margin in comparison to Coca-Cola Company and PepsiCo, Inc. has a higher return on assets, asset turnover and return on common stockholders' equity. Solution-5 There are so many requirements for both the companies to improve their financial performance which is as follow.... For the Pepsi Company Improve their solvency ratio. Improve their profit margin. For the Coca-Cola Company Coca-Cola Company has to improve their liquidity ratio. Improve their return on assets. Coca-cola company has to improve their return on common stockholders' equity For both the companies the impact of the ratio analysis is positive because with the help of the ratio analysis company able to improve their financial position in long term aspect. Solution-4 After the comparative analysis my finding is that PepsiCo company is more profitable than Coca-Cola because...... Liquidity RatiosPepsiCo is more liquid than Coca-Cola and PepsiCo better than Coca-Cola in all of the ratios. Solvency RatiosCoca Cola is more solvent than Pepsi Profitability RatiosPepsiCo has a lower profit margin in comparison to Coca-Cola Company and PepsiCo, Inc. has a higher return on assets, asset turnover and return on common stockholders' equity. Solution-5 There are so many requirements for both the companies to improve their financial performance which is as follow.... For the Pepsi Company Improve their solvency ratio. Improve their profit margin. For the Coca-Cola Company Coca-Cola Company has to improve their liquidity ratio. Improve their return on assets. Coca-cola company has to improve their return on common stockholders' equity For both the companies the impact of the ratio analysis is positive because with the help of the ratio analysis company able to improve their financial position in long term aspect