Question
The following information is available for PepsiCo, Inc. (in U.S. $ millions): 2015 2014 2013 Cost of goods sold $28,384 $30,884 $31,243 Inventories 2,720 3,143
The following information is available for PepsiCo, Inc. (in U.S. $ millions):
| 2015 | 2014 | 2013 |
Cost of goods sold | $28,384 | $30,884 | $31,243 |
Inventories | 2,720 | 3,143 | 3,409 |
Current assets | 23,031 | 20,663 | 22,203 |
Current liabilities | 17,578 | 18,092 | 17,839 |
In the notes to its financial statements, PepsiCo disclosed that it uses the FIFO and average cost formulas to determine the cost of the majority of its inventory.
The industry averages for the inventory turnover, days in inventory, and current ratios are as follows:
| 2015 | 2014 |
Inventory turnover | 8.7 times | 9.1 times |
Days in inventory | 42 days | 40 days |
Current ratio | 1.3:1 | 1.1:1 |
Instructions
- Calculate PepsiCo's inventory turnover, days in inventory, and current ratios for 2015 and 2014. Comment on the company's liquidity over the two years, and in comparison with the industry.
- What might be the reason that PepsiCo uses more than one cost formula to determine the cost of its inventory?
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