The financial statements of The Coca-Cola Company and PepsiCo, Inc. can be accessed at the book’s website.

Instructions

Use information found at the book’s website to answer the following questions.

(a) What method of computing net cash provided by operating activities does Coca-Cola use? What method does PepsiCo use? What were the amounts of cash provided by operating activities reported by Coca-Cola and PepsiCo in 2006?

(b) What was the most significant item reported by Coca-Cola and PepsiCo in 2006 in their investing activities sections? What is the most significant item reported by Coca-Cola and PepsiCo in 2006 in their financing activities sections?

(c) What were these two companies’ trends in net cash provided by operating activities over the period 2004 to 2006?

(d) Where is “depreciation and amortization” reported by Coca-Cola and PepsiCo in their statements of cash flows? What is the amount and why does it appear in that section of the statement of cash flows?

(e) Based on the information contained in Coca-Cola’s and PepsiCo’s financial statements, compute free cash flow. What conclusions concerning the management of cash can be drawn from the free cash flow analysis?