Superb Professors

Option Choice #2: Coca-Cola vs. PepsiCoThe Coca-Cola Company and PepsiCo, Inc., provide refreshments to every corner of the world. Selecteddata 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 andcomment on the relative liquidity of the two competitors.1. Current ratio2. Accounts receivable turnover3. Average collection period4. Inventory turnover5. Days in inventory6. Current cash debt coverage.2. Compute the following solvency ratios for the two companies and comment on therelative solvency of the two competitors.1. Debt to asset ratio2. Times interest earned3. Cash debt coverage4. Free cash flow.3. Compute the following profitability ratios for the two companies and comment on therelative probability of the two competitors.1. Profit margin2. Asset turnover3. Return on assets4. 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 andPepsiCo consider (i.e., how can these companies improve financial performance)? Whatimpact would each of these have on the above ratios?

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