INTERPRETING FINANCIAL STATEMENTS
Problem: he Coca-Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2004 consolidated financial statements for The Coca-Cola Company and for PepsiCo, Inc., are presented here (in millions).
Instructions:
(a) Compute the following liquidity ratios for 2004 for Coca-Cola and for PepsiCo and comment on the relative liquidity of the two competitors.
(1) Current ratio. (4) Inventory turnover.
(2) Receivables turnover. (5) Days in inventory.
(3) Average collection period. (6) Current cash debt coverage.
(b) Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors.
(1) Debt to total assets ratio.
(2) Times interest earned.
(3) Cash debt coverage ratio.
(4) Free cash flow.
(c) Compute the following profitability ratios for the two companies and comment on the relative profitability of the two competitors.
(1) Profit margin.
(2) Asset turnover.
(3) Return on assets.
(4) Return on common stockholders’ equity.