Coca Cola vs Pepsi

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  • Topic: Financial ratio, Financial ratios, P/E ratio
  • Pages : 3 (940 words )
  • Download(s) : 575
  • Published : April 14, 2011
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1. Current Ratio
Liquidity Measurement Ratio| Coca Cola| PepsiCo|
Current Ratio| 1.13| 1.44|

The current ratio measures the company’s ability to pay its short term obligations with its short term assets. Between Coca Cola and PepsiCo, PepsiCo has a higher current ratio implying that the latter is more capable of paying its obligations. The debt management policies of Coca Cola in conjunction with share repurchase program and investment activity resulted in current liabilities exceeding current assets. From the ratio we can say that is PepsiCo suddenly had to pay all its short-term creditors, it would be able to do so and have a surplus of 44% of current assets. On the other hand if Coca Cola had to pay all its short-term obligations, it would have only 13% surplus of current assets after fully repaying all short term obligations. Therefore, it can be said that PepsiCo is more liquid than Coca Cola based on its current ratio. 2. Profitability Ratios

Profitability Indicator Ratios| Coca Cola| PepsiCo|
Return on Assets| 4.45%| 14.92%|
Return on Equity| 85.1%| 35.17%|

The return on assets ratio is an indicator of how profitable a company is relative to its total assets. PepsiCo’s return on assets ratio is 14.92, slightly higher than the industry’s 14.70%. Coca Cola’s return on assets ratio is much below the industry average. This implies that Coca Cola is not utilizing its assets appropriately to generate sales. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.  Coca Cola has a much higher ratio at 85.1% than PepsiCo which has the ratio at 35.17%. The industry average for this ratio is 30.7%. This implies that both Coca Cola and PepsiCo generate more profit with shareholder’s money and Coca Cola is more attractive to investors. Hence, Coca Cola is delivering a much higher value to shareholders than PepsiCo. PepsiCo’s...
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