Ratio Analysis of Pepsi & Coke
Dan Sweeney
March 7, 2012
1. & 2) Short-term:
The quick ratio, also known as acid-test ratio, calculates a company’s cash and accounts receivable divided by its current liabilities. This ratio is a more stringent measure of liquidity than the current ratio in that it excludes inventories and other current assets. Pfizer has a quick ratio of 1.78 while the industry median is 1.21. This shows the company does not rely too much on inventory of other assets to pay for short-term liabilities.
The current ratio measures a company’s current assets divided by its current liabilities. This ratio indicates the company’s degree of liquidity by comparing its current assets to its current liabilities. The higher a company’s current ratio, the more capable the company is of paying off its short-term debts. A ratio less than one shows that the company might be unable to pay off its obligations. Pfizer, at a current ratio of 2.06, which is above the industry median of 1.67. Pfizer also holds the highest current of its competitors showing Pfizer can pay off its short-term liabilities the fastest. Long-term: Debt to equity ratio measures a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Pfizer has a debt to equity ratio of .47, above the industry median of .42. This indicates that Pfizer is right where it needs to be but could do a better job financing its assets. Asset Utilization:
Asset turnover determines a companies sales divided by its total assets. This ratio in an overall measure of asset efficiency based on the relation between a company’s sales and the total assets. Pfizer, has the lowest compared to their competitors at .35. Bayer AG has the highest asset turnover at .70. The industry median is at.49. This shows the amount of sales generated for every dollar worth of assets. The higher the figure, the better.
March 7, 2012
1. & 2) Short-term:
The quick ratio, also known as acid-test ratio, calculates a company’s cash and accounts receivable divided by its current liabilities. This ratio is a more stringent measure of liquidity than the current ratio in that it excludes inventories and other current assets. Pfizer has a quick ratio of 1.78 while the industry median is 1.21. This shows the company does not rely too much on inventory of other assets to pay for short-term liabilities.
The current ratio measures a company’s current assets divided by its current liabilities. This ratio indicates the company’s degree of liquidity by comparing its current assets to its current liabilities. The higher a company’s current ratio, the more capable the company is of paying off its short-term debts. A ratio less than one shows that the company might be unable to pay off its obligations. Pfizer, at a current ratio of 2.06, which is above the industry median of 1.67. Pfizer also holds the highest current of its competitors showing Pfizer can pay off its short-term liabilities the fastest. Long-term: Debt to equity ratio measures a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. Pfizer has a debt to equity ratio of .47, above the industry median of .42. This indicates that Pfizer is right where it needs to be but could do a better job financing its assets. Asset Utilization:
Asset turnover determines a companies sales divided by its total assets. This ratio in an overall measure of asset efficiency based on the relation between a company’s sales and the total assets. Pfizer, has the lowest compared to their competitors at .35. Bayer AG has the highest asset turnover at .70. The industry median is at.49. This shows the amount of sales generated for every dollar worth of assets. The higher the figure, the better.