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Bus 508 Coca Cola Pepsi

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Bus 508 Coca Cola Pepsi
Coca-Cola vs. PepsiCo: Financial Management

Dr. Tressa Shavers
Strayer University

Coca-Cola vs. PepsiCo: Financial Management This paper will examine Coca-cola and PepsiCo financial ratios and profit for the year 2007 and 2008 using the liquidity measurement ratio, profitability indicator’s ratio, debt Ratio, Operating performance ratio, cash flow ratio, and investment valuation ratio. It will explain both company’s liabilities, and a few personal opinions that could better both Coca-Cola and PepsiCo profits and stockholder’s investment. It will also discuss what non-financial criteria the company could consider when choosing between these two investment options.
Using the current ratio, discuss what conclusions you can make about each company’s ability to pay current liabilities (debt). Financial ratios are used to compare the financial condition of a firm to that of similar firms for the purposes of building interests for shareholders, building the confidence of creditors, and for fostering competence among the firm’s own management. Liquidity ratios evaluate a firm’s ability to satisfy its short-term obligations as they come due. An important form of liquidity ratio is the current ratio, and it gives a general picture of the company’s financial health as it reflects the efficiency of the company to convert its products into liquid assets. A high current ratio implies the greater capability of a company to allocate its current finances into paying its current liabilities. The acceptable current ratio value for most industrial firms is 1.5, while a value of 2.0 indicates that a company has twice as many assets as its liabilities. A ratio under 1.0 expresses the persistent inability of a company to meet its current liabilities. Albeit it shows a business’ general financial strength, this ratio is not a direct indicator of a company’s tendency into bankruptcy (Smart & Megginson, 2009). In the case of Coca-Cola Enterprises Inc. and PepsiCo,


References: Current Ratio Definition - What is Current Ratio? (n.d.). Investor Glossary. Retrieved March 11, 2011, from http://www.investorglossary.com/current-ratio.htm Dividend Payout Ratio Calculation Loth, R. (n.d.). Cash Flow Indicator Ratios: Dividend Payout Ratio. Investopedia. Retrieved March 11, 2011 from http://www.investopedia.com/university/ratios/cash-flow-indicator/ratio4.asp Loth, R Loth, R. (n.d.). Debt Ratios: The Debt Ratio. Investopedia, . Retrieved March 12, 2011, from http://www.investopedia.com/university/ratios/debt/ratio2.asp Loth, R Loth, R. (n.d.). Operating Performance Ratios: Fixed-Asset Turnover. Investopedia. Retrieved March 12, 2011, from http://www.investopedia.com/university/ratios/operating-performance/ratio1.asp Loth, R Loth, R. (n.d.). Profitability Indicator Ratios: Introduction. Investopedia. Retrieved March 12, 2011, from http://www.investopedia.com/university/ratios/profitability-indicator/default.asp Loth, R Price/earnings ratio Definition. (n.d.). InvestorWords.com. Retrieved December 5, 2010, from http://www.investorwords.com/3811/price_earnings_ratio.html Smart, S PepsiCo. Inc Annual Report 2009. Financial Highlights. Retrieved March 2, 2011 from www.pepsi.com/annualreport2009 Coca-Cola Enterprises Inc
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