Financial Analysis: Liquidity, Solvency and Profitability
Financial Analysis XXAC/280 Final Project Geetha Raja Labrisha Flott August 2013
Liquidity, Solvency and Profitability are the three aspects used to compare companies in a financial analysis. Their basic function is to reveal the stability of a company based on a comparison of at least two years of financial data with a company that sells products alike. The two companies must have similarities other than the products they sell; they must also be similar in popularity. “The biggest difference between each ratio is the type of assets used in the calculation. While each ratio includes current assets, the more conservative ratios will exclude some current assets as they aren't as easily converted to cash.” Ratio Analysis: Function- expresses the relationship among selected items of financial statement data. A company’s liquidity ratio, profitability ratio, and their solvency ratio can be obtained through this analysis. The results reveal the financial stability or lack thereof to the company that may have not been found in basic financial statements. “The ratio analysis yields “the relationship among selected items of financial statement data” (Weygandt, Kimmel, & Kieso, 2008) Pepsi-Co- Liquidity Ratio (Formula Used Ratio=Current Assets divided by Current Liabilities) Current Ratio 2005: 1.11=10,554 (assets)9,406 (liabilities) 2004: 1.28=8,639 (assets)6,752 (liabilities) Coca-Cola Company- Liquidity Ratio (Competitor Comparison) Current Ratio 2005: 1.041:1=10,250 (assets)9,836 (liabilities) 2004: 1.103:1=12,281 (assets)11,133 (liabilities) 15.98% of total assets: cash and cash equivalents
0.2133=6707 Cash and cash equivalents31441 Total assets
21.33% of total assets is from cash and cash equivalents.
In 2005, they had:
% of current assets 2005=10250 Current assets29427 Total assets=0.348 or 34.8%.
In 2004, Coca-Cola had:
% of current assets 2004=12281Current assets31441
Liquidity, Solvency and Profitability are the three aspects used to compare companies in a financial analysis. Their basic function is to reveal the stability of a company based on a comparison of at least two years of financial data with a company that sells products alike. The two companies must have similarities other than the products they sell; they must also be similar in popularity. “The biggest difference between each ratio is the type of assets used in the calculation. While each ratio includes current assets, the more conservative ratios will exclude some current assets as they aren't as easily converted to cash.” Ratio Analysis: Function- expresses the relationship among selected items of financial statement data. A company’s liquidity ratio, profitability ratio, and their solvency ratio can be obtained through this analysis. The results reveal the financial stability or lack thereof to the company that may have not been found in basic financial statements. “The ratio analysis yields “the relationship among selected items of financial statement data” (Weygandt, Kimmel, & Kieso, 2008) Pepsi-Co- Liquidity Ratio (Formula Used Ratio=Current Assets divided by Current Liabilities) Current Ratio 2005: 1.11=10,554 (assets)9,406 (liabilities) 2004: 1.28=8,639 (assets)6,752 (liabilities) Coca-Cola Company- Liquidity Ratio (Competitor Comparison) Current Ratio 2005: 1.041:1=10,250 (assets)9,836 (liabilities) 2004: 1.103:1=12,281 (assets)11,133 (liabilities) 15.98% of total assets: cash and cash equivalents
0.2133=6707 Cash and cash equivalents31441 Total assets
21.33% of total assets is from cash and cash equivalents.
In 2005, they had:
% of current assets 2005=10250 Current assets29427 Total assets=0.348 or 34.8%.
In 2004, Coca-Cola had:
% of current assets 2004=12281Current assets31441