Pepsico Evaluation Paper
Running head: COMPANY EVALUATION PAPER – PEPSICO
Company Evaluation Paper – PepsiCo
University of Phoenix
Company Evaluation Paper – PepsiCo.
This paper provides calculated ratios of liquidity, activity, debt and profitability of Pepsi Co for the fiscal years 2007-2008. This information was obtained from the financial statements.
Liquidity
The current ratio is considered to be the most simplified liquidity test. It essentially signifies a company 's capacity to satisfy its short-term liabilities utilizing its short-term assets. A current ratio which is larger than or equal to one shows that current assets should have the ability to satisfy its short-term obligations. A current ratio that is less than one may entail that the company has issues with its liquidity. Pepsico’s current ratio in 2007 was 1.3. In 2008 the current ratio was 1.2. As such, Pepsico’s current assets should have had the ability to satisfy its short-term obligations for both years.
Current Ratio = (Current Assets) / Current Liabilities
2007 = 10,151.0 / 7,753.0 = 1.3
2008 = 10,806.0 / 8,787.0 = 1.2
Activity Accounts receivable turnover is computed by AR/Total daily sales credits. The daily credit sales was not available on the income statements for Pepsi Co, only one line for revenue; therefore, we can assume that all sales are performed through credit, meaning no cash sales. The total Revenue for Pepsi Co is reflected below:
2008 Total Revenue 2007 Total Revenue
43252 39474
The total receivable for Pepsi Co is reflected below:
2008 Total A/R 2007 Total A/R 4683.0 4389.0 43252 = 11.0 39474 = 11.0
Total Receivable Net (or total sales) divided by the Total Revenue for both years is 11%. This equates to 40.15 days sales outstanding; meaning customers generally pay for product purchased on credit in 40 days.
Company Evaluation Paper – PepsiCo
University of Phoenix
Company Evaluation Paper – PepsiCo.
This paper provides calculated ratios of liquidity, activity, debt and profitability of Pepsi Co for the fiscal years 2007-2008. This information was obtained from the financial statements.
Liquidity
The current ratio is considered to be the most simplified liquidity test. It essentially signifies a company 's capacity to satisfy its short-term liabilities utilizing its short-term assets. A current ratio which is larger than or equal to one shows that current assets should have the ability to satisfy its short-term obligations. A current ratio that is less than one may entail that the company has issues with its liquidity. Pepsico’s current ratio in 2007 was 1.3. In 2008 the current ratio was 1.2. As such, Pepsico’s current assets should have had the ability to satisfy its short-term obligations for both years.
Current Ratio = (Current Assets) / Current Liabilities
2007 = 10,151.0 / 7,753.0 = 1.3
2008 = 10,806.0 / 8,787.0 = 1.2
Activity Accounts receivable turnover is computed by AR/Total daily sales credits. The daily credit sales was not available on the income statements for Pepsi Co, only one line for revenue; therefore, we can assume that all sales are performed through credit, meaning no cash sales. The total Revenue for Pepsi Co is reflected below:
2008 Total Revenue 2007 Total Revenue
43252 39474
The total receivable for Pepsi Co is reflected below:
2008 Total A/R 2007 Total A/R 4683.0 4389.0 43252 = 11.0 39474 = 11.0
Total Receivable Net (or total sales) divided by the Total Revenue for both years is 11%. This equates to 40.15 days sales outstanding; meaning customers generally pay for product purchased on credit in 40 days.
References: Keown, Arthur J., Martin, John D., Petty, J. William, and Scott, David F.. Financial Management: Principles and Applications, 10th ed.. copyright © 2005 Pearson Prentice Hall, Inc. MSN Money, Pepsico Inc: Financial Statement, retrieved August 2009 from moneycentral.msn.com/investor http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=pep&lstStatement=Balance&stmtView=Ann Website: Investopia http://www.investopedia.com/terms/r/receivableturnoverratio.asp Website: http://financial-education.com/2007/01/31/accounts-receivable-turnover-and-days-sales-outstanding/