Free «Financial Analysis and Interpretation» Essay Sample
  1. Liquidity ratios

Current ratio                 

(Current assets/current liabilities)           12,094/10,971=   1.102             8,639/6,752=1.279

Receivable turnover

(Receivables/sales)                                 2,131/21,962=   0.0970               2,915/29,261=0.0996

Average collection period

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(Receivable turn offer * 365 days)

Inventory turnover                                    

(Cost of sale/average stock)                  7,638/1,336=   5.7170                  13,406/1,477=9.0765

Days in inventory

(Inventory/purchases)*365)      (1336/7638)*365 =     63.8385           (1,477/13,406)*365=40.223

 Current Cash dept coverage

(Cash/current liabilities)                     5,968/10,971=   0.5440                     5054/6,752=    0.7485 

            Liquidity ratios help to establish the ability of a company to meet its financial obligations (Richard, B 2008)

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            PepsiCo has stronger liquidity ratios than Coca Cola. It can therefore, be able to meet its financial obligations in a better way than Coca Cola.

  B. Solvency ratios

Debt to total assets ratio                     15,392/31,327= 0.4913                    14,464/27,987= 0.5168

Times interest earned                                              

(Income before interest and tax/interest expense) 5043/196=25.7296              4379/167 =26.2216

Cash debt coverage                                    

(Cash/total debt)                                           5,968 /14,322 =0.4167            5,054 /27,917 =0.1810

 
 
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Free cash flow   

(Cash from operating activities-Capital expenditure) 5968-755= 5213   5054-1387=3667 

            Solvency ratios help to establish the ability of the company to meet its (Richard, B 2008) Coca Cola can relatively be able to meet its debt obligations better than PepsiCo. For example cash- dept ratio of 0.4167 and 0.1810 shows that Coca Cola can be able to use available cash to pay a bigger proportion of  its debt than PepsiCo can do.    

  1. Profitability ratios

Profit margin

(Income before interest and tax/sales)         14,324/21,962 = 0.6522       15855/29,261= 0.5418

Asset turnover

(Sales/capital employed)                          21,962/1123= 19.5565            29261/1887=15.5066       

Return on assets

(Net profit/total assets)                           4,847/31,327= 0.15472           4,212/27,987 = 0.1505

Return on common stockholders’ equity

(Net income/common stockholders’ equity) 4,847/15,013=0.3229               4,212/12,734=0.3308

            Coca Cola Company is more profitable than the PepsiCo. This is indicated by the first three profitable ratios the forth ratio indicates a higher return on common stockholders’ equity for PepsiCo this can be because Coca-Cola have more of common stock holders than PepsiCo. 

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