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Coca-Cola vs. Pepsi Co

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1. Using the current ratio, discuss what conclusions you can make about each company’s ability to pay current liabilities (debt).
The current ratio measures the company’s ability to pay its short term obligations with its short term assets. Between Coca Cola and PepsiCo, PepsiCo has a higher current ratio implying that is more capable of paying its obligations. The debt management policies of Coca-Cola in conjunction with share repurchase program and investment activity resulted in current liabilities exceeding current assets. From the ratio Pepsi Co suddenly had to pay all its short-term creditors, it would be able to do so and have a surplus of 44% of current assets. If Coca-Cola had to pay all its short-term obligations, it would have only 13% surplus of current assets after fully repaying all short term obligations. Therefore, it can be said that PepsiCo is more liquid than Coca Cola based on its current ratio.

| Coca-Cola | Pepsi Co. | Current Ratio | 1.13 | 1.44 |

2. Using the profitability ratios, discuss what conclusions you can make about each company’s profits over the past three years.
The return on assets ratio is an indicator of how profitable a company is relative to its total assets. Pepsi Co’s return on assets ratio is 14.92, slightly higher than the industry’s

Coca-Cola vs. Pepsi Co 3

14.70%. Coca-Cola’s return on assets ratio is much below the industry average. This implies that Coca-Cola is not utilizing its assets appropriately to generate sales.
Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money

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