Ratios
Current Ratio: Coca-Cola (1.10:1) Pepsi (1.28:1)
Receivables Turnover: Coca-Cola (10.31) Pepsi (10.04)
Average Collection Period: Coca-Cola (35.4) Pepsi (36.4)
Inventory Turnover: Coca-Cola (5.71) Pepsi (9.07)
Days in Inventory: Coca-Cola (63.9) Pepsi (40.2)
Current Cash Debt Coverage: Coca-Cola (.34) Pepsi (.29)
Commentary
As depicted within the examples shown above, the Coca-Cola is currently in a better financial state than its competitors, as its indicating ratios exemplify a higher level of flexibility in terms of its debt, revenues, and current accounts. While Pepsi has several indicators that are better than Coca-Cola, the company has a higher debt-load, which means that it requires the sale of more products in order to be able to cover all of its current liabilities. However, the net incomes and other factors seen on the balance sheets of both organizations demonstrate that Coca-Cola has a stronger financial position that allows it to compete more effectively against Pepsi.
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Influential Information
As an investor, it is necessary to calculate the debt, income, and other factors of a company’s financial statements in order to determine whether the organization is healthy in the short-to-long term view of investing. Furthermore, all of these ratios and factors must be accounted for for the past five years, as this will demonstrate any trends that are occurring within the organization. If the ratios have gone in a negative direction, it indicates that the company is currently experiencing trouble in its operations, and may not be a stable investment. However, if an investor is able to identify an organization that can rebound from these figures, great profits can be achieved.
