ACC 400 Week 4 Team Assignment - Interpreting Financial Statements Report
Learning Team B
1234 Phoenix Street
Phoenix, AZ 4321
17 May 2010
Mrs. Lydia Sneed, CEO
Learning Team B
1234 Phoenix Street
Phoenix, AZ 4321
Dear Mrs. Sneed
Further to your request, we hereby attach our report analyzing the Coca-Cola Company and PepsiCo, Inc. As outlined in your request, we have paid particular attention in our analysis to the ratios and commentaries derived from the ratios, useful information outside the annual report for investors, which company is more profitable, and preferable company stock.
This report provides detailed financial ratios for Coca-Cola Company and PepsiCo, Inc. in addition to our observations of such ratios.
Our analysis reveals PepsiCo, Inc is more liquid but uses a higher percentage of debt financing than The Coca-Cola Company. Therefore, The Coca-Cola Company proves more solvent than PepsiCo. However, PepsiCo uses assets more efficiently and the return on stockholders’ equity is higher than Coca-Cola.
We thank you for affording us the opportunity to work with you on this project. We will be glad to discuss any questions you may have at our meeting next week.
Sincerely
Learning Team B
A REPORT OF COCA-COLA COMPANY AND PEPSICO, INC.
Prepared for:
Lydia Sneed, CEO
Submitted: 17 May, 2010
Prepared by: A. ADOLF
M. CASTILLO
C. FRANKLIN
J. HILL
R. NICHOLSON
Executive Summary
Assigned to the task of comparing financial analysis of two companies; The Coca-Cola Company and PepsiCo, Inc., team b calculated three sets of ratios to test and compare liquidity, solvency, and profitability. The ratios used to analyze liquidity: current ratio, receivables turnover, average collection period, inventory turnover, days in inventory, and current cash debt coverage. Solvency ratios include debt to total assets, times interest earned, cash debt coverage ratio, and free cash flow. To compare the profitability of the two companies the report includes the following ratios: profit margin, asset turnover, return on assets, and return on common stockholder’s equity.
