Posted: July 19th, 2016

. What other ratios would help you more fully assess the liquidity of these companies?

Would you feel comfortable making a loan based on the ratio you computed in (1)?PROBLEM 13-6: Liquidity Analyses for Coca-Cola and Pepsi

The following information was summarized from the balance sheets of the Coca-Cola Company and Subsidiaries at December 31, 2010, and PepsiCo Inc. and Subsidiaries at December 25, 2010:
(in millions) Coca-Cola PepsiCo
Cash and cash equivalents $8,517 $5,943
Short-term investments 2,682 426
Marketable securities 138 –
Accounts and notes receivables, net* 4,430 6,323
Inventories 2,650 3,372
Prepaid expenses and other current assets 3,162 1,505
Total current assets $21,579 $17,569
Current liabilities $18,508 $15,892
*Described as “trade accounts receivable, less allowances” by Coca-Cola.

1. Using the information provided, compute the following for each company at the end of 2010:
Current ratio:
Quick ratio:

2. Coca-Cola reported cash flow from operations of $9,532 million during 2010. PepsiCo reported cash flow from operations of $8,448 million. Current liabilities reported by Coca-Cola at December 31, 2009, and PepsiCo at December 26, 2009, were $13,721 million and $8,756 million, respectively. Compute the cash flow from operations to current liabilities ratio for each company for 2010.
3. Comment briefly on the liquidity of each of these two companies. Which appears to be more liquid?
4. What other ratios would help you more fully assess the liquidity of these companies?

EXERCISE 13-8 Solvency Analyses for IBM

The following information was obtained from the comparative financial statements included in IBM’s 2010 annual report. (All amounts are in millions of dollars).

12/31/2010 12/31/2009
Total liabilities $90,279 $86,267
Total stockholders’ equity 23,172 22,755

For the Years Ended December 31
2010 2009
Interest expense $368 $402
Interest paid on debt 951 1,240
Provision for income taxes 4,890 4,713
Income taxes paid-net of refunds 3,238 1,567
Net income 14,833 13,425
Net cash provided by operating activities 19,549 20,773
Cash dividends paid 3,177 2,860

Expert paper writers are just a few clicks away

Place an order in 3 easy steps. Takes less than 5 mins.

Calculate the price of your order

You will get a personal manager and a discount.
We'll send you the first draft for approval by at
Total price:
$0.00
Live Chat+1-631-333-0101EmailWhatsApp