The Coca Cola Company and PepsiCo, Inc. provide refreshments to every corner of the world. Selected data from the 2007 consolidated financial statements for The Coca Cola Company and for PepsiCo, Inc., are presented here (in millions).

Coca Cola

PepsiCo

Total current assets

$12,105

$10,151

Total current liabilities

13,225

7,753

Net sales

28,857

39,474

Cost of goods sold

10,406

18,038

Net income

5,981

5,658

Average (net) receivables for the

2,952

4,057

Average inventories for the year

1,931

2,108

Average total assets

36,616

32,279

Average common stockholders’ equity

19,332

16,386

Average current liabilities

11,058

7,307

Average total liabilities

17,284

15,978

Total assets

43,269

32,279

Total liabilities

21,525

17,394

Income taxes

1,892

1,973

Interest expense

456

224

Cash provided by operating activities

7,150

6,934

Capital expenditures

1,648

2,430

Cash dividends

3,149

2,204

Instructions

(a) Compute the following liquidity ratios for 2007 for Coca Cola and for PepsiCo and comment on the relative liquidity of the two competitors.

(1) Current ratio. (4) Inventory turnover.

(2) Receivables turnover. (5) Days in inventory.

(3) Average collection period. (6) Current cash debt coverage.

(b) Compute the following solvency ratios for the two companies and comment on the relative solvency of the two competitors.

(1) Debt to total assets ratio.

(2) Times interest earned.

(3) Cash debt coverage ratio.

(4) Free cash flow.

(c) Compute the following profitability ratios for the two companies and comment on the relative profitability of the two competitors.

(1) Profit margin.

(2) Asset turnover.

(3) Return on assets.

(4) Return on common stockholders’ equity.