This information is from the 2008 and 2007 financial statements of Coca-Cola Com
ID: 2434640 • Letter: T
Question
This information is from the 2008 and 2007 financial statements of Coca-Cola Company and subsidiaries and PepsiCo Inc and Subsidiaries. (Year ends for PepsiCo are December 27, 2008, and December 29, 2007.) All sales are on credit for both companies.(In millions) Coca-cola PepsiCo
Accounts and notes receivable, net (a) 12/13/08 $3,090 $4,683
12/31/07 3,317 4,389
Inventories 12/31/08 2,187 2,522
12/31/07 2,220 2,290
Net revenue (b) 2008 31,944 43,251
2007 28,857 39,474
Cost of goods sold ( c ) 2008 11,374 20,351
2007 10,406 18,038
A- Is described as (trade accounts receivable, less allowances) by Coca-Cola
B- Is described as (net operating revenues) by Coca-Cola
C- Is described as (cost of sales) by PepsiCo
1. With the information provided, I need to compute the following for each company for the year 2008
a) Accounts receivable turnover ratio
b) Number of days sales in receivables
c) Inventory turnover ratio
d) Number of days sales in inventory
e) Cash to cash operating cycle
2. Give a brief comment on the liquidity of each company
Explanation / Answer
a) Accounts receivable turnover ratio Net Credit sales Average net receivables 31,944 43251 2,752 4,536 = 11.61 times =9.54 times b) Number of days sales in receivables 365 365 365 Accounts receivable turnover ratio 11.61 9.54 31.47 days 38.26 days c) Inventory turnover ratio Cost of goods sold Average Inventory 11,374 20,351 2,203 2,406 = 5.16 times = 8.46 times d) Number of days sales in inventory 365 365 365 Inventory turnover ratio 5.16 8.46 70.74 days 43.14 e) Cash to cash operating cycle = Number of days in inventory + Number of days sales in receivables 70.71+31.47 43.14+38.26 102.18days 81.40 days 2. Give a brief comment on the liquidity of each company Liquidity in case of Pepsi company is better, as they have less funds blocked in inventory and higher cash to cash operating cycle. Note to the student Average receivable and average inventory is obtained by adding the values of 2007 and 2008 and divide the sum by 2.
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