Running head: COMPANY EVALUATION PAPER – PEPSICO
Company Evaluation Paper – PepsiCo
University of Phoenix
Company Evaluation Paper – PepsiCo.
This article provides computed ratios of profitability, debt, activity, as well as liquidity of Pepsi Co for the financial years 2007-2008. This information was taken from the fiscal reports.
The current ratio is thought to be the most basic liquidity test. Basically it shows a company's capability to meet its short-term liabilities using its short-term assets. A current ratio, which is equal to, or larger than one demonstrates that current assets must have the capability to pay its short-term debts. A current ratio of less than one may indicate that the company has problems with its liquidity. In 2007 Pepsico’s current ratio was 1.3. The current ratio was 1.2 in2008. Therefore, Pepsico’s current assets must have had the capability to pay its short-term debts for both years.
Current Ratio = (Current Assets) / Current Liabilities
2007 = 10,151.0 / 7,753.0 = 1.3
2008 = 10,806.0 / 8,787.0 = 1.2
AR/Total daily sales credits are used to calculate accounts receivable turnover. The day by day credit sales was not offered on the income reports for Pepsi Co’s only one source for revenue; so, we can suppose that all sales are carried out through credit, implying no cash sales. The total revenue for Pepsi Co is revealed below:
2008 Total Revenue 2007 Total Revenue
The total receivable for Pepsi Co is revealed below:
2008 Total A/R 2007 Total A/R
43252 = 11.0 39474 = 11.0
When Total Receivable Net (or total sales) is divided by the Total Revenue for both years the result is 11%. This is equal to 40.15 days sales outstanding; it means that customers usually pay for product bought on credit in forty days.