Coke and Pepsi Essay Example | Topics and Well Written Essays - 1750 words

Coke and Pepsi - Essay Example cator of working capital, also means that Coca Cola operated within its working capital range and was therefore not in a good position to pay for its current liabilities as they fell due. A comparison of the company’s current ratio with the ratio in the period ended 2011 suggests a decline because 2011 had a current ratio of 1.399. This raises concern because the company could be experiencing a continuously declining solvency potential and may compromise stakeholders such as suppliers and investors. Pepsi reported a current ratio of 1.095. Like the ratio for Coca Cola, this was low, compared to the recommended ratio of 2:1. The organization therefore operated close to its working capital and was unlikely to meet its short-term liabilities as they fell due. Pepsi’s current ratio for the year ended 2011 was however 0.961, an indication that current liabilities were more than current assets. Consequently, Pepsi experienced an improvement in its ability to meet its current liabilities, from the year ended 2011 to the year ended 2012 (Debarshi, 2011). Pepsi is doing better in management of its current assets and liabilities, into better solvency. This is because it reported a higher ratio than Coca Cola did, 1.095 compared to Coca Cola’s 1.071. In addition, Pepsi improved its ratio in the year 2012 while the ratio for Coca Cola decreased to suggest better management in Pepsi than in Coca Cola. Coca Cola had better profitability than Pepsi. Return on assets measures effectiveness in use of assets to generate income. Higher values are therefore preferred. Coca Cola had a return on assets ratio of 11.46, a value higher than Pepsi’s 8.33 percent and this suggests more effective assets management in Coca Cola. The following table summarizes the companies’ return on assets ratios for the years 2010, 2011, and 2012. In addition, Coca Cola experienced improvements in its profitability over the period while profitability of Pepsi declined. Pepsi, however reported