LP 6. 2 Comparative Analysis Case, The Coca-Cola Company and PepsiCo, Inc. Instructions: Go to the book’s companion website and use the information found there to answer the following questions related to The Coca-Cola Company and PepsiCo, Inc. (a) What were the cash and cash equivalents reported by Coca-Cola and PepsiCo at the end of 2009? What does each company classify as cash equivalents? Answer: On April 9, 2009, Coca-Cola Company reported cash and cash equivalent to be $6,816,000,000 and on December 26, 2009, PepsiCo reported cash and cash equivalent to be $3,943,000,000.
Coca-Cola has made almost double the cash and cash equivalent than PepsiCo. Cash equivalent from both companies generally including their time deposits and other investments that are highly liquidated and have maturities of three months or less at the date of as cash equivalents from both companies. Coca-Cola Company typically fund a significant portion of their dividends, capital expenditures, contractual obligations, and share repurchases and acquisitions with cash generated from operating activities. They rely on external funding for additional cash requirements.
The Company does not typically raise capital through the issuance of stock. Instead, the company use debt financing to lower overall cost of capital and increase their return on shareowners’ equity. Refer to the heading ‘‘Cash Flows from Financing Activities”. PepsiCo believed that their cash generating capability and financial condition, together with their revolving credit facilities and other available methods of debt financing, would be adequate to meet their operating, investing and financing needs. As of December 26, 2009, their operations in Venezuela comprised 7% of their cash and cash equivalents balance. b) What were the accounts receivable (net) for Coca-Cola and PepsiCo at the end of 2009? Which company reports the greater allowance for doubtful accounts receivable (amount and percentage of gross receivable) at the end of 2009? (c) Assuming that all“net operating revenues”(Coca-Cola) and all“net sales”(Pepsi Co)were net credit sales,compute the accounts receivable turnover ratio for 2009 for Coca-Cola and PepsiCo; also compute the days outstanding for receivables. What is your evaluation of the difference?
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