(By Conley) Teamwork Of Accounting Course
Pepsico Inc. 2007CashAccounts receivable,net Beginning of year End of year Inventory Beginning of year End of year Total current assetsTotal current liabilitiesToral liabilitiesTotal assets Beginning of year End of year Some Results of the RatiosWorking CapitalCurrent RatioQuick AssetsQuick RatioCash+short-tern investment+current receviableAcid-Test Ratio23981.30929962652990.68347736468700.886108603c 9103725438919262290101517753173942993034628Liquidity Ratios calculation:
eentts L-Tiaobtai lli ties Working Capital=Total Current Ass =10151-7753=2398Curre nAtssets Curre nRtatio=?10151 ?1.309Curre nLtiabilities7753Quick Assets5299Quick Ratio=??0.683Current Liabilities7753 Cash?Shortterm Investment+current receivableAcid?Test Ratio=Current Liabilities6870 =?0.8867753 The Pepsi has positive working capital which means that the current assets excesses
current liabilities. Besides, current ratio, quick ratio, and acid-test ratio all have big value, so the Pepsi has a good liquidity.
Solvency
We will use the information as follow to calculate the solvency ratio for Pepsi in 2007 and some results are calculated in the table.
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(By Conley) Teamwork Of Accounting Course
Debit and Equity RatiosAmountRatio Total Liabilitis173940.502310269 Total Equity172340.497689731 Total Liabilities and Shareholders' Equity346281Other Ratios of Solvency1.009283974Debt-to-Equity Ratio7855Income before interest and taxes224Interest expense35.06696429times interest earnedFrom the ratios we can see debt-to-equity ratio is small, so the company has more
opportunity to expand through of debt financing.
Efficiency
We will use the information as follow to calculate the solvency ratio for efficiency in 2007 and some results are calculated in the excel.
Information that will be used in ratios calculationNet sales39474Average Total Assets32279Average Total Accounts Receivable40574389Accounts Receivable,netCost of sales18038Average Inventory2108Ending Inventory2290Ratios of EfficiencyTotal Asset Turnover1.222900338Accounts Recceivable turnover rate9.729849643Days' sales uncollected 0.111187111Inventory turnover rate8.556925996Days' sales In Inventory 46.33828584
Total asset turnover=Net sales39474??1.2223Average total assets32279Net sales39474Accounts receivable turnover rate=??9.730Average Accounts receivable4057
Accounts receivable,net43889Day's sales uncollected=??0.111Net sales39474Cost of goods sales18038Inventory turnover=??8.557Average Inventory2108Ending Inventory2290Day's sales in inventory=?365??46.338Cost of goods sales18038Total asset turnover with 1.2223 shows that the Pepsi has a degree ability to use its assets to
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(By Conley) Teamwork Of Accounting Course
generate sales. Accounts receivable turnover rate means the Pepsi needs 9.73 times to converts its receivable into cash each year. In addition, the company collects its accounts receivable with the frequency of 0.111 , and sales and replaces its merchandise inventory 8.557 times each year. From the day’s sale in inventory we know the demanded product is hard to sell for it takes 46.338 times to make it. However, the Pepsi is efficient company overall.
PART 3 Comparison between Pepsi and Coca Cola
Here we make a comparison by profitability and efficiency ratios between Pepsi and Coca Cola. The data of Coca Cola is as follow.
Profitability ratios comparison
Use this information to calculate the profitability ratio for Pepsico in 2007PepsicoEnding market price per shareNumber of common shares outstanding all of 2007Net salesOperation profitNet incomeTotal shareholders' equity Beginning of year End of yearRevenuesCost of salesTotal assets Beginning of year End of yearProfit MarginAverage of AssetsReturn on AssetsAverage of Equity Return on EquityEarning per share301782Coca Cola88035192885739474717056581544717325394741803834628299300.143334853322790.22212584163860.3452947643.175084175725259811692021744288571040629963432690.207263402366160.198055495193320.3093834061.699630577 From the table above we know that the Profit Margin of Coca Cola is larger than Pepsi, which means that Coca Cola has a great ability to earn income than Pepsi. Besides, the ROA of Coca Cola is also bigger than Pepsi. But the earning per share and ROE is smaller than the Pepsi. So we know that Coca Cola has a great profitability than Pepsi , while Pepsi can gain greater income to its shareholders.
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(By Conley) Teamwork Of Accounting Course
Efficiency ratio comparison
Information used in ratios calculation PepsicoNet sales39474Average Total Assets32279Average Total Accounts Receivable4057Accounts Receivable,net4389Cost of sales18038Average Inventory2108Ending Inventory2290Ratios of Efficiency of two companiesTotal Asset Turnover1.222900338Accounts Recceivable turnover rate9.729849643Days' sales uncollected 0.111187111Inventory turnover rate8.556925996Days' sales In Inventory 46.33828584Coca Cola288573661629523317104061930.522200.7880980999.7754065040.1149461145.3903133977.86853738 From the table we get the information that the Total Assets Turnover, Inventory Turnover rate, and of Pepsi are bigger than Coca Cola. In addition, the Days’ sales In Inventory of Coca Cola is much bigger than Pepsi. All these information show that the Pepsi is more efficient .
PART 4 Review report about Accounting course and some suggestions to the course
Review report about Accounting course
Accounting is crucial in our information age. In our Accounting course, we discussed the importance of accounting to different types of organization and described the acceptd accounting principles. At the same time we learned the financial statements and mastered the method to make journal entries. What’s more, we learned the adjustment to journal enties and closing the accounting cycle. During the last semi-term we focused on the details of assets, liabilities and equity. The whole procedure of accounting course was very meaningful and useful though it sometimes might be hard and dull.
Some suggestions
The accounting course is good overall. However, there are still some details that both teacher and student need to make improvement.
Firstly, I think the exams in class is a good method to evaluate the student, and it is
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(By Conley) Teamwork Of Accounting Course
helpful for us to consolidate the knowledge, so it should be reserved in continue teaching. Secondly, we have homework every week, we don’t need to submit it every week though. I think it will be better if we submit the homework every week because we have deadline then and may spend more time in it. Thirdly, every time we took the first part of the class we all felt tired because this part of class last nearly one and o half hours. I don’t think it is a efficient method to teaching, instead of, the first part of the class should be shorter and then we can have 10 minutes resting time, as a result of it we may have a great state to take the lessons.
Reference
[1] Pepsico 2007 Annual Report [2] Coca Cola 2007 Annual Report
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