Overview
Financial ratios are used by organizations to analyze balances from
different periods or against competitors. Investors can learn much
information about an organization from the ratios. In this assignment
you will explore debt-to-assets ratios, times-interest-earned ratios,
and foreign debt. This assignment will provide you with practice to
explore the concepts in the projects in this course.
Directions
This assignment will use the cash flow statement of The Coca-Cola
Company and PepsiCo, Inc. presented in Appendices C and D, respectively,
which are linked in the Supporting Materials Section. The companies’
complete annual reports, including the notes to the financial
statements, are also available online. Analyze the results of the
financial ratios for The Coca-Cola Company and PepsiCo, Inc. Remember,
you will need to look at both sets of financials for each company and
address the rubric criteria for both companies. Be sure to include
citations for any answers you need to explain.
Specifically, you must address the following rubric criteria:
Debt-to-Assets Ratios
Calculate the quality of the debt-to-assets ratios for both companies.
Explain the quality of the debt-to-assets ratios for both companies.
Determine which company is more highly leveraged.
Times-Interest-Earned Ratios
Calculate the times-interest-earned ratios for both companies.
Explain the times-interest-earned ratios for both companies. Address the following questions in your response:
Are the times-interest-earned ratios adequate?
Is the times-interest-earned ratio greater than or less than 2.5? What does that mean for the companies’ income?
Can the company afford the interest expense on a new loan?
Foreign Debt
Explain why The Coca-Cola Company and PepsiCo, Inc. may use foreign debt to finance their operations.
Explain the risks involved in using foreign debt to finance operations.
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