Interpreting Financial Statements
Locate the Critical Thinking CT 10.4 problem at the end of Chapter 10 in the textbook (I list it at the bottom of this intrusion). This will serve as the structure for your assignment. Begin by choosing two competing publicly traded companies from the list below.
Coca-Cola and PepsiCo
Walmart and Target
Nike and Adidas
For the pair of companies selected, you will need to use each company’s stock symbol to locate the liquidity, solvency, and profitability ratios on the MSN Money website. As part of your research, you will need to identify each company’s stock symbol for the American market.
Review the competing companies’ ratios provided at the MSN Money website https://www(dot)msn(dot)com/en-us/moneywww(dot)msn(dot)com. Navigate to My Watchlist and enter the name of the company in the Quote Search. Identify and select the correct stock symbol.
Under the “Analysis” heading, use the Growth, Profitability, Price Ratios, Financial Health, Trading Statistics, and Management Effectiveness information to complete a 750-1,000 word comparison addressing the following:
Evaluate each company’s liquidity relative to its competitor using at least three ratios
Evaluate each company’s solvency relative to its competitor using at least two ratios
Evaluate each company’s profitability relative to its competitor using at least three ratios
Note: You will be assessed on your ability to evaluate each company’s performance based on the information provided at MSN Money. You do not need to calculate the ratios for individual companies or the industry averages.
**** CT10.4: You can use the Internet to employ comparative data and industry data to evaluate a company’s performance and financial position.
Instructions
Identify two competing companies and then go to the MarketWatch website. Type in the company name in the search box (e.g., Best Buy) and then use the information from the Profile tab to answer the following questions.
Evaluate the company’s liquidity relative to the industry averages and to the competitor that you chose.
Evaluate the company’s solvency relative to the industry averages and to the competitor that you chose.
Evaluate the company’s profitability relative to the industry averages and to the competitor that you chose.
Interpreting Financial Statements
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Interpreting Financial Statements
Coca-Cola (NYSE: KO) and Pepsi (NASDAQ: PEP) are publicly traded companies with similar products and have, for a long time been, direct competitors. Coca-Cola is a top beverage corporation in the U.S and other countries across the globe. PepsiCo is also a prominent beverage firm in the world. The stock symbol for Pepsi is “PEP”, while its price stock price at the end of the 2018 fiscal year was $1000 (MSN, 2021). On the other hand, the stock symbol for Coca-Cola is “KO”. The two competing companies control nearly the whole market for soda-flavored colas. Calculating the liquidity, solvency, and profitability ratios regularly provides a better insight into the performance and overall health of the two companies.
Liquidity
Liquidity ratios can be defined as ratios between a financial institution's liabilities and liquid assets (Cont, 2020). Anything greater than one is considered to be a good liquidity ratio. It illustrates that a firm in good financial health is more likely to be successful. The greater the ratios, the higher the safety margin that a company has to meets its existing liabilities (Е tofovб, & KopДЌбkovб, 2020). The liquidity ratios are applied according to how Coca-Cola and PepsiCo can complete their short debts within the required duration. The liquidity ratios are calculated by getting the liabilities percentage as liquidity or current ratio. In 2019, the current ratio for Coca-Cola Company was 0.83, whereas the sale ratio is 7.15 (MSN, 2021). Nonetheless, in the same year, PepsiCo had a liquidity ratio of 0.95. The debt-equity ratio for PepsiCo was 2.10, while for Coca-Cola was 1.61(MSN, 2021). The current ratios indicate that the two competing companies, Coca-Cola and Pepsi, have adequate current assets to meet the cost of the current liabilities in every business.
In 2018, Pepsi's closing cash and equivalent was $10 billion, while Coca-Cola had approximately $ 8 billion (MSN, 2021). In terms of liquidity, the performance of the two companies is good. In the same year, Pepsi made a major purchase of Soda stream and recorded a net flow of $ 1.1 billion (MSN, 2021). Pepsi made a significant cash outflow in 2018 related to the "Capex" amount of $3.2 billion (MSN, 2021). Coca-Cola has not recorded any major CAPEX outflow. Both companies ensure that their sales and purchasing investment remains strong. The two firms consistently pay dividends from the financial context, which is ideal for shareholders and corporations (MSN, 2021). However, Pepsi is quite in a controlled and managed position due to its excellent liquidity.
Solvency
Solvency refers...