Coke Current Ratio Analysis Essay
Short-term Liquidity
Current ratio:
Coke's current ratio have growth constantly during the period (2014 - 2016). In 2016, the current ratio is 1.28 which is higher than the previous year ratio, 1.24. It means that Coke has more $1.28 current assets to cover every dollar of its short-term debt. In this year, the current asset in the total assets increases 1.84%. The factor that contributes to the increase of Coke's current asset is the significant increase of the Cash and cash equivalent account which rose 16.12% and took 20.80% in the total assets. Moreover, Coke's total current liability slightly reduced 1.47%. That was caused by the decline of account payable, note payable, and other current liabilities. Due to the increase in total current asset and the decrease of current liability, Coke becomes more liquidity in 2016. In contrast, in 2016, Pepsi's current ratio is 1.28 which decreased 0.03 in comparison to the 2015 ratio, 1.31. In fact, the growth of the current assets is 17.62% that is lower than the growth of the current liabilities, 20.24%. The increase of Pepsi's current assets coming from the increase of other receivables which is less liquidity than the cash and cash equivalent of Coke. …show more content…
Additionally, the note payable of Pepsi increased 69.3% in 2016. Therefore, we may conclude that Coke's liquidity is higher than Pepsi's even their current ratio are equal.
Acid test ratio (Quick Ratio):
During the period (2014-2016), Coke's quick ration have increased from 0.92 to 1.18.
In 2016, Coke's acid ratio is 1.18 that rises 4.4% in comparison to the last year ratio, 1.13. By eliminating the inventories which generally is the least liquidity current asset and takes about more than 3% in the total asset, Coke still has $1.18 liquidity assets to cover its short-term liabilities. In comparison, Pepsi's acid ratio is 1.15 which slightly reduces in comparison to 2015, 1.16. Moreover, the note payable of Pepsi increased dramatically 69% in 2016. The information gives us more information about the ability to pay off short-term debt of the two companies and also proves that Coke is more liquidity in 2016 although its quick ratio was lower than Pepsi in 2014 and
2015.
Operating cash flow ratio (OCF):
Coke's cash flow liquidity ratio has improved and increased continuously from 0.88 to 1.02 during the period (2014-2016). In 2016, the net cash provided by operating activities decreased 16.5% due to the decrease of net income 11.21%; however, with the significant increase of Cash and cash equivalent and the small decrease of the current liabilities, the cash flow liquidity of Coke still increases to 1.02 which increase 4.5% in comparison to 2015, 0.97. That means Coke can pay off it short-term debt 1.02 times. In contrast, Pepsi's cash flow liquidity ratio has fluctuated during (2014-2016). In 2015, the ratio increased from 0.92 to 1.12 because of the weighty increase of cash and cash equivalent 48.29%, but it then decreased to 0.93 in 2016. The decrease of the ratio in 2016 was caused by the significant increase of current liabilities which is bigger than the growth of its current assets and the light decrease of the cash flow generating from operating activities.
Current ratio:
Coke's current ratio have growth constantly during the period (2014 - 2016). In 2016, the current ratio is 1.28 which is higher than the previous year ratio, 1.24. It means that Coke has more $1.28 current assets to cover every dollar of its short-term debt. In this year, the current asset in the total assets increases 1.84%. The factor that contributes to the increase of Coke's current asset is the significant increase of the Cash and cash equivalent account which rose 16.12% and took 20.80% in the total assets. Moreover, Coke's total current liability slightly reduced 1.47%. That was caused by the decline of account payable, note payable, and other current liabilities. Due to the increase in total current asset and the decrease of current liability, Coke becomes more liquidity in 2016. In contrast, in 2016, Pepsi's current ratio is 1.28 which decreased 0.03 in comparison to the 2015 ratio, 1.31. In fact, the growth of the current assets is 17.62% that is lower than the growth of the current liabilities, 20.24%. The increase of Pepsi's current assets coming from the increase of other receivables which is less liquidity than the cash and cash equivalent of Coke. …show more content…
Additionally, the note payable of Pepsi increased 69.3% in 2016. Therefore, we may conclude that Coke's liquidity is higher than Pepsi's even their current ratio are equal.
Acid test ratio (Quick Ratio):
During the period (2014-2016), Coke's quick ration have increased from 0.92 to 1.18.
In 2016, Coke's acid ratio is 1.18 that rises 4.4% in comparison to the last year ratio, 1.13. By eliminating the inventories which generally is the least liquidity current asset and takes about more than 3% in the total asset, Coke still has $1.18 liquidity assets to cover its short-term liabilities. In comparison, Pepsi's acid ratio is 1.15 which slightly reduces in comparison to 2015, 1.16. Moreover, the note payable of Pepsi increased dramatically 69% in 2016. The information gives us more information about the ability to pay off short-term debt of the two companies and also proves that Coke is more liquidity in 2016 although its quick ratio was lower than Pepsi in 2014 and
2015.
Operating cash flow ratio (OCF):
Coke's cash flow liquidity ratio has improved and increased continuously from 0.88 to 1.02 during the period (2014-2016). In 2016, the net cash provided by operating activities decreased 16.5% due to the decrease of net income 11.21%; however, with the significant increase of Cash and cash equivalent and the small decrease of the current liabilities, the cash flow liquidity of Coke still increases to 1.02 which increase 4.5% in comparison to 2015, 0.97. That means Coke can pay off it short-term debt 1.02 times. In contrast, Pepsi's cash flow liquidity ratio has fluctuated during (2014-2016). In 2015, the ratio increased from 0.92 to 1.12 because of the weighty increase of cash and cash equivalent 48.29%, but it then decreased to 0.93 in 2016. The decrease of the ratio in 2016 was caused by the significant increase of current liabilities which is bigger than the growth of its current assets and the light decrease of the cash flow generating from operating activities.