In: Business and Management

Submitted By spascacio
Words 1079
Pages 5
Financial Analysis of PepsiCo
Juan Gallegos, Jr.
Chief Financial Officer

Current Ratio

Our current ratio is .96; this ratio measures a company’s liquidity and its ability to meet its short-term debt obligations. By comparing a company’s current assets with its current liabilities, the current ratio reflects our ability to pay upcoming bills in the unlikely event of all creditors demanding payment at once. Our number indicates that we should be able to get $0.96 for every dollar we owe.
Current ratio = Current assets ÷ Current liabilities
For most industrial companies, 1.5 is an acceptable current ratio. As the number approaches or falls below 1 a closer look may be needed to make sure there are no liquidity issues. Companies that have ratios around or below 1 should only be those which have inventories that can immediately be converted into cash. In our case, our products can easily be converted to cash.
If we had a ratio of 3 or 4, we would need to be concerned because a number this high means that management has so much cash on hand, they may be doing a poor job of investing it.
To follow I have graphed our current ratio against our competitors. Coca Cola being our strongest competitors have a ratio of 1.05. Although their number is a bit higher, we are still in the same range.

Gross Profit Margin
Our gross profit margin is 52.34. The gross profit margin ratio measures how efficiently a company uses its resources, materials, and labor in the production process by showing the percentage of net sales remaining after subtracting the cost of making and selling a product or service.
Gross Profit Margin = Gross Profit ÷ Total Revenue
Knowing our gross profit margin ratio is important because it tells us whether we are pricing our goods effectively. A low margin compared to our competitors would suggest we are underpricing, while a high margin…...