Financial Management Coca-Cola Company Research Paper

Financial Management Coca-Cola Company - Research Paper Example Current liabilities can be defined as the liabilities which have to be met during the year or in other words those obligations which have to be met in a year are termed as current liabilities (Bragg, 2011, p.39). Therefore the current liabilities have to be managed properly by every company. The current liabilities are met by current assets. Current assets are those assets which can be transformed into cash within one year. These are the short term assets which are held by the company to meet its short term obligations. The liquidity position of the company is determined by the current assets and the current liabilities. To determine the liquidity position of the Coca-Cola Company and PepsiCo, the current ratio and the quick ratio has been calculated. Current ratio signifies that the current liabilities of the company are backed by how many current assets. It is calculated by dividing the current assets be the current liabilities (Investopedia-a, n.d.). The current ratio of Coca-Cola Company is 1.12 while the current ratio of PepsiCo is 1.43. This signifies that each dollar of current liability of Cocacola Company is backed by $1.12 of current assets where as each dollar of current liability of PepsiCo is backed by $1.43 of current assets. To assess the capacity of the companies for meeting the day to day expenses the quick ratio has been calculated.... The quick ratio of PepsiCo is 1.19 while that of Coca-Cola Company is 0.93. The PepsiCo had more working capital that is $3815 million than the Coca-Cola Company which has only $582 million in 2009. Therefore it can be said that the liquidity potion of PepsiCo is stronger than that of the Coca-Cola Company. Hence the PepsiCo is in a better position to meet its current liabilities that the Coca-Cola Company. Overall performance The overall performance of the Coca-Cola Company and the PepsiCo has been analyzed by using the financial ratios and studying the income statement and the balance sheet of both the companies for the year 2009. For judging any company through its financial statements, three types of statements are very important. One is the cash flow statement, second one is the balance sheet and the third one is the balance sheet. Income statement shows the various revenues earned by a company and the related expenses incurred during a financial year. The net income which is us ed to judge the profitability of the organization is also assed in the income statement (Loth, 2010). The balance sheet of the company shows the financial position of that company on a given date. It also reveals the way in which the company is levered (Investopedia-b, 2010). The operating profit of PepsiCo has increased by 15% in 2009 where that of Coca-Cola Company has increased by 124%. The net profit of the former has also increased by 15% where as that of the latter increased by 116%. Investments The profitability position of the company is very important to be assessed by the investor before making any investment in the company. By analyzing the profitability position the investor can judge the financial