ments.Using the current ratio to compare current assets with current liabilities to determine the company's ability to pay its maturing obligations, the comparison for PepsiCo is hard to determine since 1997 was an unusual year. Taking this into consideration, PepsiCo's ratio of 55% doesn't look good comparing to Coca-Cola's 74%. PepsiCo did invest a lot of money on advertising, marketing and acquisition of Tropicana Products. Eliminating inventories and prepaids from current assets, PepsiCo is on-line with Coca-Cola at .36 times and .40 times respectively. The number of times on average inventory was sold has increased over a three year period for Coca-Cola from 56 days to 60 days while PepsiCo's has decreased from 41 days to 34 days. This is not a good sign for PepsiCo - appears the inventory is building up. With the acquisition of Tropicana, the increase in inventory is reasonable. The dollars of sales provided by each dollar invested in assets is determined using the asset turnover ratio which divides net sales by average total assets. This shows how efficiently assets were used to generate sales. Coca-Cola and PepsiCo are at the same level of 1.04 for 1998. Coca-Cola's has declined from 1.20 while PepsiCo's has increased from .85. The amount of net income generated by each dollar of sales for Coca-Cola has increased slightly from 18.70% in 1996 to 18.87% in 1998. PepsiCo's has increased from 5.65% to 8.91% for the same period. Coca-Cola's profit margin is significantly higher than PepsiCo because Coke owns only the concentrate manufactures and stays away from the less profitable restaurant and bottling operations. Plans for the future of both companies is expansion; which means capturing more customers around the world. Many analyses suggest that in order for Pepsi to compete in new markets with Coke, it must separate from the bottlers. Owning these independent bottlers make Pepsi more vulnerable to price wars becau...
