Current year
(in millions)
Prior year
(in millions)
Cash and cash equivalents $ 5,943 $3,943
Short-term investments, at cost 426 192
Accounts and notes receivable, net 6,323 4,624
Inventories 3,372 2,618
Prepaid expenses and other current assets 1,505 1,194
Short-term obligations 4,898 8,292
Accounts payable 10,994 464
a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.
b. What conclusions can you draw from these data?
Answer:
Current Assets
a. (1) Current Ratio =
Current Year:
Current Liabilities
$17,569
= 1.1 Prior Year: $12,571
= 1.4
$15,892 $8,756
(2) Quick Ratio = Quick Assets
Current Liabilities
$12,692 $8,759
Current Year: $15,892 = 0.8 Prior Year:
$8,756
= 1.0
b. The solvency of PepsiCo has decreased some over this time period. Both the current and quick ratios have decreased. The current ratio decreased from 1.4 to 1.1, and the quick ratio decreased from 1.0 to 0.8. While PepsiCo is a strong company with ample resources for meeting short-term obligations, its solvency as measured by the current and quick ratios has deteriorated during this period.