Ramzani Documents

CURRENT RATIO

|2007 |2008 |2009 |

|1.31 |1.23 |1.44 |

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INTERPRETATION:

Current ratio measures a company ability to meet current debts with current assets. Current ratio means that how much dollars an organization have to pay 1 dollar of its currently maturing obligations. Theoratical benchmark of this ratio is 2 that means that company has to save some surplus for the purpose of other operations. Financial ratios of PEPSI in 2007, 2008 & 2009 all are below that benchmark so that current ratio below the benchmark limit is the sign of over trading which shows that company is trying to expand its operations without strong cash base. Over trading is the define sign of liquidity problems and current ratio below the benchmark limit shows that company might not be able to pay off its liabilities on due date thus liquidation may follow. As compared to COCA COLA whose current ratios are 0.92, 0.94 & 1.28 in 2007, 2008 & 2009 respectively i think current ratios of pepsi are much better because pepsi current ratios are more closer to the theoratical benchmark.

QUICK OR ACID TEST RATIO

|2007 |2008 |2009 |

|1.14 |0.94 |1.01 |

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INTERPRETATION:

Quick ratio measures a company ability to meet current debts with most liquid(quick) current assets. This ratio is calculated by dividing current assets excluding stocks by current liabilities. The reason for exclusion of stock is the fact that stock is a least liquid asset. Quick ratio indicates that how...