Assignment 5 Financial Management
Long time competitors in the soft drink industry Pepsi Co and Coca Cola continue efforts to gain additional market share. Which do you prefer Coke or Pepsi? Let- take a look at these two companies from a financial perspective rather than our drink preference.
To learn more about PepsiCo and Coca-Cola Enterprises, download the PepsiCo 2009 Annual Report at: http://www.pepsico.com/annual09/ and the Coca-Cola 2009 Annual Report at: http://www.cce2009annualreport.com/. Review the annual reports for general information.
Required:
1. Read Understanding the Income Statement at: http://www.investopedia.com/articles/04/022504.asp
2. Read Reading the Balance Sheet at: http://www.investopedia.com/articles/04/031004.asp
3. Compute the following financial ratios for both companies and provide as an appendix to the required paper. If you need help understanding the meaning of the ratios or how to they are computed, go to: http://www.investopedia.com/university/ratios/
Liquidity measurement ratio:
• Current ratio
Profitability indicator ratios:
• Return on assets
• Return on equity
Debt ratio:
• Debt ratio
Operating performance ratio:
• Fixed asset turnover ratio
Cash flow indicator ratio:
• Dividend payout ratio
Investment valuation ratio:
• Price / Earnings ratio
You are to write a five to six (5-6) page report that answers the following:
1. Using the current ratio, discuss what conclusions you can make about each company- ability to pay current liabilities (debt).
2. Using the profitability ratios, discuss what conclusions you can make about each company- profits over the past three years.
3. Using the cash flow indicator and investment valuation ratios, discuss which company is more likely to have satisfied stockholders.
4. As an investor, discuss which company you would choose to invest in and provide a rationale for your decision.
5. Discuss what non-financial criteria you would consider when choosing between these two investment options?
The format of the report is to be as follows:
o Typed, double spaced, Times New Roman font (size 12), one inch margins on all sides, APA format.
o Use headers for each of the criteria, followed by your response.
o In addition to the 5-6 pages required, a title page is to be included. The title page is to contain the title of the assignment, your name, the instructor- name, the course title, and the date.
NOTE: You will be graded on the quality of your answers, the logic/organization of the report, your language skills, and your writing skills.
The assignment will be graded using the following rubric:
Outcomes Assessed • Evaluate the sources of short-term and long-term financing to identify the effective use and associated risks of these sources in managing working capital and in capital budgeting.
• Use technology and information resources to research issues in the functions and processes within a business enterprise and key factors affecting productivity.
Grading Rubric for Assignment #5 - Financial Management
Criteria 0
Unacceptable 20
Developing 30
Competent 40
Exemplary
1. Discuss what conclusions you can make about each company- ability to pay current liabilities (debt) using the current ratio. Did not complete the assignment or did not discuss what conclusions you can make about each company- ability to pay current liabilities (debt) using the current ratio; omitted key information and/or included irrelevant information. Completed with less than 70% accuracy, thoroughness, and logic. Partially discussed what conclusions you can make about each company- ability to pay current liabilities (debt) using the current ratio; omitted some key information or included some irrelevant information. Completed with 70-79% accuracy, thoroughness, and logic. Sufficiently discussed what conclusions you can make about each company- ability to pay current liabilities (debt) using the current ratio. Completed with 80-89% accuracy, thoroughness, and logic. Fully discussed what conclusions you can make about each company- ability to pay current liabilities (debt) using the current ratio. Completed with 90-100% accuracy, thoroughness, and logic.
2. Discuss what conclusions you can make about each company- profits over the past three years using the profitability ratios. Did not complete the assignment or did not discuss what conclusions you can make about each company- profits over the past three years using the profitability ratios; omitted key information and/or included irrelevant information. Completed with less than 70% accuracy, thoroughness, and logic. Partially discussed what conclusions you can make about each company- profits over the past three years using the profitability ratios; omitted some key information or included some irrelevant information. Completed with 70-79% accuracy, thoroughness, and logic. Sufficiently discussed what conclusions you can make about each company- profits over the past three years using the profitability ratios. Completed with 80-89% accuracy, thoroughness, and logic. Fully discussed what conclusions you can make about each company- profits over the past three years using the profitability ratios. Completed with 90-100% accuracy, thoroughness, and logic.
3. Discuss which company is more likely to have satisfied stockholders using the cash flow indicator and investment valuation ratios. Did not complete the assignment or did not discuss which company is more likely to have satisfied stockholders using the cash flow indicator and investment valuation ratios; omitted key information and/or included irrelevant information. Completed with less than 70% accuracy, thoroughness, and logic. Partially discussed which company is more likely to have satisfied stockholders using the cash flow indicator and investment valuation ratios; omitted some key information or included some irrelevant information. Completed with 70-79% accuracy, thoroughness, and logic. Sufficiently discussed which company is more likely to have satisfied stockholders using the cash flow indicator and investment valuation ratios. Completed with 80-89% accuracy, thoroughness, and logic. Fully discussed which company is more likely to have satisfied stockholders using the cash flow indicator and investment valuation ratios. Completed with 90-100% accuracy, thoroughness, and logic.
4. As an investor, discuss which company you would choose to invest in and provide a rationale for your decision. Did not complete the assignment or did not discuss which company you would choose to invest in and provide a rationale for your decision; omitted key information and/or included irrelevant information. Completed with less than 70% accuracy, thoroughness, and logic. Partially discussed which company you would choose to invest in and provide a rationale for your decision; omitted some key information or included some irrelevant information. Completed with 70-79% accuracy, thoroughness, and logic. Sufficiently discussed which company you would choose to invest in and provide a rationale for your decision. Completed with 80-89% accuracy, thoroughness, and logic. Fully discussed which company you would choose to invest in and provide a rationale for your decision. Completed with 90-100% accuracy, thoroughness, and logic.
5. Discuss what non-financial criteria you would consider when choosing between these two investment options. Did not complete the assignment or did not discuss what non-financial criteria you would consider when choosing between these two investment options; omitted key information and/or included irrelevant information. Completed with less than 70% accuracy, thoroughness, and logic. Partially discussed what non-financial criteria you would consider when choosing between these two investment options; omitted some key information or included some irrelevant information. Completed with 70-79% accuracy, thoroughness, and logic. Sufficiently discussed what non-financial criteria you would consider when choosing between these two investment options. Completed with 80-89% accuracy, thoroughness, and logic. Fully discussed what non-financial criteria you would consider when choosing between these two investment options. Completed with 90-100% accuracy, thoroughness, and logic.
6. Compute financial ratios for both companies and provide as an appendix to the required paper. Did not complete the assignment or did not compute financial ratios for both companies and provide as an appendix to the required paper; omitted key information and/or included irrelevant information. Completed with less than 70% accuracy, thoroughness, and logic. Partially computed financial ratios for both companies and provide as an appendix to the required paper; omitted some key information or included some irrelevant information. Completed with 70-79% accuracy, thoroughness, and logic. Sufficiently computed financial ratios for both companies and provide as an appendix to the required paper. Completed with 80-89% accuracy, thoroughness, and logic. Fully computed financial ratios for both companies and provide as an appendix to the required paper. Completed with 90-100% accuracy, thoroughness, and logic.
7. Clarity
Did not complete the assignment or explanations are unclear and not organized.
(Major issues) Explanations generally unclear and not well organized.
(Many issues) Explanations generally clear and/or organized. (Minor issues) Explanations very clear and well organized.
(Added helpful details.)
8. Writing - Grammar, sentence structure, paragraph structure, spelling, punctuation, APA usage.
Did not complete the assignment or had 8 or more different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage. (Major issues) Had 6 - 7 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage. (Many issues) Had 4 - 5 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage. (Minor issues) Had 0 - 3 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation or APA usage.
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