Accounting Capstone Essay Example for Free

Accounting Capstone EssayIt appears to me that both companies eat up had or so weaknesses and affirm shown some improvements.I am wary of Pepsico because its current liabilities have increased faster than its assets. However, Coca-Colas assets have decreased along with its liabilities.Both companies have increased inventory, though Pepsicos increase has been much higher than Coca-Colas (9.86% to 0.28%). Normally, this is cause for concern, but both companies inventory turnover also has improved.There be several other pros and cons for both companies. One reason to be cautious about either one is that they both have weak acid screen out ratios. Pepsicos fell from 0.95 to 0.87. Coca-Colas fell from 0.81 to 0.72). An acid-test ratio of less than 1 shows that a company will have difficulty paying its debts.My final determination is based on profitability.Pepsicos profit margin decreased from 14.4% to 12.5%.Coca-Colas decreased from 22.3% to 21.1%.See moreManifest Destiny essay Both have decreased, but Coca-Colas is much higher. So, I would choose Coca-Cola.What Does Acid-Test Ratio Mean?A stringent indicator that determines whether a firm has enough short-term assets to get over its immediate liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital ratio, primarily because the working capital ratio allows for the inclusion of inventory assets. careful byInvestopedia explains Acid-Test RatioCompanies with ratios of less than 1 cannot pay their current liabilities and should be looked at with extreme caution. Furthermore, if the acid-testratio is much lower than the working capital ratio, it meat current assets are highly dependent on inventory. Retail stores are examples of this type of business.The term comes from the way gold miners would test whether their findings were real gold nuggets. different other metals, gold does not corrode in acid if the nugget didnt dissolve when submerged in acid, it was s aid to have follow throughed the acid test. If a companys financial statements pass the figurative acid test, this indicates its financial integrity