ACC 318 Module Two Assignment
Debt-to-Assets Ratios
1. Calculate the quality of the debt-to-assets ratios for both companies.
Coca-Cola:
Total Liabilities = $63,355 million
Total Assets = $86,381 million
Debt-to-Assets Ratio = 63,355 / 86,381 ≈ 0.73
PepsiCo:
Total Liabilities = $70,491 million
Total Assets = $92,918 million
Debt-to-Assets Ratio = 70,491 / 92,918 ≈ 0.76
2. Explain the quality of the debt-to-assets ratios for both companies.
The debt-to-assets ratio measures the proportion of a company's assets that are financed through
liabilities. Coca-Cola’s ratio of 0.73 and PepsiCo’s slightly higher ratio of 0.76 both suggest that a large
portion of their assets are financed by debt. While this level of leverage is not unusual for large
corporations, PepsiCo's slightly higher ratio indicates it has a slightly greater reliance on debt financing
than Coca-Cola. High debt levels can pose risks in economic downturns but may also indicate confidence
in revenue generation to service debt.
3. Determine which company is more highly leveraged.
PepsiCo is more highly leveraged than Coca-Cola, as indicated by its higher debt-to-assets ratio
of 0.76 compared to Coca-Cola’s 0.73. This means PepsiCo relies more heavily on debt to finance
its assets.
Times-Interest-Earned Ratios
1. Calculate the times-interest-earned ratios for both companies.
Coca-Cola:
EBIT / Interest Expense = 9,998 / 1,646 ≈ 6.07
PepsiCo:
EBIT / Interest Expense = 10,080 / 2,452 ≈ 4.11
2. Explain the times-interest-earned ratios for both companies. Address the following questions
in your response:
