Accounting Capstone Essay

It appears to me that two companies tolerate had some weaknesses and accept shown some improvements.I am wary of Pepsico because its true 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(prenominal) than Coca-Colas (9.86% to 0.28%). Normally, this is cause for concern, but both companies inventory turnover also has improved.There are some(prenominal) other pros and cons for both companies. One reason to be cautious about either one is that they both have weak window pane test ratios. Pepsicos fell from 0.95 to 0.87. Coca-Colas fell from 0.81 to 0.72). An acid-test ratio of less(prenominal) than 1 shows that a company will have difficulty paying its debts.My final decision is establish on profitability.Pepsicos profit margin decreased from 14.4% to 12.5%.Coca-Colas decreased from 22.3% to 21.1%.See more diaphanous Destiny e ssayBoth have decreased, but Coca-Colas is much higher. So, I would choose Coca-Cola.What Does Acid-Test dimension Mean?A stringent indicator that determines whether a firm has enough short-term assets to cover its quick liabilities without selling inventory. The acid-test ratio is far more strenuous than the working capital letter ratio, primarily because the working capital ratio allows for the inclusion of inventory assets.Calculated byInvestopedia explains Acid-Test RatioCompanies with ratios of less than 1 cannot pay their afoot(predicate) liabilities and should be looked at with extreme caution. Furthermore, if the acid-testratio is much lower than the working capital ratio, it means current assets are highly dependent on inventory. Retail stores are examples of this type of business.The term comes from the way favourable miners would test whether their findings were real gold nuggets. Unlike other metals, gold does not corrode in acid if the nugget didnt dissolve when su bmerged in acid, it was said to have passed the acid test. If a companys financial statements pass the figurative acid test, this indicates its financial integrity