Coca-Cola and PepsiCo are two of the largest and most successful beverage companies in the world in terms of the products that they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following information reported in their 2008, 2007, and 2006 annual reports (amounts in millions).

Coca-Cola and PepsiCo are two of the largest and most successful beverage companies in the world in terms of the products that they sell and their receivables management practices. To evaluate their ability to collect on credit sales, consider the following information reported in their 2008, 2007, and 2006 annual reports (amounts in millions).

 

	Coca-Cola			PepsiCo
Fiscal Year Ended:	2008	2007	2006	2008	2007	2006
Net Sales	$ 52,944	$ 46,857	$ 25,888	$ 52,251	$ 46,674	$ 36,937
Accounts Receivable	3,321	3,568	2,830	3,964	3,850	3,327
Allowance for Doubtful Accounts	73	74	81	88	87	82
Accounts Receivable, Net of Allowance	3,248	3,494	2,749	3,876	3,763	3,245

Requirement 1:

Calculate the receivables turnover ratios and days to collect for Coca-Cola and PepsiCo for 2008 and 2007. (Consider a 365 days a year. Round your answers to 1 decimal place.)

 

2008	Coca-Cola		PepsiCo
Receivables Turnover Ratio
Days to collect		days		days

2007	Coca-Cola		PepsiCo
Receivables Turnover Ratio
Days to collect		days		days

Requirement 2:

Which of the companies is quicker to convert its receivables into cash?

Coca-Cola

 

Explanation:

 

Coca-Cola

2008

		Net sales		$ 52,944
Receivables Turnover  Ratio	=		=		=	15.7
		Average net receivables		($ 3,248 + $3,494)/2

		365		365
Days to collect	=		=		=	23.2 days
		Receivables Turnover		15.7

2007

		Net sales		$ 46,857
Receivables Turnover  Ratio	=		=		=	15
		Average net receivables		($ 3,494 + $2,749)/2

		365		365
Days to collect	=		=		=	24.3 days
		Receivables Turnover		15

PepsiCo

2008

		Net sales		$ 52,251
Receivables Turnover  Ratio	=		=		=	13.7
		Average net receivables		($ 3,876 + $3,763)/2

		365		365
Days to collect	=		=		=	26.6 days
		Receivables Turnover		13.7

PepsiCo

2007

		Net sales		$ 46,674
Receivables Turnover  Ratio	=		=		=	13.3
		Average net receivables		($ 3,763 + $3,245)/2

		365		365
Days to collect	=		=		=	27.4 days
		Receivables Turnover		13.3