Question

Suppose Presented below is 2022 information for for PepsiCo, Inc. and The Coca-Cola Company. ($ in millions)
PepsiCo Coca-Cola
Net cash provided by operating activities $7,296 $7,893
Average current liabilities 7,906 13,159
Net income 5,581 6,858
Sales revenue 40,232 28,244
Capital expenditures 2,112 1,800
Dividends paid 2,605 3,928
Required:
1. Compute free cash flow for both companies and compare.

Answer 1

Answer:

$2,579; $2,165

Pepsi Co.

Explanation:

Pepsi Co

Free cash flows:

= Cash provided by operating activities - Capital expenditures - dividends

= $7,296 - $2,112 - $2,605

= $2,579

Coca-Cola

Free cash flows:

= Cash provided by operating activities - Capital expenditures - Dividends

= $7,893 - $1,800 - $3,928

= $2,165

By the comparing the cash flows of these two companies, we have found that Pepsi company has the higher free cash flows.