ACC 318 Module Three Assignment Template
Complete this template by replacing the bracketed text with the relevant information.
Operating Activities
- Identify the method of computing net cash provided by operating activities each company used.
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- Calculate the amounts of cash provided by operating activities reported by each company in 2020.
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- Explain the two companies’ trends in net cash provided by operating activities over the period 2018 to 2020.
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Investing Activities
- Identify the most significant item in the investing activities section reported by each company in 2020.
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Financing Activities
- Identify the most significant item in the financing activities section reported by each company in 2020.
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Depreciation and Amortization
- Identify what activity would depreciation and amortization be reported on in each company’s statement of cash flow using the indirect method.
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- Explain why each company reported on depreciation and amortization where they did in their statement of cash flows.
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- Identify the amount of depreciation and amortization for each company.
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Statement of Cash Flows and Ratios
- Compute the current cash debt coverage for each company.
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- Compute the cash debt coverage for each company.
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- Explain what conclusions can be drawn from the current cash debt coverage ratio and the cash debt coverage ratio. Address the following questions in your response:
- What conclusions can be drawn from the current cash debt coverage ratio?
- What conclusions can be drawn from the cash debt coverage ratio?
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References
Include any references used to complete this assignment. This section is for the full citation. Sources should be cited using APA style.
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Question 
ACC 318 Module Three Assignment
Operating Activities
- Identify the method of computing net cash provided by each company’s operating activities.
PepsiCo, Inc., and Coca-Cola employ the indirect method, which computes cash flow from operations on an accrual basis and shows the difference from the actual cash. Notably, this method employs the figures of the prior and current year balance sheets, current income statement, and figures of the general ledger current transaction to bring the net income figure from inflow and outflow non-operating cash activities.
- Calculate the amounts of cash provided by operating activities reported by each company in 2020.
Both companies began with their net income, added non-cash items (such costs), and then adjusted for changes in working capital (assets and liabilities) to determine the amounts of cash supplied by operational activities. PepsiCo, Inc. reported $10,613 (million) in net cash created by operating activities in 2020, while Coca-Cola Company recorded $9,844 (million).
- Explain the two companies’ trends in net cash provided by operating activities from 2018 to 2020.
Both companies’ patterns for net cash provided by operational operations increased gradually between 2018 and 2020. With an overall rise of $1,198 (million), PepsiCo, Inc. saw increases of $234 (million) from 2018 to 2019 and $964 (million) from 2019 to 2020. The Coca-Cola Company, on the other hand, saw an overall rise of $2,217 (million), with an increase of $2,844 (million) from 2018 to 2019 and a reduction of $627 (million) from 2019 to 2020. The Coca-Cola Company saw a steady increase throughout the two years, notwithstanding that one year of decline.
Investing Activities
- Identify the most significant item in the investing activities section reported by each company in 2020.
The most important thing listed in each company’s 2020 investing activities section was that PepsiCo, Inc. saw a $6,372 (million) cash outflow from investments in noncontrolled affiliates and acquisitions, net of cash gained. The Coca-Cola Company spent $13,583 (million) in cash on investments.
Financing Activities
- Identify the most significant item in the financing activities section reported by each company in 2020.
The most important item in the finance activities section that each firm reported for 2020 was the cash inflow of $13,809 (million) from the issue of long-term debt by PepsiCo, Inc. The Coca-Cola Company had to pay off debt with $28,796 (million) in cash outflow.
ACC 318 Module Three Assignment Template
Depreciation and Amortization
- Identify what activity depreciation and amortization would be reported in each company’s statement of cash flow using the indirect method.
The indirect method records depreciation and amortization under the operations activity part of each company’s statement of cash flows.
- Explain why each company reported depreciation and amortization where they did in their statement of cash flows.
Depreciation and amortization are non-cash costs of the assets that impact net income since they are incurred during the acquisition of depreciable assets, which is a cash-intensive transaction (Kozlovska, 2015). To determine the net cash flow generated by operational activities for both firms on the statement of cash flows, they must be added back to the net income.
- Identify the amount of depreciation and amortization for each company.
The 2020 reported depreciation and amortization amounts for every company are as follows: $2,548 (million) is for PepsiCo and Inc., and $1,536 million is for Coca-Cola Company.
Statement of Cash Flows and Ratios
- Compute the current cash debt coverage for each company.
Current Liabilities (Average Current Liabilities = Beginning of the Year Current Liabilities + End of the Year Current Liabilities/2)
Current Cash Debt Coverage = Net Cash Flow Provided by Operating Activities/Average
PepsiCo, Inc. – 2020 – Current Cash Debt Coverage = .48 = (10,613/21,916.5) (Average Current Liabilities = 21,916.5 = (20,461+23,372/2)
Coca-Cola Company – 2020 – Current Cash Debt Coverage = .47 = (9,844/20,787) Average Current Liabilities = 20,787 = (26,973+14,601/2)
- Compute the cash debt coverage for each company.
Cash debt coverage=net cash flow from operating activities/average total liabilities
PepsiCo- 10,613/71,522.5=0.15
PepsiCo Average Total Liabilities = 79,366+63,679/2=71,522.5
Coca-Cola- 9,844/65,647.5=0.15
Coca-Cola Average Total Liabilities = 66,012+65,283/2=65,647.5
- Explain what conclusions can be drawn from the current cash debt coverage ratio and the cash debt coverage ratio. Address the following questions in your response:
- What conclusions can be drawn from the current cash-debt coverage ratio?
- What conclusions can be drawn from the cash-debt coverage ratio?
The ability of a business to pay off debt with its present cash flow is gauged by the current cash-debt coverage ratio (Suranta et al., 2023). Due to their ratios being below 0.50, both businesses may not have enough cash to cover their existing liabilities. Both companies have a cash debt coverage ratio of 0.15, indicating that they could not pay off all their debt with operating cash alone.
References
Kozlovska, I. (2015). The impact of long-lived non-financial assets depreciation/amortization
method on financial statements. Copernican Journal of Finance & Accounting, 4(2), 91-
108.
Suranta, E., Satrio, M. A. B., & Midiastuty, P. P. (2023). Effect of Investment, Free Cash Flow,
Earnings Management, Interest Coverage Ratio, Liquidity, and Leverage on Financial
Distress. Ilomata International Journal of Tax and Accounting, 4(2), 283-295.
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