The current items, listed in alphabetical order, are taken from the consolidated balance sheets of Coca-Cola as of December 31, 2008, and PepsiCo as of December 27, 2008. (All amounts are in millions of dollars.)

Coca-Cola

Accounts payable and accrued expenses .........$6,205

Accrued income taxes ................. 252

Cash and cash equivalents ................ 4,701

Current maturities of long-term debt ........... 465

Inventories ...................... 2,187

Loans and notes payable ................ 6,066

Marketable securities ................. 278

Prepaid expenses and other assets ............ 1,920

Trade accounts receivable, less allowance of ........ $51 3,090

PepsiCo

Accounts and notes receivable, net .......... $ 4,683

Accounts payable and other current liabilities ....... 8,273

Cash and cash equivalents............. 2,064

Income taxes payable............... 145

Inventories .................... 2,522

Prepaid expenses and other current assets ........ 1,324

Short-term investments .............. 4,683

Short-term obligations .............. 369

Required

1. Compute working capital and the current ratio for both companies.

2. On the basis of your answers to (1), which company appears to be more liquid?

3. Other factors affect a company’s liquidity besides working capital and current ratio. Comment on the composition of each company’s current assets and ways this composition affects liquidity.