Questions: Required information [The following information applies to the questions displayed below.] A recent annual report for PepsiCo contained the following information for the period (dollars in millions): Net income 6,462 Depreciation and amortization 2,737 Increase in accounts receivable 666 Increase in inventory 331 Increase in prepaid expense 27 Increase in accounts payable 520 Decrease in taxes payable 340 Increase in other current liabilities 589 Cash dividends paid 3,157 Share repurchases 2,489 Compute the quality of income ratio. Note: Enter your answer in decimals, not in percentages, rounded to 2 decimal places. Quality of income ratio

Required information [The following information applies to the questions displayed below.] A recent annual report for PepsiCo contained the following information for the period (dollars in millions): Net income 6,462 Depreciation and amortization 2,737 Increase in accounts receivable 666 Increase in inventory 331 Increase in prepaid expense 27 Increase in accounts payable 520 Decrease in taxes payable 340 Increase in other current liabilities 589 Cash dividends paid 3,157 Share repurchases 2,489 Compute the quality of income ratio. Note: Enter your answer in decimals, not in percentages, rounded to 2 decimal places. Quality of income ratio
Transcript text: Required information [The following information applies to the questions displayed below.] A recent annual report for PepsiCo contained the following information for the period (dollars in millions): \begin{tabular}{lr} Net income & $\$ 6,462$ \\ Depreciation and amortization & 2,737 \\ Increase in accounts receivable & 666 \\ Increase in inventory & 331 \\ Increase in prepaid expense & 27 \\ Increase in accounts payable & 520 \\ Decrease in taxes payable & 340 \\ Increase in other current liabilities & 589 \\ Cash dividends paid & 3,157 \\ Share repurchases & 2,489 \end{tabular} 2. Compute the quality of income ratio. Note: Enter your answer in decimals, not in percentages, rounded to 2 decimal places. Quality of income ratio
failed

Solution

failed
failed

The quality of income ratio is calculated as cash flow from operations divided by net income. We first need to calculate the cash flow from operations (CFO) using the indirect method.

CFO = Net Income + Depreciation & Amortization - Increase in Accounts Receivable - Increase in Inventory - Increase in Prepaid Expenses + Increase in Accounts Payable - Decrease in Taxes Payable + Increase in Other Current Liabilities

CFO = \(6462 + 2737 - 666 - 331 - 27 + 520 - 340 + 589 = 8944 \)

Quality of Income Ratio = CFO / Net Income = \( \frac{8944}{6462} \approx 1.38 \)

Therefore, the quality of income ratio is approximately 1.38.

Final Answer: The final answer is $\boxed{1.38}$

Was this solution helpful?
failed
Unhelpful
failed
Helpful

Questions asked by other users

failedAnswered
The level of real GDP produced in an economy when it is operating at the natural rate of unemployment is called: expansionary GDP. full output. full-employment GDP. the natural rate of GDP.
failedAnswered
Suppose that two electronic components in the guidance system for a missile operate independently and that each has a length of life governed by the exponential distribution with mean 5 (with measurements in hundreds of hours). (a) Find the probability density function for the average length of life of the two components. f(u)= , v ≥ , , elsewhere (b) Find the mean and variance of this average, using the answer in part (o). Check your answer by computing the mean and variance, using this theorem. mean variance
failedAnswered
Factor the given trinomial. If the trinomial cannot be factored, indicate "Not Factorable". x^2+3x-28
failedAnswered
The accompanying data set lists the F-scale intensities of recent tornadoes in the United States. Construct a frequency distribution. Do the intensities appear to have a normal distribution? Assume that the intensities are quantitative. Click the icon to view the F-scale intensities. Complete the frequency distribution. F-Scale Intensity Frequency 0 22 1 13 2 2 3 2 4 1 (Type whole numbers.) Do the intensities appear to have a normal distribution? A. No, because while the frequencies start low, proceed to one or two high frequencies, then decrease to a low frequency, the distribution is not symmetric. B. No, because the frequencies start at a maximum and become low, and because the distribution is not symmetric. C. No, because while the distribution is approximately symmetric, the frequencies start at a maximum and become low. D. Yes, because the frequencies start low, proceed to one or two high frequencies, then decrease to a low frequency, and the distribution is approximately symmetric.
failedAnswered
What is unique about the Primase compared to other DNA Polymerases? A. It extends in the 5'to 3' direction B. It uses nucleotide triphosphates C. It does not require a pre-existing 3,'-OH