# C11-11 Comparative Ratio Analysis for Coca-Cola and PepsiCo

C11-11 Analytical case-comparative analysis of profitability and financial leverage measures

The annual reports of the Coca-Cola Co. and PepsiCo, Inc., indicate the following for the year ended December 31, 2008 (amounts in millions):

Coca-Cola Co. PepsiCo., Inc.

Net revenues $31,994 $43,251

Net income 5,807 5,142

Total assets, January 1, 2008 43,269 34,628

Total liabilities, January 1, 2008 21,525 17,394

Total liabilities, December 31, 2008 20,047 23,888

Total stockholders' equity, December 31, 2008 20,472 12,203

Required:

(a)Calculate ROI and ROE for each company for 2008. (Hint: You will need to calculate some of the numbers used in the denominator of these ratios.

(b)Based on the results of your ROI and ROE analysis in part a, do you believe that either firm uses financial leverage more effectively than the other? (Hint: Compare the percentage differences between ROI and ROE for each firm).

(c)Calculate the debt ratio and debt/equity ratio for each firm at the end of 2008.

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C11-11 Analytical case-comparative analysis of profitability and financial leverage measures

The annual reports of the Coca-Cola Co. and PepsiCo, Inc., indicate the following for the year ended December 31, 2008 (amounts in millions):

Coca-Cola Co. PepsiCo., Inc.

Net revenues $31,994 $43,251

Net income 5,807 5,142

Total assets, January 1, 2008 43,269 34,628

Total liabilities, January 1, 2008 21,525 17,394

Total liabilities, December 31, 2008 20,047 23,888

Total stockholders' equity, December 31, 2008 20,472 12,203

Required:

(a)Calculate ROI and ROE for each company for 2008. (Hint: You will need to calculate some of the numbers used in the denominator of these ratios.

(b)Based on the results of your ROI and ROE analysis in part a, do you believe that either firm uses financial leverage more effectively than the other? (Hint: Compare the percentage differences between ROI and ROE for each firm).

(c)Calculate the debt ratio and debt/equity ratio for each firm at the end of 2008.