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, 2011 (amounts in millions):

a. Calculate ROI and ROE for each company for 2011.
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? Explain your answer.
c. Calculate the debt ratio and debt/equity ratio for each firm at the end of 2011.
d. Compare the results of your analysis in part c to your expectations concerning the relative use of financial leverage in part b. Do the debt and debt/equity ratios calculated in part c make sense relative to your expectations? Explain youranswer.

  • CreatedOctober 05, 2013
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