Question

The following information was taken from the financial statements of Coca-Cola and PepsiCo (dollar amounts in millions). Tax rates for Coca-Cola and Pepsi were 23 percent and 27 percent, respectively.

.:.
a. Compute return on equity, return on assets, common equity leverage, capital structure leverage, profit margin, and asset turnover for each company for 2012. Discuss the comparison.
b. For each company, what number results from the following: return on assets × common equity leverage × capital structure leverage?
c. For each company, what number results from the following: profit margin × asset turnover?
d. Compare Coca-Cola to PepsiCo. Which company has the higher return on equity and why? Which company has the higher return on assets and why? Discuss whether the two companies are creating shareholder value.



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  • CreatedAugust 19, 2014
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