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 22 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 2008. Discuss the comparison.
b. (Appendix 5A) For each company, what number results from the following; return on assets x common equity leverage x capital structure leverage?
c. (Appendix 5A) For each company, what number results from the following: profit margin x asset turnover?
d. (Appendix 5A) 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 shareholdervalue.


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  • CreatedOctober 30, 2011
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