MGMT $1000$

Company Comparison

Case Study $1$

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Select data from the financial statements of Coke and Pepsi are presented below.

Requirements $($show your formulas and calculations; be detailed and specific with your answers$)$:

a$.)$ Compute the return on equity ratio for Coke and Pepsi for $2020.$ Who would focus on this ratio and why is this an important metric?

b$.)$ Compute the debt$-$to$-$equity ratio for each company as of December $31,2020.$ Who would focus on this ratio and why is this an important metric?

c$.)$ For each company, compute net income as a percentage of revenue in $2020.$ Based on the percentage for each company, what other ratios and$/$or factors may impact the relative strength of each company$$s percentage such as gross margin percentage?$$ Why are those other ratios$/$factors important in your analysis?$$

d$.)$ For each company, calculate working capital and current ratio for $2020$ and $2019.$ How did they change from $2019$ to $2020($improve or worsen$)?$ Which is more relevant when comparing the two companies to each other and why?$$

e$.)$ For each company, compute the return on assets ratio $($ignore any interest and tax impact $$ just use net income$/$total average assets$)$ for $2020.$ Which Company earned the higher return based on its assets?$$ What is the meaning and importance of this ratio, including the disaggregation into profit margin and asset turnover?$$

f$.)$ Based on your answers to questions a $-$ e$,$ compare these two competitors, specifically if you had $$10,000,$ which would you invest in $($ignore stock price$).$ Name at least $3$ other item metrics or ratios, not listed above, that may be helpful in making your decision.

GRADUATE STUDENTS ONLY

g$.)$ Name three specific ways$/$strategies that the companies could improve their current ratio.$$ Fully explain your answer and what impacts that it would have on the current ratio.$$ For example, simply stating sell more product is not a sufficient response $$ need to explain what impact that would have on the calculation and how to accomplish that. $$