The following excerpt is from Coca-Cola Company's 2011 annual report filed with the SEC.

Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial performance. Our Company manages income taxes and certain treasury-related items, such as interest income and expense, on a global basis within the Corporate operating segment. We evaluate segment performance based on income or loss before income taxes.

Below are selected segment data for Coca-Cola Company for the 2011 and 2010 fiscal years. Dollar amounts are in millions.

Required

Compute the ROI for each of Coke's geographical segments for each fiscal year. Which segment appears to have the best performance during 2011 based their ROIs? Which segment showed the most improvement from 2010 to 2011?

Assuming Coke's management expects a minimum return of 30 percent, calculate the residual income for each segment for each fiscal year. Which segment appears to have the best performance based on residual income? Which segment showed the most improvement from 2010 to 2011?

Explain why the segment with the highest ROI in 2011 was not the segment with the highest residual income.

Assume the management of Coke is considering a major expansion effort for the next five years. On which geographic segment would you recommend Coke focus its expansion efforts? Explain the rationale for your answer.
 

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Eurasla & Latin North America Africa Europe America Pacific 2011 Fiscal Year $2,689 1,089 1,245 $4,777 3,134 3,204 $4,403 2,832 2,446 $20,559 2,325 $5,454 2,154 Net operating revenues Income before taxes Identifiable operating assets 33,422 2,085 2010 Fiscal Year Net operating revenues $2,426 1,000 1,278 $4,424 3,020 $3,880 2,426 2,298 $11,140 $4,941 2,049 1,827 Income before taxes 1,523 Identifiable operating assets 2,724 32,793 Eurasla & Latin North America Africa Europe America Pacific 2011 Fiscal Year $2,689 1,089 1,245 $4,777 3,134 3,204 $4,403 2,832 2,446 $20,559 2,325 $5,454 2,154 Net operating revenues Income before taxes Identifiable operating assets 33,422 2,085 2010 Fiscal Year Net operating revenues $2,426 1,000 1,278 $4,424 3,020 $3,880 2,426 2,298 $11,140 $4,941 2,049 1,827 Income before taxes 1,523 Identifiable operating assets 2,724 32,793

Answer rating: 100% (QA)

a Return on Investment ROI is defined as the ratio of wealth generat... View the full answer