Calculation of Gross Profi t Ratio for Coca-Cola and PepsiCo The following information was summarized from the 2008 and 2007 consolidated statements of income of The Coca-Cola Company and Subsidiaries (for years ended December 31 each year) and PepsiCo, Inc. and Subsidiaries (for years ended December 27, 2008, and December 30, 2007).

2008 2007

(in Millions) Sales* Cost of Goods Sold** Sales* Cost of Goods Sold**

Coca-Cola $31,944 $11,374 $28,857 $10,406 PepsiCo 43,251 20,351 39,474 18,038

*Described as “Net operating revenues” by Coca-Cola and as “Net revenue” by PepsiCo.

**Described as “Cost of Sales” by PepsiCo.

Required 1. Calculate the gross profi t ratios for Coca-Cola and PepsiCo for 2008 and 2007.

2. Which company appears to be performing better? What factors might cause the difference in the gross profi t ratios of the two companies? What other information should you consider to determine how these companies are performing in this regard?

AppendixLO1