Question
Coke and Pepsi are well-known international brands. Coca-Cola sells more than $35 billion worth of beverages each year while annual sales of Pepsi products exceed
Coke and Pepsi are well-known international brands. Coca-Cola sells more than $35 billion worth of beverages each year while annual sales of Pepsi products exceed $43 billion. Compare the two companies as a potential investment based on the following ratios: |
Ratio | Coca-Cola | PepsiCo | ||||
Gross profit percentage | 63.9 | % | 54.1 | % | ||
Net profit margin | 33.6 | % | 10.9 | % | ||
Return on equity | 37.7 | % | 29.4 | % | ||
EPS | $ | 5.06 | $ | 3.91 | ||
Receivables turnover ratio | 8.6 | 10.6 | ||||
Inventory turnover ratio | 5.1 | 8.9 | ||||
Current ratio | 1.17 | 1.11 | ||||
Debt-to-assets | 0.57 | 0.68 | ||||
P/E ratio | 12.6 | 16.2 | ||||
Required: |
1-a. | Which company appears more profitable? |
|
1-b. | Describe the ratio(s) that you used to reach this decision. (Select all that apply.) |
Gross profit percentage Net profit margin Return on equity Earnings per share Asset turnover Fixed asset turnover | |
2-a. | Which company appears more liquid? |
|
2-b. | Describe the ratio(s) that you used to reach this decision. (Select all that apply.) |
Receivable turnover Price/earnings ratio Inventory turnover ratio Accounts receivable turnover ratio Current ratio Quick ratio | |
3-a. | Which company appears more solvent? |
|
3-b. | Describe the ratio(s) that you used to reach this decision. (Select all that apply.) |
Debt-to-assets ratio Price/earnings ratio Current ratio Inventory turnover ratio Receivables turnover ratio | |
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