The annual reports of the Coca-Cola Co. and PepsiCo, Inc., indicate the followin

ID: 2379429 • Letter: T

Question

The annual reports of the Coca-Cola Co. and PepsiCo, Inc., indicate the following for the year ended December 31, 2011 (amounts in millions):

Calculate ROI and ROE for each company for 2011. (Hint: You will need to calculate some of the numbers used in the denominator of these ratios.)

ROI %, ROE % Cocacola

ROI % , ROE %Pepsi

b. Calculate the debt ratio and debt/equity ratio for each firm at the end of 2011.

Coca ColaDebt ratio%

Pepsi Debt ratio %

Pepsi debt equity ratio %

Coca cola debt equity ratio %

NOTe.. ROI I couldnt figure out how to even start..

I calcualted the ROE of both firms by net income / stockholders equity.. ( I got it wrong)

I calculated debt ratios by Total liabilities/ total assets (Using both January 1) GOt it wrong

I calculated debt equity ratio by total liabilities/stockholders.. got it wrong

What i am doing wrong Help

The annual reports of the Coca-Cola Co. and PepsiCo, Inc., indicate the following for the year ended December 31, 2011 (amounts in millions):

ROI = net income / average total assets

ROE = net income / average stockholders equity

By average, this means the average of year beginning and year ending values.

Stockholders equity for year beginning 2011 = assets - liabilities = 72,921-41,607 = 31,314 for Coca Cola

Stockholders equity for year beginning 2011 = assets - liabilities = 68,153-46,667 = 21,486 for PepsiCo

Total assets for year ending 2011 = liabilities + stockholders equity = 48,053+31,921 = 79,974 for Coca Cola

Total assets for year ending 2011 = liabilities + stockholders equity = 51,983+20,899 = 72,882 for PepsiCo

a. ROI for CocaCola = 8,634/((72,921+79,974)/2) = 11.29%

ROE for CocaCola = 8,634/((31,314+31,921)/2) = 27.31%

ROI for PepsiCo = 6,462/((68,153+72,882)/2) = 9.16%

ROE for PepsiCo = 6,462/((21,486+20,899)/2) = 30.49%

b. CocaCola debt ratio = debt/total assets = 48,053/79,974 = 60.09%

CocaCola debt-equity ratio = debt/stockholders equity = 48,053/31,921 = 151%

PepsiCo debt ratio = debt/total assets = 51,983/72,882 = 71.32%

PepsiCo debt-equity ratio = debt/stockholders equity = 51,983/20,899 = 249%

Hope this helped ! Let me know in case of any queries.

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