Compute the following financial ratios for Pepsico. To Solve Use PepsiCo\'s ANNU

Question

Compute the following financial ratios for Pepsico. To Solve Use PepsiCo's ANNUAL REPORTINGS for 2015 and 2016 that are posted on their website http://www.pepsico.com/Investors/Annual-Reports-and-Proxy-Information

a.asset turnover ratio:2015________,2016________

b.Rate of return on total assets:2015_________,2016__________

b.rate of return of common Stockholders Equity:2015_________,2016_________

d.Earnings per share-Basic(on income statement):2015__________,2016__________

e.Earnings per share-Basic(on income statement):2015_________,2016_________

F. Comment on the firms ability to earn a return on its assets, efficiency of use of its assets, and its ability to earn a profit for its stockholders.

Explanation / Answer

a. Assets turnover ratio = Net sales divided by average total assets

For 2015 = 63056 divided by the average of (69667 + 70509) = 63056 divided by 70088 = 0.9 times

For 2016 = 62799 divided by the average of (74129 + 69667) = 62799 divided by 71898 = 0.87 times

b. Rate of return on total assets = Net income divided by total assets

For 2015 = 5452 divided by 69667 = 0.078 = 7.8%

For 2016 = 6329 divided by 74129 = 0.085 = 8.5%

c. Rtae of return of common stockholders equity = Net income divided by average shareholders equity

For 2015 = 5452 divided by average of (17578 +12068) = 36.78%

For 2016 = 6329 divided by the average of (12068 + 11246) = 54.29%

d.Earnings per share basic = Net income divided by weighted average number of outstanding common shares

For 2015 = 5452 divided by 1469 = 3.71

For 2016 = 6329 divided by 1439 = 4.4

F. The return on assets of the company shows an increase. This could happen in two cases, either increase in income or decrese in assets. By observing the calculation, we can conclude that the compnay's rate of return on assets has increase due to an increasse in net income. Thus, the company is able to earn good return on its assets.

The asset turnover ratio gives us an insight into the efficincy of the ussage of assets. The company shows a decrease in the asset turnover ratio. This could be increased by continuously using the assets or generating more sales without purchsaing new assets.

The return on stockholders equity calculated helps us understand the money generated by the company using the investment made by the shareholders. The company in our question has been able to earn good profits for its shareholders and has increase the same for the year 2016 as compared to 2015.

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