Hi Class,
The latest annual reports of PepsiCo and Coca-Cola determines their Return on Total Assets (ROTA) and Return on Stockholder’s Equity (ROE). These ratios will provide insight into the company’s profitability and the effectiveness of its use of assets and shareholder investments.
1. Return on Total Assets (ROTA):
ROTA measures the company’s ability to generate profits from its total assets, regardless of the source of financing. It is calculated by dividing net income by total assets.
PepsiCo’s ROTA for the fiscal year 2022 was 9.67%, calculated as follows:
Net Income: 8,910 million
Total Assets: $92,187 million
ROTA: Net Income / Total Assets = 8,910 million /92,187 million = 0.0967 or 9.67%
Coca-Cola’s ROTA for the fiscal year 2022 was 10.28%, calculated as follows:
Net Income: 9,542 Billion
Total Assets: 92.763 billion
ROTA: Net Income / Total Assets = 9,542 / 92.763 billion = 0.1028 or 10.28%
In terms of ROTA, Coca-Cola has a slightly higher ratio than PepsiCo, indicating that it is more efficient in generating profits from its total assets. However, both companies have ROTA values that are within the industry standard, indicating that they are both effective in managing their assets to generate profits.
2. Return on Stockholder’s Equity (ROE):
ROE measures the company’s ability to generate profits from the investments made by shareholders. It is calculated by dividing net income by shareholder’s equity.
PepsiCo’s ROE for the fiscal year 2022 was 51.90%, calculated as follows:
Net Income: 8,910
Shareholder’s Equity: 17.15 billion
ROE: Net Income / Shareholder’s Equity = 8,910 / 17.15 billion = 0.5190 or 51.90%
Coca-Cola’s ROE for the fiscal year 2022 was , calculated as follows:
Net Income: 9,542
Shareholder’s Equity: 25.826 billion
ROE: Net Income / Shareholder’s Equity = 9,542 / 25.826 billion = 0.3697 or 36.97%
In terms of ROE, PepsiCo has a higher ratio than Coca-Cola, indicating that it is more effective in generating profits from shareholder investments. But both companies have ROE values that are within the industry standard, indicating that they are both effective in generating profits for shareholders.
To Conclude, PepsiCo and Coca-Cola are both profitable companies, as evidenced by their ROTA and ROE ratios. While PepsiCo has a slightly higher ROTA and ROE than Coca-Cola, both companies have ratios that are within the industry standard, indicating that they are both effective in generating profits from their assets and shareholder investments. Overall, the analysis of these ratios shows that both companies are well-managed and profitable, providing a solid foundation for future growth and success.
Regards,
Priscilla.