Coca Cola and Pepsi Profitability Analysis Essay Example for Free

Coca Cola and Pepsi Profitability Analysis Essay crude gain margin(2013) = 100 28,433/46,854 = 60.68%Gross gelt margin(2012) = 100 x 28,964/ 48,017=60.32%Gross profit margin(2011) = 100 x 28,326 = 60.86%Source PepsiCo Inc. Annual ReportsGross profit margin (2013) = 100 x 35,172/66,415 = 52.96%Gross profit margin (2012) = 100 x 34,201/65,492 = 52.22%Gross profit margin (2011) = 100 x 34,911/66,504 = 52.49%Gross profit margin is a resource for paying extra expenses and future cutbacks. Coca-Cola Co. gross profit margin declined from 2011 to 2012 alone then inclined from 2012 to 2013. However, it did not yield the level of 2011. PepsiCo Inc.s gross profit margin, on the other hand, decreased from 2011 to 2012 however it improved from 2012 to 2013 go over 2011s level. Comparing the two companies, Coca-Cola Co. has a higher gross profit margin which shows superior fraction of revenue existing to coat in operation(p) and other costs. exculpate Profit brim (USD $ in Millions)Co ca-Cola Co.201320122011Net Income Before Minority Share of Earnings, Equity Income, and Nonrecurring items8,5849,0198,572Net Sales46,85448,01746,542Net Profit shore18.32 %18.78 %18.42 %Source Coca-Cola Co. Annual ReportsNet Profit tolerance (2013) = 100 x 8,584/ 46,854 = 18.32%Net Profit Margin (2012) = 100 x 9,019/48,017 = 18.78%Net Profit Margin (2011) = 100 x 8,572/46,542 = 18.42%PepsiCo201320122011Net Income Before Minority Share of Earnings, Equity Income, and Nonrecurring Items6,7406,1786,443Net Sales66,41565,49266,504Net profit margin10.15 %9.43 %9.69 %Source PepsiCo Inc. Annual ReportsNet Profit Margin(2013) = 100 x 6,740/66,415 = 10.15%Net Profit Margin(2012) = 100 x 6,178/65,492 = 9.43%Net Profit Margin(2011) = 100 x 6,443/66,504 = 9.690%Net profit margin is an indicator of profitability, computed as net income divided by revenue. It measures how much out of every dollar of sales a company actually keeps in earnings.(Wintner Tardif, 2006, p349)Coca-Cola Co. net profit margin improved as of 2011 to 2012 although decreased drastically first 2012 to 2013.PepsiCo Inc. net profit margin go pop out beginning of year 2011 to year 2012 but after that recovered from 2012 to 2013 going beyond the level of 2011. The figures above insinuate that Coca-Cola Co. has a elevated profit margin compare to PepsiCo Inc., which indicates more cost-effective society which better control its costs compared to Coca-Cola Inc. count Asset Turnover (USD $ in Millions)Source Coca-Cola Co. Annual ReportsTotal assets turnover(2013) = 46854/90055 = 0.52Total assets turnover(2012) = 48017/86174 = 0.56Total assets turnover(2011) = 46542/79974 = 0.58PepsiCo Inc.20132012Net revenue6641565492Total assets7747874638Total assets turnover0.850.87Source PepsiCo Inc. Annual ReportsTotal assets turnover (2013) = 66415/77478 = 0.85Total assets turnover (2012) = 65492/74638 = 0.87Coca-Cola Co.s net profit margin enhanced from 2011 to 2012 nevertheless godown considerably as of 2012 towa rd 2013. PepsiCo Inc.s net profit margin, on the other hand, worsens since 2011 to year 2012 but raised the following year exceeding the level of 2011. The figures above indicate that PepsiCo Inc. has a higher Total Assets Turnover comparing to Coca-Cola Co. which shows that PepsiCo turns its assets faster into sales. Asset Turnover is connected to Return on Assets (ROA) through Du Pont formula.DuPont Return on Assets (ROA) (USD $ in Millions)Coca-Cola Co.201320122011Net Profit Margin18.32%18.78%18.42%Asset Turnover0.520.560.58Return on Assets(ROA)9.5210.5110.68Source Coca-Cola Co. Annual ReportsROA(2013) = 18.32% x 0.52 = 9.52ROA(2012) = 18.78% x 0.55 = 10.51ROA(2011) = 18.42% x 0.58 = 10.68PepsiCo Inc.20132012Net Profit Margin10.15%9.43%Asset Turnover0.850.87Return on Assets (ROA)8.628.20Source PepsiCo Inc. Annual ReportsROA(2013) = 10.15% x 0.85 = 8.62ROA(2012) = 9.43% x 0.87 = 8.20The ROA numbers provides investors with an overview of how efficiently the moving in is converting the investment into net income. (Gibson, 2009) Coca-Cola Co. ROA decreased starting of 2011 to 2012 as well as as of 2012 towards 2013. PepsiCo Inc. ROA, on the other hand, declined from year 2011 to 2012s level however later inclined since 2012 towards 2013, however it did not reach the level of 201l. Nevertheless, Coca-Cola has a higher the ROA numbers compare to PepsiCo. which shows that the business earns more capital on a smaller amount of investment.DuPont Return on Equity(ROE) (USD $ in Millions)Coca-Cola Co.201320122011Net Income8,5849,0198,584Total Shareholder Equity33,17332,79031,635Return on Equity (ROE)25.87%27.50%27.13%Source Coca-Cola Co. Annual ReportsROE(2013) =100 x 8,584/33,173 = 25.87%ROE(2012) = 100 x 9,019/32,790 = 27.50%ROE(2011) = 100 x 8,584/31,635 = 27.13%PepsiCo Inc.201320122011Net Income6,7406,1786,443Total Shareholder Equity24,27922,29420,588Return on Equity(ROE)27.76 %27.71 %31.29 %Source PepsiCo Inc. Annual ReportsROE (2013) = 100 x 6,740/24,279 = 27.7 6%ROE(2012) = 100x 6,178/ 22,294 = 27.71%ROE(2011) = 100 x 6,443/20,588 = 31.29%Return on Equity (ROE) determines how sound a company makes use of reinvested earnings to make more earnings. ROE is utilized as a common hint of the business effectiveness. In other words, what amount of revenue the business is capable to generate with the resources provided by its stockholders. (Gibson,2009) Coca-Cola Co.s ROE increased as of 2011 towards 2012 except that later declined considerably from 2012 to 2013.PepsiCo Inc.s ROE, on the other hand, decreased starting year 2011 to 2012 but then slightly riseup from 2012 to 2013. Based on the numbers above, we can conclude that PepsiCo Inc. has a competitive advantage over Coca-Cola Co. because it has a higher ROE, which means that is growing profits without pouring new capitals into business.ReferencesWintner, S., Tardif, M. (2006)Financial Management for Design Professionals The Path to Profitability. MA Kaplan AEC Education. Retrived from http// finance.yahoo.com/ intelligence activity/abercrombie-fitch-no-profits-just-225850116.html?session-id=7b3af266ae1a387aaf0cfe6dca24ba10 Gibson, C. (2009)Financial Reporting Analysis. Using Financial Accounting Information (11the Ed) MA South-Western Cengage Learning, Mason,OH