Question

Coca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financial figures (in \( millions) for these businesses for a recent year follow.

Check (1a) 11.3%; (1b) 9.2%

Key Figures (\) millions) Coca-Cola PepsiCo

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(46,542 \)66,504

Net income . . . . . . . . . . . . . . . . . . . . . . . 8,634 6,462

Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518

Required 1. Compute return on assets for (a) Coca-Cola and (b) PepsiCo

Short answer

The return on assets of Coca-Cola is 11.3% and the ROA of PepsiCo is 9.16%

Step-by-step solution

Computation of ROA of Coca-cola

$\begin{array}{rcl}\mathrm{Return}\mathrm{on}\mathrm{assets}& =& \frac{\mathrm{Net}\mathrm{income}}{\mathrm{Average}\mathrm{assets}}\times 100\\ & =& \frac{\$8,634}{\$76,448}\times 100\\ & =& 11.3\%\end{array}$

Computation of ROA of PepsiCo

$\begin{array}{rcl}\mathrm{Return}\mathrm{on}\mathrm{assets}& =& \frac{\mathrm{Net}\mathrm{income}}{\mathrm{Average}\mathrm{assets}}\times 100\\ & =& \frac{\$6,462}{\$70,518}\times 100\\ & =& 9.16\%\end{array}$