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 3. Write a one-paragraph memorandum explaining which company you would invest your money in and why. (Limit your explanation to the information provided.)

Short answer

Investment is anything owned which is acquired for generating income and the memorandum written shows that a company with a better profitability measure is good for investing. In this case, as per the net income, Coca-Cola is a better performing company with a net income of 8,634 which is higher than that of PepsiCo.

Step-by-step solution

Definition of Investment

Investment refers to any asset or an item or any financial instrument acquired by an investor with the purpose of generating income.

Comparison of Companies

The main motive of this memorandum is to provide information about profitability measures to assess which company is better for investing in. These profitability measures help the efficiency of the company in generating income using the assets of the company. In this case, PepsiCo has sales of $66,504 and Coca-Cola has sales of $46,542, the former has better sales. Despite the higher sales PepsiCo’s net income is $6,462 which is much less than the net income of Coca-Cola which is $8,634. So, this suggests that Coca-Cola is better for investing.