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Dupont Analysis Coke/Pepsi

In: Business and Management

Submitted By Mtjohnson
Words 412
Pages 2
Coca-Cola Co.
Vs.
PepsiCo Inc.
DuPont Analysis

Business Finance 12 pm section
PepsiCo Inc.

The DuPont analysis is a way of examining the financial ratio return on equity. ROE looks at how much a company earned in the previous period compared with the total amount of the owners’ equity invested in the business. The DuPont analysis looks at why ROE is what it is and identifies some of the underlying drivers of the ratio. The DuPont analysis numbers are taken straight form the income statements and balance sheets provided by the company in their quarterly and annual earnings releases or SEC filings. For this purpose, I am using the most recently filed Form 10-K annual report for PepsiCo, Inc., dated March 22, 2014.
A DuPont analysis begins with PepsiCo’s profit margin. The profit margin tells you how profitably Pepsi is running the business. Pepsi has a net income is $1,216,000 and the company’s sales are $12,623,000, to get the profit margin we divide the net income by sales and get a profit margin of 9.63%. People don’t view the products PepsiCo, Inc. sells as a commodity since 9.63% is a profitable business. Asset turnover measures the amount of sales a company has relative to the assets it has to own and maintain in order to generate those revenues. The amount of turnover can tell us a fair bit about how the business operates. We can reach different conclusions once we determine whether the turnover is high or low. PepsiCo’s sales are $12,623,000 and its assets are $77,493,000, which gives us an asset turnover of roughly 16.29%. PepsiCo, Inc, should have a low asset turnover because large quantities of their products are being sold on a daily basis. The equity multiplier is an indication of how much debt the company uses to finance the generation of revenues. As mentioned before, PepsiCo’s assets are $77,493,000 and its total stockholder’s equity is…...

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