Interpeting Financial Statements - Coursework Example

1) Profit margin. Coca-cola: Pepsi: (2) Asset turnover. Coca-cola: Pepsi: (3) Return on assets. Coca-cola: Pepsi: (4) Return on common stockholders’ equity.Coca-colaPepsi:Coca Cola has a better profit margin of 22.1% compared to Pepsi’s profit margin of 14.4%. The profit margin is different because of the difference in the pricing strategies of the two companies. Pepsi may have offered a lower price to the customers, which has resulted in a low profit margin but a high net sales figure as compared to Coca Cola.

Pepsi has a higher asset turnover ratio of 1.05 times as compared to Coca Cola’s asset turnover ratio of 0.7 times. This indicates that Pepsi has used its assets more productively in generating the sales than Coca Cola.Pepsi and Coca Cola have a similar return on assets of around 15% indicating that both the companies have a similar profitability position and both companies are using their assets productively to generate profits.Both the companies have a higher return stockholders’ equity than their respective return on the total assets.

This indicates that Pepsi and Coca Cola may have made effective use of leveraging (Weygandt, Kieso, & Kimmel, 2008). In conclusion, both companies have a similar profitability position. However, the pricing strategies used by the two companies are different. Pepsi has a lower margin on its sales compared to Coca Cola, but this results in a higher dollar sales of Pepsi. ReferenceWeygandt, J., Kieso, D., & Kimmel, P. (2008). Accounting Principles (8th ed.). USA, NJ: John Wiley & Sons, Inc.