«Unit II Problem Solving» - Great Essay Sample

The company identified from the S&P 500 is The Coca Cola Company with ticker symbol KO. It was founded in 1886 by Asa Griggs Candler and has risen ever since to be a leader in the world of beverage industry. It provides its customers with brands such the flagship brand Coca Cola, Sprite, Fanta, Minute Maid, vitamin water, juices and juice drinks. These and many other brands are offered in over 200 countries. The company accrued US $ 48.01 billion as revenue in the 2012 financial year. In the same financial year, it was able to secure an operating income of US $ 10.84 and net income of US $ 9.01 billion. The company has total assets US $ 86.17 billion and equity of US $ 32.79.

DuPont analysis of Coca-Cola Company involves investigation of profit margins, inventory turnover and the use of leverage. Return on investment (ROE) is given by multiplying net profit margin, asset turnover and the equity multiplier. The net profit margin is used to analyse the operating efficiency of the firm; asset turnover shows how the assets of the firm are utilized in revenue generation and the equity multiplier to analyse financial leverage (Soliman 2003). 

Return on equity has fallen compared to the same quarter of the last year, mainly due to a fall in profit margins. The asset utilization efficiency and financial leverage of the company have remained relatively same in the two periods.

The closest competitor of Coca Cola Company identified from the S&P 500 is PepsiCo Inc. (PEP). It was incorporated in 1965 and has expanded its market share through acquisitions and mergers to a broad range of food and beverage brands. PepsiCo’s products are consumed in over 200 countries. It is a competitor to Coca Cola Company earning revenues of $ 43.3 billion ranked according to net revenues. However, it is ranked first in North America because most of its revenues are generated in the market. 

The cost of goods sold is same for the two fiscal years meaning the cost of purchases and direct expenses did not change. The operating profit is declining which may be a cause of concern to the firm’s lenders and shareholders. Selling and administrative expenses remained constant in the two periods while the interest expense rose due to the company increasing debt financing. Finally, the net profit is relatively unaffected in the two periods (Brigham 2011).