Sunday, May 24, 2020

Financial Analysis On The Soft Drink Industry - 1805 Words

Financial Analysis: ROE: The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation s profitability by revealing how much profit a company generates with the money shareholders have invested. (Text book Definition). ROE is expressed as a percentage and calculated as: Return on Equity = Net Income/Shareholder s Equity Net income is for the full fiscal year (before dividends paid to common stock holders but after dividends to preferred stock.) Shareholder s equity does not include preferred shares. Return on equity (ROE) is one of the most important indicators of a firm s profitability. ROE shows how well a company uses investment funds to generate earnings growth and is an indicator of potential dividend growth. By completing a ROE analysis using the DuPont formula, an investor can understand the key drivers of that return: profitability, operating efficiency, and financial leverage. The importance of the DuPont analysis becomes clear when examining the soft drink industry. Three companies combined hold almost 90% of the entire market share of the carbonated soft drink in the U.S. - Coca-Cola (NYSE:KO), PepsiCo (NYSE:PEP) and Dr. Pepper Snapple (NYSE:DPS). All three have an ROE of approximately 27-28%, suggesting that they are evenly matched in terms of profitability and potential growth. However, a closer examination using the DuPont equation shows some important differences. DuPont Analysis Below is the DuPontShow MoreRelatedEssay on BSA555 Struense Richard WK 5 Financial Ratios Coca Cola1312 Words   |  6 Pagesï » ¿ Week 5 – Financial Ratios – Analysis: Coca-Cola Richard Brent Struense Averett University Strategic Management – BSA555-M703-SP15 Instructor: Dr. Philip R. Sturm April 9, 2015 Executive Summary The purpose of this analysis is to identify the financial strategy and performance of the Coca-Cola Company, Pepsi, and Monster. 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