COMPARATIVE ANALYSIS CASE (a) Property, plant, and equipment, net of accumulated depreciation: Coca-Cola at 12/31/14 PepsiCo at 12/31/14 $14,633 million $17,244 million Percent of total assets: Coca-Cola ($14,633 ÷ $92,023) PepsiCo ($17,244 ÷ $70,509) (b) Coca-Cola and PepsiCo depreciate property, plant, and equipment principally by the straight-line method over the estimated useful lives of the assets. Depreciation expense was reported by (in the cash flow statement) Coca-Cola (includes amortization) and PepsiCo as follows: 2014 2013 2012 (c) (1) Coca-Cola $1,976 million 1,977 million 1,982 million (2) PepsiCo $2,625 million 2,663 million 2,689 million Asset turnover: Coca-Cola $45,998 = 0.51 $92,023 + $90,055 2 PepsiCo $66,683 = 0.90 $70,509 + $77,478 2 Profit margin on sales: Coca-Cola $7,098 = 15.43% $45,998 11-66 15.90% 24.46% PepsiCo $6,513 = 9.77% $66,683 COMPARATIVE ANALYSIS CASE (Continued) (3) Return on assets: Coca-Cola $7,098 $92,023 + $90,055 2 PepsiCo = 7.80% $6,513 $70,509 + $77,478 2 = 8.80% With the exception of profit margin, each of PepsiCo’s ratios are stronger compared to Coca-Cola’s. PepsiCo’s lower profit margin is primarily due to its large food business which experiences larger investments in property, plant, and equipment and lower margins compared to the beverage segment. Coca-Cola sales are derived almost entirely from higher margin beverages. (d) Coca-Cola’s capital expenditures were $2,406 million in 2014 while PepsiCo’s capital expenditures were $2,859 million in 2014. LO: 5, Bloom: AN, Difficulty: Moderate, Time: 20-25, AACSB: Analytic, Communication, AICPA BB: None, AICPA FC: Reporting, Research, AICPA PC: Communication 11-67