You are considering an investment in the common stock of Coca-Cola. The following information is…

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You are considering an investment in the common stock of Coca-Cola. The following information is from the consolidated statements of income of The Coca-Cola Company and Subsidiaries for the years ended December 31, 2015 and 2014 and for its competitor PepsiCo, Inc. and Subsidiaries for the years ended December 26, 2015 and December 27, 2014 (included in the companies Form 10-Ks, in millions of dollars): *Described as Net operating revenues by Coca-Cola and Net revenue by PepsiCo. **Described as Cost of sales by PepsiCo. Required Part A. The Ratio Analysis Model An investor must assess a company s profitability before buying its stock. The gross profit ratio tells us how many cents on every dollar are available to cover expenses other than cost of goods sold and to earn a profit. Replicate the five steps in the Ratio Analysis Model on pages 219-220 to analyze the gross profit ratios for Coca-Cola and PepsiCo: 1. Formulate the Question 2. Gather the Information from the Financial Statements 3. Calculate the Ratio 4. Compare the Ratio with Other Ratios 5. Interpret the Ratios Part B. The Business Decision Model An investor must consider a variety of factors, including financial ratios, before buying stock. Replicate the five steps in the Business Decision Model on page 220 to decide whether to buy stock in Coca-Cola. 1. Formulate the Question 2. Gather Information from the Financial Statements and Other Sources 3. Analyze the Informatio

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