Question

Coca-Cola Company
Balance Sheet
December 31 (Amounts in Millions)
	2010	2009
Assets
Current assets
Cash and cash equivalent	$ 11,199	$ 9,151
Marketable securities	138	62
Account receivable	4,430	3,758
Merchandise inventory	2,650	2,354
Other current assets	3,162	2,226
Non-current assets
Long term investments	9,706	8,731
Property, Plant and equipment	14,727	9,561
Intangible assets	26,909	12,828
Total assets	72,921	48,671
Current liabilities
Accounts payable and accrued liabilities	$ 8,859	$ 6,657
Loans and notes payables	8,100	6,749
Other liabilities	1,549	315
Non-current liabilities
Long term debt	14,041	5,059
Other liabilities and deferred taxes	9,055	4,545
Shareholder's equity
Common Stock	10,937	9,417
Retained earnings	49,592	42,084
Accumulated other income (loss)	(1,450)	(757)
Treasury stock	(27,762)	(25,398)
Total liabilities and shareholder's equity	72,921	48,671

Coco-Cola Company
Income Statement
Year Ended December 31 (Amounts in Millions)
		2010		2009
Net Sales		$      35,119		$      30,990
Cost of goods sold		12,693		11,088
Gross profit		22,426		19,902
Selling and administrative expensive		13,158		11,358
Other operating expensive		819		313
Operating Income (EBIT)		8,449		8,231
Interest Expense		733		355
Other income		6,477		988
Income before taxes		14,193		8,864
Income tax expense		2,384		2,040
Net income		11,809		6,824
Coca-Cola Company

calculate:

1) return on equity

2) return on capital

how do we get average total capital

Answer 1

1).Return on Equity

Share holders equity 2009 = 9417 + 42084 -757-25398 = $25346 millions

Share holders equity 2010 = 10937 + 49592 -1450 -27762 = $31317 millions

Return on equity 2009 = Net income2009 / share holder's equity 2009 x 100 = 6824 / 25346 x 100 = 26.92 %

Return on equity 2010 = Net income2010 /  share holder's equity 2010 x 100 = 11809 / 31317 x 100 = 37.70 %

2).Return on capital

Return on capital for current year = (Net income - Dividends paid ) / (Debt capital + Shareholders equity) x 100

= (11809-0)/(14041+31317) x 100 = 26 %

3).Average total capital = Average of (Shareholders equity + Long term debt) in both years

=(14041+31317+25346+5059 )/(2) = $37882 millions