Finance

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Please have a read through the context provided below and answer the question with relevant references.

This is a very interesting post, thank you for starting this thread. When you look at gearing ratios, they illustrate the amount of debt and equity within a business. Wagner (2005:102) states that the debt-to-equity ratio/gearing ratio, can be defined as the inverse of insolvency ratio minus one. Therefore, the lower the figure of the gearing ratio the better the company is with respects to its outstanding debt. Based on this alone your example of Coca Cola, far outweighs the gearing ratio of Pepsi. The methods that Coca Cola use to generate its finance is a fantastic method of doing so, utilising a subsidiary of the Coca Cola brand.

My question is, is the subsidiary considered when you look at the yearend statistics already?

Generally, a business will generate its finance from its core product then reinvest in the operation to make it more efficient, attractive, current, and financially stable. When you reinvest or make a further investment you must consider other ratios such as the dividend yield. The reason that this is important to an investor or a shareholder is that this give an illustration of the likely return on investment through dividend payments, which are normally twice a year.

For a company such as Coca Cola, they have shareholders who would be vastly interested in this ratio, and this yield is a means of attracting powerful or high earning shareholders to a business. To figure this out you simply follow this equation:

Dividend Yield = Dividend/share pricex100 (Leach,2010).

With this ratio in mind, do you feel Coca Cola or Pepsi can look attractive through their dividend yield?

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