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Which is a larger company:: McDonald's or Coca Cola?
Question
#17865. Asked by Junk Food. (Apr 02 02 6:44 PM)
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mk2norwich
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As a quizmaster, this question has proved to be a real headache for me, having used it myself as a part of a pub quiz. One site led me to believe that the answer was MacDonald's, but,when I gave this as being the 'correct' answer to that particular question, it was disputed by many of my quiz contestants. Your question is very similar to one I posted here myself a few weeks ago, and most of the nice folks who replied to it (my question concerned the world' most WIDELY RECOGNIZED branded product) considered Coca-Cola to be the one. I don't know if the question in the style you've asked it means the same thing or not, but I hope it helps you.
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eliasen
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I've seen a lot of questions here just asking 'which is larger,' like 'which is the largest bird?' There are lots of ways that one company could be larger than another:
1. Number of employees
2. Market capitalization of stock
3. Number of stores (although this doesn't work well when one company doesn't have stores.)
4. Value of tangible assets.
As of today, Coca-Cola's market capitalization of common stock is 8.3 billion dollars. McDonald's has a market capitalization of 35.2 billion dollars.
Thus, if your definition of 'biggest' is 'whose stock would you rather have all of?' Then, definitely, McDonald's by a factor of 4.
I don't know about by the other criteria, but I'd rather have the stock than the employees.
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Brainy Blonde
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The Coca-Cola Company is number 233 on the Forbes Global 500 list, McDonald's 366.
FYI, PepsiCo is 234, Wal-Mart is number 2 and Exxon Mobil is number 1.
As American companies they are rated, McDonald's 139, Coca-Cola Company 99,
PepsiCo, 63 and Wal-Mart number 1. See:
 http://www.fortune500.com
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eliasen
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That's a neat link. It lets you rank the top companies based on several criteria, (but these lists, unfortunately, only work for the top 50 companies.)
Keep in mind that the Fortune 500 rankings are based solely on revenues, that is, how much money is taken in, with no regard for how much they may be spending or losing. It's another way of measuring.
The Fortune link answers a few of the questions above.
* By number of employees, McDonald's is the second-largest employer of all Fortune 500 companies, with 395,000 employees. Coca-Cola isn't even in the top 50, meaning they have less than 110,000 employees. McDonald's is larger by a factor of at least 4 in this ranking.
* By profits, Coca-Cola is the leader. They had profits of 3.9 billion dollars, as opposed to 1.6 billion by McDonald's. This means they're maybe better-run, or luckier, but probably not bigger. A one-man company that makes {$1} in profits isn't 'bigger' than a giant company that loses a billion dollars.
* The 'market value' link on the site above shows Coca-Cola having a market value of 118 billion dollars, while McDonald's isn't in the top 50. So, if you use Fortune's weighting, Coca-Cola is actually bigger, contradicting what my (admittedly naive) above estimate of common stock market capitalization indicated.
So, we've seen that there are lots of ways to measure size. Did you find the ranking your wanted?
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Brainy Blonde
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The ONLY way the size of a company is determined, is by sales and profits. That
in turn, causes the buying and selling of stock in public companies, which
determines the value of each share. The value and number of shares, or market
capitalization, determines the value of a public company. Keep in mind, with a
public company you can go from being a billionaire to a pauper virtually
overnight.
A private company size is determined by the Financial Statements each fiscal or
accounting period.
The number of employees is irrelevant. Some industries the payroll is the
largest expense, in others the smallest. A one-man company that makes {$1} in
profits IS 'bigger than a giant company that loses a billion dollars' for that
accounting period. In fact, the guy that made the dollar has a better chance of
making more dollars than the other company has of recovering from such a huge
loss, no matter who they are.
So, YOU have said there are lots of ways to measure size, there isn't. According
to GAAP, it's the bottom line that counts.
Coca-Cola Company is larger than McDonald's on a global scale and on an American
scale. If you have found a different source, I would be interested in knowing
what it is, to determine why our answers are so different.
Lastly, you would have to ask the person, who asked the question, whether I
found the answer, they were looking for.
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eliasen
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Brainy Blonde,
Your errors are based on the ungrounded assumption that you make that a company's size is based on market capitalization and nothing else.
Remember the internet boom? That alone disproves your theory. Valueless companies with 20 employees, that never turned a profit, had market caps larger than General Motors. By your reasoning, these companies were larger than General Motors, even though they're all gone and hardly any of them ever turned a profit, They were never larger in any sense.
The people who bought Yahoo at {$410} per share now realize that it was inflated, wrong, and not a measure in any sense of the company's size or value.
Stock prices are based on fallible human perceptions--a common guess or delusion that a company may someday be worth something.
Just ask yourself... MY company turned a profit last year. You own a multibillion-dollar company that got caught in a brief bad economy. Would you trade it for my company? By your statements above, you would. I love you. Let's arrange a swap.
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eliasen
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Brainy Blonde,
To avoid further confusion, in your first paragraph, you mention at least three different ways a company can be measured:
* By sales
* By profits
* By market capitalization
You base your earlier post on the Fortune 500 rankings which is
* By revenue
Those Fortune links that you posted show comparison of companies by several different criteria, which shows that the Fortune people understand that there is more than one way to compare things that vary in several dimensions.
Please pick just one of these ranking criteria and then we'll easily both agree that a company is larger if measured solely by that single criterion. But pick just one.
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Bishop
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i would have to say coca cola it has been here longer and there isnt a country you go to that dnt know what coca cola is not as true for mcdonalds there are many countrys that dnt have them even today coke can be aquired anywhere in the world.mcdonalds is the firs thing many people want to see when they arrive in america.
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Brainy Blonde
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The following phrases you used 'Your errors' and 'your reasoning,' please do
not give me credit for either. I suggest you take it up with the Institute of
Chartered Accountants, the Certified General Accountant's Association of Canada
and the Society of Management Accountants of Canada. Along with the author and
contributors of the eighth edition of Volumes One and Two of the Fundamental
Accounting Principles. Copywriter The McGraw-Hill Companies, Inc. 1996. You
might also want to get in touch with the colleges and universities across the
country to let them know, their accounting courses have errors and anyone in
the field, are wrong in their reasoning.
'MY company turned a profit last year. You own a multibillion-dollar company
that got caught in a brief bad economy. Would you trade it for my company?'
I would have to audit your company first. Then take into consideration of why
my multibillion-dollar company lost so much money. If it was a manufacturer of
anything to do with tapes or VCR's in the Beta format, chances are good I would.
Just as I would have bailed out of Bre-X, long before most others lost the
chance!!
Sales and revenue in the accounting world are the same. That figure is needed to
calculate the profit or loss on an income statement. A person who can interpret
or read an income statement uses it to decide whether to buy or sell shares in a
public company. That in turn decides the market capitalization, which is used by
accountants to determine the size of a company among other things. I know I am
repeating myself, but you just didn't seem to get it the first time. I have just
described a process, not three ways of determining the size of a company.
Market capitalization does not exist in a private company. Sales or revenue are
again required to determine the profit or loss on the income statement. The
income statement tells someone who is reading it, the size of the company. The
size of any company is determined by profit over any amount of time, called an
accounting period.
I suppose a person could calculate the size of a company for their own knowledge
using other methods such as total assets less liabilities, employees, number of
offices or franchises, but using GAAP, Sales and profit is what is considered
the correct way in accounting.
Just as the size of a city is almost always calculated by population, not land
area.
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Brainy Blonde
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I am sorry Junk Food. Your original question seems to have been lost in all of
this discussion. The answer without a doubt is the Coca-Cola Company.
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eliasen
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Blonde,
We both agree that somebody reading a financial statement needs to balance several figures to determine a company's health. That's the point of your last message. So it's clearly a balancing act, and we both agree that there's no one factor that we can point to that unambiguously represents the value of a company.
A company with no revenues is a bad company to invest in, regardless of their market capitalization.
A company with negative profits is a bad company to invest in, regardless of their (possibly gigantic) revenues, or their astronomical market cap.
I'm sorry to see you didn't choose a single criterion to gauge the size of a company. That's what's causing the problem in this debate. If we both agree on a single way to compare companies, there'd be no room for argument. But you went back and forth between profits, *and* revenues, *and* market cap again.
Your citing of authorities is interesting, but I dispute the fact that any of the books or organizations that you mention say that a company is 'larger' based on any single criteria. If so, please quote the passage and cite the reference so we can all verify it.
You can easily have 3 companies where company A has astronomically higher revenues, company B has astronomically higher profit, and company C has astronomically higher market cap.
The canonical Fortune 500 rankings are based solely on {revenue;} no other factors (market cap, profitability, etc.) are considered in this ranking. Revenue is a pretty good ranking criterion. If I had to choose the value of one company based on a single number, revenue would be *my* choice. Not market capitalization or profits. A company with a lot of revenue shows that lots of people are paying lots of money to that company for something real, and that there is real value in the company.
If the internet boom taught the investing public anything, it's that we should be extremely wary of market capitalization as a measure of value. Similar mass delusions can be seen in the gold rush in California or the tulip-bulb madness in the Netherlands in 1624.
The classic book 'Extraordinary Popular Delusions and the Madness of Crowds'
by Charles MacKay is a great treatment of the subject.
People who care about people might still say that McDonald's is a bigger company because it has more people.
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eliasen
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To help publicize this neat site, I've posted a link to this discussion on the alt.politics.economics newsgroup. Maybe somebody brilliant economists will share their opinions.
The title of the message I posted is:
'What determines if a company is 'larger' than another?'
The body of the message says:
I'm no economist, but there has been a fun discussion at a neat website:
http://www.funtrivia.com/cgi-bin/qncorner.cgi?type=answers and qnid=17865
The question posed there is 'Which is a larger company: McDonald's or Coca-Cola?'
There's been a lot of debate about this, primarily between me and someone going by the handle of 'Brainy Blonde.'
I'd love it if some real economists visited the site and chimed in.
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Junk Food
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I've created a monster...
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SOTHC
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I thought McDonald's were mostly franchised so that must fragment the company?
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