Beruflich Dokumente
Kultur Dokumente
1. EXECUTIVE SUMMARY 2. LITERATURE REVIEW 3. ABOUT THE COMPANY a. Company profile b. Mission & Vision c. Company Leadership d. Company Brands e. Milestones f. Company Profile in India 5-6 7-12 13-29 14 18 19 20 24 26
4. WORKING CAPITAL MANAGEMENT a. Introduction b. Working Capital Analysis c. Nature & importance of working capital d. The importance of Good Working Capital e. Working Capital Cycle
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5. ANALYSIS OF WORKING CAPITAL MANAGE 6. MENT a. Schedule of changes In working Capital Management b. Percentage change in working capital c. Assessment of working Capital Management
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7. OBJECTIVE OF THE STUDY 8. RESEACH METHODOLOGY 9. ANALYSIS OF THE STUDY a. Analysis of various components b. Inventory c. Sundry Debtors d. Cash & Bank Balance e. Current Liability f. Provision Analysis 10.WORKING CAPITAL RATIO a. Receivable Ratio b. Payable Ratio
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Working Capital Management c. Inventory Ratio d. Current Ratio e. Quick Ratio f. Working capital Ratio 11.PROFIT & LOSS ACCOUNT 12.INCOME STATEMENT ANALYSIS 13.MAJOR FINDINGS 14.CONCLUSION 15.RECOMMENDATION 16.BIBLIOGRAPHY & REFRENCES 17.ANNEXTURE 61 62 64 64 66 67 69 70 73 76 78
Executive Summary
The project on Working Capital Management has been a very good experience. Every manufacturing company faces the problem of Working Capital Management in their day to day processes. An organizations cost can be reduced and the profit can be increased only if it is able to manage its Working Capital efficiently. At the same time the company can provide customer satisfaction and hence can improve their overall productivity and profitability.
Working Capital Management This project is a sincere effort to study and analyze the Working Capital Management of PEPSICO Bottling group. The project was focused on making a financial overview of the company by conducting a Working Capital analysis of PEPSICO Bottling group for the years 2006 to 2008 and Ratios & various components of working capital & for the year 2008 in a cma(cash monitoring arrangement) format emphasizing on Working Capital.
The internship is a bridge between the institute and the organization. This made me to be involved in a project that helped me to employ my theoretical knowledge about the myriad and fascinating facets of finance. And in the process I could contribute substantially to the organization. The experience that I gathered over the past two months has certainly provided the orientation, which I believe will help me in shouldering any responsibility in future.
The research done by Pass C.L., Pike R.H., An overview of working capital management and corporate financing,(1984) describes that over the past 40 years major theoretical developments have occurred in the areas of longer-term investment and financial decision making. Many of these new concepts and the related techniques are now being employed successfully in industrial practice. By contrast, far less attention has been paid to the area of short-term finance, in particular that of working capital management. Such neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience shows that inadequate planning and control of working capital is one of the more common causes of business failure.
The research done by Herrfeldt B., How to Understand Working Capital Management describes thatCash is king--so say the money managers who share the responsibility of running this country's businesses. And with banks demanding more from their prospective borrowers, greater emphasis has been placed on those accountable for so-called working capital management. Working capital management refers to the management of current or short-term assets and short-term liabilities. In essence, the purpose of that function is to make certain that the company has enough assets to operate its business. Here are things you should know about working capital management.
The research done by, Samiloglu F. and Demirgunes K., The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey (2008) describes that the effect of working capital management on firm profitability. In accordance with this aim, to consider statistically significant relationships between firm profitability and the components of cash conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-2007 has been analysed under a multiple regression model. Empirical findings of the study show that accounts receivables period, inventory period and leverage affect firm profitability negatively; while growth (in sales) affects firm profitability positively.
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The research done by, Appuhami, Ranjith B A, The Impact of Firms' Capital Expenditure on Working Capital Management: An Empirical Study across Industries in Thailand , International Management Review,(2008), The purpose of this research is to investigate the impact of firms' capital expenditure on their working capital management. The author used the data colleted from listed companies in the Thailand Stock Exchange. The study used Shulman and Cox's (1985) Net Liquidity Balance and Working Capital Requirement as a proxy for working capital measurement and developed multiple regression models. The empirical research found that firms' capital expenditure has a significant impact on working capital management. The study also found that the firms' operating cash flow, which was recognized as a control variable, has a significant relationship with working capital management.
The research done by, Hardcastle J., Working Capital Management,(2007) describes that Working capital, sometimes called gross working capital, simply refers to the firm's total current assets (the short-term ones), cash, marketable securities, accounts receivable, and inventory. While long-term financial analysis primarily concerns strategic planning, working capital management deals with day-to-day operations. By making sure that production lines do not stop due to lack of raw materials, that inventories do not build up because production continues unchanged when sales dip, that customers pay on time and that enough cash is on hand to make payments when they are due. Obviously without good working capital management, no firm can be efficient and profitable.
The research done by, Beneda, Nancy; Zhang, Yilei, Working Capital Management, Growth and Performance of New Public Companies, Credit & Financial Management Review, (2008) examining impact of working capital management on the operating performance and growth of new public companies. The study also sheds light on the relationship of working capital with debt level, firm risk, and industry. Using a sample of initial public offerings (IPO's), the study finds a significant positive association between higher levels of accounts receivable and operating performance. The study further finds that maintaining control (i.e. lower amounts) over levels of cash and securities, inventory, fixed assets, and accounts.
The research done by, Dubey R., Working Capital Management-an Effective Tool for Organisational Success (2008) describes that The working capital in a firm generally arises out of four basic factors like sales volume,technological changes,seasonal , cyclical changes and policies of the firm.The strenghth of the firm is dependent on the working capital as discussed earlier but this working capital is inteslf dependent on the level of sales volume of the firm.The firm requires current assets to support and maintain operational or functional activities.By current assets we mean the assets which can be converted readily into cash say within a year such as receivables,inventories and liquid cash.If the level of sales is stable and towards growth the level of cash,receivables and stock will also be on the high.
The research done by, Gass D., How To Improve Working Capital Management (2006) "Cash is the lifeblood of business" is an often repeated maxim amongst financial managers. Working capital management refers to the management of current or shortterm assets and short-term liabilities. Components of short-term assets include inventories, loans and advances, debtors, investments and cash and bank balances. Shortterm liabilities include creditors, trade advances, borrowings and provisions. The major emphasis is, however, on short-term assets, since short-term liabilities arise in the context of short-term assets. It is important that companies minimize risk by prudent working capital management. The research done by, Maynard E. Rafuse, Working capital management: an urgent need to refocus Management Decision, (1996) Argues that attempts to improve working capital by delaying payment to creditors is counter-productive to individuals and to the economy as a whole. Claims that altering debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit.Proposes that stock reduction generates systemwide financial improvements and other important benefits.Urges those organizations seeking concentrated working capital reduction strategies to focus on stock management strategies based on lean supply-chain techniques.
The research done by, Thomas M. Krueger, An Analysis of Working Capital Management Results Across Industries American Journal of Business, (2005) found distinct levels of WCM measures for different industries, which tend to be stable over time. Many factors help to explain this discovery. The improving economy during the period of the study may have resulted in improved turnover in some industries, while slowing turnover may have been a signal of troubles ahead. Our results should be interpreted cautiously. Our study takes places over a short time frame during a generally improving market. In addition, the survey suffers from survivorship bias only the top firms within each industry are ranked each year and the composition of those firms within the industry can change annually.
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PepsiCo is a world leader in convenient foods and beverages, with 2008 revenues of more than $ 13796 Million and 168,000 employees. The company consists of Frito-Lay North America, PepsiCo Beverages North America, PepsiCo International and Quaker Foods North America. PepsiCo brands are available in nearly 200 countries and territories and generate sales at the retail level of about $92 billion. Some of PepsiCo's brand names are more than 100-years-old, but the corporation is relatively young. PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. Tropicana was acquired in 1998 and PepsiCo merged with the Quaker Oats Company, including Gatorade, in 2001. PEPSI is a soft drink produced and manufactured by PepsiCo. It is sold in many places such as retail stores, restaurants, schools, cinemas and from vending machines. The drink was first made in the 1890s by pharmacist Caleb Bradham in New Bern, North Carolina. The brand was trademarked on June 16, 1903. There have been many Pepsi variants produced over the years since 1898. In October 2008, Pepsi announced that it would be redesigning its logo and re-branding many of its products by early 2009. In 2009, Pepsi, Diet Pepsi and Pepsi Max began using all lower-case fonts for name brands, and Diet Pepsi Max was re-branded as Pepsi Max. The brand's blue and red globe trademark became a series of "smiles," with the central white band arcing at different angles depending on the product. As of July 2009, the 2003 Pepsi logo is still the current logo for Pepsi Wild Cherry and Pepsi ONE. Countries such as Australia and India continue to use the old design on all packaging. Diet Pepsi Wild Cherry, Pepsi throwback, Diet Pepsi Lime, and Diet Pepsi Vanilla received the redesign.
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ORIGIN
It was first introduced in North Carolina in 1898 by Caleb Bradham, who made it at his pharmacy which sold the drink. Known back then as "Brad's Drink", it was later named Pepsi Cola possibly due the digestive enzyme pepsin and kola nuts used in the recipe. Bradham sought to create a fountain drink that was delicious and would aid in digestion and boost energy. In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore into a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles, and sales increased to 19,848 gallons. In 1926, Pepsi received its first logo redesign since the original design of 1905. In 1929, the logo was changed again. In 1929, automobile race pioneer Barney Oldfield endorsed Pepsi-Cola in newspaper ads as "A bully drink...refreshing, invigorating, a fine bracer before a race. In 1931, the Pepsi-Cola Company went bankrupt during the Great Depression- in large part due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years later, the company went bankrupt again. Pepsi's assets were then purchased by Charles Guth, the President of Loft Inc. Loft was a candy manufacturer with retail stores that contained soda fountains. He sought to replace Coca-Cola at his stores' fountains after Coke refused to give him a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola syrup formula.
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Rise
During the Great Depression, Pepsi gained popularity following the introduction in 1936 of a 12-ounce bottle. Initially priced at 10 cents, sales were slow, but when the price was slashed to five cents, sales increased substantially. With a radio advertising campaign featuring the jingle "Pepsi-Cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you," arranged in such a way that the jingle never ends. Pepsi encouraged price-watching consumers to switch, obliquely referring to the Coca-Cola standard of six ounces per bottle for the price of five cents (a nickel), instead of the 12 ounces Pepsi sold at the same price. Coming at a time of economic crisis, the campaign succeeded in boosting Pepsi's status. In 1936 500,000,000 bottles of Pepsi were consumed. From 1936 to 1938, Pepsi-Cola's profits doubled. Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had initially used Loft's finances and facilities to establish the new Pepsi success, the nearbankrupt Loft Company sued Guth for possession of the Pepsi-Cola company. A long legal battle, Guth v. Loft, then ensued, with the case reaching the Delaware Supreme Court and ultimately ending in a loss for Guth.
History
Headquartered in Purchase, New York, with Research and Development Headquarters in Valhalla, The Pepsi Cola Company began in 1898 by a Pharmacist and Industrialist Caleb Bradham, but it only became known as PepsiCo when it merged with Frito Lay in 1965. Until 1997, it also owned KFC, Pizza Hut, and Taco Bell, but these fastfood restaurants were spun off into Tricon Global Restaurants, now Yum! Brands, Inc. PepsiCo purchased Tropicana in 1998, and Quaker Oats in 2001. In December 2005, PepsiCo surpassed Coca-Cola Company in market value for the first time in 112 years since both companies began to compete.
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COMPANY PROFILE
PepsiCo, Incorporated
$13796 Million USD (2008) $1149 Million USD (2008) $162 Million USD (2008)
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At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do, but the right thing to do for our business.
MISSION
Our mission is to be the worlds premier consumer products focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employee, our business partners and the communities which we operate. And in everything we do, we strive for honestly, fairness and integrity.
VISION
PepsiCo responsibility is to continually improve all aspects of the world in which we operate environment, social, economic creating a better tomorrow than today. Our vision is put in to action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company.
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COMPANY LEADERSHIP
We are a company full of strong, talented individuals starting at the top of our organization. Get to know the inspiring people helping lead PepsiCo on its 'Performance with Purpose' journey. "Together we are all building on the platform of human, environmental and talent sustainability while continuing to deliver great results." INDRA K. NOOYi Chairman and CEO
Massimo F. d'Amore John C. Compton Indra K. Nooyi Chairman and CEO CEO PepsiCo CEO PepsiCo Americas Beverages Americas Foods
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PepsiCo owns five different billion-dollar brands. These are Pepsi, Tropicana, Frito-Lay, Quaker, and Gatorade.
Pepsi, including
Caffeine-Free Pepsi Light, Wild Cherry Pepsi, Pepsi Lime, Pepsi Max, Pepsi Twist and Pepsi ONE. Other U.S. carbonated soft drinks including Frawg, Mountain Dew, Mug Root Beer, Sierra Mist and Tropicana Twister Soda
7 Up (international distribution) Other U.S. beverages including Aquafina (Flavour Splash, Alive, and Twist/Burst), Dole, Gatorade, Mountain Dew AMP, Propel Fitness Water, SoBe, Quaker Milk Chillers, Ben & Jerry's MilkShakes, and Tropicana
Fiesta, Frui'Vita, Fruko, Kas, Loza, Manzanita Sol, Mirinda, Paso de los Toros, Radical Fruit, San Carlos, Shani, Teem, Triple Kola, and Yedigun
U.S Quaker Oats brands: Aunt Jemima, Cap'n Crunch, Coqueiro, Crisp'ums,
Cruesli, FrescAvena, King Vitaman, Life, Oatso Simple,Quake, Quisp, Rice-A-Roni, and Spudz
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2008 Milestones
PepsiCo Foundation announces two major new grants to WaterPartners and Safe Water Network programs to provide access to safe water and sanitation in developing countries PepsiCo Again Named to the Dow Jones Sustainability Index PepsiCo Agrees to Buy Bulgaria's Leading Nuts and Seeds Company PepsiCo Announces Initiatives With the Earth Institute and H2O Africa to Drive Sustainable Water Practices
Forbes Names PepsiCo Among Its Best Big Companies PepsiCo India Commissions First Remote Wind Turbine to Generate Renewable, Clean Energy
CRO Names PepsiCo to Top 25 100 Best Corporate Citizens 2008 PepsiCo to Buy Russian Juice Leader, Lebedyansky Employees Lead Effort to Make Chicago Plaza First LEED-Certified PepsiCo Headquarters
PepsiCo Honored with 2008 Energy Star Partner of the Year Award UK Vitamin Water Brand- V Water Acquired by PepsiCo
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Quaker Plant in Cedar Rapids Closes and Reopens Facility Due to Flooding to Protect Employees
PepsiCo Foodservice and Naked Juice Expand Starbucks Presence Gatorade Sports Science Institute Gathers World's Leading Researchers on Protein Nutrition
PepsiCo International's China Foods Wins "China's Top Leaders 2008" Award Wall Street Journal Article Recognizes PepsiCo for Leadership in Employment of People with Different Abilities
PepsiCo and Frito-Lay Join SmartWay in Commitment to Reduce Greenhouse Gas Emissions
PepsiCo Beats Coke in Race to Launch New Natural Sweetener (Stevia) PepsiCo France Recognized as "Great Place To Work" by Institute Survey PepsiCo Commits to Reducing Acryalmide Levels in Potato Chip Products and Restructured Potato Snacks in California
Subway Names PepsiCo "Vendor of the Year" for Sustainability Leadership Tazo Tea Joins Pepsi Lipton Partnership
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PEPSICO IN INDIA
PepsiCo entered India in 1988 and has grown to become one of the countrys leading food and beverage companies. One of the largest multinational investors in the country, PepsiCo has established a business which aims to serve the long term dynamic needs of India. PepsiCo India and its partners have invested more than U.S.$1 billion since the company was established in the country. PepsiCo provides direct and indirect employment to 150,000 people including suppliers and distributors. PepsiCo nourishes consumers with a range of products from treats to healthy eats, that deliver joy as well as nutrition and always, good taste. PepsiCo Indias expansive portfolio includes iconic refreshment beverages Pepsi, 7 UP, Mirinda and Mountain Dew, in addition to low calorie options such as Diet Pepsi, hydrating and nutritional beverages such as Aquafina drinking water, isotonic sports drinks - Gatorade, Tropicana100% fruit juices, and juice based drinks Tropicana Nectars, Tropicana Twister and Slice. Local brands Lehar Evervess Soda, Dukes Lemonade and Mangola add to the diverse range of brands. PepsiCos foods company, Frito-Lay, is the leader in the branded salty snack market and all Frito Lay products are free of trans-fat and MSG. It manufactures Lays Potato Chips; Cheetos extruded snacks, Uncle Chips and traditional snacks under the Kurkure and Lehar brands. The companys high fibre breakfast cereal, Quaker Oats, and low fat and roasted snack options enhance the healthful choices available to consumers. Frito Lays core products, Lays, Kurkure, Uncle Chips and Cheetos are cooked in Rice Bran Oil to significantly reduce saturated fats and all of its products contain voluntary nutritional labelling on their packets. The group has built an expansive beverage and foods business. To support its operations, PepsiCo has 43 bottling plants in India, of which 15 are company owned and 28 are franchisee owned. In addition to this, PepsiCos Frito Lay foods division has 3 state-of-theart plants. PepsiCos business is based on its sustainability vision of making tomorrow better than today. PepsiCos commitment to living by this vision every day is visible in its contribution to the country, consumers and farmers.
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COUNTRY/TERRITORY: India
3B;DLF Corporate parks Block; Qutub Enclave; Gurgaon, Haryana, India Sanjeev Chadha, CEO of PepsiCo India.
PRODUCTS/SERVICES WE Mango, Guava, Papaya, Banana OFFER: BUSINESS TYPE: INDUSTRY FOCUS: NO. OF EMPLOYEES:
Manufacturer Food Processing
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INTRODUCTION
A managerial accounting strategy focusing on maintaining efficient levels of both Components of working capital, current assets and current liabilities, in respect to each other are referred to as working capital management. Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. Implementing an effective working capital management system is an excellent way for many companies to improve their earnings. The two main aspects of working capital management are ratio analysis and management of individual components of working capital. Ratio analysis will lead management to identify areas of focus such as inventory management, cash management, accounts receivable and payable management. The study objectives in working capital management particular to this study are: To examine the impact of accounts receivables days, inventories days, accounts payable Days and cash conversion cycle on return on total assets To analyze the trend in working capital needs of firms and to examine the causes for any significant differences between the industries.
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The working capital is calculated as: WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIES
CURRENT ASSETS
Cash in hand/at bank Bills Receivable Sundry Debtors Short term Loans Inventory/ Stock Temporary Investment Prepaid Expenses Accrued Income
CURRENT LIABILITY
Bills Payable Sundry Creditors Outstanding Expenses Accrued Expenses Bank overdraft
Positive working capital means that the company is able to pay off its short-term liabilities. Negative working capital means that a company currently is unable to meet its short-term liabilities with its current assets (cash, accounts receivable, inventory). If a company's current assets do not exceed its current liabilities, then it may run into trouble paying back creditors in the short term. The worst-case scenario is bankruptcy. A declining working capital ratio over a longer time period could also be a red flag that warrants further analysis. Working capital also gives investors an idea of the company's underlying operational efficiency. Money that is tied up in inventory or money that customers still owe to the company cannot be used to pay off any of the company's obligations. So, even if accompany is not operating in the most efficient manner (slow collection), it will show up as an increase in the working capital. This can be seen by comparing the working capital from one period to another; slow collection may signal an underlying problem in the company's operations.
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The objective of working capital management is to maintain the optimum balance of each of the working capital components. This includes making sure that funds are held as cash in bank deposits for as long as and in the largest amounts possible, thereby maximizing the interest earned. However, such cash may more appropriately be invested in other assets or in reducing other liabilities.
Cash Conversion Cycle = Average Stockholding Period (in days) + Average Receivables. Processing Period (in days) - Average Payables Processing Period (in days) with. Average Stockholding Period (in days) = Closing Stock / Average Daily Purchases. Average Receivables Processing Period (in days) = Accounts Receivable / Average Daily Credit Sales. Average Payable Processing Period (in days) = Accounts Payable / Average Daily Credit Purchases.
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A short cash conversion cycle indicates good working capital management. Conversely, a long cash conversion cycle suggests that capital is tied up while the business waits for customers to pay. The longer the production process, the more cash the firm must keep tied up in inventories. Similarly, the longer it takes customers to pay their bills, the higher the value of accounts receivable. On the other hand, if a firm can delay paying for its own materials, it may reduce the amount of cash it needs. In other words, accounts payable reduce net working capital.
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2007
2008
698
871
58
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1000 800 600 400 200 0 2006 2007 2008 58 691 871
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PERCENTAGE CHANGE IN CURRENT ASSET & CURRENT LIABILITY FROM 2006 TO 2008
A
CURRENT ASSET Cash & Equilvalants Accounts Receivable Inventory Other current Asset Total Current asset B CURRENT LIABILITY Accounts Receivable Short term debt Accrued Liability Total current liability
2006
2007
2008
15 1.9 0 0 16.9
12.9 10.8
23.7
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CHART ANALYSIS
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2006
1 Total Current Assets 2 current Liabilities (Other than Bank Borrowings) 3 working capital gap(1-2) 4 Min. stipulated Net working capital( 25% of Total C.A) 5 Actual/ projected Net W.C. 6 item 3 minus item 4 7 item 3 minus item 5 8 Max. Permissible Bank Finance (item 6 or 7, Whichever is less)
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ANALYSIS
Working capital management ensures a company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses. In 2006 the company have Rs.691mill$. Its shows good financial position of the company. In 2007 it increases to 871 mill $. In this year company have take less short term debt from previous year. This year company uses his own funds. Its shows the efficient working capital management by Pepsi. In 2008 the company have only 58 mill $ working capital because in this year company have takes much more short term loans for its expansion and pay for his day to day expenses. Its shows the company have not utilise efficiently the fixed assets. In this year world economy faces downturns. Recession has also affected on Pepsi. This year. For this company has take $1408 mill. Short term loans. Its increases the current liability of the company. Company pay its quickly in his payable time. Its shows the good liquidity position of the company in 2008. This year company have more cash & bank balance in hand from the previous year. Its 50% more than from the previous year. This year company have $1675 mill. Accounts payable it is less from the previous year. It is good for the company.
To observe the systems, process, interactions in the organization. To study and analyze the working capital management of PepsiCo. To study that how they use working capital to solve day to day problems. To study about their Operating Cycle, cash conversion cycle, processing period.
Research Methodology
RAJU KUMAR SINGH
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Primary Data:
Collected data through discussion with the Finance manager in Pepsi. Collected data during working in Pepsi.
Secondary Data:
Collected data from personnel manual of Pepsi. Collected data from different magazines, journals, News papers and Internet.
For this project Ive used the secondary data in the form of Annual report 2006, Annual report 2007, and Annual report 2008.
TOOLS
RAJU KUMAR SINGH
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Ive used analysis tools that are mention below Ratio Analysis Charts & Graphs
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Rs. IN MILL.$
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CHART ANALYSIS
INTERPRETATION
By analyzing the 3 years data we see that the inventories are increased in year 2007 by 577. We are looking approximate same pattern in inventories. We can see that inventories are grown by 4.1% and 4.1% in 06 and 07 respectively from previous year. By this growth we can say that the company is growing very smoothly in soft drink sector. A company uses inventory when they have demand in market and Pepsi is having a great demand in beverages sector. From other point of view we can say that the liquidity of firm is blocked in inventories but to stock is very good due to uncertainty of availability of raw material in time.
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2008
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INTERPRETATION
In the table and figure we see that there is rise in the debtors in PepsiCo Limited in the successive years. A simple logic is that debtors increase only when sales increase and if sales increases it is good sign for growth. We can say that it is a good sign as well as negative also. Company policy of debtors is very good but a risk of bad debts is always present in high debtors. When sales is increasing with a great speed the profit also increases. If company decreases the Debtors they can use the money in many investment plans.
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RS.IN MILL. $ 2006 CASH in hand& 629 BANKBALANCE & EQUILANTS 2007 647 2008 966
CHART ANALYSIS
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CHART ANALYSIS
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2006
Deferred taxes Proposed Dividend Income tax
INTERPRETATION
From the above table we can see that provision shows an approximate same trend and the huge amount is being kept in these provisions. Though the profits of the company are increased income tax is also increased which is good that company is creating goodwill in market by paying income tax in time. Other provisions are also for the benefit of employees and public. This is good sign for Company growth.
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2006 10.1
2007 9.5
2008 9.5
CHART ANALYSIS
10.1
9.5
9.5
2006
2007
2008
INTERPRETATION
Generally a low debtors turnover ratio implies that it considered congenial for the business as it implies better cash flow. The ratio indicates the time at which the debts are collected on an average during the year. Needless to say that a high Debtors Turnover Ratio implies a shorter collection period which indicates prompt payment made by the customer.
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2006 87.4
2007 90.3
2008 87.6
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INTERPRETATION
Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers throughout the year. Generally a low creditors turnover ratio implies favourable since the firm enjoys lengthy credit period. Now if we analyze the three years data we find that in these year the ratio was approximately same high which means that its position of creditors is good, but in the 2007 it increases to 90 days. In next year it is seen that it has followed a decreasing trend which is very good sign for the company. So we can say it enjoys a very good credit facility from the from the suppliers.
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Average stock INVENTORY TURNOVER RATIO. = ______________ Cost of goods sold * 365
2006 13.7
2007 13.3
2008 13.7
CHART ANALYSIS
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TOTAL CURRENT ASSET CURRENT RATIO = ________________________ TOTAL CURRENT LIABILITY YEARS CURRENT RATIO 2006 1.34 2007 2008 1.39 1.02
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CHART ANALYSIS
INTERPRETATION
This ratio reflects the financial stability of the enterprise. The standard of the normal ratio is 2:1 but in most of companies standard is taken according to Tandon Committee which is taken as 1.33:1. Now if we analyze the three years data it can be predicted that it holds a stable position all throughout period but it is seen that it holds a low position than the standard one and the company is required to improve its position.
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2006 1.08
2007 1.13
2008 0.84
CHART ANALYSIS
INTERPRETATION It is the ratio between quick liquid assets and quick liabilities. The normal value for such
ratio is taken to be 1:1. It is used as an assessment tool for testing the liquidity position of the firm. It indicates the relationship between strictly liquid assets whose realizable value is almost certain on one hand and strictly liquid liabilities on the other hand. Liquid assets comprise all current assets minus stock.
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YEARS
2006 9.88
2007 8.46
2008 130.79
CHART ANALYSIS
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INTERPRETATION
This ratio indicates whether the investments in current assets or net current assets (i.e., working capital) have been properly utilized. In order words it shows the relationship between sales and working capital. Higher the ratio lower is the investment in working capital and higher is the profitability. But too high ratio indicates over trading. This ratio is an important indicator about the working capital position. Now if we analyze the three years data, we find that it follows an increasing trend which means that its investment in working capital is lower and the company is utilizing more of its profit. But we find that in2008 the ratio was increasing up to 130. In this year company takes much more short term loans for its short time requirement which is not a good sign for the company and the company is required to look into these matters closely.
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PROFITABILITY ANALYSIS
Particulars
RS.IN MILL. $
2006
Net Sale Cost of goods sold Operating Profit before Interest Operating Profit after Interest Profit/Loss before Tax Profit/Loss after Tax Dividend Payout/Drawing
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2004
Sales Operating Income Income Tax Net Income
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FINDINGS
Pepsi bottling group has once again, demonstrated the power of our operating capabilities and unique assets in 2008. Comparable diluted earnings per share growth of 3% to $2.27 Worldwide revenue growth of 2% Comparable operating income growth of 2% Returned $624 million in cash to shareholder This year company takes $1400mill short term loans because of macro economics downturns in economy. In 2008 company gives .65$ dividend to his share holder. This year company have 2% growth in EPS this is very low from the previous year because company has paid many interest on short term loans.
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Pepsi bottling group has once again, demonstrated the power of our operating capabilities and unique assets in 2008. While facing unprecedented macroeconomics challenges throughout the world, PBG showed flexibility and discipline to advance our business priorities and become a stronger, more focused organisation. The overall performance of PepsiCo is getting on a good track. The total turnover of the company has registered a growth of 205 Million where as the operating profits for the year were lower by 422 million mainly on the accounts of increase in the volume or sales, higher realization and effective cost control measures taken by the company. The profit before tax is 709 million at against 681 millions in the previous year. The cash earning of the company improved substantially to 1437 million as against 1228 million in the last financial year. With the increase in capacity on account of expansion projects being undertaken by the company, it is expected that the company would be in a position to maintain the growth in future years. Company has parked its surplus fund in the various debt schemes of mutual fund. There is an Investment in non controlled affiliates of 619 million in current year. Company is cash rich but as there are expansion and diversification plans under the pipeline, company is not utilizing these funds. For meeting the working capital needs and capacity expansion needs it has borrowed from banks.
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During the year company has embarked upon expansion projects which would effectively enhance the capacity of the company. With the capacitive power plants already in operation and expansion projects under implementation, it is expected that the beverages division of the company will do well in the foreseeable future.
They achieved these results by adapting quickly to the economic environment and by focusing on several business drivers to grow our top line, improve cost and productivity, and strengthen our people and culture.
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Working capital management is an important yardstick to measure a company operational and financial efficiency. This aspect must form part of the strategic and operational thinking. Efforts should constantly be made to improve the working capital position. This will yield greater efficiencies and improve customer satisfaction.
Placing the responsibility for collecting the debt upon the centre that made the sale. i.e., cold rolled, hot rolled, galvanized etc.
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REFRENCE
Shashi k. Gupta (2008) Financial Management, kalyani Publications
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27-Dec-08
29-Dec-07
30-Dec-06
Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets 2,064,000 213,000 4,683,000 2,522,000 1,324,000 910,000 1,571,000 4,389,000 2,290,000 991,000 1,651,000 1,171,000 3,725,000 1,926,000 657,000
Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges
Total Assets
35,994,000
34,628,000
29,930,000
Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt 6,494,000 369,000 6,209,000 5,271,000 274,000
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Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Minority Interest Negative Goodwill
Total Liabilities
23,888,000
17,394,000
14,483,000
Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity (97,000) 30,000 30,638,000 (14,122,000) 351,000 (4,694,000) 41,000 30,000 28,184,000 (10,519,000) 450,000 (952,000) (79,000) 30,000 24,837,000 (7,758,000) 584,000 (2,246,000)
12,203,000
17,234,000
15,447,000
$5,219,000
$10,021,000
$9,004,000
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PERIOD ENDING
Gross Profit
6,210,000
6,221,000
5,920,000
Operating Expenses Research Development Selling General and Administrative Non Recurring Others Total Operating Expenses 5,149,000 412,000 5,150,000 4,903,000 -
649,000
1,071,000
1,017,000
Income from Continuing Operations Total Other Income/Expenses Net (25,000) Earnings Before Interest And Taxes 564,000 Interest Expense 290,000 Income Before Tax 274,000 Income Tax Expense 112,000 Minority Interest (60,000) Net Income From Continuing Ops 162,000
Non-recurring Events Discontinued Operations Extraordinary Items Effect Of Accounting Changes Other Items
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Net Income Preferred Stock And Other Adjustments Net Income Applicable To Common Shares
162,000 $162,000
532,000 $532,000
522,000 $522,000
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