You are on page 1of 83


Submitted in partial fulfilment of the requirement for the award of
Two year full time, Masters in Business Administration.
Sudhir Kumar
Summer Project-2009 Working Capital
Whatever we do and whatever we achieve during the course of our limited life
is ust not done only by our own efforts, but by efforts contributed by other
people associated with us indirectly or directly. ! than" all those people who
contributed to this from the very beginning till its successful end.
! sincerely than" Mr. Ashutosh Aggarwal (Account Executive, PepsiCo,
Phillaur), person of amiable personality, for assigning such a challenging
proect wor" which has enriched my wor" e#perience and getting me
acclimati$ed in a fit and final wor"ing ambience in the premises of PEPSICO.
! ac"nowledge my gratitude to Ms. Harjeet Kaur (Lovely Professional
University), for her e#tended guidance, encouragement, support and reviews
without whom this proect would not have been a success.
%ast but not the least ! would li"e to e#tend my than"s to all the employees at
&'&S!() *Aradhna +rin"s , Beverages &vt. %td- and my friends for their
cooperation, valuable information and feedbac" during my proect.

1. '.'(/T!0' S/MMA12 345
Lovely Professional University
Summer Project-2009 Working Capital
2. %!T'1AT/1' 1'0!'W 6478
3. AB)/T T9' ()M&A:2 7;48<
a. (ompany profile 7=
b. Mission , 0ision 7>
c. (ompany %eadership 7<
d. (ompany Brands 8?
e. Milestones 8=
f. (ompany &rofile in !ndia 85
4. W)1@!:A (A&!TA% MA:AA'M':T ;?4;6
a. !ntroduction ;7
b. Wor"ing (apital Analysis ;;
c. :ature , importance of wor"ing capital ;;
d. The importance of Aood Wor"ing (apital ;=
e. Wor"ing (apital (ycle ;5
5. A:A%2S!S )B W)1@!:A (A&!TA% MA:AA' ;>4=;
6. M':T
a. Schedule of changes !n wor"ing (apital Management ;>
b. &ercentage change in wor"ing capital =?
c. Assessment of wor"ing (apital Management =8
7. )BC'(T!0' )B T9' ST/+2 ==
8. 1'S'A(9 M'T9)+)%)A2 =34=5
9. A:A%2S!S )B T9' ST/+2 =6453
a. Analysis of various components =>435
b. !nventory =>
c. Sundry +ebtors 3?
d. (ash , Ban" Balance 38
e. (urrent %iability 3=
f. &rovision Analysis 35
10.W)1@!:A (A&!TA% 1AT!) 36453
a. 1eceivable 1atio 3>
b. &ayable 1atio 3<
c. !nventory 1atio 57
Lovely Professional University
Summer Project-2009 Working Capital
d. (urrent 1atio 58
e. Duic" 1atio 5=
f. Wor"ing capital 1atio 5=
11. &1)B!T , %)SS A(()/:T 55
12.!:()M' STAT'M':T A:A%2S!S 56
13.MAC)1 B!:+!:AS 5<
14.():(%/S!): 6?
15.1'()MM':+AT!): 6;
16.B!B%!)A1A&92 , 1'B1':('S 65
17.A::'.T/1' 6>
Executive Summary
The proect on Wor"ing (apital Management has been a very good e#perience.
'very manufacturing company faces the problem of Wor"ing (apital
Management in their day to day processes. An organi$ationEs cost can be
reduced and the profit can be increased only if it is able to manage its Wor"ing
(apital efficiently. At the same time the company can provide customer
satisfaction and hence can improve their overall productivity and profitability.

This proect is a sincere effort to study and analy$e the Wor"ing (apital
Management of &'&S!() Bottling group. The proect was focused on ma"ing a
financial overview of the company by conducting a Wor"ing (apital analysis of
Lovely Professional University
Summer Project-2009 Working Capital
&'&S!() Bottling group for the years 8??5 to 8??> and 1atios , various
components of wor"ing capital , for the year 8??> in a cma*cash monitoring
arrangement- format emphasi$ing on Wor"ing (apital.

The internship is a bridge between the institute and the organi$ation. This
made me to be involved in a proect that helped me to employ my theoretical
"nowledge about the myriad and fascinating facets of finance. And in the
process ! could contribute substantially to the organi$ationEs growth.
The e#perience that ! gathered over the past
two months has certainly provided the orientation, which ! believe will help me
in shouldering any responsibility in future.
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
The research done by &ass (.%., &i"e 1.9., FAn overview of wor"ing capital management
and corporate financingG,*7<>=- describes that over the past =? years maor theoretical
developments have occurred in the areas of longer4term investment and financial decision
ma"ing. 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
short4term finance, in particular that of wor"ing capital management. Such neglect might be
acceptable were wor"ing capital considerations of relatively little importance to the firm, but
effective wor"ing capital management has a crucial role to play in enhancing the profitability
and growth of the firm. !ndeed, e#perience shows that inadequate planning and control of
wor"ing capital is one of the more common causes of business failure.
The research done by 9errfeldt B., F9ow to /nderstand Wor"ing (apital ManagementG
describes thatF(ash is "ingG44so say the money managers who share the responsibility of
running this countryHs businesses. And with ban"s demanding more from their prospective
borrowers, greater emphasis has been placed on those accountable for so4called wor"ing
capital management. Wor"ing capital management refers to the management of current or
short4term assets and short4term liabilities. !n essence, the purpose of that function is to ma"e
certain that the company has enough assets to operate its business. 9ere are things you should
"now about wor"ing capital management.
The research done by, Samiloglu B. and +emirgunes @., FThe 'ffect of Wor"ing (apital
Management on Birm &rofitabilityI 'vidence from Tur"eyG *8??>- describes that the effect of
wor"ing capital management on firm profitability. !n 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 !stanbul Stoc" '#change *!S'- listed
manufacturing firms for the period of 7<<>48??6 has been analysed under a multiple
regression model. 'mpirical findings of the study show that accounts receivables period,
inventory period and leverage affect firm profitability negativelyJ while growth *in sales-
affects firm profitability positively.
Lovely Professional University
Summer Project-2009 Working Capital
The research done by, Appuhami, 1anith B A, FThe !mpact of BirmsH (apital '#penditure on
Wor"ing (apital ManagementI An 'mpirical Study across !ndustries in ThailandG ,
!nternational Management 1eview,*8??>-, The purpose of this research is to investigate the
impact of firmsH capital e#penditure on their wor"ing capital management. The author used
the data colleted from listed companies in the Thailand Stoc" '#change. The study used
Shulman and (o#Hs *7<>3- :et %iquidity Balance and Wor"ing (apital 1equirement as a
pro#y for wor"ing capital measurement and developed multiple regression models. The
empirical research found that firmsH capital e#penditure has a significant impact on wor"ing
capital management. The study also found that the firmsH operating cash flow, which was
recogni$ed as a control variable, has a significant relationship with wor"ing capital
The research done by, 9ardcastle C., FWor"ing (apital ManagementG,*8??6- describes that
Wor"ing capital, sometimes called gross wor"ing capital, simply refers to the firmHs total
current assets *the short4term ones-, cash, mar"etable securities, accounts receivable, and
inventory. While long4term financial analysis primarily concerns strategic planning, wor"ing
capital management deals with day4to4day operations. By ma"ing sure that production lines
do not stop due to lac" 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 ma"e payments when they are due. )bviously without good wor"ing capital
management, no firm can be efficient and profitable.
Lovely Professional University
Summer Project-2009 Working Capital
The research done by, Thachappilly A., FWor"ing (apital Management Manages Blow of
BundsG,*8??<- describes that Wor"ing capital is the cash needed to carry on operations
during the cash conversion cycle, i.e. the days from paying for raw materials to
collecting cash from customers. 1aw materials and operating supplies must be bought
and stored to ensure uninterrupted production. Wages, salaries, utility charges and other
incidentals must be paid for converting the materials into finished products. (ustomers
must be allowed a credit period that is standard in the business. )nly at the end of this
cycle does cash flow in again.
The research done by, Beneda, :ancyJ Khang, 2ilei, FWor"ing (apital Management, Arowth
and &erformance of :ew &ublic (ompaniesG, Credit & Financial Management
Review, (2008) e#amining impact of wor"ing capital management on the operating
performance and growth of new public companies. The study also sheds light on the
relationship of wor"ing capital with debt level, firm ris", and industry. /sing a sample of
initial public offerings *!&)Hs-, 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, fi#ed assets, and accounts.
The research done by, +ubey 1., FWor"ing (apital Management4an 'ffective Tool for
)rganisational SuccessG *8??>- describes that The wor"ing capital in a firm generally
arises out of four basic factors li"e sales volume,technological changes,seasonal ,
cyclical changes and policies of the firm.The strenghth of the firm is dependent on the
wor"ing capital as discussed earlier but this wor"ing 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.!f the level of sales is stable and towards growth the level of cash,receivables and
stoc" will also be on the high.
Lovely Professional University
Summer Project-2009 Working Capital
The research done by, McClure B., ~Wor"ing (apital Wor"sG describes that (ash is the
lifeline of a company. !f this lifeline deteriorates, so does the companyHs ability to fund
operations, reinvest and meet capital requirements and payments. /nderstanding a
companyHs cash flow health is essential to ma"ing investment decisions. A good way to
udge a companyHs cash flow prospects is to loo" at its wor"ing capital management
*W(M-. (ash is "ing, especially at a time when fund raising is harder than ever. %etting
it slip away is an oversight that investors should not forgive. Analy$ing a companyHs
wor"ing capital can provide e#cellent insight into how well a company handles its cash,
and whether it is li"ely to have any on hand to fund growth and contribute to shareholder
The research done by, Aass +., F9ow To !mprove Wor"ing (apital ManagementG *8??5-
L(ash is the lifeblood of businessL is an often repeated ma#im amongst financial
managers. Wor"ing capital management refers to the management of current or short4
term assets and short4term liabilities. (omponents of short4term assets include
inventories, loans and advances, debtors, investments and cash and ban" balances. Short4
term liabilities include creditors, trade advances, borrowings and provisions. The maor
emphasis is, however, on short4term assets, since short4term liabilities arise in the
conte#t of short4term assets. !t is important that companies minimi$e ris" by prudent
wor"ing capital management.
The research done by, Maynard '. 1afuse, F Wor"ing capital managementI an urgent need to
refocusG Management +ecision, *7<<5- Argues that attempts to improve wor"ing capital by
delaying payment to creditors is counter4productive to individuals and to the economy as a
whole. (laims that altering debtor and creditor levels for individual tiers within a value
system will rarely produce any net benefit.&roposes that stoc" reduction generates system4
wide financial improvements and other important benefits./rges those organi$ations see"ing
concentrated wor"ing capital reduction strategies to focus on stoc" management strategies
based on Flean supply4chainG techniques.
Lovely Professional University
Summer Project-2009 Working Capital

The research done by, Thomas M. @rueger, FAn Analysis of Wor"ing (apital Management
1esults Across !ndustriesG American Cournal of Business, *8??3- found distinct levels of
W(M measures for different industries, which tend to be stable over time. Many factors help
to e#plain 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. )ur results should be interpreted cautiously. )ur study ta"es places
over a short time frame during a generally improving mar"et. !n addition, the survey suffers
from survivorship bias M only the top firms within each industry are ran"ed each year and the
composition of those firms within the industry can change annually.
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
PepsiCo is a world leader in convenient foods and beverages, with 8??> revenues of more
than N 7;6<5 Million and 75>,??? employees.
The company consists of Brito4%ay :orth America, &epsi(o Beverages :orth America,
&epsi(o !nternational and Dua"er Boods :orth America. &epsi(o brands are available in
nearly 8?? countries and territories and generate sales at the retail level of about N<8 billion.
Some of &epsi(oHs brand names are more than 7??4years4old, but the corporation is relatively
young. &epsi(o was founded in 7<53 through the merger of &epsi4(ola and Brito4%ay.
Tropicana was acquired in 7<<> and &epsi(o merged with the Dua"er )ats (ompany,
including Aatorade, in 8??7.
&'&S! is a soft drin" produced and manufactured by PepsiCo. !t is sold in many places such
as retail stores, restaurants, schools, cinemas and from vending machines. The drin" was first
made in the 7><?s by pharmacist (aleb Bradham in :ew Bern, :orth (arolina. The brand
was trademar"ed on Cune 75, 7<?;. There have been many &epsi variants produced over the
years since 7><>.
!n )ctober 8??>, &epsi announced that it would be redesigning its logo and re4branding many
of its products by early 8??<. !n 8??<, &epsi, +iet &epsi and &epsi Ma# began using all
lower4case fonts for name brands, and +iet &epsi Ma# was re4branded as &epsi Ma#. The
brandHs blue and red globe trademar" became a series of Lsmiles,L with the central white band
arcing at different angles depending on the product. As of Culy 8??<, the 8??; &epsi logo is
still the current logo for &epsi Wild (herry and &epsi ):'. (ountries such as Australia and
!ndia continue to use the old design on all pac"aging. +iet &epsi Wild (herry, &epsi
throwbac", +iet &epsi %ime, and +iet &epsi 0anilla received the redesign.
Lovely Professional University
Summer Project-2009 Working Capital
!t was first introduced in :orth (arolina in 7><> by (aleb Bradham, who made it at his
pharmacy which sold the drin". @nown bac" then as LBradHs +rin"L, it was later named &epsi
(ola possibly due the digestive en$yme pepsin and "ola nuts used in the recipe. Bradham
sought to create a fountain drin" that was delicious and would aid in digestion and boost
!n 7<?;, Bradham moved the bottling of &epsi4(ola from his drugstore into a rented
warehouse. That year, Bradham sold 6,<5> gallons of syrup. The ne#t year, &epsi was sold in
si#4ounce bottles, and sales increased to 7<,>=> gallons. !n 7<85, &epsi received its first logo
redesign since the original design of 7<?3. !n 7<8<, the logo was changed again. !n 7<8<,
automobile race pioneer Barney )ldfield endorsed &epsi4(ola in newspaper ads as LA bully
drin"...refreshing, invigorating, a fine bracer before a race.
!n 7<;7, the &epsi4(ola (ompany went ban"rupt during the Areat +epression4 in large part
due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of
World War !. Assets were sold and 1oy (. Megargel bought the &epsi trademar". 'ight years
later, the company went ban"rupt again. &epsiHs assets were then purchased by (harles Auth,
the &resident of %oft !nc. %oft was a candy manufacturer with retail stores that contained
soda fountains. 9e sought to replace (oca4(ola at his storesH fountains after (o"e refused to
give him a discount on syrup. Auth then had %oftHs chemists reformulate the &epsi4(ola syrup
Lovely Professional University
Summer Project-2009 Working Capital
+uring the Areat +epression, &epsi gained popularity following the introduction in 7<;5 of a
784ounce bottle. !nitially priced at 7? cents, sales were slow, but when the price was slashed
to five cents, sales increased substantially. With a radio advertising campaign featuring the
ingle L&epsi4(ola hits the spot O Twelve full ounces, thatHs a lot O Twice as much for a nic"el,
too O &epsi4(ola is the drin" for you,L arranged in such a way that the ingle never ends. &epsi
encouraged price4watching consumers to switch, obliquely referring to the (oca4(ola
standard of si# ounces per bottle for the price of five cents *a nic"el-, instead of the 78 ounces
&epsi sold at the same price. (oming at a time of economic crisis, the campaign succeeded in
boosting &epsiHs status. !n 7<;5 3??,???,??? bottles of &epsi were consumed. Brom 7<;5 to
7<;>, &epsi4(olaHs profits doubled.
&epsiHs success under Auth came while the %oft (andy business was faltering. Since he had
initially used %oftHs finances and facilities to establish the new &epsi success, the near4
ban"rupt %oft (ompany sued Auth for possession of the &epsi4(ola company. A long legal
battle, Guth v. Loft, then ensued, with the case reaching the +elaware Supreme (ourt and
ultimately ending in a loss for Auth.
9eadquartered in Purchase, New York, with 1esearch and +evelopment 9eadquarters in
Valhalla, The &epsi (ola (ompany began in 7><> by a &harmacist and !ndustrialist
Caleb Bradham, but it only became "nown as &epsi(o when it merged with Frito Lay
in 7<53. /ntil 7<<6, it also owned KFC, Pizza Hut, and Taco Bell, but these fast-food
restaurants were spun off into Tricon Global Restaurants, now Yum! Brands, Inc.
&epsi(o purchased Tropicana in 7<<>, and Quaker Oats in 8??7. !n +ecember 8??3,
&epsi(o surpassed Coca-Cola Company in mar"et value for the first time in 778 years
since both companies began to compete.
Lovely Professional University
Summer Project-2009 Working Capital
PepsiCo, Incorporated
Public (NYSE: PEP)
Purchase, New York, USA
Key people
Indra Nooyi, Chairman, President &
Food and beverage
Tropicana Products
Frappuccino (for Starbucks)
Mountain Dew
$13796 Million USD (2008)
Operating income $1149 Million USD (2008)
Net income $162 Million USD (2008)
Lovely Professional University
Summer Project-2009 Working Capital
At &epsi(o, we believe being a responsible corporate citi$en is not only the right thing to do,
but the right thing to do for our business.
)ur mission is to be the worldEs premier consumer products focused on convenient foods and
beverages. We see" 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.
F&epsi(o responsibility is to continually improve all aspects of the world in which we
operate environment, social, economic M creating a better tomorrow than todayG.
)ur 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 ma"ing &epsi(o
a truly sustainable company.
Lovely Professional University
Summer Project-2009 Working Capital
We are a company full of strong, talented individuals starting at the top of our organi$ation.
Aet to "now the inspiring people helping lead &epsi(o on its H&erformance with &urposeH
LTogether we are all building on the platform of human, environmental and talent
sustainability while continuing to deliver great results.L
(hairman and (')
Lovely Professional University
Indra K. Nooyi
Chairman and CEO
Massimo F. d'Amore
CEO PepsiCo
Americas Beverages
1ohn C. Compton
CEO PepsiCo
Americas Foods
Michael D. White
CEO PepsiCo Intl.
& Vice Chairman,
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
&epsi(o owns five different billion4dollar brands. These are Pepsi,
Tropicana, Frito-Lay, Quaker, and Gatorade.

The company owns many other brands as well.
/&epsi, including/
&epsi4(ola, (affeine4Bree &epsi, +iet &epsiO&epsi %ight, (affeine4Bree +iet &epsi,
(affeine4Bree &epsi %ight, Wild (herry &epsi, &epsi %ime, &epsi Ma#, &epsi Twist
and &epsi ):'.
)ther /.S. carbonated soft drin"s including Brawg, Mountain +ew, Mug 1oot Beer,
Sierra Mist and Tropicana Twister Soda
6 /p *international distribution-
)ther /.S. beverages including Aquafina *Blavour Splash, Alive, and TwistOBurst-,
+ole, Aatorade, Mountain +ew AM&, &ropel Bitness Water, SoBe, Dua"er Mil" (hillers,
Ben , CerryHs Mil"Sha"es, and Tropicana
/Beverages mar"eted outside the /.S/.I Alvalle, (oncordia, (opella, 'vervess,
Biesta, BruiH0ita, Bru"o, @as, %oP$a, Man$anita Sol, Mirinda, &aso de los Toros, 1adical
Bruit, San (arlos, Shani, Teem, Triple @ola, and 2edigun
U.S Frito-Lay brandsI Ba"en4ets, Barcel, Bocabits, (heese Tris, (heetos,
(hesterHs, (hi$itos, (hurrumais, (rac"er Cac", (ruitos, +oritos, Bandangos, Britos,
Bunyuns, Aamesa, Ao Snac"s, CamesH ArandmaHs (oo"ies, 9am"aHs, %ayHs, Miss 0ic"ieHs,
Munchies, Munchos, :i" :a"s, )berto Meat Snac"s, Duavers, 1old Aold, 1uffles,
Lovely Professional University
Summer Project-2009 Working Capital
1ustlerHs Meat Stic"s, Sabritas, Sabritones, Santitas, Smartfood, The SmithHs Snac"food
(ompany, SonricHs, StacyHs &ita (hips, Sun (hips, Tor4tees, Tostitos, Wal"ers, and
U.S Quaker Oats brands: Aunt Cemima, (apHn (runch, (oqueiro, (rispHums,
(ruesli, BrescAvena, @ing 0itaman, %ife, )atso Simple,Dua"e, Duisp, 1ice4A41oni, and
Lovely Professional University
Summer Project-2009 Working Capital
2008 Milestones
&epsi(o Boundation announces two maor new grants to Water&artners and Safe
Water :etwor" programs to provide access to safe water and sanitation in developing
&epsi(o Again :amed to the +ow Cones Sustainability !nde#
&epsi(o Agrees to Buy BulgariaHs %eading :uts and Seeds (ompany
&epsi(o Announces !nitiatives With the 'arth !nstitute and 98) Africa to +rive
Sustainable Water &ractices
Borbes :ames &epsi(o Among !ts Best Big (ompanies
&epsi(o !ndia (ommissions Birst 1emote Wind Turbine to Aenerate 1enewable,
(lean 'nergy
(1) :ames &epsi(o to Top 83 7?? Best (orporate (iti$ens 8??>
&epsi(o to Buy 1ussian Cuice %eader, %ebedyans"y
'mployees %ead 'ffort to Ma"e (hicago &la$a Birst %''+4(ertified &epsi(o
Aatorade %aunches Aatorade Tiger with (omprehensive !ntegrated Mar"eting
&epsi(o 9onored with 8??> 'nergy Star &artner of the 2ear Award
/@ 0itamin Water Brand4 0 Water Acquired by &epsi(o
Lovely Professional University
Summer Project-2009 Working Capital
Dua"er &lant in (edar 1apids (loses and 1eopens Bacility +ue to Blooding to &rotect
&epsi(o Boodservice and :a"ed Cuice '#pand Starbuc"s &resence
Aatorade Sports Science !nstitute Aathers WorldHs %eading 1esearchers on &rotein
&epsi(o !nternationalHs (hina Boods Wins L(hinaHs Top %eaders 8??>L Award
Wall Street Cournal Article 1ecogni$es &epsi(o for %eadership in 'mployment of
&eople with +ifferent Abilities
&epsi(o and Brito4%ay Coin SmartWay in (ommitment to 1educe Areenhouse Aas
&epsi(o Beats (o"e in 1ace to %aunch :ew :atural Sweetener *Stevia-
&epsi(o Brance 1ecogni$ed as LAreat &lace To Wor"L by !nstitute Survey
&epsi(o (ommits to 1educing Acryalmide %evels in &otato (hip &roducts and
1estructured &otato Snac"s in (alifornia
Subway :ames &epsi(o L0endor of the 2earL for Sustainability %eadership
Ta$o Tea Coins &epsi %ipton &artnership
Lovely Professional University
Summer Project-2009 Working Capital
&epsi(o entered !ndia in 7<>> and has grown to become one of the countryEs leading food
and beverage companies. )ne of the largest multinational investors in the country, &epsi(o
has established a business which aims to serve the long term dynamic needs of !ndia.
&epsi(o !ndia and its partners have invested more than /.S.N7 billion since the company was
established in the country. &epsi(o provides direct and indirect employment to 73?,???
people including suppliers and distributors.
&epsi(o nourishes consumers with a range of products from treats to healthy eats, that deliver
oy as well as nutrition and always, good taste. &epsi(o !ndiaEs e#pansive portfolio includes
iconic refreshment beverages &epsi, 6 /&, Mirinda and Mountain +ew, in addition to low
calorie options such as +iet &epsi, hydrating and nutritional beverages such as Aquafina
drin"ing water, isotonic sports drin"s 4 Aatorade, Tropicana7??Q fruit uices, and uice based
drin"s M Tropicana :ectars, Tropicana Twister and Slice. %ocal brands M %ehar 'vervess
Soda, +u"es %emonade and Mangola add to the diverse range of brands.
&epsi(oEs foods company, Brito4%ay, is the leader in the branded salty snac" mar"et and all
Brito %ay products are free of trans4fat and MSA. !t manufactures %ayEs &otato (hipsJ
(heetos e#truded snac"s, /ncle (hips and traditional snac"s under the @ur"ure and %ehar
brands. The companyEs high fibre brea"fast cereal, Dua"er )ats, and low fat and roasted
snac" options enhance the healthful choices available to consumers. Brito %ayEs core
products, %ayEs, @ur"ure, /ncle (hips and (heetos are coo"ed in 1ice Bran )il to
significantly reduce saturated fats and all of its products contain voluntary nutritional
labelling on their pac"ets.
The group has built an e#pansive beverage and foods business. To support its operations,
&epsi(o has =; bottling plants in !ndia, of which 73 are company owned and 8> are
franchisee owned. !n addition to this, &epsi(oEs Brito %ay foods division has ; state4of4the4art
plants. &epsi(oEs business is based on its sustainability vision of ma"ing tomorrow better
than today. &epsi(oEs commitment to living by this vision every day is visible in its
contribution to the country, consumers and farmers.
Lovely Professional University
Summer Project-2009 Working Capital
&epsi(o gained entry to !ndia in 7<>> by creating a oint venture with the &unab
government4owned &unab Agro !ndustrial (orporation *&A!(- and 0oltas !ndia %imited.
This oint venture mar"eted and sold %ehar &epsi until 7<<7, when the use of foreign brands
was allowedJ &epsi(o bought out its partners and ended the oint venture in 7<<=. )thers
claim that firstly &epsi was banned from import in !ndia, in 7<6?, for having refused to
release the list of its ingredients and in 7<<;, the ban was lifted, with &epsi arriving on the
mar"et shortly afterwards. These controversies are a reminder of L!ndiaHs sometimes
acrimonious relationship with huge multinational companies.L !ndeed, some argue that
&epsi(o and The (oca4(ola (ompany have Lbeen maor targets in part because they are
well4"nown foreign companies that draw plenty of attention.L
!n 8??;, the (entre for Science and 'nvironment *(S'-, a non4governmental organi$ation in
:ew +elhi, said aerated waters produced by soft drin"s manufacturers in !ndia, including
multinational giants &epsi(o and The (oca4(ola (ompany, contained to#ins, including
lindane, ++T, malathion and chlorpyrifos R pesticides that can contribute to cancer, a
brea"down of the immune system and cause birth defects. Tested products included (o"e,
&epsi, 6 /p, Mirinda, Banta, Thums /p, %imca, and Sprite. (S' found that the !ndian4
produced &epsiHs soft drin" products had ;5 times the level of pesticide residues permitted
under 'uropean /nion regulationsJ (oca (olaHs ;? times. (S' said it had tested the same
products in the /S and found no such residues. 9owever, this was the 'uropean standard for
water, not for other drin"s. :o law bans the presence of pesticides in drin"s in !ndia.
The (oca4(ola (ompany and &epsi(o
angrily denied allegations that their products manufactured in !ndia contained to#in levels far
above the norms permitted in the developed world. But an !ndian parliamentary committee,
in 8??=, bac"ed up (S'Hs findings and a government4appointed committee, is now trying to
develop the worldHs first pesticides standards for soft drin"s. (o"e and &epsi(o opposed the
move, arguing that lab tests arenHt reliable enough to detect minute traces of pesticides in
comple# drin"s. )n +ecember 6, 8??=, !ndiaHs Supreme (ourt ruled that both &epsi(o and
competitor The (oca4(ola (ompany must label all cans and bottles of the respective soft
drin"s with a consumer warning after tests showed unacceptable levels of residual pesticides.
Both companies continue to maintain that their products meet all international safety
standards without yet implementing the Supreme (ourt ruling
As of 8??3, The (oca4(ola
(ompany and &epsi(o together hold <3Q mar"et share of soft4drin" sales in !ndia. &epsi(o
Lovely Professional University
Summer Project-2009 Working Capital
has also been accused by the puthussery panchayat in the &ala""ad district in @erala, !ndia,
of practicing Lwater piracyL due to its role in e#ploitation of ground water resources resulting
in scarcity of drin"ing water for the panchayatHs residents, who have been pressuring the
government to close down the &epsi(o unit in the village.
!n 8??5, the (S' again found that soda drin"s, including both &epsi and (oca4(ola, had high
levels of pesticides in their drin"s. Both &epsi(o and The (oca4(ola (ompany maintain that
their drin"s are safe for consumption and have published news paper advertisements that say
pesticide levels in their products are less than those in other foods such as tea, fruit and dairy
products. !n the !ndian state of @erala, sale and production of &epsi4(ola, along with other
soft drin"s, was banned by the state government in 8??5, but this was reversed by the @erala
high court merely a month later. Bive other !ndian states have announced partial bans on the
drin"s in schools, colleges and hospitals.
Lovely Professional University
Summer Project-2009 Working Capital
Pepsi Co India Holdings Private Limited
3B;DLF Corporate park`s Block; Qutub
Enclave; Gurgaon, Haryana, India
Sanjeev Chadha, CEO of PepsiCo India.
Mango, Guava, Papaya, Banana
Food Processing
Middle East
Above 1000 People
Above US$100 Million
Gained entry to India in T 1988 T

Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
A managerial accounting strategy focusing on maintaining efficient levels of both
(omponents of wor"ing capital, current assets and current liabilities, in respect to each other
are referred to as wor"ing capital management. Wor"ing capital management ensures a
company has sufficient cash flow in order to meet its short4term debt obligations and
operating e#penses. !mplementing an effective wor"ing capital management system is an
e#cellent way for many companies to improve their earnings. The two main aspects of
wor"ing capital management are ratio analysis and management of individual components of
wor"ing capital. 1atio analysis will lead management to identify areas of focus such as
inventory management, cash management, accounts receivable and payable management.
The study obectives in wor"ing capital management particular to this study areI
To e#amine the impact of accounts receivables days, inventories days, accounts
payable +ays and cash conversion cycle on return on total assets
To analy$e the trend in wor"ing capital needs of firms and to e#amine the causes for
any significant differences between the industries.
Working Capital Components
The term wor"ing capital refers to the amount of capital which is readily available to an
)rgani$ation. !t is a measure of both a companyHs efficiency and its short4term financial
health. That is, wor"ing capital is the difference between resources in cash or readily
convertible into cash *(urrent Assets- and organi$ational commitments for which cash will
soon be required *(urrent %iabilities-. (urrent Assets are resources which are in cash or will
soon be converted into cash in Fthe ordinary course of businessGS. (urrent %iabilities are
commitments which will soon require cash settlement in Fthe ordinary course of businessG.
Lovely Professional University
Summer Project-2009 Working Capital
The wor"ing capital is calculated asI
W)1@!:A (A&!TA% T (/11':T ASS'TS4(/11':T %!AB!%!T!'S
(ash in handOat ban" Bills &ayable
Bills 1eceivable Sundry (reditors
Sundry +ebtors )utstanding '#penses
Short term %oans Accrued '#penses
!nventoryO Stoc" Ban" overdraft
Temporary !nvestment
&repaid '#penses
Accrued !ncome
&ositive wor"ing capital means that the company is able to pay off its short4term liabilities.
:egative wor"ing capital means that a company currently is unable to meet its short4term
liabilities with its current assets *cash, accounts receivable, inventory-. !f a companyHs current
assets do not e#ceed its current liabilities, then it may run into trouble paying bac" creditors
in the short term. The worst4case scenario is ban"ruptcy. A declining wor"ing capital ratio
over a longer time period could also be a red flag that warrants further analysis. Wor"ing
capital also gives investors an idea of the companyHs 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 companyHs obligations. So, even if accompany is not operating
in the most efficient manner *slow collection-, it will show up as an increase in the wor"ing
capital. This can be seen by comparing the wor"ing capital from one period to anotherJ slow
collection may signal an underlying problem in the companyHs operations.
Working Capital Analysis
The maor components of gross wor"ing capital include stoc"s *raw materials, wor"4in4
progress and finished goods-, debtors, cash and ban" balances. The composition of wor"ing
Lovely Professional University
Summer Project-2009 Working Capital
capital depends on a multiple of factors, such as operating level, level of operational
efficiency, inventory policies, boo" debt policies, technology used and nature of the industry.
While inter4 industry variation is e#pected to be high, the degree of variation is e#pected to
be low for firms within the industry.
Nature and Importance of Working Capital
The wor"ing capital meets the short4term financial requirements of a business enterprise. !t is
a trading capital, not retained in the business in a particular form for longer than a year. The
money invested in it changes form and substance during the normal course of business
operations. !f it becomes wea", the business can hardly prosper and survive. The success of a
firm depends ultimately, on its ability to generate cash receipts in e#cess of disbursements.
)n the one hand, wor"ing capital is always significant. This is especially true from the
lenders or creditors
&erspective, where the main concern is defensivenessI can the company meet its short4term
obligations, such as paying vendor billsU
But from the perspective of equity valuation and the companyHs growth prospects, wor"ing
capital is more critical to some businesses than to others. At the ris" of oversimplifying, we
could say that the models of these businesses are asset or capital intensive rather than service
or people intensive.
The Importance of Good Working Capital Management
Lovely Professional University
Summer Project-2009 Working Capital
Wor"ing capital constitutes part of the (rownEs investment in a department. Associated with
this is an opportunity cost to the (rown. *Money invested in one area may FcostG
opportunities for investment in other areas.- !f a department is operating with more wor"ing
capital than is necessary, this over4investment represents an unnecessary cost to the (rown.
Brom a departmentEs point of view, e#cess wor"ing capital means operating inefficiencies. !n
addition, unnecessary wor"ing capital increases the amount of the capital charges.
The Management of Working Capital
The amounts invested in wor"ing capital are often high in proportion to the total assets
employed and so it is vital that these amounts are used in an efficient and effective way. A
firm can be very profitable, but if this is not translated into cash from operations within the
same operating cycle, the firm would need to borrow to support its continued wor"ing capital
needs. Thus, the twin obectives of profitability and liquidity must be synchroni$ed and one
should not impinge on the other for long. !nvestments in current assets are inevitable to
ensure delivery of goods or services to the ultimate customers and a proper management of
same should give the desired impact on either profitability or liquidity. !f resources are
bloc"ed at different stages of the supply chain, this will prolong the cash operating cycle.
Although this might increase profitability *due to increase sales-, it may also adversely affect
the profitability if the costs tied up in wor"ing capital e#ceed the benefits of holding more
inventory andOor granting more trade credit to customers. Another component of wor"ing
capital is accounts payable, but it is different in the sense that it does not consumer sourcesJ
instead it is often used as a short term source of finance. Thus it helps firms to reduce its cash
operating cycle, but it has an implicit cost where discount is offered for early settlement of
Approaches to Working Capital Management
Lovely Professional University
Summer Project-2009 Working Capital
The obective of wor"ing capital management is to maintain the optimum balance of each of
the wor"ing capital components. This includes ma"ing sure that funds are held as cash in
ban" deposits for as long as and in the largest amounts possible, thereby ma#imi$ing the
interest earned.
9owever, such cash may more appropriately be FinvestedG in other assets or in reducing
other liabilities.
Wor"ing capital management ta"es place on two levelsI
1atio analysis can be used to monitor overall trends in wor"ing capital and to identify areas
requiring closer management.
The individual components of wor"ing capital can be effectively managed by using various
techniques and strategies.
When considering these techniques and strategies, departments need to recogni$e that each
department has a unique mi# of wor"ing capital components. The emphasis that needs to be
placed on each component varies according to department. Bor e#ample, some departments
have significant inventory levelsJ others have little if any inventory.
Burthermore, wor"ing capital management is not an end in itself. !t is an integral part of the
departmentEs overall management. The needs of efficient wor"ing capital management must
be considered in relation to other aspects of the departmentEs financial and non4financial
Working Capital Cycle
Lovely Professional University
Summer Project-2009 Working Capital
Wor"ing capital cycle, also "nown as the asset conversion cycle, operating cycle, cash
conversion cycle or ust cash cycle, is used in the financial analysis of a business. The higher
the number, the longer a firmHs money is tied up in business operations and unavailable for
other activities such as investing. The cash conversion cycle is the number of days between
paying for raw materials and receiving cash from selling goods made from that raw material.
(ash (onversion (ycle T Average Stoc"holding &eriod *in days- V Average
&rocessing &eriod *in days- 4 Average &ayables &rocessing &eriod *in days- with.
Average Stoc"holding &eriod *in days- T (losing Stoc" O Average +aily &urchases.
Average 1eceivables &rocessing &eriod *in days- T Accounts 1eceivable O Average
+aily (redit Sales.
Average &ayable &rocessing &eriod *in days- T Accounts &ayable O Average +aily
(redit &urchases.
Lovely Professional University
Summer Project-2009 Working Capital
A short cash conversion cycle indicates good wor"ing capital management. (onversely, 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 "eep tied
up in inventories. Similarly, the longer it ta"es customers to pay their bills, the higher the
value of accounts receivable.
)n the other hand, if a firm can delay paying for its own materials, it may reduce the amount
of cash it needs. !n other words, accounts payable reduce net wor"ing capital.
Lovely Professional University
Summer Project-2009 Working Capital

2006 2007 2008
(ash , 'quilvalnts 58< 5=6 <55
Accounts 1eceivable 7;;8 738? 7;67
!nventory 3;; 366 38>
)ther current Asset 833 ;=8 865
Total Current asset 2749 3086 3141
Accounts &ayable 7566 7<5> 7563
Short term debt ;6= 8=6 7=?>
Accrued %iability ? ? ?
Total current liability 2051 2215 3083
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
2006 2007 2008
(ash , 'quilvalants 3.; =.< 6.=
Accounts 1eceivable 77.8 77.5 7?.5
!nventory =.3 =.= =.7
)ther current Asset 8.7 8.5 8.7
Total Current asset 23.1 23.5 24.2
Accounts 1eceivable 7=.7 73 78.<
Short term debt ;.7 7.< 7?.>
Accrued %iability ? ?

Total current liability 17.2 16.9 23.7
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
*MA.!M/M &'1M!SS!B%' BA:@ B!:A:('-
2006 2007 2008
7 Total (urrent Assets 86=< ;?>5 ;7=7
8 current %iabilities 58< 5=6 <55
*)ther than Ban" Borrowings-
; wor"ing capital gap*748- 878? 8=;< 8763
= Min. stipulated :et wor"ing 5>6.83 667.3 6>3.83
capital* 83Q of Total (.A-
3 ActualO proected :et W.(. 5<> >67 3>
5 item ; minus item = 7=;8.63 7556.3 7;><.63
6 item ; minus item 3 7=88 735> 8776
> Ma#. &ermissible Ban" Binance 7=88 735> 7;><.63
*item 5 or 6, Whichever is less-
Lovely Professional University
Summer Project-2009 Working Capital
Wor"ing capital management ensures a company has sufficient cash flow in order to meet its
short4term debt obligations and operating e#penses. !n 8??5 the company have 1s.5<7millN. !ts
shows good financial position of the company. !n 8??6 it increases to >67 mill N. !n this year
company have ta"e less short term debt from previous year. This year company uses his own
funds. !ts shows the efficient wor"ing capital management by &epsi. !n 8??> the company have
only 3> mill N wor"ing capital because in this year company have ta"es much more short term
loans for its e#pansion and pay for his day to day e#penses. !ts shows the company have not
utilise efficiently the fi#ed assets.
!n this year world economy faces downturns. 1ecession has also affected on &epsi. This year. Bor
this company has ta"e N7=?> mill. Short term loans. !ts increases the current liability of the
company. (ompany pay its quic"ly in his payable time. !ts shows the good liquidity position of
the company in 8??>.
This year company have more cash , ban" balance in hand from the previous year. !ts 3?Q more
than from the previous year. This year company have N7563 mill. Accounts payable it is less from
the previous year. !t is good for the company.
Objective of the study
Lovely Professional University
Summer Project-2009 Working Capital
To observe the systems, process, interactions in the organi$ation.
To study and analy$e the wor"ing capital management of &epsi(o.
To study that how they use wor"ing capital to solve day to day problems.
To study about their )perating (ycle, cash conversion cycle, processing period.
Research Methodology
Lovely Professional University
Summer Project-2009 Working Capital
Research in common parlance refers to search for knowledge
The term research refers to the systematic method consisting of enunciating the problem ,
formulating a hypothesis collecting the data , analy$ing the facts and reaching the certain
conclusions either in the form of solution towards the concern problem or in certain
generali$ation for some theoretical formulation .
1esearch Methodology is a way to systematically solve the research problem .!t may be
understood as a science of studying how research is done scientifically.
Bor completing the proect wor", data inputs were collected from the following sourcesI
Primary Data:
(ollected data through discussion with the Binance manager in &epsi.
(ollected data during wor"ing in &epsi.

Secondary Data:
(ollected data from personnel manual of &epsi.
(ollected data from different maga$ines, ournals, :ews papers and !nternet.
Bor this proect !Eve used the secondary data in the form of Annual report 8??5, Annual
report 8??6, and Annual report 8??>.
Lovely Professional University
Summer Project-2009 Working Capital
!Eve used analysis tools that are mention below4
1atio Analysis
(harts , Araphs
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
!nventory is total amount of goods and materials content in a store of factory at any given
time. !nventory means stoc" of three things I4
7. 1aw materials
8. Semi finished goods.
;. Binished goods.
Position of inventory in PepsiCo
1s. !: M!%%.N
Inventories 2006 2007 2008
1aw Material , Supply 763 7<3 7>3
Binished goods ;3> ;>8 ;=;
Total 533 577 528
Lovely Professional University
Summer Project-2009 Working Capital
By analy$ing the ; years data we see that the inventories are increased in year 8??6 by 366.
We are loo"ing appro#imate same pattern in inventories. We can see that inventories are
grown by =.7Q and =.7Q in ?5 and ?6 respectively from previous year. By this growth we
can say that the company is growing very smoothly in soft drin" sector. A company uses
inventory when they have demand in mar"et and &epsi is having a great demand in beverages
sector. Brom other point of view we can say that the liquidity of firm is bloc"ed in inventories
but to stoc" is very good due to uncertainty of availability of raw material in time.
Lovely Professional University
Summer Project-2009 Working Capital
+ebtors or an account receivable is an important component of wor"ing capital and fall under
current assets. +ebtors will arise only when credit sales are made.
1S. !: M!%% N
2006 2007 2008
Debtors Net
Trade accounts receivable 7?85 7;7< 78?>
Allowances for doubtful accounts 38 3= 67
Accounts receivable 7<> 7>> 73=
)ther receivable 35 56 >?
1332 1628 1513
Lovely Professional University
Summer Project-2009 Working Capital
!n the table and figure we see that there is rise in the debtors in &epsi(o %imited 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. (ompany policy of debtors is very
good but a ris" of bad debts is always present in high debtors. When sales is increasing with a
great speed the profit also increases. !f company decreases the +ebtors they can use the
money in many investment plans.
Lovely Professional University
Summer Project-2009 Working Capital
(ash is called the most liquid asset and vital current assets. !t is an important component of
wor"ing capital. !n a narrow sense, cash includes notes, ban" draft, cheque etc while in a
broader sense it includes near cash assets such as mar"etable securities and time deposits
with ban".
1S.!: M!%%. N
2006 2007 2008
(AS9 in hand, 58< 5=6 <55
BA:@BA%A:(' , 'D/!%A:TS
Lovely Professional University
Summer Project-2009 Working Capital
!f we analy$e the above table and chart we find that it follows a increasing trend. !n the year
8??5 it had maintained a 58< mill N amount of cash and ban" balance which has increase in
the year 8??6 up to 5=6 mill N but there is huge increase between the year 8??6 and 8??>.
Although companyEs cash is increasing this is very good sign for company. 9olding more
cash is not good it means company not using the cash for better proects. The analysis shows
that the fi# deposits of company are rapidly increase in last year as =<Q respectively from
previous year. (ompany is utili$ing the fi#ed cash for e#ploding the proects that is good for
Lovely Professional University
Summer Project-2009 Working Capital
!: M!%%. N
Accounts payable and 7566 7<5> 7563
)ther (urrent %iabilities
Short term liabilities ;6= 8=? 7?;
(urrent Maturities ? 6 7;?3
Total 2051 2215 3083
Lovely Professional University
Summer Project-2009 Working Capital
we analy$e the above table then we can see that it follow an uneven trend. The important
component of current liabilities is sundry creditors and other liabilities. !n ?54?6 it increased
by 76Q and in ?64?> it increased by 75.<Q. !n ?64?> it was increased because of growth in
short term debt by ;<Q.This is liability for company so this should be less. When company
have minimum liabilities it creates a better goodwill in mar"et. 9igh current liabilities
indicate that company is using credit facility.
Lovely Professional University
Summer Project-2009 Working Capital
2006 2007 2008
+eferred ta#es 57 =8 =6
&roposed +ividend <? 77; 7;3
!ncome ta# 73< 766 778
310 332 294
Brom the above table we can see that provision shows an appro#imate same trend and the
huge amount is being "ept in these provisions. Though the profits of the company are
increased income ta# is also increased which is good that company is creating goodwill in
mar"et by paying income ta# in time. )ther provisions are also for the benefit of employees
and public. This is good sign for (ompany growth.
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
1'('!0AB%' 1AT!) T WWWWWWWWWWW X ;53
8??5 8??6 8??> 2'A1S
1'('!0AB%' 1AT!) 7?.7 <.3 <.3

Aenerally a low debtorEs 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. :eedless to say that a high +ebtors Turnover 1atio implies a
shorter collection period which indicates prompt payment made by the customer.
Lovely Professional University
Summer Project-2009 Working Capital
:ow if we analy$e the three year data we can say that it holds a good position while
receiving its money from its debtors. The ratios are same in last two year, which implies that
recovery position is good and company should maintain these positions.
()ST )B SA%'S
8??5 8??6 8??> 2'A1S
&A2AB%' 1AT!) >6.= <?.; >6.5
*!: +A2S-
Lovely Professional University
Summer Project-2009 Working Capital
Actually this ratio reveals the ability of the firm to avail the credit facility from the suppliers
throughout the year. Aenerally a low creditorEs turnover ratio implies favourable since the
firm enoys lengthy credit period.
:ow if we analy$e the three years data we find that in these year the ratio was appro#imately
same high which means that its position of creditors is good, but in the 8??6 it increases to <?
days. !n ne#t year it is seen that it has followed a decreasing trend which is very good sign
for the company. So we can say it enoys a very good credit facility from the from the
Lovely Professional University
Summer Project-2009 Working Capital
Average stoc"
!:0':T)12 T/1:)0'1 1AT!). T WWWWWWWWWWWWWW X ;53
(ost of goods sold
8??5 8??6 8??> 2'A1S
!.T.1. 1AT!) 7;.6 7;.; 7;.6

Lovely Professional University
Summer Project-2009 Working Capital
This ratio tells the story by which stoc" is converted into sales. A high stoc" turnover ratio
reveals the liquidity of the inventory i.e., how many times on an average, inventory is turned
over or sold during the year. !f a firm maintains a minimum stoc" level in order to ma#imi$e
sales by quic" rotation of inventory and the holding cost of inventory will be minimum. A
low stoc" turnover ratio reveals undesirable accumulation of obsolete stoc".
By analy$ing the three year data it seen that it follows an appro#imately same trend. We see
that from the year 8??5 to 8??> it is more or less double which has been rectified in the year
8??>. But it is needless to say that ratio the company maintains is very high and the company
is required to ta"e measures to lower down this ratio as it affects the wor"ing capital cycle of
company and the flow of cash in the company.
T)TA% (/11':T ASS'T
T)TA% (/11':T %!AB!%!T2
2'A1S 8??5 8??6
(/11':T 1AT!) 7.;= 7.;< 7.?8
Lovely Professional University
Summer Project-2009 Working Capital
This ratio reflects the financial stability of the enterprise. The standard of the normal ratio is
8I7 but in most of companiesE standard is ta"en according to Tandon (ommittee which is
ta"en as 7.;;I7.
:ow if we analy$e the three years data it can be predicted that it holds a stable position all
throughout period but it is seen that it holds a low position than the standard one and the
company is required to improve its position.
Lovely Professional University
Summer Project-2009 Working Capital
T)TA% %!D/!+ ASS'T
T)TA% (/11':T %!AB!%!T2
!t is the ratio between quic" liquid assets and quic" liabilities. The normal value for such
ratio is ta"en to be 7I7. !t is used as an assessment tool for testing the liquidity position of the
firm. !t indicates the relationship between strictly liquid assets whose reali$able value is
almost certain on one hand and strictly liquid liabilities on the other hand. %iquid assets
comprise all current assets minus stoc".
By analy$ing the three years data it can be said that its position was good in the year 8??5
and 8??6 but its decrease in the ne#t year. But it is to be said that it is higher than the
standard in the year 8??5 , 8??6. !ts shows the higher liquidity position of the company.
Lovely Professional University
2'A1S 8??5 8??6 8??>
D/!(@ 1AT!) 7.?> 7.7; ?.>=
Summer Project-2009 Working Capital
()ST )B SA%'
:'T W)1@!:A (A&!TA%
YEARS 2006 2007 2008
Wor"ing capital ratio <.>> >.=5 7;?.6<
Lovely Professional University
Summer Project-2009 Working Capital
This ratio indicates whether the investments in current assets or net current assets *i.e.,
wor"ing capital- have been properly utili$ed. !n order words it shows the relationship
between sales and wor"ing capital. 9igher the ratio lower is the investment in wor"ing
capital and higher is the profitability. But too high ratio indicates over trading.
This ratio is an important indicator about the wor"ing capital position. :ow if we analy$e the
three years data, we find that it follows an increasing trend which means that its investment in
wor"ing capital is lower and the company is utili$ing more of its profit. But we find that
in8??> the ratio was increasing up to 7;?. !n this year company ta"es 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 loo" into these matters closely.
Lovely Professional University
Summer Project-2009 Working Capital
&articulars 1S.!: M!%%. N
8??5 8??6 8??>
:et Sale
786;? 7;3<7 7;,6<5
(ost of goods sold 5<?? 6;6? 63>5
)perating &rofit before !nterest 3>;? 5887 587?
)perating &rofit after !nterest 3>;? 7?67 5=<
&rofitO%oss before Ta# 5>7 6?< 86=
&rofitO%oss after Ta# 388 3;8 758
+ividend &ayoutO+rawing ?.=7 ?.3; ?.53
Lovely Professional University
Summer Project-2009 Working Capital
2004 2005 2006 2007 2008 TTM
7?,<?5 77,>>3 78,6;? 7;,3<7 7;,6<5 7;,=?=
Operating Income
<65 7,?8; 7,?76 7,?67 5=< 576
Income Tax
8;8 8=6 73< 766 778 4<
Net Income
=36 =55 388 3;8 758 88;
Lovely Professional University
Summer Project-2009 Working Capital
Analy$ing the last five year data we say that sales have increasing trend. !ts shows the
growth of the company. The profits are increasing year by year but in 8??> the profits
are very low from previous year. !n this year company ta"es huge amount of short term
loans in this way they give more interest on this. This is the main reason the company
profits are very low. :ow in 8??< the profits of the company is 88; mill N its shows
ama$ing growth rate of the company !n two quarters of 8??< company sales are equal
to last year. This year company cover all the loses of previous year.
Lovely Professional University
Summer Project-2009 Working Capital
&epsi bottling group has once again, demonstrated the power of our operating
capabilities and unique assets in 8??>.
(omparable diluted earnings per share growth of ;Q to N8.86
Worldwide revenue growth of 8Q
(omparable operating income growth of 8Q
1eturned N58= million in cash to shareholder
This year company ta"es N7=??mill short term loans because of macro
economics downturns in economy.
!n 8??> company gives .53N dividend to his share holder.
This year company have 8Q growth in '&S this is very low from the previous
year because company has paid many interest on short term loans.
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
&epsi bottling group has once again, demonstrated the power of our operating capabilities
and unique assets in 8??>. While facing unprecedented macroeconomics challenges
throughout the world, &BA showed fle#ibility and discipline to advance our business
priorities and become a stronger, more focused organisation.
The overall performance of &epsi(o is getting on a good trac". The total
turnover of the company has registered a growth of 8?3 Million where as the operating
profits for the year were lower by =88 million mainly on the accounts of increase in the
volume or sales, higher reali$ation and effective cost control measures ta"en by the company.
The profit before ta# is 6?< million at against 5>7 millions in the previous year. The cash
earning of the company improved substantially to 7=;6 million as against 788> million in the
last financial year. With the increase in capacity on account of e#pansion proects being
underta"en by the company, it is e#pected that the company would be in a position to
maintain the growth in future years.
(ompany has par"ed its surplus fund in the various debt schemes of
mutual fund. There is an !nvestment in non controlled affiliates of 57< million in current year.
(ompany is cash rich but as there are e#pansion and diversification plans under the pipeline,
company is not utili$ing these funds. Bor meeting the wor"ing capital needs and capacity
e#pansion needs it has borrowed from ban"s.
+uring the year company has embar"ed upon e#pansion proects which
would effectively enhance the capacity of the company. With the capacitive power plants
already in operation and e#pansion proects under implementation, it is e#pected that the
beverages division of the company will do well in the foreseeable future.
Lovely Professional University
Summer Project-2009 Working Capital
They achieved these results by adapting quic"ly 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.
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
Measures to Improve Working Capital Management at PEPSICO:
The essence of effective wor"ing capital management is proper cash flow forecasting.
This should ta"e into account the impact of unforeseen events, mar"et cycles, loss of
a prime customer and actions by competitors. So the effect of unforeseen demands of
wor"ing capital should be factored by company. This was one of its reasons for the
variation of its revised wor"ing capital proection from the earlier proection.
!t pays to have contingency plans to tide over une#pected events. While mar"et4
leaders can manage uncertainty better, even other companies must have ris"4
management procedures. These must be based on obective and realistic view of the
role of wor"ing capital.
Addressing the issue of wor"ing capital on a corporate4wide basis has certain
advantages. (ash generated at one location can well be utili$ed at another. Bor this to
happen, information access, efficient ban"ing channels, good lin"ages between
production and billing, internal systems to move cash and good treasury practices
should be in place.
An innovative approach, combining operational and financial s"ills and an all4
encompassing view of the companyEs operations will help in identifying and
implementing strategies that generate short4term cash. This can be achieved by having
the right set of e#ecutives who are responsible for setting targets and performance
levels. They could be then held accountable for delivering, encouraged to be
enterprising and to act as change agents.
'ffective dispute management procedures in relation to customers will go along way
in freeing up cash otherwise loc"ed in due to disputes. !t will also improve customer
service and free up time for legitimate activities li"e sales, order entry and cash
collection. )verall, efficiency will increase due to reduced operating costs.
Wor"ing capital management is an important yardstic" to measure a company
operational and financial efficiency. This aspect must form part of the strategic and
Lovely Professional University
Summer Project-2009 Working Capital
operational thin"ing. 'fforts should constantly be made to improve the wor"ing
capital position. This will yield greater efficiencies and improve customer satisfaction.
!nventories should be managed on a line4by4line basis using the >?O8? rule.
&lacing the responsibility for collecting the debt upon the centre that made the sale.
i.e., cold rolled, hot rolled, galvani$ed etc.
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
Shashi ". Aupta *8??>- Binancial Management, "alyani &ublications
Lovely Professional University
Summer Project-2009 Working Capital
Lovely Professional University
Summer Project-2009 Working Capital
PERIOD ENDING 27-Dec-08 29-Dec-07 30-Dec-06
(urrent Assets
(ash And (ash 'quivalents 8,?5=,??? <7?,??? 7,537,???
Short Term !nvestments 87;,??? 7,367,??? 7,767,???
:et 1eceivables =,5>;,??? =,;><,??? ;,683,???
!nventory 8,388,??? 8,8<?,??? 7,<85,???
)ther (urrent Assets 7,;8=,??? <<7,??? 536,???
Total Current Assets 10,806,000 10,151,000 9,130,000
%ong Term !nvestments ;,<<>,??? =,=63,??? ;,>;<,???
&roperty &lant and 'quipment 77,55;,??? 77,88>,??? <,5>6,???
Aoodwill 3,78=,??? 3,75<,??? =,3<=,???
!ntangible Assets 7,>5?,??? 8,?==,??? 7,>=<,???
Accumulated Amorti$ation 4 4 4
)ther Assets 8,;8=,??? 7,;35,??? 3<<,???
+eferred %ong Term Asset (harges 87<,??? 8?3,??? 8;8,???
Total Assets 35,994,000 34,628,000 29,930,000
(urrent %iabilities
Accounts &ayable 5,=<=,??? 5,8?<,??? 3,867,???
ShortO(urrent %ong Term +ebt ;5<,??? 4 86=,???
Lovely Professional University
Summer Project-2009 Working Capital
)ther (urrent %iabilities 7,<8=,??? 7,3==,??? 7,;73,???
Total Current Liabilities 8,787,000 7,753,000 6,860,000
%ong Term +ebt 6,>3>,??? =,8?;,??? 8,33?,???
)ther %iabilities 6,?76,??? =,6<8,??? =,58=,???
+eferred %ong Term %iability (harges 885,??? 5=5,??? 38>,???
Minority !nterest 4 4 4
:egative Aoodwill 4 4 4
Total Liabilities 23,888,000 17,394,000 14,483,000
Stockholders' Equity
Misc Stoc"s )ptions Warrants 4 4 *6<,???-
1edeemable &referred Stoc" *<6,???- 4 4
&referred Stoc" 4 =7,??? 4
(ommon Stoc" ;?,??? ;?,??? ;?,???
1etained 'arnings ;?,5;>,??? 8>,7>=,??? 8=,>;6,???
Treasury Stoc" *7=,788,???- *7?,37<,???- *6,63>,???-
(apital Surplus ;37,??? =3?,??? 3>=,???
)ther Stoc"holder 'quity *=,5<=,???- *<38,???- *8,8=5,???-
Total Stockholder Equity 12,203,000 17,234,000 15,447,000
Net Tangible Assets $5,219,000 $10,021,000 $9,004,000
Lovely Professional University
Summer Project-2009 Working Capital
PERIOD ENDING 27-Dec-08 29-Dec-07 30-Dec-06
Total Revenue 13,796,000 13,591,000 12,730,000
(ost of 1evenue 6,3>5,??? 6,;6?,??? 5,>7?,???
Gross Profit 6,210,000 6,221,000 5,920,000
)perating '#penses
1esearch +evelopment 4 4 4
Selling Aeneral and Administrative 3,7=<,??? 3,73?,??? =,<?;,???
:on 1ecurring =78,??? 4 4
)thers 4 4 4
Total )perating '#penses 4 4 4
Operating Income or Loss 649,000 1,071,000 1,017,000
!ncome from (ontinuing )perations
Total )ther !ncomeO'#penses :et *83,???- 5,??? *77,???-
'arnings Before !nterest And Ta#es 35=,??? <>;,??? <=6,???
!nterest '#pense 8<?,??? 86=,??? 855,???
!ncome Before Ta# 86=,??? 6?<,??? 5>7,???
!ncome Ta# '#pense 778,??? 766,??? 73<,???
Minority !nterest *5?,???- *<=,???- *3<,???-
:et !ncome Brom (ontinuing )ps 758,??? 3;8,??? 388,???
:on4recurring 'vents
+iscontinued )perations 4 4 4
'#traordinary !tems 4 4 4
'ffect )f Accounting (hanges 4 4 4
)ther !tems 4 4 4
Lovely Professional University
Summer Project-2009 Working Capital
Net Income 162,000 532,000 522,000
&referred Stoc" And )ther Adustments 4 4 4
Net Income Applicable To Common Shares $162,000 $532,000 $522,000
Lovely Professional University