A STUDY ON

WORKING CAPITAL MANAGEMENT

(WITH REFERENCE TO PEARL BOTTLING PVT. LTD.)

A Project Report is Prepared and Submitted to Department of Management Studies,

ANDHRA UNIVERSITY, VISAKHAPATNAM in partial fulfillment for the
Award of Degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by

K.SAI SUDHAKAR
Regd. No. 115232902050

Under the guidance of

K. MADHAVA RAO M.B.A., M.COM. M.Phil., Ph.D.

DEPARTMENT OF MANAGEMENT STUDIES

SANKETIKA VIDYA PARISHAD ENGINEERING COLLEGE

BEHIND YSR CRICKET STADIUM, P.M.PALEM, 530041
Affiliated to ANDHRA UNIVERSITY
VISAKHAPATNAM
 2015-17

DECLARATION

I KANURI SAI SUDHAKAR declare that the project report entitled “WORKING
CAPITAL MANAGEMENT” with reference to PEARL BOTTLING COMPANY PVT. LTD.,
VISAKHAPATNAM has been prepared by me under the guidance of Mr. K.MADHAVA RAO
Assistant Professor is an original work resulted through my own efforts, to best of my knowledge
and belief the similar kind of work has never been done by anyone in the past or else anyone has
submitted for the purpose of awarding degree or diploma to any university.

Date :
(K.SAI SUDHAKAR)

Reg. No. 115232902050

2
 CERTIFICATE

This is to certify that Mr. K.SAI SUDHAKAR, student of MBA, Batch 2015-17, of
SANKETIKA VIDYA PARISHAD ENGINEERING COLLEGE has prepared this project report
entitled “A Study on WORKING CAPITAL MANAGEMENT” with reference to PEARL
BOTTLING PVT. LTD., VISAKHAPATNAM under my guidance and supervision. Further I
state that this project work is bonafied work which was carried out by him, in partial fulfillment for
the award of the Degree of “MASTER OF BUSINESS ADMINISTRATION” mandatory to the
curriculum as set by the university.

{Mr. K. Madhava Rao (Ph.D)}

Assistant Professor
Place: Visakhapatnam
Date:

3
 ACKNOWLEDGEMENTS

I feel immense pleasure and pride of being part of SANKETIKA VIDYA PARISHAD
ENGINNERING COLLEGE that has nurtured me to the present state and I feel a deep sense of
gratitude towards it.

I want to express my deep sense of gratitude to Mr. S.K.GOYAL, (Executive Vice president
Finance), PEARL BOTTLING PVT.LTD., and also K.HARI PRASAD RAO, (Accounts Deputy
Manager), G.BHARGAVA (Asst Manager Finance), for rendering valuable information and
guidance while I am working at Pearl Bottling Pvt. Ltd.

I would take the privilege to thank Mr. V. SRINIVASA RAO Head of the Department and
other faculty members of M.B.A SANKETIKA VIDYA PARISHAD ENGINEERING
COLLEGE for their support. I express my thanks to my project guide Mr. K. MADHAVA RAO,
Assistant professor for having encouraged me to undergo this project and also for his excellent
guidance given to me in completing this project successfully.

I would wish to thank Dr. M.V.V. SUBRAHMANYA SHARMA, PRINCIPAL OF

SANKETIKA VIDYA PARISHAD who has provided me the opportunity to do the project and for
the successful completion of my course.

I am very earnestly acknowledging my deep sense of gratitude, thankfulness to all others

those who extended their constant source of help and guidance to me in carrying out this study and
presenting this report successfully.

K.SAISUDHAKAR

4
 TABLE OF CONTENTS
Page no.

CHAPTER-1

 INTRODUCTION
 IMPORTANCE OF WORKING CAPITAL
 NEED FOR THE STUDY
 SCOPE OF THE STUDY
 OBJECTIVES OF THE STUDY
 METHODOLOGY
 LIMITATIONS OF THE STUDY

CHAPTER-2

 INDUSTRY PROFILE
 COMPANY PROFILE

CHAPTER-3

 THEORITICAL FRAMEWORK OF THE STUDY

CHAPTER-4

 ANALYSIS & INTERPRETATION OF THE STUDY

CHAPTER-5

 SUMMARY
 FINDINGS
 SUGGESTIONS
 CONCLUSION
 BIBILIOGRAPHY

5
CHAPTER - 1
 INTRODUCTION
 NEED FOR THE STUDY
 SCOPE OF STUDY
 OBJECTIVES OF THE STUDY
 METHODOLOGY
 LIMITATIONS

6
 INTRODUCTION

In our present day economy, finance is defined as the provision of money at the time when it is
required. Finance may be defined as the art and sciences of managing money. Finance holds key to all
human activity. No business activity can ever be pursued without financial support.

Finance is the only common decision/ denominator for a vast range of corporate objectives.
The major part of any corporate plan must be expressed in financial terms. The major areas of finance
are
1. Financial services.
2. Managerial finance/corporate finance/financial Management.

Financial management is the managerial activity, which is concerned with the planning and
controlling of the firm’s financial resources though it was a branch of economics till 1890 as a
separate discipline it is of recent origin. Still it has no unique body of knowledge of its theoretical
concepts even today. Of great interest to academicians because the subject is still developing and
there are still developing and there are still certain areas where controversies exit for which no
unanimous solutions have been reached as yet. Practicing managers are interested in this subject
because among the crucial decisions of the firm are those which relate to finance and on
understanding of theory of financial management provides them with conceptual and analytical
incites to make those decisions skillfully.
The area of financial management has undergone far-reaching changes over a time. The
finance function assumes a lot of significance in the modern days in the view of increased size of
business operations and growing complexities associate there to. A firm performs finance functions
simultaneously and continuously in the normal course in the business.
They do not necessarily occur in a sequence. Finance function call for skillful planning,
control and execution of business activities. The financial statements provide a summarized view of
the financial position and operation of the organization. Therefore much can be learnt about the
organization by a careful examination of its financial statements or they are the invaluable documents

7
regarding the financial performance of an organization. This analysis of financial statements is an
important id to financial analysis. The focus on key figures in the analysis of financial statements is a
process of evaluating relationships between components parts of financial statements to obtain a
better understanding of the financial position and performance.

Managements of the organization are confronted with taking decision about source of finance its
capital structure and credit policy its application of funds. In order to take strategic decision the
management needs to assess the progress and performance of the organization. Ratio analysis funds
flow analysis is the some of the tools.

Financial statement analysis can be undertaken either by the management of the organization
or by outside parties, viz., creditor’s investors and public. The nature of analysis differs depending
upon the purpose of analysis.

The analysis and interpretation of financial statements is an important accounting activity. The
end users of financial statement will get further insight about financial strengths and weakness of the
firm. Management will be particularly interested in knowing financial strengths of the firm to make
their best use to be able to spot out financial weakness to take suitable corrective actions. Also the
further plans of the firm should be laid down in view of firm’s financial strengths and weakness.
A proper financial analysis must be used to analyze a firm past performance and asses its
present financial strengths for making the better future plans. The financial resources of every
organization are always scarce and therefore require proper planning and control in order to achieve
the best out of funds available.

Capital is essential for the setting up and smooth running of any business. Investments made
on fixed assets will yield excess cash inflows apart from the payback amount and is spread over a
longer period of time. Hence the cash inflows (or) benefits associated are not immediate but are
expected in the future. Cash inflows & outflows occur on a continuous basis in case of current assets.
Credit forms an essential feature in the business (credit given to customers & credit from suppliers).
Since there is some time lag from the time of sales & sales realization current assets & current

8
liabilities, which together constitute the net working capital, supports the business in its normal of
operations. This calls for an efficient management of working capital.

The growth of any organization depends on overall performance of all the departments. A
firms financial performance reflects its strength, weaknesses, opportunities and threats of the
organization with respect to profits earned, investments, sales, realization, turnover, turn on
investment, net worth of capital. Efficient management of financial resources and analysis of
financial results are prerequisite for success of an enterprise. In that working capital management is
one of the major areas of financial management. Managing of working capital implies managing of
current assets of the company like cash, inventory, accounts receivable, loans and advances and
current liabilities like sundry creditors, interest payment and provision.

IMPORTANCE OF WORKING CAPITAL:

Working capital is the life and nerve centre of a business. No business can run
successfully without an adequate amount of working capital.

The main important of adequate amount of working capital are as follows:

 Good Will:

Sufficient Working capital enables a business concern to make prompt payments and hence
helps in creating and maintaining good will.

 Easy Loan:

A Concern having adequate working capital, high solvency and good credit standing
can arrange loans from banks and others on easy and favorable terms.

 Cash Discounts:

Adequate working capital also enables a concern avail discounts on the purchases and
hence it reduces costs.

9
  Regular supply of Raw Material:

Sufficient Working Capital ensures regular supply of raw materials and continues
production.

 Regular payment of salaries, Wages and other day to day commitments:

A company which has sample Working capital can made payment of salaries wages
and other day to day commitments which raises the morale of its employee, increases their efficiency,
reduces wastages costs and enhances production and profits.

NEED FOR THE STUDY :

The study is conducted with the following needs.

 Management of funds, particularly working capital decides not only liquidity and
solvency but also operating efficiency of the organization.

 Pearl Bottling (P) Ltd is a fastest growing liquid beverage company, so it needs more
working capital and its management has to keep the pace of its financial growth.

 To study the working capital needs and strengths of the organization in meeting and
managing working capital of the organization.

 To review the elements of working capital and its importance in operating the
activities in the organization.

SCOPE OF THE STUDY:

 Since the working capital management concerned with day to day activities of the
organization, so it mirrors the operational efficiency.

10
  The study covers working capital management of the Pearl bottling Pvt. Ltd. And its
importance to the company especially relating to inventory, debtors, and cash.

 The scope of this study is limited to the Visakhapatnam franchise of Pearl bottling
Pvt. Ltd. Only

 The figures relating to this study is extracted from the financial statement of the Pearl
bottling company.

 The comparative statements are prepared based on the information given by the
financial department of the company.

OBJECTIVE OF THE STUDY:

The study for the report preparation is based on the following objective:

 To study growth and development of Pearl Bottling Pvt. Ltd.

 To know working capital practices of the firm.

 To analyze cash management ,inventory management and

Receivable management procedures of the firm.

 To analyze the overall liquidity position of Pearl Bottling Pvt. Ltd.

 To identify the problem areas of organization and basing on which necessary

suggestions can be rendered.

 To study the methodology used by the Pearl Bottling Pvt. Ltd. in managing working
capital management.

 To know how the Pearl Bottling Pvt. Ltd. is able to increase the current assets to meet
current liabilities

11
 METHODOLOGY

The analysis of the project was based on the available information. Any information about the
topic is called the data. The data was gathered from various sources i.e., Primary and Secondary
sources.

Type of Data:

1. Primary Data
2. Secondary Data

Primary Data:

Any information which is collected afresh and for the first time is called primary data. The
primary data happen to be original in character. The information is gathered from concerned
employees. The employees and manager of the financial department have provided the information
needed for the study.

Secondary Data:

Information which has already been collected by somebody else or some other agency with
definite purpose and which has already been processed is called secondary data. The secondary data
for the study have been gathered from the balance sheets, profit and loss accounts, annual reports and
other books and manuals of the PEARL BOTTLING PRIVATE LIMITED.

12
LIMITATIONS OF THE STUDY:

Every study is conducted under certain limitations.

1. The study relates to financial data and other areas have not taken into consideration.

2. The study has been carried out only for a period of

60 Days which is not enough to study the operational activities of the organization.

3. It was not possible to get cent percent correct information. The research was made
according to the information available from related departments and through annual
reports published.

4. The present study covers only for a period of five years. So the analysis will be made on
this basis.

2010-11
2011-12
2012-13
2013-14
2014-15

13
CHAPTER - 2
 INDUSTRY PROFILE
 COMPANY PROFILE

14
INTRODUCTION TO BEVERAGE INDUSTRY:-

"SOFT DRINK" market is like an ocean; the demand for it can never be estimated
properly, for as long as the competition from unorganized sector and homemade drinks continue
unabated.

In Europe, there are many springs with natural effervescent water of therapeutic use.
Since, everyone will not get this water as often as they wanted the human mind thought of increased
volume of sale and these early attempts marked the beginning of bottled soft drinks in volume.

Around 1807, in the American Continent bottled soda was on a fairly large scale sale and
the credit goes to JOSEPH HAWKINS, who invented a machine and obtained a patent for
manufacturing and bottling carbonated water in 1809. This is the first instance of recorded patents in
soft drinks.

With the invention made by JOHN MERVIN NOOTH, an English man who developed an
apparatus for the production of Co2 (Carbon dioxide) during 1832 cholera epidemic, manufacturing
soft drinks on scientific lines was made possible. (Effervescent water was manufactured basing on
this invention).

GENESIS OF INDIAN SOFT DRINK MARKET:

Indian was considered as an under developed economy till early ethics. But somewhere
in ethics , the Prime Minister of Indian late Sri Rajiv Gandhi has a vision of putting our country on
the world map by fast track leading the nation into 21st century by bringing in super computers and by
putting heavy thrust on speedy industrialization .

This brought a searching in investments added with high savings. Indian having a hot
climate has always been a place of variety of drinks to cool, off from the hot sunny days. This aspect
has served as a boom to soft drinks market. However, it is a pity that though after nearly fifty years of
independence from foreign yoke, we are unable to have our own indigenous soft drink to be a brand

15
name of Indian origin throughout the length and breadth of the country. Finally, the re-entry of two
multi-national titans as soft drinks seller has charged the scenario in India.

With the introduction of liberalization policies, many foreign multi nationals have
started business ventures in India. The first attempt to enter Indian market in the soft drinks market
was made by coke pure drinks private ltd; Delhi was the first franchise bottles of coca-cola.
Basically, all soft drinks manufactures have the following flavors but branded in their
patented trade mark:
a) Pepsi …………. Cola

b) Mirinda lemon………….... Cloudy

c) Mirinda orange…………… Orange

d) Slice……………... Mango

e) 7-UP……... ………… Clear Lemon

Out of these marketable brands, some of them have clinched and cashed a niche through
the length and breadth of the country. Whereas others were permitted only for some seasons within
and limited metropolis.

SCENARIO OF SOFT DRINK INDUSTRY IN INDIA:

By buying over competitors, The two American cola giants have cleared up the arena
and are backing all their power behind the Indian franchises of their globe-girdling brands. They are
varying with each other the market by increasing the capital base in the country.

Till 1990 soft drink were available in 200ml bottles uniformly. It was in 1990, Thums up
has introduced 250ml. bottle with a slogan entitled "more cola same price.' with this, Thumsup has
registered a hike in sales equivalent to 65%. In 1994, the government has exhibited enthusiasm to
bring amendments to weights and measurements act, 1976. As per its notification issued all
manufacturers should strictly adhere to the following measurements.
For all bottled soft drinks 300ml
For all bottled soft drinks 500ml

16
For all bottled soft drinks 700ml
For all bottled soft drinks 1 liter
For all bottled soft drinks 2 liters
For all bottled soft drinks 5 liters
Soft drinks in tins 330ml

By march 1993, coca-cola was introduced after 15 years gap in India and it was already
been marketing 300ml size bottles besides coca-cola, compa-cola has also introduced 300ml bottles
drinks at little extra price. But true experiment of thumps up with 250ml bottles at the same price
adversely affected the market of campa-cola.

COMPETITORS:

While the competition in moving so close between various Indian manufacturing, it was
in 1990, Pepsi has introduced for the first time to the Indian public, the competition, which mainly
existing between " Thums-up" and " Pepsi ".

Consumers are going to be benefited when competition is stiff. It is proved beyond doubt
with the Indian soft drinks. Pepsi objected the introduction of 300ml bottles by coca-cola. But the
objective was over-ruled and Government of India has permitted Coca- Cola to go ahead with 300ml
bottles. While cola is mainly marketing its range among metropolitan cities, Pepsi has introduced
300ml size throughout the country to take an edge over Coca-Cola. Whether one buys COKE OR
PEPSI/ THUMS-UP OR DUKE, profits flow only to the American multinational corporations.

Previously, Parle group has introduced slowly 250ml bottles of GOLD-SPOT, LIMCA
AND CITRA in the market. At this time, Pepsi has introduced 1 liter bottle. While all India soft
drinks are sold in 200ml bottles, Pepsi with 250ml size has tried to conquer the market.

Lack of competition is the primary cause for the slow ate of development of the Indian soft
drinks industry. Since, 60% of the market is the monopolized by one single company and because of
the restrictive practices hundreds of local and small companies could not flourish. If PEPSI will be

17
investing Rs 300 crores, Coke will be pumping is eighty times as much as Pepsi's i.e. Rs 2400 crores
nearly. The total investment is of size and scale that the RS 1800 crores soft drinks business has never
been before. Both players see an enormous potential in this country.
The soft drink industry in India has annual sales of 12000 crores and most of the bottling
companies have been doing flourishing business. In the past five years all the bottling companies
have grown and expanded their activities placing more and more soft drink cases in the market and by
improving refrigeration, supply of electric bottle coolers, etc. to the retailers The soft drink market in
India is growing at the rate of 10% every year. With growing urbanization and the younger
generation, which has a liking for non-conventional foods and beverages, there is good possibility
that per capita consumption, will go up.

TRENDS IN AND MARKET SHARE OF SOFT DRINKS INDUSTRY:

Export Corporation in 1950 with Swedish started by Janata party CCEC was asked to
reduce its foreign capital holding 40% and delivers the know-how to Indian company. This refusal
forced CCEC to leave the country in 1977. With the leaving of Coca-Cola the domestic soft drinks
market got a lift and raised to capture the Indian market with Parle as the main leader. GOLD SPOT,
THUMS UP, MAAZA and KISMET became a household name. its market share grew to 60% in
1991 and it emerged as the market leader. The first challenge to the supremacy of Parle brands came
from Pepsi-cola in may 1990.
Pepsi that was in India from 1956-61 had left the country, as its product was not found
acceptable to the Indian public. Pepsi company incorporation, the 22 billion worth soft drink, snack
and fast foods. Company has finally re-entered the Indian market. Soft drinks come mainly in three
flavors - cola, lemon and orange. Accordingly to estimates, cola dominates the market with 40%
market share. Lemon flavored drink comes second with 30% market share and orange flavored drinks
third with a 20% share. Other flavors account for the rest of the market.

18
 COLA 40%
LEMON 30%
ORANGES 20%
OTHER FLAVOUR 10%

COLA
LEMON
ORANGES
OTHER FLAVOUR

The Punjab agro industry corporation with 36% equity and Tata group Company Volta's with 24%
equity where the promoters of Pepsi which itself had 40% equity. Pepsi leaving only 8% to Punjab
Agro industry acquired later Volta's share. The Pepsi Company has been using "Lehar" as prefix to
each of its brand names. Later it was allowed by the government to drop the prefix. Another
challenge to Parle came from Coca-Cola.

Thus, the Indian soft drink market dominated by Pepsi, Parle and coke in the ensuring days.
Coca-cola merged with Parle in the year 1993.

SOFT DRINKS BRANDS PRESENTLY AVAILABLE

FLAVOURS COLA CLEAR ORANGE CLOUDY MANGO SODA
DRINK LEMON FLAVOUR LEMON FLAVOUR
BRANDS
Pepsi Pepsi 7up/M.DEW Mirinda(O) Mirinda (l) Slice Lehars
Coke,
Coca-cola Thums Sprite Fanta Limca Maaza kinley
Up

19
 The sales of Coca-Cola only in Delhi have surpassed l20 lakh bottles per year. Though the
percentage of coke sales in India is around 1 % of its global sales. Yet India is considered to the biggest
on future. India is considered to be heaven for soft drink industry as happened to be the single largest
country in the world with 12 crores consumers.
Also the Government of India considers soft drinks as non-essential
commodity. Thus, heavy excise duty is levied on bottled soft drink.
In a country like India where more than 70% of the population exists below the poverty
line. The trading activities of the soft drinks industry are concentrated in around big cities where
purchasing power of people is considered to be comparatively high.

Consequently by world standards, India per capital consumption of these servings is

rock bottom, less than our neighbours Pakistan and Bangladesh.

COUNTRY PER CAPITA

INTAKE
(BOTTLES)
India 3.7 5.3
Pakistan 13.0 30.0
Bangladesh 7.0 11.0

Indian soft drinks industry is witnessing 15 to 20% growth rate every year. The

introduction of Pepsi has given big jerk to the hither to untapped market. Adding air to the fire, the

reintroduction of law (after 1997) in 1993 has brought international flavor to the Indian soft drinks

industry.

PRESENT MARKET SHARE:

20
PEPSI 31.8

COCA-COLA 44.0

The low consumption of soft drinks in India may be attributed to the fact that the prices of
soft drinks are inflated due to high excise duties and taxes. A bottler must pay 22% of price per case
as excise duty, sales turnover tax. Further 10% goes into expenditure on local advertisements,
distribution and transportation 10%; raw materials eat off another 13%. Production cost in terms of
fuel, power maintenance another 14% since the retail price of a bottle ranges between Rs.12/-Rs.l5/-,a
bottling operation is viable only with large volumes. The fizzy drinks industry logs in a 10% growth
on an average with estimated sales of 140 million cases (of 300ml).

Bottles are disappearing from the shelves faster than they can be replaced. In peak seasons
they found themselves shift of capacity, even though they were working three shifts a day.

MODERN MANUFACTURERS:

The Delhi based public sector undertaking launched cola drink under the brand name of
"77" (Double seven) in 1977. It has launched orange and lemon flavours.

PEPSI FOODS (P) Ltd:

Pepsi, which in India from 1956-1961 had left this country, as its products were not
acceptable to the Indian public. But in 1990 it re-entered the Indian market in collaboration with
Punjab Agro Industries Corporation (PAIC) and Volta's. Pepsi produces cola, mango, orange, clear
lemon and cloudy lemon flavours under the brand names of Lehar Pepsi, Slice, and Mirinda's, Lehar-
7up and teem. Recently Pepsi Company also acquired the dukes company of Mumbai.

COCA-COLA PARLE:

21
 Coca-cola Export Corporation, which left India in 1977 has re-entered soft drinks
market. It has tied up with the Parle group, which owns Thums-up, Limca, Citra and Gold spot.

CADBURY SCHWEPPES:

Schweppes has launched 3 brands in (1995) four months and in Delhi, their
orange crush has picked up a 30% market against 'coke's fanta and Pepsi’s, Mirinda. The other two
brands are Canada dry and Schweppes topic water sunist. This British beverage giant also has stake in
Dr.pepper's.

ORGANIZATION PROFILE - PEPSI CO.INC

22
 PepsiCo.Inc is founded by DONALD M. KENDALL, President and chief executive
officer of Pepsi-cola and HERMAN W.LAY chairman & chief executive of Frito-lay through the
merger of two companies in the year 1965. CALEB BRADHAM, a New Bern, created Pepsi-cola in
the late 1890's; ELEMER DOOLIN formed C.Pharmacist, FRITO-LAY , INC.IN 1932. PepsiCo. is
a world leader in convenience foods and beverages with revenues of about $27 billion and over
1,43,000 employees. The company consists of the snack business of Frito-lay north-America and the
beverage and food business of PepsiCo beverages and foods, which includes PepsiCo Beverage
North America and Quaker foods North America. PepsiCo international includes the snack business
of PepsiCo beverages international. PepsiCo brands are available in nearly 200 countries and
territories. Many of PepsiCo's brand names are over 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 success is the result of superior products, high standard of performance, distinctive
competitive strategies and the high integrity of our people.
The companies overriding objective is to increase the value of our shareholders
investment through integrated operating, investing and financing activities. Its strategy is to
concentrate its resources on growing its business, both through internal growth and carefully selected
acquisitions. Its strategy is continually fine-tuned to address the opportunities and risks of the global
marketplace. The corporation’s success reflects its continuing commitment to growth and a focus on
those businesses where it can drive its own growth and create opportunities.

MAJOR PRODUCTS OF THE NEW COMPANIES ARE:

Pepsi-cola company——————-Pepsi-cola (formulated in 1898). Diet Pepsi

(1964). Mountain Dew (introduced by T.P Corporation 1948). Frito-lay include Frito brand corn
chips , lays brand potato chips and cheeotos brand cheese flavored snacks, Ruffles brand potato chips
& Rold gold brand pretzels. PepsiCo include world head quarter is located in purchase, New York.

23
PEPSI-COLA COMPANY:

Caleb Brad ham a NEW BERU and M.C Druggist who first formulated Pepsi-cola founded
company's beverage business at the turn of the century. Brand Pepsi and other Pepsi-cola products
including Diet Pepsi one, Mountain Dew, slice and mug brand account for nearly 1/3 of total soft
drinks in United States.
Outside U.S.., Pepsi-cola company's soft drink operations include the business of 7-up
international. Pepsi-cola beverages are available in about 170 countries.
 Pepsi-cola began selling its products internationally in the year 1934 with its operations in
Canada.
 Key Pepsi-cola products international markets including Argentina, Brazil, China, India,
Mexico, Philippines, Saudi Arabia, Spain and United Kingdom.

Pepsi-cola provides advertising, marketing, sales and promotion support to Pepsi-cola

bottler. This includes some of the world’s best loved and most recognizing. New advertising and
existing promotions keep Pepsi-cola brands young. The company manufactures and sells soft drink
concentrate to Pepsi-cola bottlers.

24
HISTORY OF PEPSICO:

1965 PepsiCo, Inc. was established through the merger of Pepsi-Cola

And frito-lay.

1966 Doritos brand tortilla chips are introduced. They are designed to

Become most popular snack chip in The united states.

Pepsi enters Japan and Eastern Europe.

1967 Pepsi Generation advertising, "Come Alive! You're in the Pepsi

generation" campaign that named and claimed a whole generation
(1963-67), introduced a new theme: “taste that beats the others cold.
Pepsi pours it on!"
PepsiCo stock split two for one.

1968 North American Van Lines (NAVL) a premier transportation

company, PepsiCo and remained a strong contributor to Pepsi until
it has divested in 1984.
1969 Bold modern Pepsi-cola packing using red, white & blue is
introduced. Frito-lay introduces funyuns brand onion flavored
snacks.
1970 Pepsi introduces the industry's first two liter bottles. Pepsi is the
first company to respond to consumer preference with lightweight,
recyclable plastic bottles. The company has 36,000 employees.
Pepsi introduces the industry's first two-liter bottle
25
1971 PepsiCo Chief Executive Officer Donald M. Kendall assumes the
position of chairman of the board of directors on the retirement of
Herman Wiley.lay maintains an active role in the corporation until
his death December 6,1982..Andrall E.pearson is appointed
president of Pepsi co., a position he holds until his retirement in
1984.

1972 Mountain Dew, acquired by Pepsi-cola in 1964, switches its

advertising and package graphics from hill billies to action oriented
scenes sales club and mountain dew will become one of the 10 best
selling soft drinks in the United States. Don Kendrall announces
agreement making Pepsi-cola the first foreign product sold in the
U.S.S.R.

1973 Foods International, later called PepsiCo Foods International (PFI)

and subsequently named Frito-Lay International, is established to
market snack foods around the world.

1974 PepsiCo sales pass the $2billion mark. Pepsi-cola becomes the first
American consumer product to be produced, marketed and sold in
the former Soviet Union Pepsi Light, with a distinctive lemon taste ,
is introduced as an alternative to traditional diet colas.
1975 PepsiCo has 49,000 employees. Pepsi light, with a distinctive lemon
taste, is introduced as an alternative to traditional diet colas.

1976 PepsiCo adopts code of Worldwide Business Conduct.

1977 PepsiCo acquires pizza Hut, Inc. Pizza Hut was founded in 1958 by
Dan and Frank Camey. It is spun off along with Taco Bell and KFC
businesses as Tricon Global Restaurants, Inc.in 1997. PepsiCo stock
splits three-for-one.

26
1978 Taco Bell is acquired. Glen Bell established taco bell in the mid
1960's, it is spun off along with pizza Hut and KFC business as
Tricon Global Restaurants Jnc in 1997. Later becomes YUM.

1979 Opening of PepsiCo Research and Technical Center in Valhalla,

N.Y.Pepsi introduces twelve-pack cans.

1980 PepsiCo food service international (PFSI) is formed to focus on

overseas development of restaurants. PepsiCo now has 1,11,000
employees.

1981 PepsiCo Fitness Center is completed; making PepsiCo one of the

most advanced companies in the area of employee health and
fitness.

1982 Pepsi Free and Diet Pepsi Free, the first major brand caffeine-free
colas, are introduced. Inauguration of the first Pepsi-cola operation
in china.

1983 "Dew it to it"; theme is incorporated to brand mountain Dew. The

Bottler Hall of Fame is established to recognize the achievement &
dedication of international bottlers.

1984 PepsiCo is restructuring to focus on its three core business Soft

drinks, snacks foods and restaurants. Transportation and sporting
goods business are sold.
1985 Pepsi-cola products are available in nearly 150 countries and
territories around the world. Snacks are in 10 international markets.

27
1986 The corporation is reorganized and decentralized beverages
operations are combined under PepsiCo worldwide beverages;
snack foods operations are combined under PepsiCo worldwide
foods.

1987 Pepsi sponsors tours of major music stars, including Miami sound
machine, David Bowie and Tina Turner.

1988 Pepsi-cola international enters a landmark joint venture agreement

in India.

1989 PepsiCo acquires smart food ready-to-eat popcorn business PepsiCo

enters top 25 of Fortune 500 ranking with sales of $15.4 billion, it is
number 23. The company has more than 3,00,000 employees.

1990 PepsiCo stock splits three-for-one. PepsiCo signs the largest

commercial trade agreement in history with the Soviet Union.

1991 Pepsi-cola introduce a new logo, its eighth in 93 years.

1992 Pepsi introduce a new slogan "be young -have fun –drink Pepsi".
Pepsi-cola begins distribution of Lipton line of ready-to-drink tea
nationwide.

1993 Pepsi introduced "the cube”, an innovative 24 can multipack that

satisfies growing consumer demand for convenient large size soft
drink packaging.

1994 Pepsi -cola launches its sports drink all sport. It is sold in 2001.

28
1995 7 up international launches 7 up ice cola, a new clear cola. Pepsi
Company introduced lay's brand potato chips in 20 markets.

1996 Pepsi-cola launches Pepsi world at http: //www.Pepsi.com/ Pepsi

cola and MTV establish a partnership to develop international
programming.

1997 Pepsi-cola celebrates 100th anniversary with first worldwide

bottler's conference, held in Hawaii.

1998 Pepsi-cola introduces two-liter plastic bottle with built-in “grip

handle" that makes it easier to grip and pour.

1999 Tropicana juices are entering the huge India market for the first
time. Orange juice will appear in the New Delhi and Bangalore
market.

2000 Pepsi-cola teams up with yahoo Inc.., the biggest web navigation
company, in the multimedia marketing campaign.

2001 Pepsi-cola launches the bold new Mountain Dew code Red
nationwide. It is Mountain Dew first line extension since the
introduction of Diet Mountain Dew in 1988.

2002 Mr. Green," a green tinted carbonated soft drink with caffeine and
ginseng, is launched under So Be's new age beverage line in April.

2003 Pepsi-cola trademark turns 100 years old. Pepsi vanilla is launched
in the United States.

29
2004 PepsiCo is mentioned among 26 companies that earned governance
Metrics international highest governance rating. PepsiCo is chosen
for the 2005 list of the NAFE top 35 companies for executive
women.

2005 Pepsi introduced a new slogan “be young and have fun drink
Pepsi”. Pepsi –cola begins distribution of a Lipton line of ready to
drink tea to a national wide.

2006 Pepsi-cola introduces two-litre plastic bottle with built in “grip

handle” that makes it easy to grip and pour.

2007 Pepsi-cola products are available to nearly 150 countries and

territories around the world. Snacks are in 10 international markets.

2008 Pepsi-cola teams up with yahoo inc. , the bigger navigation

company, in the multimedia marketing campaign.

2009 Pepsi sponsors tours of major music stars, including Miami sounds
machines, David bowie and Tina turner.

2010 PEPSICO completed the acquisition of the Pepsi Bottling Group,

inc. , and Pepsi Americas, Inc., its two largest anchor bottlers.
PepsiCo announces its intent to acquire Russia’s Wimm –Bill-
Dann, Russia’s leading branded food and beverage company. AMP
energy juice launches across the united states.

2011 PepsiCo and Tingyi holding, one of the major food and beverage
companies in China, announced an agreement to form a strategic
alliance in China. PepsiCo acquires Mabel, a leading producer of
cookies, crackers and snacks in Brazil.

30
2012 Diet mountain dew, Brisk and starbucks ready -to –drink beverages
join PepsiCo’s portfolio of billion –dollar brands, bringing the total
to 22. Pepsi launches reduced-calorie cola innovation Pepsi Next.

2013 Miller Quaker Dairy , a joint venture between PepsiCo and The
Miller Group open a new state -of -the –art yogurt manufacturing
facility in Batavia, New York.

2014 Pepsi introduces Pepsi Spire, a portfolio of innovative fountain

beverage dispensers. Consumers can creat more than 1000
customized beverages with the touch of a button.

2015 PepsiCo celebrates its 50th anniversary as a combined food and

beverage company.

Pepsi logos:

31
 Future logo of Pepsi

PEPSICO PRODUCT LIST :-

Foods
 Cheetos
 Kurkure
 Lays
 Lehar Namkeen
 Quaker oats
 Uncle chips
 Aliva

Beverages
 Pepsi
 7 UP
 Aquafina
 Gatorade
 Mountain dew
 Nimbooz
 Slice
 Tropicana
 Tropicana twister
 Mirinda
32
PEPSICO LEADERSHIP :-

We are a company full of strong, talented individuals starting at top of our organizations. 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 Chief executive Officer

JON BANNER - Executive Vice President, Communications

OSWALD BARCKHAHN - President, PepsiCo North America Nutrition

UMRAN BEBA - Senior Vice president and Chief HR officer,

PepsiCo AMEA

RICH BECK - Senior Vice President, Global Supply Chain Operations,

PepsiCo

ALBERT P. CAREY - Chief Executive Officer, PepsiCo American Beverages

33
PEPSICO COMPANIES :-

 Pepsi-Cola
 Tropicana
 Quaker
 Frito Lay
 Gatorade

PEPSI CO. MISSION STATEMENT:

Pepsi co.., overall mission is to increase the value of their shareholders investment. They believe that
their commercial success depend upon offering quality and value to their consumers and providing
product that are safe, wholesome and economically efficient and environmentally sound.
Providing a fair return to their investors while adhering to the highest standard of integrity.

PEPSI CO'S ENVIRONMENTAL COMMITMENT:

As a consumer product company, PepsiCo does not have the major environment problems of heavy
industry. Their biggest environmental challenge is packing generated by their product. Packaging is
important to public health and a critical component of the distributors system that delivers products to
consumer and commercial establishment. Each business is also committed to responsible use of
resources required in manufacturing their products.

34
MAKING OF PEPSI:
Actually there's no secret how to make Pepsi. But there is a system plus a lot of hard work, is what
enables Pepsi-cola and the independent Pepsi-cola bottler all around the world to bring us that high
quality, consistently, refreshing Pepsi taste each time we open one of their products.
The system starts with the finest ingredients available.....

 Kola nuts
 Vanilla beans
 Flavour oils
 Sweeteners
The main ingredient found in product include carbonated water, carbohydrates, sugar, sodium,
potassium, caffeine, A spartame andhey add the technology and all the care they can muster to blend
these ingredient.

30 STEPS INVOLVED:
Flavour concentrates are shipped from Pepsi-cola manufacturing plants in heavy
duty air right container. Liquid sweetener is transported in special tanker truck. All ingredient and
food product are stored in clean, sanitary areas and items requiring refrigeration are kept in
temperature controlled areas.
The bottles that will eventually be filled Pepsi are manufactured elsewhere,
and shipped to Pepsi plants wrapped & sealed for protection Others companies are also produce
labels, cartoons, caps , the carbon dioxide used to carbonate soft drink and others supplier's for
Pepsi. On arrival, everything is subject to careful inspection to make certain mall of the
ingredient and material meet Pepsi's high standards. Special equipment is used to uncase and
depletive incoming shipment of bottles and cans. Cans are by far the most popular package with
consumers because they are lightweight and easy to store. Through bulky, the cartoon and pallets
on which the empty packages arrive are also relatively light in weight. So it's for the machines to
automatically remove the cans from their shipping. Container at high speed. The machines then
transfer the individual packages to a conveyor belt. Once on the belt, cans are part of an enclosed,
controlled environment that keeps them sanitary & helps ensure quality throughout the filling
process. They travel rapidly through a printer that applies a production code to each can. Then
35
they are automatically turned upside down and rinsed thoroughly with filtered water before
proceeding directly to the filter.

Water is a key ingredient in all soft drink. Pepsi-cola takes special care to purify the
water it uses a procedure that involves careful treatment. Filtration and purification. Pepsi standards
are precise and closely monitored at every step of the process. The result of this kind of pains taking
attention to detail is that the water used in Pepsi-cola and all of Pepsi beverages is among the purest
available anywhere. Pepsi flavour concentrated is carefully combined with sweeteners and other
ingredient in large stainless steel mixing tasks. Quality control audits performed by specially trained
technicians are a critical part of the manufacturing sequence for each batch and are typical of the
attention to detail that's necessary if the highest possible quality standard are to be maintained.

Cleanliness is also vital so all internal and external surfaces of the production system
includes cooling & carbonating equipment are meticulously sanitized. In the last step of the
manufacturing process as the new rinsed cans reach the filter they reinserted, immediately filled and
lid is applied at an average speed of 1200 cans per minute. The filler is where the syrup from the
mixing tanks is combined with the purified water from the filter process.

This carbonation process gives soft drink the special sparkle-fizzy bubbles that add to their
quality of refreshment. All Pepsi cans bottles are imprinted with a freshness date, which is a date code
that tells us about soft drinks freshness. A final quality check ensures that the packaging is properly
filled, sealed and labeled.

DEMAND FORECASTING :-
PepsiCo implements various methodologies in order to know the production plan for the
next day. Some of the famous methods are average moving, weighted average moving, exponential
smoothing etc.
1. Quanity of Empty Bottles In Plant.
2. Quantity of available concentrate in the form of units.
3. Based on season.

36
 PROFILE ON VISAKHAPATNAM FRANCHISE
(PEARL BOTTLING PVT.LTD)
JAIPURIA GROUP

Its head office was located in Delhi. Its old name was Krishna Mohan Beverages
& construction. Before tying up with Pepsi in 1991 it was owned by Campa Cola which
produced Thrill, Rush, Sprint, Mc Dowells soda etc. later its name was converted into Pearl
Bottling Pvt. Ltd.
This is a bottling plant and a franchise of Pepsi located in Visakhapatnam. It is a 20 years old
company and has another 2 bottling plants in Hyderabad and Guntur. Recently Pepsi was
building a mega plant in Andhra Pradesh in chittoor District at Sri City SEZ located near to
Chennai.
Plants in Andhra Pradesh :
1. Visakhapatnam
2. Guntur
Pepsi came to India in 1988 and started Operations in 1991. Today it has 22 various products in
its portfolio. Some of its CSD products manufactured in plant.
1. Pepsi
2. Diet Pepsi
3. Mountain dew
4. Mirinda Orange
5. Mirinda Lemon
6. 7up
Fruit based product – Slice
This plant has 5 lines
Glass lines - 3
PET Bottles lines – 2
It has a total staff of around 185 working round the clock in 3 shifts.
Company Full Time Employees - 160
37
 Contrtact Employees – 25
Pepsi Bottling Operations in Andhra Pradesh:
1. Company owned bottling operations
- Sri city
- Hyderabad
2. Franchise owned bottling operations
- Guntur
- Visakhapatnam

Often new flavour is added to the product line of cool drinks to prevent a competitor. By
establishing a relation with retailers, it is also desirable to sell more than one flavor of cool drinks to
decrease the security of seasonal or cyclical fluctuations. From the point of view of production
additional products are added to utilize the resources available so as to lessen its risk. Pepsi has given
the franchises of Visakhapatnam region to PEARL BOTTLING PVT. LTD. which belongs to Pearl
group, head quarter at Delhi and Mr. C.K. JAIPURIA is the chairman, Mr. RUCHIRANS JAIPURIA
is the Managing director of the group. Pepsi food Ltd. Appointed Krishna Mohan beverages and
construction as franchises, in 1992. Later on it was changed to PEARL BOTTLING PVT. LTD. taken
by the Pearl group. The premises were originally owned by campa-cola soft-drinks. Since 1980 at
Madhurawada. After the insolvency of campa-cola, KMBC purchase the premises in 1990 in the
auction by APSFC . Initially it used to produce cola, orange and lemon flavours under the brand
names of thrill, rush and sprint. It has produced Mc Dowell's soda and bagpiper soda.

DISTRIBUTION:
The company distributes its products in Six districts in Andhrapradesh (India).
They are:

1. Visakhapatnam

2. Srikakulam

3. Vizianagaram

4. East Godavari
38
 5. West Godavari

6. Khammam.

MAIN OBJECTIVES:
The objectives of the company set out in memorandum of association and franchise agreement are
as follows:
1. To manufacturing soft drinks by concentrate supplied by Pepsi foods.
2. To market and advertise with in specified area for Pepsi product.
3. To sell soft drink at a fixed price.

FINANCIAL STRUCTURE:
To start and operate any business the company has to invest its capital in fixed asset and floating asset
and also in meeting the daily requirement of the company. However, depending on the nature of the
business and the product being offered by the company the ratio of the investment of capital in fixed
and floating asset differ.

FIXED CAPITAL:
Some costs in a business are fixed which are incurred irrespective of production. For example
building, furniture, machinery etc..,

WORKING CAPITAL:
It means capital required for daily management &operations of the company. For example
wages, salaries etc..,

39
PLANT LAYOUT:
The machines and equipment have been imported from Germany, which are arranged in
the plant according to the sequence of operation. All the operation is carried on a continuous
movement. The reasons choosing the product layout are:
1. There is continuous supply of material.
2. The brands are all standardized products.
3. The demand for the product brand is reasonable stable.
4. The volume of production is adequate for the reasonable utilization of equipment.
Since the company follows continuous operations, the cost of material handling goes
low. The total floor space required by the machine is less than other types of plant layout.

PLANT CAPACITY:
The company installed latest up to date automatic plant conforming to plant layout. At
present the company installed 4 different lines of production two glass lines, one pet line & one slice
line. The installed production capacity in Bottles Per Minute (BPM) are as below.
One glass line – 400 BPM
Second glass line – 550 BPM
Pet line 1 - 160 BPM
Pet line 2 – 160 BPM
Slice line – 300 BPM
During season the plant runs three shifts and during un season the plant runs double shift.

Example of Production plan :-

Product - 300ml - 7up
Total target cases – 5650
Total target cases/Hr - 700
Allotted duration – 10.30hr
Filler original capacity/mn – 400
Filler actual capacity/mn – 250
250*60m=15000 BPH
Bottles per crate – 24
40
No. of cases /Hr – 15000/24=625
Actual cases as per duration – 6563
Actual cases - target cases = 913
As per the target, time needed is 8 hrs, but an additional 1:30 hrs was given as weighted average time.

PRODUCTION SCHEDULE:

The production schedule is fixed by taking into consideration.

1. The present or current market demand.

2. The availability of empty bottles and

3. The inventory position filled bottles of different flavours. The production schedule for

each brand is fixed daily, filling the bottles of each brand and flavour. This has an advantage

in manufacturing the branded products one at a time.

QUALITY CONTROL:

Pearl Bottling Pvt. Ltd. takes great care to maintain the quality control of the products
in their factory. The bottles are visually examined for impurities continuously, as the bottles move out
samples are checked every ten minutes of production time by the chemist for its quality & hygiene
condition. The chemical analysis is also made for flavour, gas content and sugar percentage. The
appearance smell and taste of the products are also checked.

If any defected are noticed, the production is suspended and the correcting measures
are taken so as to set right the bottling process irregularities. Further samples from each batch are
dispatched to the affiliated parent agency company in each week for quality check up. Moreover,
agency of the company also lifts samples from the market at random for quality checkup at any time
to make sure that the quality is maintain to the exact standard of the parent company.

41
 At the end of the production schedule, daily all the equipment floor and wet patches

are cleaned with bleaching powder or some other solution. The standard of hygiene maintained inside

the production shops are commending.

MATERIAL REQUIRED FOR PRODUCTION PROCESS :-

(i) Raw Materials (ii)Packing Material (iii) chemicals and consumables

1. Concentrate 1.Cartons (iv) Engineering Stores

2. Sugar 2. Labels
3. CO2 3. Bopp tapes
4. R.O. Water (100% Purified) 4. Glue Gum
5. Crowns/closures
6. Preforms
7. Mango pulp for Slice (Alphanso, Totapuri )

Note : Glass Bottles are considered as Fixed Asset in this Company but not as a Raw Material.

RESOURCES REQUIRED BEFORE PRODUCTION :-

1. Availability Of Preforms
2. Inspecting machines, applying lubricants
3. Setting up temperatures for some needed machines
4. Production Time /plan
5. Cleanness of glass bottles
6. Floor cleaning
7. Crates cleaning

RESOURCES REQUIRED AFTER PRODUCTION :-

1. Packaging
2. Arranging into lots
3. Placing in plant warehouse
4. Availability of forklifts
5. Wooden pallets
6. Availability of sufficient space
7. Vehicles

Common need during entire production – MANPOWER

42
MANUFACTURING IN PEARL BOTTLING PVT.LTD:

The process of manufacturing soft drinks is mainly divided into 4 parts. They are:

1. Syrup making

2. Water treatment

3. Bottling

4. Crating

SYRUP MAKING:

In this process, the syrup of the particular product is prepared by heating sugar with

activated carbon powder and filter aid (Hyflousuper cell) in treatment tank for a specified time and up

to a particular temperature.

During the treatment most of the color, odour and some organic impurities are removed

from sugar syrup. This treated syrup then passes through filter press, filter papers and heat exchanges

and clear syrup is collected in the syrup making tank, the essence of particular product will be added

for which a required amount of sugar is taken for treatment. Sugar syrup and essence are mixed in the

tank with the help of mechanical stirrer and eventually the flavour syrup is ready to be used in the

end use product.

WATER TREATMENT:

This is the second stage in the process of soft drink manufacture water is the basic

ingredient in the soft drink, which comprises up to 90% of the quantity. Hence the quality of H 20 is

of the great significance to the soft drinks manufacturer. Here H 20 is brought to treatment tank and

then H20 treatment chemicals such as hydrated lime, bleaching powder and ferrous sulphate are added

to the tank and mixed thoroughly with the help if mechanical stirrer.
43
The reasons of water treatment are:

1. It removes the water and converts the water into soft water.

2. It frees the water of microorganisms.

3. Reduces the alkalinity to a required level.

4. Removes suspended matter in water.

This treated water passes through the specially designed filtration plant containing

chemicals such as activated carbon (granular) & finally the manufacturer will get the H 20 suitable for

soft drink bottling. For managing equipments in hygiene conditions soda bicarbonate is used.

BOTTLING:

In this process both the concentrate and the purified water are mixed together along

with C02 gas and them bottled. In soft drinks field, only reusable glass bottles sparking clean and they

are sterilized before the beverages are filled. For this purpose, the company makes use of machine

known as “Bottle washer “. For clean of bottles washing chemicals such as caustic soda and tri-soda

phosphate are used. In the bottle washing system in one end of washer the dirty bottles are fed and the

bottles washed automatically while passing through various designed container chemical solution at

different temperature and concentration. Hot H20 is used for cleaning the bottle. The bottles after

sterilization are collected at the other end of the washer. They are then sending towards "filler" on

conveyer belts. Before the beverage reaches the filling machine it is saturated with C0 2 gas in

carbonate after being chilly. This C02 gas fizz to the soft drinks and along side prolonged the shelf

life of the products. The bottles then are moved on the conveyer belts to the tilling machines where

the beverages are filled under pressure and bottles are sent in to crowns, where sealing is done with

the help of crowns.

44
CRATING:

The bottle collected from conveyor belts are placed manually into plastic crates. Each plastic

case has capacity of 24 bottles. These protect the bottles from breakage and for easy handling on

bottles. These create are put on specially designed vans for carrying bottles and are sent to various

consumption points.

VISION STATEMENT OF PEARL BOTTLING PVT. LTD.

Pepsi company’s responsibility is to concentrate on all aspects of the world in which we operate and

creating better tomorrow than today.

“LET’S GROW TOGETHER”

MISSION OF PEARL BOTTLING PVT. LTD.

Target to accomplish Rs. 1650 crores turnover with a return on investment of 10% by 2020, across

diverse business interests by :-

 Placing Jaipuria Group brands amongst the top five in the country.

 Provides best quality products and services.

 Treating our employees as an asset.

 Improve the stakeholders value.

 Protecting environment and being sensitive to all natural resources.

45
ORGANIZATION STRUCTURE AND MANAGEMENT OF PEARL

BOTTLING PVT. LTD.

Organization structure can be defined as the arrangement & relationship of the component parts &

position of the compass. An organization structure specifies its division of work activities and shows

how different functions and activities are linked.

THERE ARE TWO TYPES OF DEPARTMENTS IN PEARL BOTTLING PVT .LTD. :

1. Operational department

2. Non-operational department

1. Operational department

 Production

 Quality control

 Maintenance

 Shipping

 Transport

 Sales & marketing

2. Non operational department

 CEO Office

 Human resources

 Administration

 Finance

 Purchase

 Stores

46
There are mainly 5 elements of organization structure:

1. Specialization of activities.

2. Standardization of activities.

3. Coordination of activities.

4. Centralization and decentralization of deviation making.

5. Size of the work unit.

The M.D. Mr. RUCHIRANS JAIPURIA is the head of the organization & administration. The

company is managed by able director, and is assisted by a team of well qualified & experience senior

management personnel.

47
 The following table shows the description of employees along with the designation & no. of

employees:

SL. DESIGNATION NO. OF

NO. EMPLOYEES
1. MANAGING DIRECTOR 1
2. EXECUTIVE DIRECTOR 1
3. EXECUTIVE VICE PRESIDENT 1
4. VICE PRESIDENT 1
5. GENERAL MANAGER 1
6. DEPUTY GENERAL MANAGER 3
7. ASSISTANT GENERAL MANAGER 2
8. Sr. MANAGER 2
9. MANAGER 7
10. DEPUTY MANAGER 7
11. ASSISTANT MANAGER 17
12. SENIOR EXECUTIVE 25
13. EXECUTIVE 42
14. ASSISTANT EXECUTIVE 42
15. FOREMAN 8
16. JUNIOR SUPERVISOR 24
17. ASSISTANT FOREMAN 10
18. SENIOR OPERATOR 7
19. OPERATOR 16
20. ASSISTANT OPERATOR 2
21. SENIOR ASSISTANT 3
22. ASSISTANT 3
23. HELPER 7
24. P.S.O. 2
25. SUPERVISOR 5
26. SENOIR TECHNICIAN 1
27. TECHNICIAN 1
28. Tr. SUPERVISOR 4
29. HO 1
30. DRIVER 17
GRAND TOTAL 263

48
CHAPTER - 3
THEORITICAL FRAMEWORK OF THE STUDY

49
 WORKING CAPITAL MANAGEMENT

INTRODUCTION:-
Every business needs funds for two purposes i.e. For its establishment and to carry out its
day to day operations. Working capital refers to that part of the firm’s capital which is required for
financing short term or current assets such as cash, marketable securities, debtors and inventories.
Working capital is the amount of funds necessary to cover the cost of operating the enterprise.

The goal of working capital management is to manage the current assets and current
liabilities of the firm in such a way that a satisfactory level of working capital is maintained. Working
capital is the difference between the inflow and out flow of funds. Working capital is also known as
revolving or circulating capital or short term capital.

MEANING AND DEFINITION OF WORKING CAPITAL:

DEFINITION:-
According to Ralph Kennedy and Steward Mc Muller “a study of working capital is of
major importance to internal and external analysis because of its close relationship with the current
day to day operations of business”.

MEANING:
Working capital refers to the funds invested in current assets i.e. investment in stocks,
sundry debtors, cash and other current assets. Current assets are essential to use fixed assets
profitably. For example a machine cannot be used without raw material. Thus it is obvious that
certain amount of funds is always tied up in raw materials and work in progress, finished goods.
However, the business also enjoys credit facilities from its suppliers who may supply raw materials
on credit and the firm may not pay immediately all expenses. Therefore, certain amount of funds is
automatically available to finance the current assets requirements. However the requirements for
current assets are usually greater than the amount of funds payable through current liabilities. In other
words, current assets are to be kept at a higher level than the current liabilities.
50
CONCEPTS OF WORKING CAPITAL:
There are two concepts of working capital:
(a) Gross working capital
(b) Net working capital

(a) Gross Working Capital:-

Gross Working capital refers to the firm’s investment in current assets. Current assets
are the assets which can be converted into cash within an accounting year and include cash, short-
term securities, debtors, (accounts receivables or book debts), bills receivable and stock (inventory).

(b) Net Working Capital:-

Net working capital refers to the difference between current assets and current
liabilities. Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year and include creditors (accounts payable), bills payable, and outstanding
expenses. Net working capital can be positive or negative. A positive working capital will arise when
current assets exceed current liabilities. A negative working capital occurs when current liabilities are
in excess of current assets.

List of current assets and current liabilities:-

Current assets Current liabilities
 INVENTORY SUNDRY CREDITORS
 SUNDRY DEBTORS BILLS PAYABLE
 BILLS RECEIVABLE ACCRUED EXPENSES
 CASH IN HAND SHORT TERM LOANS
 CASH AT BANK DIVIDEND PAYABLE
 PREPAID EXPENSES BANK OVERDRAFT
 ACCRUED INCOME PROVISION FOR TAXES
 SHORT TERM INVESTMENTS

51
CLASSIFICATION OF WORKING CAPITAL:
Working capital may be classified in two ways.
(a) On the basis of concept
 Gross Working Capital
 Net Working Capital
(b) On the basis of time
Permanent or Fixed Working Capital
 Regular Working Capital
 Reserve Working Capital
Temporary or Variable Working Capital
 Seasonal Working Capital
 Special Working Capital
SOURCES OF WORKING CAPITAL:
There are two sources of working capital .They are
1. Permanent or Fixed:- The fixed proportion of working capital should be generally financed
from the fixed capital sources like
 Shares
 Debentures
 Public deposits
 Retention of profit
 Loans from financial institutions
2. Temporary or variables:-Variables or temporary working capital requirement of a concern
may be met from the short term sources of capital like:
 Commercial bankers
 Indigenous bankers
 Trade creditors
 Accrued expenses
 Commercial papers
 Accounts receivables
52
MEASURING THE WORKING CAPITAL:-
Working capital is very essential to maintain the smooth running of a business. No business can run
successfully without an adequate amount of working capital. However it must also be noted that
working capital is a means to run the business smoothly and profitably and not an end. Thus concept
of working capital has its own importance in a going concern. The analysis of working capital can be
conducted through a number of devices such as

1. Ratio Analysis
2. Funds flow analysis
3. Budgeting.

1. RATIO ANALYSIS:
A Ratio is a simple arithmetic expression of the relationship of one number to
another. The technique of ratio analysis can be employed for measuring short-term liquidity or
working capital position of a firm. Several ratios like current ratio, quick ratio, inventory turnover
ratio, receivable turnover ratio, payables turnover ratio, working capital turnover ratio, cash position
ratio etc.
2. FUNDS FLOW ANALYSIS:
Funds flow analysis is a technical device designated to study the sources from which
additional funds were derived and the use to which these sources were put. It is an effective
management tool to study changes in the financial position (working capital) of a business enterprise
between beginning and ending of financial statements dates. The funds flow analysis consists of:
(1) Preparing schedule of changes in working capital
(2) Statement of sources and application of funds.
3. WORKING CAPITAL BUDGET:
Working capital budget, as a part of total budgeting process of a business, is prepared
estimating future long-term and short-term working capital needs and the sources to finance them,
and then comparing the budgeted figures with the actual performance for calculating variances, if
any, so that corrective actions may be taken in the future. Its main objective is to ensure availability
of funds as and when needed, and to ensure effective utilization of these resources. The successful

53
implementation of working capital budget involves preparation of separate budgets for various
elements of working capital, such as, cash, inventories and receivables.

OBJECTIVES OR NEED OF WORKING CAPITAL:-

The need for working capital cannot be over emphasized. Every business needs some
amount of working capital. The need for working capital arises due to the time gap between
production and realization of cash from sales. It requires

1. For the purchase of materials, components and spares.

2. To pay wages and salaries.
3. To incur day-to-day expenses and overheads such as fuel, power and office expenses
etc.
4. To meet the selling costs as packing, advertising etc.
5. To provide credit facilities to the customers.
6. To maintain the inventories of raw materials, work in progress, stores and spares and
finished stock.

IMPORTANCE OF WORKING CAPITAL:-

Working capital is just like the heart of the business. If it becomes weak; the business
can hardly prosper and service. It is an index of solvency of a concern. Its proper circulation provides
to the business the right amount of cash to maintain in business. Without adequate amount of
working capital, production interruption may take place and results in reduction of profit. Just as
circulation of blood is very necessary in human body to maintain life, smooth flow or circulation of
working capital is necessary for the health of the enterprise. “The prime object of management is to
make profit. Whether or not this is accomplished in most businesses depends largely in the manner in
which the working capital is administered.

54
ADVANTAGES OF ADEQUATE WORKING CAPITAL:
Working capital is the life blood of the business. Just as circulation of blood is essential in the
human body for maintaining life, working capital is very essential to maintain the business.

The main advantages of maintaining adequate amount of working capital are as follows:-

 Good solvency position in the business

 Goodwill, it is easy to get loans
 Cash discounts
 Regular supply of raw materials
 Regular payment of salaries, wages and other day to day commitments
 Exploitation of favorable market conditions
 Ability to face crisis
 Quick and regular return on investment
 High morale
Every business concern should have adequate working capital to run its business operations. It should
not have either redundant/excess or shortage of working capital.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL:

1. Excessive working capital means idle funds which earn no profit for the business and hence
the business cannot earn a proper rate of return on its investment. Where there is a
redundant working capital, it may lead to unnecessary purchasing and accumulation of
inventories causing more chances of theft, waste and losses. Excessive inventory increase in
carrying cost the profit will come down.
2. Excessive inventory increase in carrying cost the profit will come down.
3. Excessive working capital implies excessive debtors and defective credit policy which may
cause higher incidence of bad debts.
4. It may result in overall inefficiency in the organization.
5. When there is excessive working capital, relations with banks and other financial
institutions may not be maintained.
6. Due to low rate of return on investments the value of shares may also fall.
7. The redundant working capital gives rise to speculative transactions.

55
DISADVANTAGES OF INADEQUATE WORKING CAPITAL:

1. A concern which has inadequate working capital cannot pay its short term liabilities in time.
Thus it will lose its reputation and shall not be able to get good credit facilities.
2. It cannot buy its requirements in bulk and can not avail of discount etc.
3. It becomes difficult for the firm to exploit favorable market conditions and undertake
projects due to lack of working capital.
4. The firm cannot pay day to day expenses of its operations and it creates inefficiencies,
increase costs and reduces the profits of the business.
5. It becomes impossible to utilize efficiently the fixed assets due to non availability of liquid
funds.
6. The rate of return on investments also falls with the shortage of working capital.

FACTORS DETERMINING THE WORKING CAPITAL REQUIRMENTS:

A firm should plan its operations in such a way that it should have neither too much nor too little
working capital. The working capital requirements are determined by a wide variety of factors.

1. Nature and size of business : Working capital requirements of a firm are basically
influenced by the nature of its business. Trading and financial firms have a very small investment
in fixed assets, but require a large sum of money to be invested in working capital. Whereas
public utilities have a very limited need for working capital and have to invest abundantly in fixed
assets. Their working capital requirements are nominal because they may have cash sales only
and supply services but not products. Working capital needs of most manufacturing concerns fall
between too extreme requirements of trading firms and public utilities. Such concerns have to
make adequate investments in current assets depending upon the total assets structure and other
variables. The size of the business that is measured in terms of scale of operations also has an
impact on the working capital needs.

56
2. Manufacturing cycle: The manufacturing cycle comprises of the purchase and use of raw
material in the production of finished goods. As the firm’s manufacturing cycle is lengthy the
working capital requirement of the firm is large.

3. Sales growth: The working capital needs of firm increase as its sales grow. Current assets will
have to be employed before growth takes place. A growing firm needs to invest funds in fixed assets
in order to sustain its growing production and sales. This in turn increases investment in current assets
to support enlarged scale of operations. A growing firm needs funds continuously.

4. Demand conditions: The business variations such as seasonal and cyclical fluctuations in the
demand for products and services affect the working capital requirements. When there is an upward
swing in the economy, sales will increase. Correspondingly, the firm’s investment in inventories and
book debts will also increase. During boom, additional investments in fixed assets may be made by
some firms to increase their productive capacity. These act as further additions to working capital.

5. Production policy: To reduce working capital problems arising due to changes in demand for
the firm’s products, a steady production policy may be maintained. If the firm’s productive capacities
can be utilized for manufacturing varied products, it can have the advantage of diversified activities
and solve its working capital problems.

6. Price level changes: Generally, rising price levels will require a firm to maintain higher
amount of working capital. However, companies which can immediately revise their product prices
with rising price levels will not face a severe working capital problem.

7. Operating efficiency and performance: The operating efficiency of the firm relates to the
optimum utilization of resources at minimum costs. The use of working capital is improved and the
pace of cash cycle is accelerated with operating efficiency. Better utilization of resources improves
profitability and thus helps in decreasing the pressure on working capital. A high net profit margin
contributes towards the working capital pool. In fact, the net profit is a source of working capital to
the extent it has been earned in cash. A firm can enhance its working capital funds by saving taxes
through appropriate tax planning.
57
8. Firm’s credit policy: The credit policy of the firm affects working capital by influencing the
level of book debts. The credit terms to be granted to customers may depend upon norms of the
industry to which the firm belongs. The firm should be discretionary in generating credit terms to its
customer. Depending upon the individual case different terms may be given to different customers. A
liberal credit policy without rating the credit worthiness of customers will be detrimental to the firm
and will create a problem for collecting funds later on. Slack collection procedures result in increase
of book debts. The firm should follow a rationalized credit policy based on the credit standing of
customers and other relevant factors.

OPERATING CYCLE:-
Operating cycle is the time duration required to convert sales, after the conversion of resources into
inventories and inventories into debtors and debtors into cash. The operating cycle of a manufacturing
company involves three phases:

 Acquisition of resources such as raw material, labor power and fuel etc.
 Manufacturing of the product which includes conversion of raw material into work-in-
progress and WIP into finished goods.
 Sale of the product either for cash or on credit. Credit sales create accounts receivable for
collection.

 If the operating cycle length is high we need to invest large amount as working capital and
vice versa.
 Sometimes basing on the competition we need to invest huge amount in debtors as a credit
sales.
 Fluctuations in the prices also need increase or decrease in the amount of working capital.
 Some seasonal factors also influence the need of working capital.

Operating cycle involves the following sequence of events.

 Conversion of cash into raw materials and labour.

58
  Conversion of raw material and labor into work in progress.
 Conversion of working progress into finished goods.
 Conversion of finished goods into debtors through credit sales.
 Conversion of debtors and bill receivables into cash.

WORKING CAPITAL CYCLE OF A MANUFACTURING FIRM

Raw
Raw
Cash
Cash material
material

Debtors
Debtors Work-in-
Work-in-
&& progress
progress
B/R
B/R

Finished
Finished
sales
sales goods
goods

Uses of operating cycle:

The operating cycle is helpful to the company in two ways:

 It helps in forecasting working capital requirements.

 Control of working capital can be done efficiently by the use of operating cycle.

Determination of the length of operating cycle:

The length of the operating cycle of a manufacturing firm is the sum of:
59
  Inventory conversion period.
 Book debts conversion period.

GROSS OPERATING CYCLE (GOC):-

The firms’ gross operating cycle (GOC) can be determined as inventory conversion period (ICP) plus
debtors’ conversion period (DCP). Thus, GOC is given as follows:
Gross operating cycle=Inventory conversion period + Debtors conversion period

INVENTORY CONVERSION PERIOD:

The inventory conversion is the sum of Raw material conversion period (RMCP), work-in-
progress conversion period (WIPCP) and finished goods conversion period (FGCP):

ICP=RMCP+WIPCP+FGCP

 RAW MATERIAL CONVERSION PERIOD (RMCP):

The raw material conversion period (RMCP) is the average time period taken to convert
material into work-in-progress. It depends on:
 Raw material consumption per day
 Raw material inventory
The raw material conversion period is obtained when raw material inventory is divided by raw
material consumption per day.

Avg. Raw material

Raw material conversion period (In Days) =
[Raw material consumption for total year]/365days

 WORK-IN-PROGRESS CONVERSION PERIOD (WIPCP):

Work-in-progress conversion period (WIPCP) is the average time taken to complete the semi-
finished or work-in-progress. It is given by the following formula:
60
 Work-in-process
Work-in-process conversion period=
[Cost of production]/365 days

 FINISHED GOODS CONVERSION PERIOD (FGCP):

Finished goods conversion period (FGCP) is the average time taken to sell the finished
goods. FGCP is given by the following formula:

Finished goods
Finished goods conversion period=
[Cost of goods sold]/365 days

 DEBTORS (RECEIVABLES) CONVERSION PERIOD (DCP):

Debtors’ conversion period (DCP) is the average time taken to convert debtors into cash. DCP
represents the average collection period. It is calculated as follows:

Debtors + Bills receivable

Debtors conversion period (DCP) =
Credit sales/365 days

 CREDITORS (PAYABLES) DEFERRAL PERIOD (CDP):

61
 Creditors (Payables) Deferral Period (CDP) is the average time taken by the firm in paying
its suppliers (creditors). CDP is given as follows:

Creditors + Bills payable

Creditors Deferral Period (CDP) =
Credit purchases/365 days

CASH CONVERSION OR NET OPERATING CYCLE:

Net Operating Cycle (NOC) is the difference between gross operating cycle and payables
deferral period.

Net Operating Cycle (NOC) = Gross operating cycle – Creditors deferral period.

KEY AREAS OF WORKING CAPITAL

Generally in the working capital management, there are three important areas which are
very important. Those are

1. Cash management
2. Receivables management
3. Inventory management
4. Payable management

CASH MANAGEMENT:-

62
 Cash management is one of the key areas of working capital management .The term cash
reference to cash management is used in two senses. In a narrow sense it is used broadly to cover
currency and generally accepted equivalent of cash such as Cheques, drafts and demand deposits in
banks. The broader view of cash also includes near cash assets such as marketable securities and time
deposits in banks. The main characteristic of these is that they can be readily converted into cash.

The three primary motives for main cash balance are as follows:

Transaction motives:- This refers to the holding of cash to meet routine cash requirements to
finance the transactions which a firm carries on, in the ordinary course of business.

Precautionary motive:- This motive of holding cash implies the need to hold cash to meet
unpredictable obligations.

Speculation motive:- It refers to the desire of a firm to take advantage of opportunities which
present themselves at unexpected moments and which are typically outside the normal course of
business.

Cash cycle:- The cash cycle refers to the process by which cash is used to purchase material from
which goods are produced and then sold to customers to pay bills later. The firm receives cash from
customers and the cycle repeats itself.

Cash budget:- It is a device to help a firm to plan and control the use of cash.
It is a statement showing the estimated cash inflow and cash outflow over the firms planning horizon.

RECEIVABLES MANAGEMENT:-

63
 When a firm makes an ordinary sale of goods and services and does not receive
payment, the firm grants trade credit and creates accounts receivables, which would be collected in
future. The management of these is known as receivables management. The management of
receivables involves crucial decision in three key areas: credit policies, credit terms and collection
policies.

Credit policy:- The credit policy of a firm provides a frame work to determine whether or not to
extend credit to customer.
 How much credit to extend.
 Credit standards are criteria to decide the type of customer to whom the goods could be sold
on credit. If a firm has more slow paying customers, its investment in accounts receivables
will increase. The firm will also be exposed to higher risk of default. The choice of
optimum credit standards involves a tradeoff between incremental return and incremental
cost.
 Analysis of customers:- Credit standards influence the quality of the firm’s customers . The
two aspects of the quality of customers
(a) The time taken by customer to repay credit obligations and
(b) The default rate

Credit terms:-
Credit terms specify the duration of credit and terms of payment by customers. Investment
in account receivables will be high if customers are allowed extended time period for making
payments.

Credit period:-
Credit period is the length of time for which credit is extended to customers, represented as
net date. A firm lengthens credit period to increase its operating profit through expanded sales.

Cash discount:-
64
 Cash discount is a reduction in payment offered to customer to induce them to repay credit
amount within a specified period of time which will be less than the normal credit period.

Collection efforts:-
This determines actual collection period .The lower the collection period, the lower the
investment in accounts receivables and vice versa. Prompt collection is needed for fast turnover of
working capital. Keeping collection costs and bad debts within limits and maintaining collection
efficiency also influence the working capital needs of the firm.

INVENTORY MANAGEMENT :-
Inventories constitutes the most important part of current assets of large majority of
companies. On an average the inventories are approximately 60% of the current assets in public
limited companies in India. Because of the large size of inventories maintained by the firms a
considerable amount of funds is committed to them. It is therefore, imperative to manage the
inventories effectively and efficiently in order to avoid unnecessary investment.

Nature Of Inventories:-
Inventories are stock of the product of the company is manufacturing for sale and components make
up of the product. The various forms of inventories in the manufacturing companies are:
Raw materials :- It is the basic input that is converted into the finished product through the
manufacturing process. Raw materials are those units which have been purchased and stored for
future production.
Work- in -progress :- These are semi finished products. They represent product that need more work
they become finished products for sale.
Finished goods :- These are completely manufactured products which are ready for sale. Stocks of
raw materials and work in progress facilitates production, while stock of finished goods is required
for smooth marketing operations. These inventories serve as a link between the production and
consumption of goods.

Inventory management techniques :-

65
In managing inventories, the firm’s objective should be to be in consonance with the shareholder wealth
maximization principle. To achieve this the firm should determine the optimum level of inventory. Efficiently
controlled inventories make the firm flexible. Inefficiency inventory control results in unbalanced inventory
and inflexibility. The firm sometimes run out of stock and sometimes pile up unnecessary stocks.
Economic Order Quantity (EOQ) :-
The major problem to be resolved is how much the inventory should be added when inventory is
replenished. If the firm is buying raw materials, it has to decide lots in which it has to purchase on
replenishment. If the firm is planning a production run, the issue is how much production to schedule.
These problems are called order quantity problems, and the task of the firm is to determine the
optimum or economic lot size. Determine an optimum level involves two types of costs.
 Ordering costs :- This term is used in case of raw materials and include all the cost of
acquiring raw material. They include the costs incurred in the following activities.
 Requisition
 Purchase ordering
 Transporting
 Receiving
 Inspecting
 Storing
Ordering cost increase with the number of orders placed; thus the more frequently inventory is
acquired, the higher the firm’s ordering costs. On the other hand, if the firm maintains large
inventory’s level, there will be few orders placed and ordering costs will be relatively small. Thus,
ordering costs decreases with the increasing size of inventory.
 Carrying costs :- These costs are incurred for maintaining a given level of inventory are
called carrying costs. These include the following activities.
 Warehouse rent
 Handling
 Administrative costs
 Insurance
 Deterioration and obsolescence

66
Carrying costs are varying with inventory size. Carrying costs increases with the increase of size of
inventory. The economic size of inventory would thus depend on trade off between carrying costs and
ordering costs.

ABC system (Always Better Control) :-

ABC system of inventory keeping is followed in the factories. Various items are categorized into
three different levels in the order of their importance. For example, items such as memory, high
capacity processors and royalty are placed in the ‘A’ Category. Large number of firms has to
maintain several types of inventories. It is not desirable to maintain the same degree of control on all
the items. The firm should pay maximum attention to these items whose value is highest. The firm
should therefore, classify inventories to identify which items should receive the most effort in
controlling.
The firm should be selective in approach to control investment in various types of inventories. This
analytical approach is called “ABC Analysis ”. The high value items are classified as “A items” and
would be under tightest control. “C items” represents relatively least value and would require simple
control. “B items” fall in between the two categories and require reasonable attention of management.

PAYABLES MANAGEMENT :-
There is an old age saying in business that if you can buy well then you can sell well.
Management of creditors is just as important as the management of debtors. Trade creditor is a
spontaneous source of finance in the sense that it arises from ordinary business transaction. But it is
also important to look after creditors- slow payment may create ill feeling and supplies could be
disrupted and also create a bad image of your company. Creditors are a vital part of effective cash
management and should be managed carefully to enhance the cash position.

Cost and benefits of trade credit:

(a). Cost of availing trade credit
Normally it is considered that the trade credit doesn’t carry any cost. However it carries
following costs:

67
(1) Price : There is often a discount on the price that the undergoes when it uses trade credit, since it
can take advantage of the discount only if it pays immediately. This discount can translate into a high
implicit cost.
(2) Loss of Goodwill : If the credit is overstepped, suppliers may discriminate against delinquent
customers if suppliers become short. As with the effect of any loss of goodwill, it depends verymuch
on the relative market strength of the parties involved.
(3) Cost of managing : Management of creditors involves administrative and accounting costs that
would otherwise be incurred.
(4) Conditions : Sometimes most of the suppliers insists that for availing the credit facility the order
should be of some minimum size or even on regular basis.

(b) Cost of not taking Trade credit :

On the other hand the costs of not availing trade credit facilities are as under :
(1) Impact of inflation : If inflation persists than the borrowers are favoured over the lender with the
levels of interest rates not seeming totally to redress the balance.
(2) interest : Trade credit is a type of interest free loan, therefore failure to avail this facility has an
interest cost. This cost is further increased if interest rates are higher.
(3) Inconvenience : Sometimes it may also cause inconvenience to the supplier if the supplier is
geared to the differed payment.

Computation of cost of payables :

By using trade credit judiciously, a firm can reduce the effect of growth or burden on investments in
working capital.
The cost of lost cash discount can be estimated by the formula:
(100/100-d)365/t - 1
Where ,
d= size of discount i.e. for 6% discount, d = 6
t = the reduction in payment period in days, necessary to obtain the early discount or days
credit outstanding-discount period.

68
CHAPTER - 4
ANALYSIS AND INTERPRETATION OF THE STUDY

69
STATEMENT OF CHANGES IN WORKING CAPITAL OF PEARL
BOTTLING PVT. LTD. FROM THE YEAR 2011 TO 2015

NET WORKING CAPITAL = CURRENT ASSETS – CURRENT LIABILITIES

PARTICULARS 2010-11 2011-12 2012-13 2013-14 2014-15

A. CURRENT ASSETS:-
Inventory 74,493,207 74,512,171 94,190,987 73,338,250 119,488,570
Trade receivables 43,393,180 89,508,280 80,641,134 68,212,799 93,036,750
Cash and bank balances 14,205,055 16,823,063 14,621,124 11,089,298 2,734.380
Short term loans and advances 23,064,281 5,323,052 3,990,192 3,740,192 4,154,817
Other current assets 23,970,869 26,608,757 27,121,615 19,783,893 28,452,631

TOTAL CURRENT ASSETS 183,126,591 212,775,322 220,565,053 176,164,432 247,867,148

B.CURRENT LIABILITIES:-
Short term borrowings
Trade payables
Other current liabilities
Short term provisions

TOTAL CURRENT LIABILITIES 210,467,832 404,725,449 369,801,539 477,913,808 423,290,128

NET WORKING CAPITAL (A-B) -27,341,241 -191,950,127 -149,236,486 -301,749,376 -175,422,980

+ -
INCREASE/DECREASE IN NET -137,364,881 -164,608,886 +42,713,641 -152,512,890 +126,326,396
WORKING CAPITAL

70
Interpretation:

GRAPH

Data Analysis and Interpretation:

 The above diagram shows that the current liabilities are more than the current assets so the net
working capital became negative. Therefore the company liquidity position is very weak to
pay its short term obligations.

 The reasons for negative working capital is that the company’s trade payables and short term
borrowings and other current liabilities were showing huge amounts.

71
  Company creditors balances are more than the debtors balances so the company is unable to
rotate the working capital in an effective manner.

 In F.Y. 2014-15 the net working capital is increased in huge manner because of better
working capital rotation in that year.

 The main reason for negative working capital of the company is that it concentrates more on
inventory and remaining liquid assets balances are very low.

STATEMENT OF CHANGES IN WORKING CAPITAL OF PEARL

BOTTLING PVT. LTD. FOR THE YEAR ENDING 31.3.10 AND 31.3.11

Particulars 31.3.10 31.3.11 Working Working

capital capital
increase decrease

A. Current Assets :
Inventories 93,362,030 74,493,207 - 18,868,823
Trade receivables 57,590,248 47,393,180 - 10,197,068
Cash and bank balances 31,835,037 14,205,055 - 17,629,982
Short term loans and 175,881,843 23,064,281 - 121,311,033
advances
Other current assets 23,970,869

TOTAL CURRENT 358,669,158 183,126,592 168,006,906

ASSETS
B. CURRENT
LIABILITIES:
Short term borrowings
Trade payables
Other current liabilities
Short term provisions

TOTAL CURRENT 248,645,518 210,467,832 38,177,686

LIABILITIES

72
Net Working Capital +110,023,640 -27,341,240 129,829,220
(A –B)

Decrease In -137,364,880
Workingcapital

TOTAL 27,341,240 27,341,240 168,006,906 168,006,906

INTERPRETATION:

GRAPH

Data Analysis and Interpretation:

73
  In F.Y.2009-10 the net working capital is positive where as in F.Y. 2010-11 the net working
capital is negative because all current assets are decrease in 2010-11 when compared to
previous year.

 Short term loans and advances are hugely decreased because all the loans that are given by
company to others are realized.

 Current liabilities are also decreased but it cannot make the net working capital to improve the
liquidity position.

 Cash and bank balances are also decreased due to payment of creditors and other short term
debts.

Statement of Changes In working Capital of PEARL BOTTLING PRIVATE

LIMITED for the year ending 31.3.2011 and 31.3.2012

Particulars 31.3.11 31.3.12 Working Working

capital capital
increase decrease

74
(A) A. Current assets:-
Inventories 74,493,207 74,512,171 18,964 -

Trade Receivables 47,393,180 89,508,280 42,115,100 -

Cash and bank balances 14,205,055 16,823,063 2,618,008 -

Short term loans and advances 23,064,281 5,323,052 - 17,741,229

Other current assets 23,970,869 26,608,757 2,637,888 -

Total Current Assets 183,126,592 212,775,323 47,389,960 17,741,229

B. Current Liabilities :-
Short Term Borrowings
Trade payable
Other current liabilities
Short term provisions

Total Current Liabilities 210,467,832 404,725,449 194,257,617

Net working capital (A – B) -27,241,240 -191,950,126 223,906,348

Decrease in working capital -164,608,886

Total 191,950,126 191,950,126 241,647,577 241,647,577

75
Interpretation:

GRAPH

Data Analysis and Interpretation:

 Trade receivables are increased to a large extent and short term loans and advances are
decreased in a huge manner.
 Debtors are increased due to increase in credit sales in the F.Y. 2011-12
 Creditors are also increased, that’s why the current liabilities are more than current assets in
this year.
 The above graph shows that the net working capital is decreased which tells us liquidity
position of company is weakening than previous year to a large extent.

76
Statement of Changes In working Capital of PEARL BOTTLING PRIVATE
LIMITED for the year ending 31.3.12 and 31.3.13

Particulars 31.3.12 31.3.13 Working Working

Capital Capital
increase decrease
(A). CURRENT ASSETS:-
Inventories 74,512,171 94,190,987 19,678,816 -
Trade receivables 89,508,280 80,641,134 - 8,867,146
Cash and bank balances 16,823,063 14,621,124 - 2,201,939
Short term loans and
advances 5,323,052 3,990,192 - 1,332,860
Other current assets 26,608,757 27,121,615 512,858 -

Total Current Assets 212,775,323 220,565,052 20,191,674 12,401,945

(B).CURRENT
LIABILITIES :-
Short Term Borrowings
Trade Payables
Other current liabilities
Short term provisions

Total Current Liabilities 404,725,449 369,801,539 34,923,910

Net Working Capital (A-B) -191,950,126 -149,236,487 42,713,639

Increase in working
capital +42,713,639

Total 191,950,126 191,950,639 55,115,584 55,115,584

77
Interpretation:

GRAPH

Data Analysis and Interpretation:

 Inventories are increased in 2012-13 in a huge manner that means the company blocked its
working capital more in its inventories.
 Debtors and cash and bank balances of the company is decreased in 2012-13 when compared
to 2011-12 and the company took more loans in 2012-13.
 Creditors are decreased in 2012-13 that means the company made payments to the creditors
and also more stock is available with the company.
 The working capital position of the company has been improved in the year 2012-13.

Statement of Changes In Working Capital of PEARL BOTTLING PRIVATE

LIMITED for the year ending 31.3.13 and 31.3.14

78
Particulars 31.3.13 31.3.14 Working Working
Capital Capital
increase decrease
(A). Current Assets:-
Inventories 94,190,987 73,338,250 - 20,852,737

Trade Receivables 80,641,134 68,212,799 - 12,428,335

Cash And Bank Balances 14,621,124 11,089,298 - 3,531,826

Short Term Loans And 3,990,192 3,740,192 - 250,000

Advances
Other Current Assets 27,121,615 19,783,893 - 7,337,722

Total Current Assets 220,565,052 176,164,432 44,400,620

(B). Current Liabilities:-

Short Term Borrowings
Trade Payables
Other Current Liabilities
Short Term Provisions

Total Current Liabilities 369,801,539 477,913,808 108,112,269

Net Working Capital (A-B) -149,236,487 -301,749,376 152,512,889

Decrease in Working
-152,512,889
Capital
Total 301,749,376 301,749,376 152,512,889 152,512,889

Interpretation:

79
GRAPH

Data Analysis And Interpretation:

 Inventories are decreased in the year 2013-14 that means sales are improved than in previous
year.
 Creditors are increased to a great extent and also the company cash and bank balances are
decreased, so the company has taken the loans from their commercial banks to pay its
creditors.
 Debtors are decreased in the year 2013-14 when compared to 2012-13 because cash is
realized from many debtors in 2013-14.
 The net working capital of the company was decreased in the year 2013-14 that means the
working capital position of the company is weaker than the previous year.

80
Statement of Changes In Working Capital of PEARL BOTTLING PRIVATE
LIMITED for the year ending 31.3.14 and 31.3.15

Particulars 31.3.14 31.3.15 Working Working

Capital Capital
increase decrease
(A). Current Assets:-
Inventories 73,338,250 119,488,570 46,150,320 -

Trade Receivables 68,212,799 93,036,750 24,823,951 -

Cash And Bank Balances 11,089,298 2,734,380 - 8,354,918

Short Term Loans And 3,740,192 4,154,817 414,625 -

Advances
Other Current Assets 19,783,893 28,452,631 8,668,738

Total Current Assets 176,164,432 247,867,148 80,057,634 8,354,918

(B). Current Liabilities:-

Short Term Borrowings
Trade Payables
Other Current Liabilities
Short Term Provisions

Total Current Liabilities 477,913,808 423,290,128 54,623,680

Net Working Capital (A-B) -301,749,376 -175,422,980 126,326,396

Increase In Working
+126,326,396
Capital
Total 301,749,376 301,749,376 134,681,314 134,681,314

Interpretation:

81
GRAPH

Data Analysis and Interpretation:

 There is a huge increase in the inventories in the F.Y. 2014-15 that leads to increase in the
current assets. Inventories are the main parts of the current assets and it contributes 56% to
the total current assets in the year 2014-15.
 Sales are improved in the year 2014-15 that means debtors of the company has been increased
because the company involves in more credit sales.
 Cash and bank balances are decreased because the payments are increased in the year
2014-15.
 Short term borrowings are increased because the company need to maintain the working
capital with them. So company taken a working capital loan and also the company has to pay
to the creditors on or before due date.
 In overall position the company net working capital has increased by 12.63 Crores which is
one of the positive aspect of the company.

RATIO ANALYSIS

82
 A ratio is a Simple arithmetical expression of the relationship of the one number to another; it
may be defined as the indicated co – efficient of two mathematical expressions. The technique of
ratio analysis can be employed for measuring short term liquidity or working capital position of a
firm. The following ratios may be calculated for this purpose.

A. Liquidity ratios
B. Turnover ratios

A. Liquidity ratios:-

1. Current Ratio
2. Quick ratio

B. Turnover ratios:-

1. Inventory turnover ratio

2. Debtors turnover ratio
3. Creditors turnover ratios

83
LIQUIDITY RATIOS:-

1. CURRENT RATIO:-

Current ratio may be defined as the relationship between current assets

and current liabilities. This ratio, also known as working capital ratio, is a measure of general
liquidity and is most widely used to make the analysis of a short – term financial position or liquidity
of a firm.

Current Assets
CURRENT RATIO =

Current Liabilities

Current assets = inventory + debtors + loans & advances + cash + bank balance

Current liabilities = short term borrowings+trade payables+short term provisions

CALCULATION OF CURRENT RATIO OF PEARL BOTTLING PVT. LTD.

FROM THE F.Y. 2010-11 TO F.Y. 2014-15

YEAR CURRENT CURRENT CURRENT RATIO

ASSETS LIABILITIES

2010-11 183,126,591 210,467,832 0.87

2011-12 212,775,322 404,725,449 052

2012-13 220,565,053 369,801,539 0.59

2013-14 176,164,432 477,913,808 0.36

2014-15 247,867,148 423,290,128 0.58

84
GRAPH:

INTERPRETATION:

 The ability of meeting the obligations can be characterized by the current assets ratio. A higher
ratio signifies the firm is able to meet its obligations. However the company’s current asset ratio
was below in all the past 5 years.
 The company’s creditors might not be giving them the usual credit period or the company’s credit
policy might be too weak.
 Current ratio is maximum in F.Y. 2010-11 and it is minimum in the F.Y. 2013-14.

85
QUICK RATIO:

Quick ratios establish the relationship between quick or liquid assets and liabilities.
An asset is liquid if it can be converting into cash immediately or reasonably soon without a loss of
value. Cash is the most liquid asset, other assets which consider being relatively liquid and including
in quick assets are debtors and bills receivables and marketable securities, inventories are considered
as less liquid. Inventory normally required sometimes for realizing into cash. Their value also
tendency to fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.

QUICK ASSETS
QUICK RATIO =
CURRENT LIABILITIES

Quick Assets = Current Assets – Inventories

Current liabilities = short term borrowings+trade payables+short term provisions

CALCULATION OF QUICK RATIO OF PEARL BOTTLING PVT. LTD.

FROM F.Y.2010-11 TO F.Y. 2014-15

YEAR QUICK ASSETS CURRENT QUICK RATIO

LIABILITIES

2010-11 108,633,384 210,467,832 0.51

2011-12 138,263,152 404,725,449 0.34

2012-13 126,374,065 369,801,539 0.34

2013-14 102,826,182 477,913,808 0.21

2014-15 128,378,578 423,290,128 0.30

86
GRAPH:

INTERPRETATION:

 The company is maintaining very less cash balances with them, that is one of the main reason
for lower quick ratio in all the last 5 years.

 The company is concentrating more on its inventory, that’s why the quick ratios are too low.

 The company has better quick ratio in the F.Y. 2010-11 when compared to other years.

87
WORKING CAPITAL TURNOVER RATIO:-

It signifies that for an amount of sales, a relative amount of working capital is

needed. If any increase in sales contemplated working capital should be adequate and thus this
ratio helps management to maintain the level of working capital. The ratio measures the
efficiency with which the working capital is being used by a firm. It may thus compute working
capital turnover by dividing sales by working capital.

Net Sales
Working capital turnover ratio =
Net Working Capital

CALCULATION OF WORKING CAPITAL TURNOVER RATIO OF PEARL

BOTTLING PVT. LTD. FROM F.Y.2010-11 TO F.Y. 2014-15

YEAR NET SALES WORKING CAPITAL WORKING CAPITAL

TURNOVER RATIO

2010-11 1,020,152,679 -27,241,240 -37.31

2011-12 1,193,582,291 -191,950,126 -6.22

2012-13 1,119,090,517 -149,236,487 -7.50

2013-14 1,275,235,989 -301,749,376 -4.23

2014-15 1,411,696,25 -175,422,980 -8.05

88
 GRAPH:

INTERPRETATION:

 As we seen in the graph, the working capital turnover ratio is negative in all financial years because the
net working capital of the company is negative in all years.

 The F.Y. 2010-11 shows huge increase in in working capital turnover ratio because the net working
capital is less negative which means the company’s sales are less when compared to other years.

 The best working capital turnover is shown in F.Y. 2013-14.

89
INVENTORY TURNOVER RATIO:-

Sales
Inventory turnover ratio =
Average Inventory

OPENING INVENTORY + CLOSING INVENTORY

AVERAGE INVENTORY =
2

CALCULATION OF INVENTORY TURNOVER RATIO OF PEARL

BOTTLING PVT. LTD. FROM F.Y.2010-11 TO F.Y. 2014-15

YEAR SALES AVERAGE INVENTORY INVENTORY

TURNOVER RATIO

2010-11 1,100,681,016 74,493,207 14.77

2011-12 1,289,695,142 74,512,171 17.30

2012-13 1,240,718,218 94,190,987 13.17

2013-14 1,400,364,708 73,338,250 19.09

2014-15 1,574,002,447 119,488,570 13.17

90
GRAPH:

INTERPRETATION:

 In F.Y. 2013-14 inventory turnover ratio is high because inventory is converted into sales by
19 times in a year.

 In F.Y. 2012-13 and 2013-14 , the inventory rotation was very slow that is the reason for
lower inventory turnover ratio.

91
DEBTORS TURNOVER RATIO:

Sales
DEBTORS TURNOVER RATIO =
Average Debtors

Opening Debtors + Closing Debtors

AVERAGE DEBTORS =
2

CALCULATION OF DEBTORS TURNOVER RATIO OF PEARL BOTTLING

PVT. LTD. FROM F.Y.2010-11 TO F.Y. 2014-15

YEAR SALES AVERAGE DEBTORS

DEBTORS TURNOVER
RATIO

2010-11 1,100,681,016 52,491,714 20.96

2011-12 1,289,695,142 68,450,730 18.84

2012-13 1,240,718,218 85,074,707 14.58

2013-14 1,400,364,708 74,426,966 18.81

2014-15 1,574,002,447 80,624,775 19.52

92
GRAPH:

INTERPRETATION:

 In F.Y. 2010-11 the manages the debtors in a better way because the company is getting the
cash from debtors in a very quick period.
 In F.Y. 2012-13 the debtors turnover ratio is very low because the debtors collection period is
more in that year.
 The debtors turnover ratio was in a increased state from the year 2012-13 which means the
management of debtors is improving year to year.

93
INVENTORY HOLDING PERIOD

It may also be of interest to see average time taken for clearing the stocks. This can be possible by
calculating inventory conversion period. This period is calculated by dividing the number of days by
inventory turnover ratio. The formula may be as:

Days in a Year
INVENTORY HOLDING PERIOD =
Inventory Turnover Ratio

CALCULATION OF INVENTORY HOLDING PERIOD OF PEARL

BOTTLING PVT. LTD. FROM F.Y.2010-11 TO F.Y. 2014-15

YEAR NO.OF INVENTORY INVENTORY

WORKING TURNOVER RATIO HOLDING PERIOD
DAYS (IN DAYS)

2010-11 365 14.77 24.17

2011-12 365 17.30 21.09

2012-13 365 13.17 27.71

2013-14 365 19.09 19.11

2014-15 365 13.17 27.71

94
GRAPH:

INTERPRETATION:

 In F.Y. 2012-13 the company takes more time to clear the inventories which means the
working capital cycle is slower in this year.

 In F.Y. 2013-14 the company was holding the inventory for just 19 days on an average which
indicates that the working capital was rotated very quickly in that year.

95
CREDITORS TURNOVER RATIO:

Purchases
CREDITORS TURNOVER RATIO =
Average Creditors

Opening creditors + Closing creditors

Average creditors =
2

CALCULATION OF CREDITORS TURNOVER RATIO OF PEARL

BOTTLING PVT. LTD. FROM F.Y.2010-11 TO F.Y. 2014-15

YEAR PURCHASES AVERAGE CREDITORS CREDITORS

TURNOVER RATIO

2010-11 670,869,523 207,673,142 3.23

2011-12 648,824,050 189,744,433 3.41

2012-13 614,304,895 161,588,741 3.80

2013-14 748,208,890 174,645,465 4.28

2014-15 822,353,615 219,200,626 3.75

96
GRAPH:

INTERPRETATION:

 Since F.Y. 2010-11 there is an increasing trend in creditors turnover ratio which means that
each and every year the purchases were increasing that tells us the company have been
purchasing more from creditors year by year to improve their sales because of increase in
demand.

 In F.Y. 2013-14 creditors turnover ratio is maximum that indicates the sales were raised
hugely in that year.

 In F.Y. 2010-11 the sales were lower that’s why the creditors turnover ratio is lower in that
year.

97
CHANGES IN WORKING CAPITAL IN FIVE YEARS OF PEARL BOTTLING
PVT. LTD.

Year Working Capital WORKING CAPITAL

(RS. In Crores) CHANGES
2010-11 -2.73 -
2011-12 -19.19 -16.46
2012-13 -14.92 +4.27
2013-14 -30.17 -15.25
2014-15 -17.54 +12.63

GRAPH:

INTERPRETATION:

 There is a negative working capital trend as we seen above diagram. It indicates

that the working capital management of the company is not satisfactory level
since last 5 years.
 The trend of working capital is fluctuating in all years that means the company
is not consistent with rotating working capital.
 The company managed the working capital in a better way in the F.Y. 2010-11
and the company faced poor management of working capital in F.Y. 2013-14.

98
CHAPTER – 5
SUMMARY

FINDINGS

SUGGESTIONS

CONCLUSION

BIBILIOGRAPHY

99
 SUMMARY

A well designed and implemented working capital management is expected to contribute

positively to the creation of firm’s value. The purpose of this project is to examine the trends in
working capital management and its impact on the performance of PEARL BOTTLING PVT.
LTD. During the last 5 years. This project aims at learning various facets of working capital
management at PBPL by studying the day to day activities in the company.

This project also draws a comparision between current assets and current liabilities of
various financial years to measure the net working capital and observe the trend of working capital
and draw the analysis by using graphs to show the relationship between current assets and current
liabilities and interpret graph and analyse the reasons for changes in working capital.

Working capital management involves not only managing the components of current assets,
but also managing the current liabilities. A firm is required to maintain the balance between
liquidity and profitability while conducting its day to day operations.

Liquidity is a precondition to ensure that the firms are able to meet its short term obligations
and its continued flow can be guaranteed from a profitable venture. An asset-liability mismatch may
occur which may increase the firm profitability in the short run but at a risk of its insolvency. On the
other hand, too much focus on liquidity will be at the expense of profitability. The financial
statements are used to workout various ratios which help us in better understanding the organization.

There are three main areas of working capital management and the project focuses on the following.

 Inventory management
 Receivables management
 Cash management

By using the financial statements of PEARL BOTTLING PVT. LTD. An analysis has been carried
out to understand the trends.

100
 FINDINGS

 The Working Capital management of the company is not efficient in the year 2011-12.

 The short term borrowings are in increasing trend that is not good for the company and it will
effect the liquidity position of the company.

 The comparision of working capital of every two years is giving the negative working capital
that tells us that the financial position of the company is very weak.

 In 2012-13 there has been highest increase in the net working capital when compared to other
years.

 In the last 3 years the working capital position is in increasing trend which is one of the
positive signs of the company.

 The company follows a good strategy in making payment to the creditors. It uses the cheque
system to pay to the creditors, that takes some time to clear payment. it uses the system of
real time gross settlement for collection of cash from the debtors which means the cash is
collected from debtors in a quick manner and also it takes time to pay to creditors. hence the
company can maintain adequate working capital with them.

 The sales of the company increased from the year 2012-13 and till now it is in the growing
trend.

 The company was faced losses in the 3 years from last 5 years.

 The company is not maintaining the appropriate cash balances with them to manage the short
term obligations.

 In the year 2013-14 and 2014-15 the company’s cash conversion cycle is very aggressive
which means the resources of the company are converted into cash in a quick period.

 The company took 90 days on an average to make payments to the creditors which is
acceptable.

 The company took 20 days on an average to collect the cash from the debtors which means
the company is managing efficient debtors management.

 Inventory turnover ratio is 3 times in the year 2014-15 which is a good aspect because the
inventory is cleared for every 4 months on an average and also the inventory is converted into
sales 3 times In a year.
101
 SUGGESTIONS

The following suggestions given for the improvement and the effective use of working capital and its
efficient management in the Pearl Bottling Private Limited.

 It is suggested to improve the credit control measures to collect the debtors within the time
limit and to reduce the bad debts losses and to reduce the debtor’s collection period.

 It is suggested to maintain the inventories at optimum level and minimize the ordering costs
and carrying costs and carry out the production as per the demand.

 The cash and bank balances are fluctuating too much in the last five years, so it is suggested
that the company has to maintain the cash and bank balances in a consistent and flexible
manner to meet the contingencies of the future.

 It is suggested to repay the creditors within the time limit to gain goodwill for the company in
financial market.

 The short term borrowings are increasing year to year so the company have to pay interest for
the loans. It is suggested to the company not to depend more on borrowings and it may effect
liquidity position.

 The company is still under the negative working capital so it is suggested that improve the
current assets and decrease the current liabilities to get positive net working capital.

 It is Suggested to improve the rotation of Working Capital Cycle and maintain Inventory
Management, Cash Management, Debtors Management Standards to reach the goal of the
company.

102
 CONCLUSION

Overall position of Pearl Bottling Pvt. Ltd. In Working Capital Management

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15

Turnover 110.06 129 124.07 140.03 157.40
(Rs. In Crores)
Profit after tax (4.50) 0.90 (9.62) (2.38) 0.37
(Rs. In Crores)
Current ratio 0.87 0.52 0.59 0.36 0.58
Quick ratio 0.51 0.34 0.34 0.21 0.30
Inventory 14.77 17.30 13.17 19.09 13.17
turnover ratio
Debtors 20.96 18.84 14.58 18.81 19.52
turnover ratio
Inventory 24.17 21.09 27.71 19.11 27.71
holding period
Creditors 3.23 3.41 3.80 4.28 3.75
turnover ratio
Working -37.31 -6.22 -7.50 -4.23 -8.05
capital turnover
ratio
Net working -2.73 -19.19 -14.92 -30.17 -17.54
capital
(Rs. In Crores)

The basic objective of the working capital management is to minimize the cost to the firm whether
managing cash, receivables, inventory, minimize risk to the company on receivables, ensure just level
of inventory to operate full level of capacity with minimum inventory. The working capital
management should aim to optimize production and sales with minimum risk and cost.

The working capital management of the company is not acceptable manner in all financial years
because of negative working capital.
The company is largely depends on the inventory because major percentage of total current assets are
contributed by inventories.
The liquidity position of the company is weak in all previous financial years.
The company manages the debtors very well in the past 5 years because the debtors are realized in a
reasonable period of time.
The company is taking more time to make payment to the creditors which means that the company is
managing the creditors in a best possible manner.

103
 BIBILOGRAPHY
Books and its Author names

 I.M. Pandey : Financial Management – Vikas Publishers

 M.Y.Khan : Financial Management – Tata McGraw Hill

Publishers

 Prasana Chandra : Introduction of Financial Management

- Tata McGraw

 Sharma and shashi K.Gupta : Management accounting.

 Van Horne and James W : Financial Management and policy

ANNUAL REPORTS OF PEARL BOTTLING PRIVATE LIMITED.,

JOURNALS AND MAGAZINES OF COMPANY

Website : WWW.Pepsico.com

http://www.pepsico.com/company/Our-History

104