Study on financial performance and working capital of pepsico. limited

Submitted to: Prof. Padmavathi

Submitted by:

Harsh jain

Pgdm, Sec-‘c’

Sem-2nd, Roll- 5130

ACKNOWLEDGEMENT

I sincerely thank to Teacher______________, person of amiable

personality, for assigning such a challenging project work which has

enriched my work experience and getting me acclimatized in a fit and final

working ambience in the premises of AIRTEL And RELIANCE

COMMUNICATION

I acknowledge my gratitude to Prof. _____________________ Seth

Anandram Jaipuria College and, for her extended guidance,

encouragement, support, and reviews without whom this project would not

have been a success.

Last but not the least I would like to extend my thanks to all employees at

AIRTEL And RELIANCE COMMUNICATION and my friends for their

cooperation, valuable information and feedback during my project.

CONTENTS1. SUMMARY

2. LTERATURE REVIEW

3. ABOUT THE COMPANY

4. WORKING CAPITAL MANAGEMENT

5. ANALYSIS OF WORKING CAPITAL MANAGEMENT

6. OBJECTIVE OF THE STUDY

7. RESEARCH METHODOLOGY

8. ANALYSIS OF THE STUDY

9. MAJOR FINDINGS

10. CONCLUSION

11. BIBLIOGRAPHY

SUMMARY

The project on working capital management has been a very good

experience. Every company faces the problem of working capital

management in their day to day process. An organization’s cost can be

reduced and the profit can be increased only if it is able to manage its

working capital efficiently. At the same time the company can provide

customer satisfaction and hence can improve their overall productivity and

profitability.

This project is a sincere effort to study and analyse the working capital

management of AIRTEL And RELIANCE COMMUNICATION. The

project was focused on making a financial overview of the company by

conducting a Working Capital analysis of AIRTEL And RELIANCE

COMMUNICATION for the years 2014 to 2016 and Ratios & various

components of working capital & for the year 2016 in a CMA (cash

monitoring arrangement) format emphasizing on Working Capital.

The experience that I gathered over the past three days has certainly

provided the orientation, which I believe will help me in shouldering any

responsibility in future.

LITERATURE REVIEWThe research done by, Gass D., “How To Improve Working Capital

Management” (2006) "Cash is the lifeblood of business" is an often

repeated maxim amongst financial managers. Working capital

management refers to the management of current or short term assets and

short-term liabilities.

Components of short-term assets include inventories, loans and advances,

debtors, investments and cash and bank balances. Short term liabilities

include creditors, trade advances, borrowings and provisions. The major

emphasis is, however, on short-term assets, since short-term liabilities arise

in the context of short-term assets. It is important that companies minimize

risk by prudent working capital management. The research done by,

Hardcastle J., “Working Capital Management,” (2007) describes that

Working capital, sometimes called gross working capital, simply refers to

the firm's total current assets (the short-term ones), cash, marketable

securities, accounts receivable, and inventory. While long-term financial

analysis primarily concerns strategic planning, working capital

management deals with day-to-day operations. By making sure that

production lines do not stop due to lack of raw materials, that inventories

do not build up because production continues unchanged when sales dip,

that customers pay on time and that enough cash is on hand to make

payments when they are due. Obviously without good working capital

management, no firm can be efficient and profitable. The research done by,

Dubey R., “Working Capital Management-an Effective Tool for

Organisational Success” (2008) describes that the working capital in a firm

generally arises out of four basic factors like sales volume, technological

changes, seasonal , cyclical changes and policies of the firm. The strength of

the firm is dependent on the working capital as discussed earlier but this

working capital is in itself dependent on the level of sales volume of the

firm. The firm requires current assets to support and maintain operational

or functional activities. By current assets we mean the assets which can be

converted readily into cash say within a year such as receivables,

inventories and liquid cash. If the level of sales is stable and towards

growth the level of cash, receivables and stock will also be on the high.

The research done by, Thachappilly G., “Working Capital Management

Manages Flow of Funds”, (2009) describes that Working capital is the cash

needed to carry on operations during the cash conversion cycle, i.e. the

days from paying for raw materials to collecting cash from customers. Raw

materials and operating supplies must be bought and stored to ensure

uninterrupted production. Wages, salaries, utility charges and other

incidentals must be paid for converting the materials into finished

products. Customers must be allowed a credit period that is standard in the

business. Only at the end of this cycle does cash flow in again.

COMPANY PROFILE

Company Profile Of Bharti Airtel:

Bharti Airtel is an Indian global  telecommunications  services

company based in  New Delhi, India. It operates in 18 countries across

South Asia   and  Africa. Airtel provides  GSM,  3G  and  4G LTE mobile

services, fixed line broadband and voice services depending upon the

country of operation. It is the largest mobile network operator in India and

the third largest in the world with 365 million subscribers. Airtel was

named India's second most valuable brand in the first ever Brandz ranking

by Millward Brown and WPP plc. Airtel is credited with pioneering

the business strategy of outsourcing all of its business operations except

marketing, sales and finance and building the 'minutes factory' model of

low cost and high volumes. The strategy has since been adopted by several

operators. Airtel's equipment is provided and maintained

by Ericsson and Nokia Solutions and Networks whereas IT support is

provided by IBM.  The transmission towers are maintained by subsidiaries

and joint venture companies of Bharti including Bharti Infratel and Indus

Towers in India.  Ericsson agreed for the first time to be paid by the minute

for installation and maintenance of their equipment rather than being paid

up front, which allowed Airtel to provide low call rates

of  1₹  (1.5¢ US)/minute.

Established July 07, 1995, as a Public Limited Company

Proportionate

revenue

617,858 (` Millions) as at march 31, 2016

606,894 (` Millions) as at march 31, 2016

Shares in issue 3997.4 Mn shares as at September 30, 2016

Listings

Bombay Stock Exchange Limited (BSE) 

National Stock Exchange of India Limited

(NSE)

Company Profile Of Reliance Communications Ltd

Reliance Communications Ltd. (RCom) is an Indian Internet

access and telecommunications company headquartered in Navi Mumbai,

India. It provides GSM (Voice, 2G, 3G, 4G) mobile services, fixed line

broadband and voice services, DTH depending upon the areas of operation.

Reliance Communications is the fourth largest telecom operator in India

with 98.70 million subscribers as of June 2016. Established in 2002, it is

a subsidiary of Reliance Anil Dhirubhai Ambani Group. Reliance

Communication IT Support is provided by Reliance Tech Services and

Telecom network is maintained and operated by Ericsson, transmission

towers are maintained by its subsidiary Reliance Infratel. Reliance

Infocomm laid the largest Optic Fiber Cable network in the country in

2003 to 2005, approximately 135,000 km, and touched almost all top

broadband cities with the help of their Franchisee's - Local Cable

Operators (LCO's). On an average 1900 large LCO's were connected to the

Reliance Infocomm network to provide Voice, Data and Video services

known as Triple Play on IPTV platform. After the split of the Telecom

business venture between Mukesh Ambani and Anil Ambani, the telecom

business was handed over to Anil Ambani, who later christened the

company as "Reliance Communications Limited".

In September 2016, RCom announced that it would merge its wireless

business with Aircel

Established27 December 2002, as a Public Limited

Company

Proportionate

revenue

10,295 (` Millions) as at march 31, 2016

11,136 (` Millions) as at march 31, 2016

Listings

Bombay Stock Exchange Limited (BSE) 

National Stock Exchange of India Limited

(NSE)

MISSION

Our mission is to be the world’s premier consumer products focused on

convenient foods and beverages. We seek to produce financial rewards to

investors as we provide opportunities for growth and enrichment to our

employee, our business partners and the communities which we operate.

And in everything we do, we strive for honestly, fairness and integrity.

VISION

AIRTEL And RELIANCE COMMUNICATION is to continually improve

all aspects of the world in which we operate environment, their vision is to

enrich the lives of our customers.

INTRODUCTIONA managerial accounting strategy focusing on maintaining efficient levels

of both Components of working capital, current assets and current

liabilities, in respect to each other are referred to as working capital

management. Working capital management ensures a company has

sufficient cash flow in order to meet its short-term debt obligations and

Operating expenses. Implementing an effective working capital

management system is an excellent way for many companies to improve

their earnings. The two main aspects of working capital management are

ratio analysis and management of individual components of working

capital. Ratio analysis will lead management to identify areas of focus such

as inventory management, cash management, accounts receivable and

payable management. The study objectives in working capital management

particular to this study are:

To examine the impact of accounts receivables days, inventories

days, accounts payable Days and cash conversion cycle on return on

total assets

To analyse the trend in working capital needs of firms and to

examine the causes for any significant differences between the

industries.

Working Capital Components

The term working capital refers to the amount of capital which is readily

available to an Organization. It is a measure of both a company's efficiency

and its short-term financial health. That is, working capital is the

difference between resources in cash or readily convertible into cash

(Current Assets) and organizational commitments for which cash will soon

be required (Current Liabilities). Current Assets are resources which are

in cash or will soon be converted into cash in “the ordinary course of

business”. “Current Liabilities are commitments which will soon require

cash settlement in “the ordinary course of business”.

The working capital is calculated as:

WORKING CAPITAL = CURRENT ASSETS-CURRENT LIABILITIES

Current assets Current liabilitiesCash in hand/bank Bills payables

Bills receivables Sundry creditors

Sundry Debtors Outstanding expenses

Short term loans Accrued expenses

Inventory stocks Bank overdraft

Temporary investment

Accrued income

prepaid expenses

Positive working capital means that the company is able to pay off its

short-term liabilities. Negative working capital means that a company

currently is unable to meet its short-term liabilities with its current assets

(cash, accounts receivable, inventory). If a company's current assets do not

exceed its current liabilities, then it may run into trouble paying back

creditors in the short term. The worst-case scenario is bankruptcy.

A declining working capital ratio over a longer time period could also be a

red flag that warrants further analysis. Working capital also gives

investors an idea of the company's underlying operational efficiency.

Money that is tied up in inventory or money that customers still owe to the

company cannot be used to pay off any of the company's obligations. So,

even if accompany is not operating in the most efficient manner (slow

collection), it will show up as an increase in the working capital. This can

be seen by comparing the working capital from one period to another; slow

collection may signal an underlying problem in the company's operations.

Working capital analysisThe major components of gross working capital include stocks (raw

materials, work-in-progress and finished goods), debtors, cash and bank

balances. The composition of working capital depends on a multiple of

factors, such as operating level, level of operational efficiency, inventory

policies, book debt policies, technology used and nature of the industry.

While inter- industry variation is expected to be high, the degree of

variation is expected to be low for firms within the industry.

Nature and importance of working capital analysisThe working capital meets the short-term financial requirements of a

business enterprise. It is a trading capital, not retained in the business in a

particular form for longer than a year. The money invested in it changes

form and substance during the normal course of business operations. If it

becomes weak, the business can hardly prosper and survive. The success of

a firm depends ultimately, on its ability to generate cash receipts in excess

of disbursements. On the one hand, working capital is always significant.

This is especially true from the lenders or creditors perspective, where the

main concern is defensiveness: can the company meet its short-term

obligations, such as paying vendor bills? But from the perspective of equity

valuation and the company's growth prospects, working capital is more

critical to some businesses than to others. At the risk of oversimplifying, we

could say that the models of these businesses are asset or capital intensive

rather than service or people intensive.

Approaches of working capital managementThe objective of working capital management is to maintain the optimum

balance of each of the working capital components. This includes making

sure that funds are held as cash in bank deposits for as long as and in the

largest amounts possible, thereby maximizing the interest earned.

However, such cash may more appropriately be “invested” in other assets

or in reducing other liabilities.

Working capital management takes place on two levels:

Ratio analysis can be used to monitor overall trends in working capital and

to identify areas requiring closer management. The individual components

of working capital can be effectively managed by using various techniques

and strategies. When considering these techniques and strategies,

departments need to recognize that each department has a unique mix of

working capital components. The emphasis that needs to be placed on each

component varies according to department. For example, some

departments have significant inventory levels; others have little if any

inventory. Furthermore, working capital management is not an end in

itself. It is an integral part of the department’s overall management.

The needs of efficient working capital management must be considered in

relation to other aspects of the department’s financial and non-financial

performance.

Working capital cycleWorking capital cycle, also known as the asset conversion cycle, operating

cycle, cash conversion cycle or just cash cycle, is used in the financial

analysis of a business. The higher the number, the longer a firm's money is

tied up in business operations and unavailable for other activities such as

investing. The cash conversion cycle is the number of days between paying

for raw materials and receiving cash from selling goods made from that

raw material.

Cash Conversion Cycle = Average Stockholding Period (in days) +

Average Receivables.

Processing Period (in days) - Average Payables Processing Period (in

days) with.

Average Stockholding Period (in days) = Closing Stock / Average

Daily Purchases.

Average Receivables Processing Period (in days) = Accounts

Receivable / Average Daily Credit Sales.

Average Payable Processing Period (in days) = Accounts Payable /

Average Daily Credit Purchases.

Schedule of changes in working capital BSNL Working capital for 2014 to 2016

2013-14 2014-15 2015-16

Current assets

(INR$ lakh)

cash equivalents 93,195 122,477 103,509Accounts

receivable

276,258 232,660 261,515

Inventory 354,728 369,688 443,371Other current

assets

1,321,806 911,286 1,058,576

Current

investment0 0 0

Short term loan

advances

76,344 69,135 101,918

Total current

assets

2,122,331 1,705,246 1,968,889

Current liability

Short term

borrowing

373,853 632,871 283,672

Accounts payable 870,657 828,914 682,370

Short term

provision

67,459 63,980 27,995

Other current

liability

682,363 734,591 858,270

Total current

liability

1,994,332 2,260,356 1,852,307

Net working

capital127999 (555,110) 116,582

Working capital for 2006 to 2008

2013-14 2014-15 2015-16

Current assets

(` in Crore)

Current

investment- 638 -

cash equivalents 127 572 820Accounts

receivable1,994 1,334 1,573

Inventory 269 201 119

Short term loans

and advances9,375 10,861 4,140

Other current

assets2,934 3,359 2,464

Total current

assets

14,699 16,965 9,116

Current liability

Accounts

payable2,076 4,385 3,877

Short term debt 7,332 1,189 3,669Other current

liability5,653 6,596 8,954

Short term

provision4,159 1,248 1,234

Total current

liability19,220 13,418 17,734

Net working

capital(4521) 3,547 (8,618)

Assessment of working capital requirement:

2013-14 2014-15 2015-161.Total current assets

2,122,331 1,705,246 1,968,889

2. Current liabilities (other than bank borrowings)

1,994,332 2,260,356 1,852,307

3. Working capital gap

127,999 (555110) 116582

4. Min. stipulated net working capital (25% of total c.a.)

528,083 426,312 492,222

5. Projected net working capital

529,000 500,000 500,000

6. Item 3 minus (400,084) (128,798) (375,640)

item 47. Item 3 minus item 5

(401,001) 55,110 383,418

8. Maximum permissible bank finance

1422 1568 1389.75

Assessment of working capital requirement:

2013-14 2014-15 2015-161.Total current assets

2749 3086 3141

2. Current liabilities (other than bank borrowings)

629 647 966

3. Working capital gap

2120 2439 2175

4. Min. stipulated net working capital (25% of total c.a.)

687.25 771.5 785.25

5. Projected net working capital

698 871 58

6. Item 3 minus item 4

1432.75 1667.5 1389.75

7. Item 3 minus item 5

1422 1568 2117

8. Maximum permissible bank finance

1422 1568 1389.75

Analysis

Working capital management ensures a company has sufficient cash flow

in order to meet its short-term debt obligations and operating expenses. In

2014 the company have Rs.691mill$. Its shows good financial position of

the company. In 2015 it increases to 871 million $. In this year company

have taken less short term debt from previous year. This year company

uses his own funds. Its shows the efficient working capital management by

Pepsi. In 2016 the company have only 58 mill $ working capital because in

this year company have takes much more short term loans for its expansion

and pay for his day to day expenses.

Its shows the company have not utilise efficiently the fixed assets. In this

year world economy faces downturns. Recession has also affected on Pepsi.

this year. For this company has taken $1408 mill. Short term loans. Its

increases the current liability of the company. Company pay its quickly in

his payable time. Its shows the good liquidity position of the company in

2008. This year company have more cash & bank balance in hand from the

previous year. Its 50% more than from the previous year. This year

company have $1675 million. Accounts payable it is less from the previous

year. It is good for the company.

Objective of the study

To observe the systems, process, interactions in the organization.

To study and analyse the working capital management of PepsiCo.

To study that how they use working capital to solve day to day

problems.

To study about their Operating Cycle, cash conversion cycle,

processing period.

Research methodology

The term research refers to the systematic method consisting of enunciating the problem , formulating a hypothesis collecting the data , analysing the facts and reaching the certain conclusions either in the form of solution towards the concern problem or in certain generalization for some theoretical formulation .Research Methodology is a way to systematically solve the research problem .It may be understood as a science of studying how research is done scientifically. For completing the project work, data inputs were collected from the following sources:Primary data:· Collected data through discussion with the Finance manager in Pepsi.

· Collected data during working in Pepsi.

Secondary Data:

· Collected data from personnel manual of Pepsi.

· Collected data from different magazines, journals, Newspapers and

Internet.

For this project I’ve used the secondary data in the form of Annual report

2006, Annual report 2007, and Annual report 2008.

Analysis of various components of working capital

Inventory analysis:Inventory is total amount of goods and materials content in a store of

factory at any given time. Inventory means stock of three things:-

1. Raw materials

2. Semi-finished goods.

3. Finished goods.

Position of inventory in PepsiCo:

Inventories 2006 2007 2008Raw materials 175 195 185Finished goods 358 382 343Total 533 577 528All are in Rs. in million $.

Interpretation:

By analysing the 3 years data we see that the inventories are increased in

year 2007 by 577. We are looking approximate same pattern in inventories.

We can see that inventories are grown by 4.1% and 4.1% in 06 and 07

respectively from previous year. By this growth we can say that the

company is growing very smoothly in soft drink sector. A company uses

inventory when they have demand in market and Pepsi is having a great

demand in beverages sector. From other point of view we can say that the

liquidity of firm is blocked in inventories but to stock is very good due to

uncertainty of availability of raw material in time.

Sundry debtor analysis:Debtors or an account receivable is an important component of working

capital and fall under current assets. Debtors will arise only when credit

sales are made.

Position of sundry debtor in PepsiCo:All are in Rs. m million $

Debtor(net) 2006 2007 2008Trade account

receivable

1026 1319 1208

Allowances for

doubtful

accounts

52 54 71

Accounts

receivable

198 188 154

Other

receivable

56 67 80

Total 1332 1628 1513

Interpretation:In the table we see that there is rise in the debtors in PepsiCo Limited in

the successive years. A simple logic is that debtors increase only when sales

increase and if sales increases it is good sign for growth. We can say that it

is a good sign as well as negative also.

Company policy of debtors is very good but a risk of bad debts is always

present in high debtors. When sales are increasing with a great speed the

profit also increases. If company decreases the Debtors they can use the

money in many investment plans.

Cash and bank balances analysis:Cash is called the most liquid asset and vital current assets. It is an

important component of working capital. In a narrow sense, cash includes

notes, bank draft, cheque etc. while in a broader sense it includes near cash

assets such as marketable securities and time deposits with bank.

Position of cash and bank balance in PepsiCo:Year 2006 2007 2008Cash and bank

balance equivalent

629 647 966

All are in Rs. million $.

Interpretation:If we analyse the above table we find that it follows an increasing trend. In

the year 2006 it had maintained a 629 mill $ amount of cash and bank

balance which has increase in the year 2007 up to 647 mill $ but there is

huge increase between the year 2007 and 2008. Although company’s cash is

increasing this is very good sign for company. Holding more cash is not

good it means company not using the cash for better projects. The analysis

shows that the fix deposits of company are rapidly increase in last year as

49% respectively from previous year. Company is utilizing the fixed cash

for exploding the projects that is good for growth.

Position of current liabilities in PepsiCo:

Current liabilities 2006 2007 2008Account payable

and other current

liabilities

1677 1968 1675

Short term

liabilities

374 240 103

current maturities 0 7 1305Total 2051 2215 3083All are in Rs. million $.

Interpretation:We analyse the above table then we can see that it follow an uneven trend.

The important component of current liabilities is sundry creditors and

other liabilities. In 06-07 it increased by 17% and in 07-08 it increased by

16.9%. In 07-08 it was increased because of growth in short term debt by

39%.This is liability for company so this should be less. When company

have minimum liabilities it creates a better goodwill in market. High

current liabilities indicate that company is using credit facility.

Provision analysis:

Year 2006 2007 2008Deferred taxes 61 42 47Proposed 90 113 135

dividendIncome tax 159 177 112Total 310 332 294Interpretation:From the above table we can see that provision shows an approximate same

trend and the huge amount is being kept in these provisions. Though the

profits of the company are increased income tax is also increased which is

good that company is creating goodwill in market by paying income tax in

time. Other provisions are also for the benefit of employees and public.

This is good sign for Company growth.

Working capital ratios:

Position of receivable ratio in PepsiCo:

Receivable ratio= debtors / sales*365

Year 2006 2007 2008Receivable ratio 10.1 9.5 9.5

Interpretation:Generally a low debtor’s turnover ratio implies that it considered congenial

for the business as it implies better cash flow. The ratio indicates the time

at which the debts are collected on an average during the year. Needless to

say that a high Debtors Turnover Ratio implies a shorter collection period

which indicates prompt payment made by the customer. Now if we analyse

the three year data we can say that it holds a good position while receiving

its money from its debtors. The ratios are same in last two year, which

implies that recovery position is good and company should maintain these

positions.

Position of payable ratio in PepsiCo:

Payable ratio= creditors/cost of sales*365

Year 2006 2007 2008Payable ratio in

days

87.4 90.3 87.6

Interpretation:Actually this ratio reveals the ability of the firm to avail the credit facility

from the suppliers throughout the year. Generally a low creditor’s

turnover ratio implies favourable since the firm enjoys lengthy credit

period. Now if we analyse the three years data we find that in these year the

ratio was approximately same high which means that its position of

creditors is good, but in the 2007 it increases to 90 days. In next year it is

seen that it has followed a decreasing trend which is very good sign for the

company. So we can say it enjoys a very good credit facility from the from

the suppliers.

Position of inventory ratio in PepsiCo:

Inventory turnover ratio= average stock/cost of goods sold*365

Year 2006 2007 2008Inventory ratio 13.7 13.3 13.7

Interpretation:This ratio tells the story by which stock is converted into sales. A high stock

turnover ratio reveals the liquidity of the inventory i.e., how many times on

an average, inventory is turned over or sold during the year. If a firm

maintains a minimum stock level in order to maximize sales by quick

rotation of inventory and the holding cost of inventory will be minimum. A

low stock turnover ratio reveals undesirable accumulation of obsolete

stock. By analysing the three year data it seen that it follows an

approximately same trend. We see that from the year 2006 to 2008 it is

more or less double which has been rectified in the year 2008. But it is

needless to say that ratio the company maintains is very high and the

company is required to take measures to lower down this ratio as it affects

the working capital cycle of company and the flow of cash in the company.

Position of current ratio in PepsiCo:

Current ratio= total current asset/total current liabilities

Year 2006 2007 2008Current ratio 1.34 1.39 1.02

Interpretation:This ratio reflects the financial stability of the enterprise. The standard of

the normal ratio is 2:1 but in most of companies’ standard is taken

according to Tendon Committee which is taken as 1.33:1. Now if we

analyse the three years data it can be predicted that it holds a stable

position all throughout period but it is seen that it holds a low position than

the standard one and the company is required to improve its position.

Position of quick ratio in PepsiCo:

Quick ratio= total liquid assets/total liquid liabilities

Year 2006 2007 2008Quick ratio 1.08 1.13 0.84

Interpretation:It is the ratio between quick liquid assets and quick liabilities. The normal

value for such ratio is taken to be 1:1. It is used as an assessment tool for

testing the liquidity position of the firm. It indicates the relationship

between strictly liquid assets whose realizable value is almost certain on

one hand and strictly liquid liabilities on the other hand. Liquid assets

comprise all current assets minus stock. By analysing the three years data

it can be said that its position was good in the year 2006 and 2007 but its

decrease in the next year. But it is to be said that it is higher than the

standard in the year 2006 & 2007. Its shows the higher liquidity position of

the company.

Working capital turnover ratio:

Working capital ratio= cost of sale/net working capital

Year 2006 2007 2008Working capital 9.88 8.46 130.79

ratio

Interpretation:This ratio indicates whether the investments in current assets or net

current assets (i.e., working capital) have been properly utilized. In order

words it shows the relationship between sales and working capital. Higher

the ratio lower is the investment in working capital and higher is the

profitability. But too high ratio indicates over trading. This ratio is an

important indicator about the working capital position. Now if we analyse

the three years data, we find that it follows an increasing trend which

means that its investment in working capital is lower and the company is

utilizing more of its profit. But we find that in 2008 the ratio was increasing

up to 130. In this year company takes much more short term loans for its

short time requirement which is not a good sign for the company and the

company is required to look into these matters closely.

Profitability ratio:

Particulars 2006 2007 2008Net sale 12730 13591 13796Cost of goods

sold

6900 7370 7586

Opening profit

before interest

5830 6221 6210

opening profit

after interest

5830 1071 649

Profit/loss

before tax

681 709 274

Profit/loss after

tax

522 532 162

Dividend

payout/

drawings

0.41 0.53 0.65

Income statement of PepsiCo 2004 to 2008:

Year 2004 2005 2006 2007 2008 TTMSales 10906 11885 12730 13591 13796 13404Operating

income

976 1023 1017 1071 649 617

Income

tax

232 247 159 177 112 -9

Net

income

457 466 522 532 162 223

Interpretation:Analysing the last five year data we say that sales have increasing trend. Its

shows the growth of the company. The profits are increasing year by year

but in 2008 the profits are very low from previous year. In this year

company takes huge amount of short term loans in this way they give more

interest on this. This is the main reason the company profits are very low.

Now in 2009 the profits of the company is 223 mill $ its shows amazing

growth rate of the company In two quarters of 2009 company sales are

equal to last year. This year company cover all the loses of previous year.

Findings Pepsi bottling group has once again, demonstrated the power of our

operating capabilities and unique assets in 2008.

Comparable diluted earnings per share growth of 3% to $2.27

worldwide revenue growth of 2%

Comparable operating income growth of 2%

Returned $624 million in cash to shareholder

This year company takes $1400 million short term loans because of

macroeconomics downturns in economy.

In 2008 company gives .65$ dividend to his shareholder.

This year company have 2% growth in EPS this is very low from the

previous year because company has paid many interest on short term

loans.

Conclusion Pepsi bottling group has once again, demonstrated the power of our

operating capabilities and unique assets in 2008. While facing

unprecedented macroeconomics challenges throughout the world, PBG

showed flexibility and discipline to advance our business priorities and

become a stronger, more focused organisation. The overall performance of

PepsiCo is getting on a good track. The total turnover of the company has

registered a growth of 205 Million whereas the operating profits for the

year were lower by 422 million mainly on the accounts of increase in the

volume or sales, higher realization and effective cost control measures

taken by the company. The profit before tax is 709 million at against 681

millions in the previous year. The cash earning of the company improved

substantially to 1437 million as against 1228 million in the last financial

year. With the increase in capacity on account of expansion projects being

undertaken by the company, it is expected that the company would be in a

position to maintain the growth in future years. Company has parked its

surplus fund in the various debt schemes of mutual fund. There is an

Investment in non-controlled affiliates of 619 million in current year.

Company is cash rich but as there are expansion and diversification plans

under the pipeline, company is not utilizing these funds. For meeting the

working capital needs and capacity expansion needs it has borrowed from

banks. During the year company has embarked upon expansion projects

which would effectively enhance the capacity of the company. With the

capacitive power plants already in operation and expansion projects under

implementation, it is expected that the beverages division of the company

will do well in the foreseeable future.

They achieved these results by adapting quickly to the economic

environment and by focusing on several business drivers to grow our top

line, improve cost and productivity, and strengthen our people and culture.

Bibliography

www.pepsico.com

www.yahoofinance.com

http://www.rediff.com/money/2003/aug/21pepsi.htm

http://www.stjohns.edu/media/3/80dc682a41f44209b5da9de5f8ac8bec.pdf

http://quicktake.morningstar.com/stocknet/cashflow10.aspx?

Country=USA&Symbol=PBG

http://quicktake.morningstar.com/stocknet/EfficiencyRatios10.aspx?