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A
Project Report
On
A STUDY ON Working Capital
Management PepsiCo.
Submitted in partial fulfilment of the requirements for the award of the
degree Of
PREFACE
This study was undertaken by me at PepsiCo as my summer training project. My report on the topic “ A Study of Working Capital Management of PepsiCo ” is prepared .the eight weeks training program is an integral part of our course curriculum as per MJPRU Bareilly program of B.Com(H) program. The main objective of the report is to give one an
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opportunity to correlate theory to practical and learning all which can learn through practical experience to on the job situation and industrial environment. Project report is the inseparable aspect of the professional course today. This is the basic criteria which makes it mandatory for the participants in any curriculum that he/she carries out in his/her own thought and blends it with the official’s data on the basis of which a complete report is formulated.
ACKNOWLEDGEMENT
Report with such topic demands for some experienced knowledge, professional help and encouragement from many quarters.
I have deep regard for and gratefully thank Managemen t Faculty of Mr. Pankaj Kumar Gupta. who have devoted his precious time, friendly assistance, support and guidance for encouraging me to develop this project report. I would feel pleasure if I could contribute even to the smallest extent in this regard.
Last but not the least I must thank Almighty God for his inspiration and guidance and my family members for their unquestioning encouragement without which this work would not be possible.
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The information, facts & findings in this report are based on my indigenous work and are original in nature.
Date:
TABLE OF CONTENTS
TOPIC PAGE NO.
1. EXECUTIVE SUMMARY 7
2. INTRODUCTION 8
3. ABOUT THE COMPANY 13
4. WORKING CAPITAL MANAGEMENT 28
5. ANALYSIS OF WORKING CAPITAL MANAGE
MENT 38
6. OBJECTIVE OF THE STUDY 39
7. RESEACH METHODOLOGY 40
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8. ANALYSIS OF THE STUDY 42
9. WORKING CAPITAL RATIO 52
10. MAJOR FINDINGS 65
11. CONCLUSION 67
12. RECOMMENDATION 69
13. BIBLIOGRAPHY & REFRENCES 72
14. ANNEXTURE 74
EXECUTIVE SUMMARY
The project on Working Capital Management has been a very good experience. Every
manufacturing company faces the problem of Working Capital Management in their day to
day processes. An 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 analyze the Working Capital Management
of PEPSICO Bottling group. The project was focused on making a financial overview of the
company by conducting a Working Capital analysis of PEPSICO Bottling group for the years
INTRODUCATION
The research done by Pass C.L., Pike R.H., “An overview of working capital management and corporate financing”,(1984) describes that over the past 40 years major theoretical developments have occurred in the areas of longer-term investment and financial decision making. Many of these new concepts and the related techniques are now being employed successfully in industrial practice. By contrast, far less attention has been paid to the area of short-term finance, in particular that of working capital management. Such neglect might be acceptable were working capital considerations of relatively little importance to the firm, but effective working capital management has a crucial role to play in enhancing the profitability and growth of the firm. Indeed, experience shows that inadequate planning and control of working capital is one of the more common causes of business failure.
The research done by Herrfeldt B., “How to Understand Working Capital Management” describes that“Cash is king”--so say the money managers who share the responsibility of running this country's businesses. And with banks demanding more from their prospective borrowers, greater emphasis has been placed on those accountable for so-called working capital management. Working capital management refers to the management of current or short-term assets and short-term liabilities. In essence, the purpose of that function is to make certain that the company has enough assets to operate its business. Here are things you should know about working capital management.
The research done by, Samiloglu F. and Demirgunes K., “The Effect of Working Capital Management on Firm Profitability: Evidence from Turkey” (2015) describes that the effect of working capital management on firm profitability. In accordance with this aim, to consider statistically significant relationships between firm profitability and the components of cash conversion cycle at length, a sample consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period of 1998-2014 has been analysed under a multiple regression model. Empirical findings of the study show that accounts receivables period, inventory period and leverage affect firm profitability negatively; while growth (in sales) affects firm profitability positively. The research done by, Appuhami, Ranjith B A, “The Impact of Firms' Capital Expenditure on Working Capital Management: An Empirical Study across Industries in Thailand” ,
International Management Review,(2015), The purpose of this research is to investigate the impact of firms' capital expenditure on their working capital management. The author used the data colleted from listed companies in the Thailand Stock Exchange. The study used Shulman and Cox's (1985) Net Liquidity Balance and Working Capital Requirement as a proxy for working capital measurement and developed multiple regression models. The empirical research found that firms' capital expenditure has a significant impact on working capital management. The study also found that the firms' operating cash flow, which was recognized as a control variable, has a significant relationship with working capital management.
The research done by, Hardcastle J., “Working Capital Management”,(2014) 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, 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.
The research done by, Beneda, Nancy; Zhang, Yilei, “Working Capital Management, Growth and Performance of New Public Companies”, Credit & Financial Management Review, (2015) examining impact of working capital management on the operating performance and growth of new public companies. The study also sheds light on the relationship of working capital with debt level, firm risk, and industry. Using a sample of initial public offerings
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The research done by, Maynard E. Rafuse, “ Working capital management: an urgent need to refocus” Management Decision, (1996) Argues that attempts to improve working capital by delaying payment to creditors is counter-productive to individuals and to the economy as a whole. Claims that altering debtor and creditor levels for individual tiers within a value system will rarely produce any net benefit.Proposes that stock reduction generates system- wide financial improvements and other important benefits.Urges those organizations seeking concentrated working capital reduction strategies to focus on stock management strategies based on “lean supply-chain” techniques.
The research done by, Thomas M. Krueger, “An Analysis of Working Capital Management Results Across Industries” American Journal of Business, (2012) found distinct levels of WCM measures for different industries, which tend to be stable over time. Many factors help to explain this discovery. The improving economy during the period of the study may have resulted in improved turnover in some industries, while slowing turnover may have been a signal of troubles ahead. Our results should be interpreted cautiously. Our study takes places over a short time frame during a generally improving market. In addition, the survey suffers from survivorship bias – only the top firms within each industry are ranked each year and the composition of those firms within the industry can change annually.
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In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore into a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles, and sales increased to 19,848 gallons. In 1926, Pepsi received its first logo redesign since the original design of 1905. In 1929, the logo was changed again. In 1929, automobile race pioneer Barney Oldfield endorsed Pepsi-Cola in newspaper ads as "A bully drink...refreshing, invigorating, a fine bracer before a race. In 1931, the Pepsi-Cola Company went bankrupt during the Great Depression- in large part due to financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years later, the company went bankrupt again. Pepsi's assets were then purchased by Charles Guth, the President of Loft Inc. Loft was a candy manufacturer with retail stores that contained soda fountains. He sought to replace Coca-Cola at his stores' fountains after Coke refused to give him a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola syrup formula.
Rise During the Great Depression, Pepsi gained popularity following the introduction in 1936 of a 12-ounce bottle. Initially priced at 10 cents, sales were slow, but when the price was slashed to five cents, sales increased substantially. With a radio advertising campaign featuring the jingle "Pepsi-Cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you," arranged in such a way that the jingle never ends. Pepsi encouraged price-watching consumers to switch, obliquely referring to the Coca-Cola standard of six ounces per bottle for the price of five cents (a nickel), instead of the 12 ounces Pepsi sold at the same price. Coming at a time of economic crisis, the campaign succeeded in boosting Pepsi's status. In 1936 500,000,000 bottles of Pepsi were consumed. From 1936 to 1938, Pepsi-Cola's profits doubled. Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had initially used Loft's finances and facilities to establish the new Pepsi success, the near- bankrupt Loft Company sued Guth for possession of the Pepsi-Cola company. A long legal battle, Guth v. Loft , then ensued, with the case reaching the Delaware Supreme Court and ultimately ending in a loss for Guth.
History
Headquartered in Purchase, New York, with Research and Development Headquarters in Valhalla, The Pepsi Cola Company began in 1898 by a Pharmacist and Industrialist Caleb Bradham, but it only became known as PepsiCo when it merged with Frito Lay in 1965. Until 1997, it also owned KFC, Pizza Hut, and Taco Bell, but these fast-food restaurants were spun off into Tricon Global Restaurants, now Yum! Brands, Inc. PepsiCo purchased Tropicana in 1998, and Quaker Oats in 2001. In December 2012, PepsiCo surpassed Coca-Cola Company in market value for the first time in 112 years since both companies began to compete.
COMPANY PROFILE
PepsiCo, Incorporated
Type Public (NYSE: PEP) Founded 1965
Headquarters Purchase, New York, USA Key people Indra Nooyi, Chairman, President &
CEO
Industry Food and beverage Products Pepsi
Tropicana Products
Gatorade
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MISSION & VISION
At PepsiCo, we believe being a responsible corporate citizen is not only the right thing to do,
but the right thing to do for our business.
MISSION Our mission is to be the 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 “PepsiCo responsibility is to continually improve all aspects of the world in which we
operate environment, social, economic – creating a better tomorrow than today”.
Our vision is put in to action through programs and a focus on environmental stewardship,
activities to benefit society, and a commitment to build shareholder value by making PepsiCo
a truly sustainable company.
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COMPANY LEADERSHIP
We are a company full of strong, talented individuals starting at the top of our organization.
Get to know the inspiring people helping lead PepsiCo on its 'Performance with Purpose'
journey.
"Together we are all building on the platform of human, environmental and talent
sustainability while continuing to deliver great results."
INDRA K. NOOYi
Chairman and CEO
Indra K. Nooyi Chairman and CEO
Massimo F. d'Amore CEO PepsiCo Americas Beverages
John C. Compton CEO PepsiCo Americas Foods
Michael D. White CEO PepsiCo Intl. & Vice Chairman, PepsiCo
▲ U.S Quaker Oats brands: Aunt Jemima, Cap'n Crunch, Coqueiro, Crisp'ums,
Cruesli, FrescAvena, King Vitaman, Life, Oatso Simple,Quake, Quisp, Rice-A-Roni, and Spudz Milestones
▲ PepsiCo Foundation announces two major new grants to WaterPartners and Safe Water Network programs to provide access to safe water and sanitation in developing countries
▲ PepsiCo Again Named to the Dow Jones Sustainability Index
▲ PepsiCo Agrees to Buy Bulgaria's Leading Nuts and Seeds Company
▲ PepsiCo Announces Initiatives With the Earth Institute and H2O Africa to Drive Sustainable Water Practices
▲ Forbes Names PepsiCo Among Its Best Big Companies
▲ PepsiCo India Commissions First Remote Wind Turbine to Generate Renewable, Clean Energy
▲ CRO Names PepsiCo to Top 25 100 Best Corporate Citizens 2015
▲ PepsiCo to Buy Russian Juice Leader, Lebedyansky
▲ Employees Lead Effort to Make Chicago Plaza First LEED-Certified PepsiCo Headquarters
▲ Gatorade Launches Gatorade Tiger with Comprehensive Integrated Marketing Campaign
▲ PepsiCo Honored with 2015 Energy Star Partner of the Year Award
▲ UK Vitamin Water Brand- V Water Acquired by PepsiCo
▲ Quaker Plant in Cedar Rapids Closes and Reopens Facility Due to Flooding to Protect Employees
▲ PepsiCo Foodservice and Naked Juice Expand Starbucks Presence ▲ Gatorade Sports Science Institute Gathers World's Leading Researchers on Protein Nutrition ▲ PepsiCo International's China Foods Wins "China's Top Leaders 2015" Award ▲ Wall Street Journal Article Recognizes PepsiCo for Leadership in Employment of People with Different Abilities ▲ PepsiCo and Frito-Lay Join SmartWay in Commitment to Reduce Greenhouse Gas Emissions ▲ PepsiCo Beats Coke in Race to Launch New Natural Sweetener (Stevia) ▲ PepsiCo France Recognized as "Great Place To Work" by Institute Survey ▲ PepsiCo Commits to Reducing Acryalmide Levels in Potato Chip Products and Restructured Potato Snacks in California ▲ (^) Subway Names PepsiCo "Vendor of the Year" for Sustainability Leadership ▲ Tazo Tea Joins Pepsi Lipton Partnership
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