“CASH MANAGEMENT SYSTEM

AT PEPSI”
Submitted for the partial fulfillment of the
requirement
For the award of Post Graduate degree
Of

Master of business administration

Degree Programme of G.B, Technical University, Lucknow
SESSION
2009– 2011

Submitted to Submitted By:

Amit Kumar
MBA – III SEM
Roll No. 0927170007

BHARAT INSTITUTE OF TECHNOLOGY

MEERUT

1
 TABLE OF CONTENTS

1. PREFACE 3

2. ACKNOWLEDGE 4

3. DECLARATION 5

4. INTRODUCTION 6

5. OBJECTIVE OF THE STUDY 9

6. RESEARCH METHODOLOGY 15

I. METHOD OF DATA COLLECTION

II. SOURCE OF DATA

III. TOOLS AND TECHNIQUES OF ANALYSIS

7. INDUSTRY 19

I.PROFILE

II.PLANTS

III.COMMITMENT

IV.CLIENTELES

V .PRODUCT

8. PROJECT PROFILE 30

CASH MANAGEMENT

9. THEORITICAL ASPECTS 33

I.OBJECTIVE AND SCOPE OF CMS 42

II.CASH MANAGEMENT SERVICE OF PEPSI 44

III.ADVANTAGES OF CMS 51

2
 IV.LIMITATIONS OF CMS 51

10. DATA ANALYSIS AND INTERPRITATION 56

I. FINANCIAL STATEMENTS 56

II.POSITION STATEMENT 59

III.INCOME STATEMENT 63

IV.CASH FLOW STATEMENT 68

V.PURPOSE OF FINANCIAL STATEMENTS 71

VI.COLLECTION CHARGES OF BANK 73

11. CONCLUSION 87

12. RECOMMENDATION 89

13. KEY FINDING 90

14. BIBLIOGRAPHY 91

3
 PREFACE

For any Management Course Summer training is an essential part of curriculum

of MBA degree. It is an exposure to corporate environment and helps MBA

aspirants to get acquainted with organizational norms, procedures, practices,

ethics and culture. It also gives an insight of actual functioning of the

organization. It helps the students to understand and coirelate theoretical aspects

with practical reality.

It was a great experience to work with PEPSI during my summer project which

has help me to improve my communication and interpersonal skills and also

give me the better understanding on the subject CASH MANAGEMENT

SYSTEM & LATTER OF CRADIT. AT PEPSI.

4
 ACKNOWLEDGEMENT

On the successful completion of this project I would like to express my

gratitude to all the people who have helped me & encouraged me throughout the

project.

At first, I owe my dept of thanks to Mr. AJAY KEDIA (FINANCE,

Manager), for providing me with this opportunity of working as a summer

trainee in PEPSI It was a real great and unforgettable moment for me to meet

such a great personality face to face.

My sincere thanks are also due to Dr. YASMEEN ANSARI., Faculty of

Management for their significant help extended for the successful completion

of the project. I highly the help I got from them in providing me and lot of

information regarding the functioning of this organization.

AMIT KUMAR

ROLL NO. – 0927170007

MBA III SEM

5
 DECLARATION

I hereby declare that the study entitled “Cash Management System” in the

Context Of Pepsi ” being submitted by me in the partial fulfilment of the

requirement by the “BIT, Meerut ”, Meerut is a record of my own work. The

study was conducted at Finance Department, ITC Saharanpur.

AMIT KUMAR
Roll No. –
0927170007
M.B.A. III SEM

6
 INTRODUCTION

This Research Report is very practical approach for me being a student. All

students learn theoretical subjects in their classroom, but as we are the

management students, apart from theoretical studies we need to get a deeper

insight into the practical aspects of those theories by working as a part of

organization during our Research Report is a period in which a student can

apply his theoretical knowledge in practical field. Basically practical knowledge

and theoretical knowledge have a very broad difference.

So this training has high importance as to know how both the aspects are

applied together.

The study of management acquires most crucial position in the business

administration. In order to be successful, it is necessary to give priority to the

management in an organization. But it can’t be denied that the study of

management would be more educational, materialistic and even more

interesting, if it is to be paired with the work in organization as an employee.

The training session helps to get details about the working process in the

organization. It has helped me to know about the organizational management

and discipline, which has its own importance. The training is going to be a life

long experience.

7
Background of the study

Pepsi have been using two techniques for managing cash inflow – Cash

Management Services (CMS) provided by ICICI CORPRATION.

HDFC HSBC & UTI bank and Short term financing through Letter Of Credit

(LC). The first Technique is used to manage the funds through cash sales and

the other is used in case of sale on credit.

In case of Cash Sales the Industry had to wait for 4-5 days before it could

realize the cash (in case the customer paid through draft. In case of payments

through cheques the lag as even larger) as the customers are based in different

locations in India. So the basic aim of the project is to evaluate the cost benefit

to after adopting CMS. The project stress on the ways to further lower down

the cost of procuring funds through cash sales by doing a comparative analysis

of the banks providing this facility to the corporate.

Letter of Credit also is important means of procuring funds as the corporate can

realize the payment against sale made on credit terms. The project intends to

study various terms and conditions involved in realizing payments through LC.

It also throws light on the procedures to be followed to realize payments as if

any of the terms and conditions of an LC remains unfulfilled the bank is under

no obligations to make payment. The transactions in the steel industry are

usually of high value that runs into lakhs and crores. Also, LC insures the

credibility of buyer and seller as the transactions are through banks. Thus, the

8
Study becomes very crucial in the era of globalization where the trade could be

between buyer and seller in two different countries.

9
 OBJECTIVE OF THE STUDY

Main Objective

To meet Cash disbursement as per payment schedule & minimize the

amount locked up as cash balance.

1.Meeting Payment Schedule :- The main objective of cash management is

to meet the payment schedule. In other words, the Industry should have

sufficient cash to meet the various requirements of the Industry at

different times. The Industry has to make payment for purchase of raw

materials, purchase of plant-machinery parts & tools, wages, taxes etc.

2.Minimize the amount lock up as cash balance :- Other main objective of

cash management of the Industry is to minimize cash balance. For

minimizing the cash balance, the company’s financial manager always

focuses to have an optimum amount of cash balance keeping in mind

that a high level of cash balance will result in a large balance of cash

remaining idle because cash is a non earning asset. On the other hand, a

low level of cash balance will result in the failure of meeting the

payment schedule.

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Specific Objective

To achieve the main objectives, the Industry will have to do Sthe following:-

1. Cash Planning & Control: - Industry should hold adequate cash balance.

Cash planning serves as a useful device for maintaining optimum level of

cash. Cash planning includes cash control, the process to assure that cash

receipts & payments are in accordance with the cash planning. The

various tools of cash planning & control as under:-

(a). Cash Budget : It is an important tool of cash planning. A cash

budget is a statement which shows the various estimated sources of cash

receipts & various applications of cash. Company, by preparing the cash

budget may predict whether at any point of time, there is likely to be

excess or shortage of cash.

(b). Cash Flow Statement : The statement depicting change in cash

position from one period to another period. It may be prepared on the

basis of actual or estimated data.

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(c). Cash Management Models : With the help of cash management

models, an optimum level of cash can be ascertained to facilitate control

& planning.

(d). Ratio Analysis : Cash ratios are also important tool of cash control.

Various ratios are acid test ratio, cash ratio, receivable turnover ratio etc.

2. Managing the Cash Flows :- To achieve the main objective, managing

the cash flow is an very important factor. Cash flow includes both cash

inflows & cash outflows.

(a). Cash Inflow : It is closely related with managing the cash efficiency

which, by & large, is the concern of collection department under the

finance manager.

Thus, an important problem for the financial manger is to manage the

cash inflow. He has to face the problem of speedy & timely recoveries

of receivables. In order to make quicker collection, the finance manager

can adopt two ways- one to motivate the debtors for prompt payments

and another to convert the payment received from debtors into cash as

early as possible. Methods of improving cash collections are as under :

12
(i). Prompt payments by Customers : For this purpose, prompt billing

policy must be adopted & customers should be promptly informed about

the amount payable. Another method in this regard is to allow cash

discount to its customers.

(ii). Establishment of Cash Collections : Industry must establish the

collection centers in different parts of the country to save the postal

delays. This is known as

concentration banking. Under this system, the collection centers themselves

collect payments from customers & deposit them in local bank account.

The concentration banking results in saving of time of collection & hence

result in better cash management.

(iii). Lock-Box : Under this system, the Industry hires a post-office box at

important collection centers. The local bankers of the Industry are

authorized to pick up the cheques from the lock-box. The bank informs

the Industry about the details of cheques received & credited. This system

helps to reduce the overhead expenses.

(b). Cash Outflows : Industry must manage the cash outflow in order to

reduce the cash requirements. The financial manager should try to slow

13
disbursements as much as possible but goodwill & credit rating of the

Industry shouldn’t be affected. Payments to creditors need not be delayed. The

credit facilities allowed by the creditors should be fully utilized. The

discount offered by the creditors for prompt payment must be evaluated

properly. Balance lying in the bank a/c should also be managed properly

to take maximum advantage out of it. There may not be balance in the

bank a/c when a cheque is issued but there must be sufficient balance

when the cheque is expected to be presented for payment. The Industry

should follow centralized system for disbursement. Under this system , all

payments are made from a single control account

3. Determining the Optimum Cash Level :- The problem of determining

the optimum cash balance for an organization, in fact implies a trade off

between risk and return of maintaining cash balance. In case the cash

balance is less than the requirements, the Industry have to borrow from

outside sources and the transaction cost will have to be born. If the

Industry has surplus cash, it causes the loss of interest or profit from

investment

4.Investing Surplus or Idle Cash :- Cash in excess of the company’s

normal cash requirement is surplus cash. It may be temporary or may

14
exist more or less on permanent basis. There are, sometimes, surplus

funds with the Industry which are required after sometime. These funds

can be employed in liquid & risk free securities to earn some income.

Finance manager of the Industry is required to consider the minimum

cash balance to avoid the cost of running out of funds. Such minimum

level is called as safety level for cash. For this purpose , the finance manager

must consider both normal & peak periods. If the finance manager is

anticipating cash shortage in any particular month, then he should arrange

additional funds from some reliable source. These requirements of funds

are generally for short term. Industry must avail bank loan etc. If the

shortage is on regular basis, long term sources of funds may be used. If

cash is surplus , the finance manager must decide the channels of

investment. For this purpose, the finance manager must consider the security,

liquidity, yield & maturity factors before investingthesurplesfund.

15
 RESEARCH METHODOLOGY

Methodology is the bone of a project. It has also an important place as

regards to cash management system project. A person who is going to

prepare a project, he should be very aware in connection with collection

& analysis of data. I have gone very deeply in preparing the project & I

devoted my full attention to get the accurate & real data collection. For

this purpose I became in close contact with sources of data collection by

personally & through Internet.

The Methodology contains the following things:-

• Methods of Data Collection :- For the project report, methods of

data collection also has an important role in connection with

accuracy & exact information. So, I adopted both the methods

primary as well as secondary method of data collection.

(A) Primary Data : Throughout the preparation of the project

report, I was in the contact of DGM(Finance) & other staff

of finance department of Pepsis to get the information in

connection with the practical working of transaction between

the Industry & banks.

(B) Secondary Data: I have also collected the information, figures

& data in connection with the preparation of project report

16
 from Balance-sheet & annual report of Bhushan Steel from

annual report of Jindal Steel Ltd for comparative analysis,

from the Internet in connection with the whereabouts of the

Steel Industry. I have also collected the information about cash

management services & Latter of Credit provided by the bank to

the company.

• Sources of Data :- Sources of collection of data for a

project report has a very important role. So, the sources

must be very reliable. For this purpose, I did my best

efforts to get proper & correct information.

(A) I have taken the figures, information & data in connection with

Profit & Loss A/c, Balance Sheet, Cash Flow Statement from the

annual report of

the Industry & through website of the Industry which are

most important for cash management system.

(B) I have also got the figures, data & information in connection

with Jindal Steel From the website of the Jindal steel for the

purpose of comparative analysis like Balance Sheet & Ratio

analysis with Bhushan Steel

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 (C) With the help of Internet, I have got the information, data &

figures about the steel industry, beginning of steel industry in

India, Recent Developments of steel industry, history of the

steel industry, global & Indian scenario of the steel industry.

(D) I have collected the information from the website of HSBC,

Corporation & UTI Banks, HDFC regarding services provided by

the banks to the Industry in connection with day to day

transactions like payment & receivable etc.

(E) I have collected the data, information & figures from the

printed annual report of Bhushan Steel (PEPSI) for the

purpose of preparing of charts of Gross Sales, Net Profit,

Exports, EPS, Cash Accruals etc.

• I have also got the figures, information & data from the

DGM(Finance) & other staff of the Industry with the discussion

personally regarding working of the Industry with banks.

• Instrument Used :- The use of reliable, necessary & authentic

instrument are the most important for cash management.

Instrument must be used according to the requirement of the

company. A finance manager of the Industry must be very

careful in this matter. Vouchers, daybook, main cashbook,

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 petty cashbook, cheque book, Bank Pay-in-slip, Bank Draft,

Bankers Cheque, Bank Statements of Ledger, Bank

Reconciliation Statement, Bank Book are being used by the

company.

• Tools and Techniques of Analysis :- The relevant tools &

proper techniques must be used in connection with analysis.

• Tools:- In preparing the project report , I have used the

Profit & Loss A/c, Balance-sheet, Cash Flow & annual

report of Pepsi Balance-sheet of Jindal Steel Ltd is also

used in the project report.

• Techniques:- As a technique of analysis,I have prepared

comparative Profit & Loss A/c and Balance Sheet,Ratio

analysis statement & cash

Flow Statement of Pepsi Ltd for the financial year 2008-09 & 2009-10

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 INDUSTRY PROFILE

THE PEPSICO.

PepsiCo Inc. was founded in the year 1965. Major products of the new Industry

are Pepsi Cola, Diet Pepsi and Mountain Dew. Pepsi entered the Indian market

in 1992 and now is the market leader with a market share of 26.5 percent in the

cola segment. Pepsi is in between the two of it’s closet competitors as far as

marketing strategies are concerned. Pepsi is an international drink with Indian

imagery in it’s communication. Traditional focus of Pepsi has been on the early

teenager with a gender skew more to the female.

Pepsi is by far the more aggressive player in the market. With in your face

advertising, continuous event marketing targeting the new generation and eye

catching merchandising. It’s got its selling strategy well mapped out.

The Industry has always been innovating it’s ad campaigns which has helped

the Industry to get top of the mind recall. From “The choice of the new

generation” to the “Freedom” campaign the Industry has been able to Indianise

the brand. With the help of promotional schemes Pepsi has managed to keep the

brand alive and has not let it become old. During 1995 the total ad spent by the

Industry was Rs.6,98 crore only on television. Pepsi has set aside Rs. 8 crore for

its advertising programme in the run up to and during the cricket world cup.

On April 2, 1996 Pepsi announced that the second most popular drink in the

world would hence forth come in Blue packaging. Pepsi had spent $ 500 million

20
to relaunch it’s product. But the results of this exercise are still awaited, and it is

expected that they would not be as good as expected by the company.

According to Roger Enrico, President PepsiCo, that much of the ammunition

that the two companies lab at each other in the cola war is “damn silly stuff”

and Dough Ivester, Coca Cola claiming that “the cola was is over”, the cola

war continues.

21
 SHAREHOLDERS

PepsiCo (symbol: PEP) shares are traded principally on the New York Stock

Exchange in the United States. The Industry is also listed on the Amsterdam,

Chicago, Swiss and Tokyo stock exchanges. PepsiCo has consistently paid cash

dividends since the corporation was founded.

CORPORATE CITIZENSHIP

PepsiCo believes that as a corporate citizen, it has a responsibility to contribute

to the quality of life in our communities. This philosophy is put into action

through support of social agencies, projects and programes. The scope of this

support is extensive – ranging form sponsorship of local programs and support

of employee volunteer activities, to contributions of time, talent and funds to

programs of national impact. Each division is responsible for its own giving

program. Corporate giving is focused on giving where PepsiCo employees

volunteer.

22
PEPSICO HEADQUARTERS

PepsiCo World Headquarters is located in Purchase, New York, approximately

45 minutes from New York City. The seven building headquarters complex was

designed by Edward Durrell Stone, one of America’s foremost architects. The

building occupies 10 acres of a 144 – acre complex that includes the Donate M.

Kendall Sculpture Gardens, a world acclaimed sculpture collection in a garden

setting.

The collection of works is focused on major twentieth century art, and features

works by masters such as Auguste Rodin, Henri Laurens, Henry Moore,

Alexander Calder, Alberto Giacometti, Arnaldo Pomodoro and Class Olden

berg. The gardens were originally designed by the world famous garden

planner, Russelll Page, and have been extended by Francois Goffinet. The

grounds are open to the public, and a visitor’s booth is in operation during the

spring and summer.

23
 OVERALL MARKET STRUCTURE OF SOFT DRINKS

Indian soft drink industry is witnessing a boom time. It’s Growth rate is around

20%. With such a high growth rate, volume could reach billion carats within

10 years. Three major multinational companies are fighting to grab major

chunk of business from Indian markets. These three are Coca- Cola, Pepsi

and Cadbury Schweppes. All these companies have seen an enormous

potential in this country. Consequently, by world standard, Indian per capita

consumption of soft drinks, is still very low. There fore soft drinks giants

feel that per capita consumption can only grow up. Soft drink industry has

already seen an estimated sale of 170 million case (2000) ( one case =24

bottles) which is 30 million crates higher than last year’s sale of 140

million crates ( 1999). The main reason for such a high growth rate is

heighten compassion between Coca- Cola and Pepsi. Cadbury Schweppes,

being a new entrant is far behind.

Size &Sector

India is a actually more vivid in taste and preference than any other country

market. Delhi far instance, accounts for about 20% of total soft drink

consumption in India, states like Orissa accounts for a meager contribution in

terms of sales.

There are about 3, 00,000 soft drink retailers in India and their number is

increasing day by day. This actually means that there is just one soft drink

24
retailer on a population of 31,334 which is far below the international standard.

Where as Philippines has one soft retail counter over a population of 150 people

i.e., 4, 00,000 outlets on population of 60 million.

25
 INTRODUCTION

What is a Brand ?

The concept of a brand is probably the most powerful idea in the commercial

world. The formal history of brands is in many ways a prosaic one, starting not

all that many years ago when mass production and wider distribution led

manufacturers to identify (or brand) their merchandise in a recognizable way, so

as to offer a promise of consistent quality. But the real history of brands is much

longer and more interesting. Brands truly understood are the things which patrol

the boundary between people and the world outside them. Well before the

industrial revolution people were acquiring swords, horses, estates even

countries, not only for their usefulness but because of what they projected about

the person him or herself. In a deeper sense, people have always used objects

not just to change outward impressions, but also to change things inwardly, i.e.

to change themselves. Children’s obsession with trivial objects like, say’

colored pens, is instructive. Once they have acquired the desired, but frequently

useless object, their interest disappears because they find that no amount of

colored pens makes you into a different person.

The same is sadly true in later life. The anticipation of owning a fast sports car

is never matched by the reality. In truth, one car turns out to be much like

another, and you’re still the same person. The science and art of branding has

become much more valuable since its practitioners have learnt to expand the

26
notion beyond the makers’ mark and pure performance-based claims, to

embrace the whole relationship between a product or service and its customers.

In the yearly 1990’s, the marketing big wig were deliberating vociferously

about “The Immortal Brand” and it was said that :

‘Building age and become dilapidated.

Machines wear out.

People die.

But what live on are the brands.’

The metaphor is clear: the brand as deity, a sentient being whose existence

transcends our merely human lifespan. And indeed this how we in marketing

and advertising talk of brands. They life cycles; they have personalities. In our

research we personify brands, and find consumers can play the game.

Unconsciously we credit the brand with some kind of absolute platonic

existence. Our mission is to discover (rather than invent) its ‘core values’ and

abide by them. In fact, the brand is a rather primitive kind of god. If we keep its

laws and pay regularly the tributes due (mainly advertising), fortune will smile

on us - otherwise disaster.

Now most of this is way of saying valuable and important things about

branding. Brands can ‘live’ longer than people. The metaphor of personality has

been very helpful, here. A brand may have ‘personality’, but it is not a person,

27
still less a good on a cloud. you cannot talk to its and it cannot answer you back.

In fact, a brand has no absolute or objective existence - nor are its ‘core values’

are engraved on any stone. A brand is simply a collection of perceptions in the

mind of the consumer.

The tentative answers in this chapter - and I regard it only as an essay which I

hope others may improve on - are rather complex. Branding can be seen as

satisfying various different needs, and working at different levels and in

different ways. What I will suggest in fact has happened is that brands originally

begin as a badge or promise of certainty in an uncertain world, and that this

offers simple and functional benefits to any consumer. But because a brand

offers this kind of certainty it also becomes a kind of currency for consumers to

carry out less obviously related kinds of transactions with themselves and with

each other. In a sense, consumers have ‘hijacked’ brands for their own

purposes. But all the ways in which brands can be used derive from the basic

promise of certainty, and I will therefore argue that we are talking about one

coherent, if complex phenomenon. Brands as a badge, and brands as personality

are aspects of the same thing.

At its simplest, a brand is a recognizable and trustworthy badge of origin, and

also a promise of performance. But to be No. 1. is the name of the game. To be

the Best brand in a product category entails much-much more than just being

recognizable, trustworthy promise of performance. It is to a very large extent

28
perceptual in nature. In other world, it is directly proportional the consumer.

And, Consumer is the King. To be No. 1. is something that every brand in its

lifespan would try to achieve. Is it possible? If yes, what does it take to be No.

1.? Let’s find out.

How do Brands Become Number One ?

Now a days, everyone is talking about Coca Cola, McDonalds, Marlboro etc.

But what is common to these Brands, that makes them the talk of the town! The

common feature in these brands is that, either they are, or have been the

Number One Brands of the worlds.

Since Liberalization of the Indian economy, Indian companies are now facing

tough competition from these brands. Coca Cola is here to compete with its

traditional rival Pepsi and with other Indian brands of Pure Drinks. Pepsi, on the

other hand, had an even tougher task to gain market share in the Indian market,

as is had to compete with two big players, Pure Drinks and Parle, with brands

such as Thums Up, Gold Spot and Limca.

McDonalds has come into the Indian market only a few months back and is

already creating waves. It’s giving a tough competition to the already strong

local player Nirula’s which has been on the scene for a long time.

Now, the talk is of the cigarette giant Philip Morris Inc. of “Marlboro” fame

planning to enter India with it’s world famous brands. What should the Indian

big wig ITC do to make their brands of cigarettes compete against the challenge

29
posed by the one time Number One brands of the world ? Are there any

common attributes in the Number One brands which make them Number One?

To find out the answer to this question and also to find out whether these

attributes can be applied across different industries lets take a journey into the

“World of Brands”.

30
 PROJECT PROFILE

CASH MANAGEMENT CYCLE

CASH
BUSINESS COLLECTIONS
OPERATIONS

DEFICIT BORROW

SURPLUS INVEST

INFORMATION
&
CONTROL

CASH PAYMENTS

Pepsi Ltd (PEPSI) have been using two techniques for managing cash inflow-

Cash management service (CMS) provided by ICICI,Bank,UTI,HDFC and

Corparation Bank and short term financing through Letter of credit .

31
In case of Cash Sales the Industry had to wait for 4-5 days before it could

realize the Cash (in case the customer paid through draft.In case of payments

through cheques the iag as evan larger) as the customers are based in different

locations in India . So the basic aim of project is to evaluate the cost benefit to

PEPSI after adopting CMS. The project stress on the ways to further lower

down the cost of procuring funds through cash sales by doing a comparative

analysis of the banks providing this facility to the corporates.

TYPICAL CASH FLOW

Realization of
Sales in Cash
Payment

Payment by Draft
or Cheque
Locking time 3-7
CASH FLOW UNDER
days CMS

32
Realization on
day 1 or day 2
Sales in Cash

Collection by
banker locking
period 1-2days

33
 THEORITICAL ASPECTS

CASH MANAGEMENT SYSTEM

The Cash Management System manages the transfer of funds between your

cash accounts, cash management investment accounts, asset

based revolving line of credit accounts and line of credit

accounts, according to the rules you set up for them. For each account, you

must establish minimum and maximum balances and determine the relative

priority for applying cash to the account, or using cash from the account.

The Cash Management System applies these rules automatically throughout the

Plan Period, using the Other/Miscellaneous cash account as a balancing

account. The balance in the Other/Miscellaneous cash account will be

calculated as containing whatever cash is available after all of the Cash

Management System rules have been applied for the other accounts in the Cash

Management System. If there is inadequate cash in the system, this will result in

Other/Miscellaneous cash having a negative balance.

Applying Extra Cash to the Cash Management Accounts - Cash is first

applied to put enough cash in each of the Cash Management accounts so that

their minimum balance requirements are met. This will occur even if it leaves

the Other/Misc Cash account with a negative balance.If additional cash exists

34
after the minimum balance requirements are met for all of the Cash

Management Accounts, then cash is first applied to 'fill up' the Priority 1

account until it reaches its maximum allowed balance. If additional cash exists,

it is next applied to the Priority 2 account, and so on until all Cash Management

accounts have been filled to their maximum allowed balance, or the Other/Misc

Cash account has run out of cash to apply. If the system runs out of extra cash to

apply, the disbursement ends, leaving the Other/Misc Cash account with a zero

balance. If all of the Cash Management accounts are filled to their maximum

allowed balance, or the Other/Misc Cash account has run out of cash to apply. If

the system runs out of extra cash to apply, the disbursement ends, leaving the

Other/Misc Cash account with a zero balance. If all of the Cash Management

accounts are filled to their maximum limits, then all remaining cash will be left

in the Other/Misc. Cash account.

35
Using Needed Cash from the Cash Management Accounts - If the

Other/Misc. Cash account has a positive balance, cash is first used from it until

it is reduced to a zero balance. If more cash is required, it is then taken from the

Priority 1 account, until it is reduced to the minimum amount, or no more cash

is required. Next, cash is used from the Priority 2 account, and so on in similar

fashion, until no more cash is needed or until all Cash Management Accounts

have been reduced to their minimum amounts and more cash is required, then

cash is removed from the Other/Misc. Account even if this results in a negative

balance.

36
 CASH MANAGEMENT SERVICES GENERALLY OFFERED

Cash Management offers a variety of services to its customers and its not

necessary that one must choose all the services offered under Cash Management

for its Industry .Its compltely on the discretion of the Industry whether to avail

all the services or as per the requirement .The following is a list of services

generally offered by banks and utilised by larger businesses and corporations.

1. Account Reconcilement Services: Balancing a checkbook can be a difficult

process for a very large business, since it issues so many checks it can take a

lot of human monitoring to understand which checks have not cleared and

therefore what the

2. company's true balance is. To get around this, banks have developed a

system which allows companies to upload a list of all the checks that they

issue on a daily basis, so that at the end of the month the bank statement will

show not only which checks have cleared, but also which have not. More

recently, banks have used this system to prevent checks from being

fraudulently cashed if they are not on the list, a process known as positive

pay.

3. Advanced Web Services: Most banks have an Internet-based system which

is more advanced than the one available to consumers. This enables

managers to create and authorize special internal

37
4. logon credentials, allowing employees to send wires and access other cash

management features normally not found on the consumer web site.

5. Armored Car Services: Large retailers who collect a great deal of cash may

have the bank pick this cash up via an armored car company, instead of

employees depositing the cash.

6. Automated Clearing House: services are usually offered by the cash

management division of a bank. The Automated Clearing House is an

electronic system used to transfer funds between banks. Companies use this

to pay others, especially employees (this is how direct deposit works).

Certain companies also use it to collect funds from

7. customers (this is generally how automatic payment plans work). This

system is the subject of the ire of some consumer groups, because under this

system all banks assume that the Industry initiating the debit is correct until

proven otherwise.

8. Balance Reporting Services: Corporate clients who actively manage their

cash balances usually subscribe to secure web-based reporting of their

account and transaction information at their lead bank. These sophisticated

compilations of banking activity may include balances in foreign currencies,

as well as those at other banks.

9. Wire Transfer: A wire transfer is an electronic transfer of funds. Wire

transfers can be done by a simple bank account transfer, or by a transfer of

cash at a cash office. Bank wire transfers are often the most expedient

38
 method for transferring funds between bank accounts. A bank wire transfer

is a message to the receiving bank requesting them to effect payment in

accordance with the instructions given. The message also includes settlement

instructions. The actual wire transfer itself is virtually instantaneous,

requiring no longer for transmission than a telephone call.

10. Controlled Disbursement: This is another product offered by banks under

Cash Management Services. The bank provides a daily report, typically early

in the day, that provides the amount of disbursements that would be charged

to the customers account. This early knowledge of daily funds requirement

allows the customer to invest any surplus in intraday investment

opportunities, typically money market. This is different from delayed

disbursements, where payments are issued through a remote branch of a

bank and customer is able to delay the payment due to increased float time.

Location Days Rate

Agra 2 0.18
Aligarh 2 0.18
Allahabad 2 0.18
Banglore 2 0.18
Bareilly 2 0.18
Belgaum 1 0.18
Bhopal 2 0.05
Coimbatore 2 0.18
Deharadun 2 0.18
Dindigul 2 0.18
Ernakulam 2 0.18
Gorakhput 2 0.18
Guwahati 2 0.18
Hubli 2 0.18

39
 Jammu 2 0.18
Jamshedpur 2 0.18
Jodhpur 2 0.18
Kanpur 2 0.05
Lucknow 1 0.18
Madhurai 2 0.18
Muzf. Nagar 2 0.18
Pondicherry 2 0.18
Rewari 2 0.18
Rohtak 2 0.18
Saharanpur 2 0.18
Salem 2 0.18
Tirchirapally 2 0.18
Tirupati 2 0.18
Tumkur 1 0.18
Varanasi 2 0.18

In the past, other services have been offered the usefulness of which has

diminished with the rise of the Internet. For example, companies could have

daily faxes of their most recent transactions or be sent CD-ROMs of images of

their cashed checks.

These services can be costly but usually the cost to a Industry is outweighed by

the benefits: costsavings, accuracy, efficiencies,etc

Banks having CMS account are:

HDFC

ICICI

HSBC

Corporation bank

40
UTI Bank

Axis Bank etc

Sales are of two types

OEM- original equipment manufacturer – These are the major customers of

Pepsi Like TATA, Maruti, Hyundai, Godrej etc.

These are the buyers who purchase the remaining production of products

produced by Pepsi As the order of fixed units cannot be produced, excess or

deficit will always remain same. This excess is sold to Traders at reasonable

rate. They sell the small quantity of steels which is left over.

in order to manage the cash, we have to calculate opportunity cost of receiving

90 days before date of receiving cash.

41
OBJECTIVE AND SCOPE OF CMS

PEPSI has saved huge amount of cost after adopting CMS. Had PEPSI not

adopted this system of collection it would have received the amount in not less

than 4-5 days. And for the same period it would have to avail the Cash Credit

(CC) facilities granted to it by various banks. But in order to use the funds

available through CC account it had to pay an interest of 9-10% and in some

cases up to 12%. Use of CMS has brought down the cost considerably and

PEPSI has been able to save the interest amount because now it receives the

fund within 24-48 hrs. For calculating the cost saving for PEPSI the data set for

the two month of Ist quarter end (Mar 08, April 08-) is considered for Pepsi.

The cost incurred by PEPSI would include the draft charges, Postage charges

and interest forgone. While calculating the draft charges it has been assumed

that PEPSI bears the cost of draft sent by customers all the time, this might not

hold true in all cases but for its major customers it would have to do so because

of the competition in the industry. If PEPSI received cash in 4 days it had to

avail the CC limit and paid interest for the same period that would also add to

the cost incurred by PEPSI. PEPSI also would have to bear courier charge

which is assumed to be Rs 35 per day per location which is equal to what

charges. Interest is calculated @ 11% p.a.

Interest Forgone = Total cash in a week * .11/365*( 4- days taken in CMS)

Where 4 are the days taken by the draft to reach Delhi & gets realized i.e. 2

days in transit & 2 days clearing.

42
The Objective was to gather information about the collection charges charged

by different banks at different locations for the given period and find out which

Bank provides better services at minimum cost.

The scope of research is spread over the comparison of the collection charges

under the Cash Management System availed by Pepsi through the above stated

Banks.

43
CASH MANAGEMENT SERVICES OF PEPSI

Cash Management is the stewardship or proper use of an entity’s cash

resources. It serves as the means to keep an organisation functioning by making

the best use of cash or liquid resources of the organisation. At the same time the

organisations have the responsibility to use timely, reliable and comprehensive

financial information systems.

Cash Management helps the organisation in:

Eliminating idle cash balances.

Monitoring exposure and reducing risks.

Ensuring timely deposit of collections.

Properly timing the disbursements.

Cash Management Services (CMS) is one of our thrust areas. Today, we have

large number of satisfied CMS customers, many of whom are in the top

segment of the Indian Corporate and Public Sectors. This has been a result of a

robust, end to end cash management product which offers innovative and

reliable solutions by combining an efficient collections and disbursements

product, backed by state of the art systems to ensure customised delivery. The

Bank has constructed a wide range of CMS products covering collections and

disbursements of operating flows, as well as specialized cash flow streams such

as rights/public issue collections, dividends, interest/principal repayments,

excise and sales tax payments etc. We operate out of a large and expanding

44
network of over 175 outlets across the country. This is the largest network of

online, electronically linked branches in the country. This provides us with a

clear competitive advantage, which naturally translates into a lower cost and

faster credit to corporates. In addition to our network, we have an extensive

correspondent banking arrangement, which allows us to offer you Cash

Management Services – over 1100 locations covered for collections and over

650 locations for Payments.

Benefits to Corporates

If your organisation is multi-locational, managing outstation funds collections

and payments can often be time consuming and expensive. Delays of days or

even weeks in realising outstation cheques, constant tracking and follow-up to

transfer funds from outstation collection accounts, uncertainty and delays

regarding information on the fate of cheques etc., are common.

At Pepsi we offer a comprehensive range of Collections and Payments solutions

under our Cash Management Services (CMS) umbrella to meet your needs and

put you in control of your cash position.

Pepsi's Cash Management Services will enable you to :

45
Lower Interest Costs

Our collection services enable you to receive funds in your main concentration)

account with the bank with a minimum transit time thereby reducing interest

costs.

Improve Liquidity

Saving on transit time enables you to realise cheques and use funds earlier and

therefore gives you enhanced liquidity.

Better Accounting and Reconciliations

Detailed information on cheques deposited are made available on a daily /

weekly basis/periodically thus simplifying accounting, reconciliation and query

resolution. Pepsi can also provide customised MIS as per your requirements.

Achieve Overall Operational Convenience

Pepsi's Collection Services enable you to derive convenience in banking

operations thereby facilitating management of cash positions through a central

treasury. Also, the same may be used for improved control over different

business segments. The advantages of our collection products can also be

availed without opening a current account with Pepsi.

Transfer Cheque Collections

This product provides quick realisation of local/outstation cheques drawn on

any branch of Pepsi This product is available at all locations of Pepsi

("HDFCTRF") locations.

46
Clean Collections

Cheques drawn on any locations, which are not covered, by Pepsi or our

correspondent bank are also collected at any of our locations and proceeds

credited to your account as soon as credit is received by Pepsi.

Pepsi's comprehensive MIS includes:

Daily report of deposits made at various locations.

Location wise report

Credit Forecast report

Monthly cumulative report - date wise / location wise

Monthly charging statement

Monthly cheque return statement

Customized reports as per mutual agreement.

IMPORTANCE OF CMS FOR A COMPANY

47
Cash is the ready money in the bank or in the business. It is not

inventory, it is not accounts receivable (what you are owed), and it is not

property. These might be converted into cash at some point in time, but

it takes cash in hand or at the bank to pay suppliers, to pay the rent, to

pay wages & to make day by day payments.

Cash Budget

By preparing cash budget Industry planned the sources & application of

funds in the manner of cash.

Operating Cash Flow

Operating cash flow, often referred to as working capital, is the cash flow

generated from internal operations. It is the cash generated from sales of the

product or service of company’s business. It is the real lifeblood of your

business, and because it is generated internally, it is under a finance

manager’s control.

Since it is easy to control the Operating Cash Flow the companies these days

are adopting Cash Management Services. This service reduces the time taken in

realization of cash considerably and at a much lower cost.

Investing Cash Flow

Investing cash flow is generated internally from non-operating activities.

This component would include investments in plant and equipment or

48
other fixed assets, non recurring gains or losses, or other sources and

uses of cash outside of normal operations.

Financing Cash Flow

Financing cash flow is the cash to and from external sources, such as

lenders, investors and shareholders. A new loan, the repayment of a loan,

the insurance of stock and the payment of dividend are some of the

activities that would be included in this section of the cash flow

statement.

49
ADVANTAGES OF CMS:

1. Saves a huge amount in form of DD commission and clearing charges.

2. All high value cheques get cleared and credit is given the same day.

3. We desired the desired liquidity in form of cash very quickly. This means

there is a saving of interest on the amount that would have remained

blocked under the normal course of clearing and credit by banks.

4. Even if the cheque gets dishonored we can use the amount till the banks

get to know it. During this time we can use this money.

5. When credit is given same day, we have our cash position by evening we

can accordingly plan our investment and expenditures accordingly for

coming days.

6. We can have an accurate figure of what were our collections from which

place.

LIMITATIONS OF CMS:

1. Collection would have meant collection either through outstation cheque

or through DD.

2. DD’s worth crores of rupees would have brought substantial amount of

DD charges to the company’s P/L account.

50
The outstation cheque would take days to reach to the company’s account s

department and some more days to get cleared with deduction of some bank

charges from the cheque amount.

51
Advantages to the Buyer

• The buyer is assured that his/her bank will refuse payment to the seller

unless

• the seller’s documents comply with the terms and conditions of the Letter

of Credit

• If the seller is willing to grant extended terms to the buyer, the buyer may

arrange for a Letter of Credit which is payable at a future date (i.e. 60 or

90 days after presentation of complying documents).

• Through the use of Banker’s Acceptances, a buyer who has purchased

goods under a Letter of Credit may finance the goods until they are

marketed.

• By the documents called for, the Buyer can seek to minimize the risks in

not receiving the goods ordered. The Buyer may also impose conditions

on the manner and dates in which the goods are to be shipped.

52
Risk to the Buyer

• In Letters of Credit, banks deal only with documents, not with goods.

• The merchandise may not be as it is represented in the documents.

Advantages to the Seller

• The seller may rely on a bank’s credit worthiness rather than the buyers.

The seller is more confident when he has a bank’s commitment to pay

upon presentation of complying documents.

The seller can reduce the risk that payment for the goods might be delayed or

otherwise jeopardized by political or foreign exchange problems in the

buyer’s country.

• The seller may be able to obtain financing for the purchase or

manufacture of goods that will be shipped under the Letter of Credit.

• Under Banker’s Acceptance financing the seller may receive funds

shortly after shipment despite having granted credit terms to the buyer, or

the seller may receive funds prior to export. The decision is typically

based on the seller’s cash flow position.

53
Risk to the Seller

• The seller’s documents must comply strictly with the terms and

conditions of the Letter of Credit to entitle the seller to payment.

• The seller is exposed to the commercial risk that the bank providing its

undertaking is willing and able to perform.

• The seller assumes any political and foreign exchange risk affecting the

issuing bank’s obligation.

54
DATA ANALYSIS AND INTERPRITAION

FINANCIAL STATEMENTS

Financial statements (or financial reports) are formal records of business

financial activities. Financial statements paint a picture of the transactions that

flow through a business. Each transaction or exchange - for example, the sale of

a product or the use of a rented a building block – contributes to the whole

picture.

Let's approach the financial statements by following a flow of cash-based

transactions. In the illustration below, we have numbered four major steps:

55
Shareholders and lenders supply capital (funds) to the company.

The capital suppliers have claims on the Industry assets. The balance sheet

is an updated record of the capital invested in the business as on date. On the

Left-hand side of the balance sheet, lenders hold liabilities and shareholders

hold equity. The equity claim is "residual", which means shareholders own

whatever assets remain after deducting liabilities. The capital is used to buy

assets, which are itemized on the Right-

56
hand side of the balance sheet. The assets are or long-term, such as a land, plant

& machinery, furniture/fixtures, and short term or current assets, such as

inventory, debtors, investments, liquid funds (cash & bank balances).

The assets are deployed to create fund flow in the current year (cash inflows are

shown in green, outflows shown in red). Selling equity and issuing debt start the

process by raising cash. The Industry then "puts the cash to use" by purchasing

assets (long term & short term) in order to create (build or buy) inventory. The

inventory helps the Industry make sales (generate revenue), and most of the

revenue is used to pay operating costs, which include salaries.

After paying costs (and taxes), the Industry can do three things with its profits.

One, it can (or probably must) pay interest on its debt. Two, it can pay

dividends to shareholders at its discretion. And three, it can retain or re-invest

the remaining profits. The retained profits increase the shareholders' equity

account (retained earnings). In theory, these reinvested funds are held for

the shareholders' benefit and reflected in a highershareprice.

This basic flow of funds through the business introduces two financial

statements: the balance sheet and profit /loss account. The other statements

are fund flow and cash flow statements. It is often said that the balance

sheet is a static financial snapshot taken at any given moment of time in a year.

The Profit/Loss statement on the other hand always covers a period of time.

57
POSITION STATEMENT

In financial accounting, a balance sheet or statement of financial position is a

summary of a person's or organization's balances. Assets, liabilities and

ownership equity are listed as of a specific date, such as the end of its financial

year. A balance sheet is often described as a snapshot of a company's financial

condition. The only statement, which applies to a single point in time.

A Industry balance sheet has three parts: assets, liabilities and shareholders'

equity. The main categories of assets are usually listed first and are followed by

the liabilities. The difference between the assets and the liabilities is known as

equity or the net assets or the net worth of the company; according to the

accounting equation, net worth must equal assets minus liabilities

Another way to look at the same equation is that assets equal liabilities plus net

worth. This is how a balance sheet is presented, with assets in one section and

liabilities and net worth in the other section. The sum of these two sections must

be equal; they must "balance".

Records of the values of each account or line in the balance sheet are usually

maintained using a system of accounting known as the double-entry

bookkeeping system.

A business operating entirely in cash can measure its profits by withdrawing the

entire bank balance at the end of the period, plus any cash in hand. However,

58
real businesses are not paid immediately; they build up inventories of goods and

they acquire buildings

and equipment. In other words: businesses have assets and so they can not, even

if they want to, immediately turn these into cash at the end of each period. Real

businesses owe money to suppliers and to tax authorities, and the proprietors do

not withdraw all their original capital and profits at the end of each period. In

other words businesses also have liabilities.

59
BALANCE SHEET OF PEPSI (Rs. In Lacs)

SOURCES OF FUNDS: Schedule: 2007-08 2008-09 2009-10

Shareholders' funds:
Share capital 1 4047.17 4127.17 4247.17
Reserves and surplus 2 69011.88 84839.55 117203.29
73059.05 88966.72 121450.46
Advances for share warrant

money received _ 360 _

Loan funds:
108979.0

Secured loans 3 8 165091.22 241283.74

Unsecured loans 4 22768.07 38526.59 82913.96
131747.1

Total 5 203617.81 324197.7

Deferred tax liability (net) 7487.52 6631.24 12374.12
(Refer note No. 11 of schedule

17)
212293.7

Total 2 299575.77 458022.28

APPLICATIONS OF FUNDS
Fixed assets:- 5
165781.2

Gross block 9 179590.57 269372.64

Less: Depreciation 61080.68 77582.98 97027
104700.6

Net block 1 102007.59 172345.64

Capital work in progress 38570.2 129522.49 189211.25
143270.8

Total 1 231530.08 361556.89

Investments 6 1899.01 1916.57 2085.39
Current Assets, Loans and

Advances

60
Inventories 7 58167.25 47478.46 75634.14
Sundry debtors 8 33943.53 40447.72 53889.61
Cash & Bank balances 9 1738.94 8151.64 10013.68
Loans & Advances 10 12976.33 24114.2 36737.48
106826.0

Total 5 120192.02 176274.91

Current Liabilities &

Provisions
Current Liabilities 11 38891.16 52658.74 80115.57
Provisions 12 810.99 1404.16 1779.34
Total 39702.15 54062.9 81894.91

Net Current Assets 67123.9 66129.12 94380

Miscellaneous Expenditure _ _ _
212293.7

Total 2 299575.77 458022.28

61
INCOME STATEMENT

An Income Statement, also called a Profit and Loss Statement (P&L), is a

financial statement for companies that indicates how Revenue (money received

from the sale of products and services before expenses are taken out, also

known as the "top line") is transformed into net income (the result after all

revenues and expenses have been accounted for, also known as the "bottom

line"). The purpose of the income statement is to show managers and investors

whether the Industry made or lost money during the period being reported.

The important thing to remember about an income statement is that it represents

a period of time. This contrasts the balance sheet, which represents a single

moment in time.

Charitable organizations that are required to publish financial statements do not

produce an income statement. Instead, they produce a similar statement that

reflects funding sources compared against program expenses, administrative

costs, and other operating commitments.

A financial statement that measures a company's financial performance over a

specific accounting period. Giving a summary of how the business incurs its

revenues and expenses through both operating and non-operating activities

assesses financial performance. It also shows the net profit or loss incurred over

a specific accounting period, typically over a fiscal quarter or year.

62
Also known as the "profit and loss statement" or "statement of revenue and

expense". The income statement is divided into two parts: the operating and

non-operating sections.

The portion of the income statement that deals with operating items is

interesting to investors and analysts alike because this section discloses

information about revenues and expenses that are a direct result of the regular

business operations. For example, if a business creates sports equipment, then

the operating items section would talk about the revenues and expenses

involved with the production of sports equipment.

The non-operating items section discloses revenue and expense information

about activities that are not tied directly to a company's regular operations. For

example, if the sport equipment Industry sold a factory and some old plant

equipment, then this information would be in the non-operating items section.

63
PROFIT AND LOSS ACCOUNT OF PEPSI (Rs. In Lacs)

PARTICULARS 2007-08 2008-09 2009-10

Income
Sales of products 282921.52 299259.23 417925.85
Less: Excise duty 18577.55 27763.81 36432.5
Net sales 264343.97 271495.42 381493.55
Export Incentives 13 3868.56 7778.56 2279.45
Other Income 681.12 1240.8 3043.35
Total Income 4549.68 280514.78 386816.15
Expenditure 14
Manufacturing & Other

expenses 227772.94 239670.11 320962.37

Profit before Interest,

Depreciation and Tax 15 41120.71 40844.67 65853.78

Interest and Financial Charges 8082.91 8303.07 7725.02
Profit Before Depreciation 33037.8 32541.6 58128.76
Depreciation 16472.12 16575.77 20892.21
Profit Before Tax 16565.68 15965.83 37236.55
Less: Income Tax
Current Tax 1310 1345 4170
MAT Credit Available for set off _ _ -4120
Deferred Tax -79.54 -856.28 5742.88
Fringe Benefits Tax _ 32 117.69
Profit After Tax 16565.68 15445.11 31325.98
Profit brought forward from

previous year 12576.34 3992.52 3604.36

Profit available for

Appropriations 27911.56 19437.63 34930.34

Appropriations
Proposed Dividend 607.07 1031.79 1061.79
Provision for Dividend Tax 79.34 144.71 180.45
Dividend paid for earlier year _ 4.5 _
Interim Dividend paid 404.72 _
Dividend tax paid on Interim

Dividend 52.89 _

64
Dividend Tax paid for earlier

year _ 6.44 _
Tranferred to Debenture

Redemption Reserve 2500 _ 8975

Release from Debenture

Redemption Reserve -734.38 -5354.17 -3036.45

Tranferred to General Reserve 21009.4 20000 26000
Balance carried forward to

Balance sheet 3992.52 3604.36 1749.55

27911.56 19437.63 34930.34
Basic Earning Per Share 37.89 37.9 74.96
Diluted Earning Per Share 37.89 37.75 74.45
Nominal Value of Share 10 10 10

65
CASH FLOW STATEMENT OF PEPSI ( In Rs. Lacs)

A. Cash flow from operating activities 2007-08 2008-09 2009-10

Net Profit before Tax, Dep. and

Extraordinary items 16565.68 15965.83 37236.55

Depreciation 16472.12 16575.77 20892.21
Transfer from General Reserve _ _ _
Expenses Amortised _ _ _
Provisions 58.1 23.53 90.15
Interest & Financial Charges 7938.7 8303.07 7725.02
Interest /Dividend Income _ -0.46 -28.46
Interest Income on Investments -652.16 -1185.31 -1653.71
Profit on sale of non trade Investment -1.05 -7.47 -69.88
Profit on sale of fixed assets -22.64 -16.47 -64.41
Provision for doubtful debts 2.18 -193.31 127.68
Bad debts written off 0.96 254.24 __
Effects of exchange rate change 4.32 102.54 -1837.57
Operating Profit Before Working
40366.21 39821.13 62417.58
Capital Changes
Adjustments for:
Increase(-) / Decrease in inventories -18756.28 10688.79 -28155.68
Increase (-)/Decrease in other

receivables 1115.34 -6564.65 -13618.13

Increase (-)/Decrease in loans and

advances -4099.28 -11174.53 -8503.28

Increase/ Decrease (-) in trade payables 5941.22 13840.3 27237.36
15799 6789.91 -23039.73

Cash flow from operating activities 24567.21 46611.87 39377.85

Less: Direct tax paid(net of refund) -1239.9 -1260.79 -4068.4
Net cash flow from operating activities

(A) 23327.31 45351.08 35309.45

B. Cash flow from investing activities
-

Purchase of fixed assets -50353 -96090.85 132421.76

66
Sale of fixed assets 68.21 27.64 99.58
Purchase of investments -18.39 -10317.66 -20756.12
Sale of investments 20 10307.57 20657.18
Interest income 652.16 1185.31 2559.33
Dividend income _ 0.46 28.46
-

Net cash used in investing activities (B) 49631.02 -94887.53 129833.33

C). Cash flow from financing activities
Interest & financial charges paid -10692.7 -17219.77 -27397.27
Proceeds from cash credit from banks 10009.84 -8436.52 13879.8
Proceeds from other borrowings 28676.45 80307.18 106700.09
Proceeds from share capital' _ 80 120
Proceeds from share premium _ 1570 2280
Proceeds from share warrants _ 360 -360
Dividend paid -809.44 -612.24 -1031.4
Dividend tax paid -104.75 -85.78 -144.71
Effect of exchange rate change -166.8 -13.72 2339.41
Net cash flow from financing activities

© 26912.6 55949.15 96385.92

Net increase in cash and cash

equivalents (A+B+C) 608.89 6412.7 1862.04

Opening balance of cash and cash

equivalents 1130.05 1738.94 8151.64

Closing balances of cash and cash

equivalents 1738.94 8151.64 10013.68

67
PURPOSE OF FINANCIAL STATEMENTS

"The objective of financial statements is to provide information about the

financial strength, performance and changes in financial position of an

enterprise that is useful to a wide range of users in making economic decisions."

Financial statements should be understandable, relevant, reliable and

comparable. Reported assets, liabilities and equity are directly related to an

organization's financial position. Reported income and expenses are directly

related to an organization's financial performance.

Financial statements are intended to be understandable by readers who have "a

reasonable knowledge of business and economic activities and accounting and

who are willing to study the information diligently."

Owners and managers require financial statements to make important business

decisions that affect its continued operations. Financial analysis is then

performed on these statements to provide management with a more detailed

understanding of the figures. These statements are also used as part of

management's annual report to the stockholders.

Employees also need these reports in making collective bargaining agreements

(CBA) with the management, in the case of labour unions or for individuals in

discussing their compensation, promotion and rankings.

2. External Users: are potential investors, banks, government agencies and

other parties who are outside the business but need financial information about

the business for a diverse number of reasons.

68
Prospective investors make use of financial statements to assess the viability of

investing in a business. Financial analyses are often used by investors and is

prepared by professionals (financial analysts), thus providing them with the

basis in making investment decisions.

Financial institutions (banks and other lending companies) use them to decide

whether to grant a Industry with fresh working capital or extend debt securities

(such as a long-term bank loan or debentures) to finance expansion and other

significant expenditures. Government entities (tax authorities) need financial

statements to ascertain the propriety and accuracy of taxes and other duties

declared and paid by a company.

Media and the general public are also interested in financial statements for a

variety of reasons.

69
BANK COLLECTION CHARGES

CORP-CMS BANK SERVICE CHARGES FOR THE M/O

JAN-2010

LOCATION COLLECTION RATE TOTAL

ALLAHABAD 3983356.00 0.00008 318.67
SAHARANPUR 4135340.00 0.00008 330.83
BHOPAL 905190.00 0.00003 27.16
LUCKNOW 10106181.00 0.00008 808.49
GORAKHPUR 40055502.90 0.00008 3204.44
AGRA 10362284.00 0.00008 828.98
DEHRADUN 3398447.00 0.00008 271.88
JAMMU 30438496.00 0.00008 2435.08
TOTAL 103384796.90 8225.52

CORP-CMS CH.RTURNS CHARGES FOR THE M/O JAN-

2010

LOCATION AMOUNT RET.CHGS INTEREST TOTAL

BHOPAL 452595 100.00 359.60 459.60
TOTAL 100.00 359.60 459.60

PARTICULARS AMOUNT
Collection-

Charges 8325.52
SERVICE-TAX 12.36% 1029.03

70
INTEREST 359.60
TOTAL 9714.16

CORP-CMS BANK SERVICE CHARGES FOR

THE M/O FEB-2010

LOCATION COLLECTION RATE TOTAL

ALLAHABAD 2138971.00 0.00008 171.12
SAHARANPUR 3843031.00 0.00008 307.44
BHOPAL 329907.00 0.00003 9.90
LUCKNOW 10964321.06 0.00008 877.15
GORAKHPUR 36136865.00 0.00008 2890.95
AGRA 15236079.00 0.00008 1218.89
DEHRADUN 1264099.00 0.00008 101.13
JAMMU 23360461.00 0.00008 1868.84
TOTAL 93273734.06 7445.40

71
CORP-CMS CH.RTURNS CHARGES FOR THE M/O

FEB-2010

LOCATION AMOUNT RET.CHGS INTEREST TOTAL

GORAKHPUR 345573.00 100.00 137.28 237.28
JAMMU 249682.00 100.00 0.00 100.00
GORAKHPUR 644589.00 100.00 256.07 356.07
TOTAL 1239844.00 300.00 393.35 693.35

PARTICULARS AMOUNT 12.36% 10.30% TOTAL

Collection-

Charges 7838.75 5671.00 2167.72 7838.72

RET.CHARGRS 300.00 0.00 0 300.00
SERVICE-TAX 922.34 700.94 223.28 924.21
TOTAL 9061.09 6371.94 2391.00 9062.93

UTI-CMS BANK SERVICE CHARGES FOR THE M/O JAN-2010

LOCATION COLLECTION RATE COLL.CHGS. COURIER TOT
COIMBATORE 2131775.00 0.00004 85.27 0.00 8
RUDDRAPUR 460704.00 0.00004 18.43 0.00 1
VARANASI 50102939.07 0.00004 2004.12 400.00 240
TOTAL 52695418.07 2107.82 400.00 250

UTI-CMS BANK CH.RETURNS FOR THE M/O JAN-2010

LOCATION AMOUNT RET.CHARGS INTEREST TOTAL
RUDDRAPUR 24000.00 100.00 11.67 111.67
VARANASI 168856.38 100.00 82.12 182.12
VARANASI 364366.00 100.00 177.19 277.19
TOTAL 300.00 270.98 570.98

72
Collection+Ret.Chargs 3078.79
SERVICE-TAX 12.36% 380.54
TOTAL 3459.33

UTI-CMS BANK SERVICE CHARGES FOR THE M/O FEB-2010

LOCATION COLLECTION RATE COLL.CHGS. COURIER TOTAL
COIMBATORE 2438624.00 0.00004 97.54 0.00 97.54
RUDDRAPUR 1175094.00 0.00004 47.00 0.00 47.00
VARANASI 58848048.42 0.00004 2353.92 400.00 2753.92
TOTAL 62461766.42 2498.47 400.00 2898.47

UTI-CMS BANK CH.RETURNS FOR THE M/O FEB-2010

LOCATION AMOUNT RET.CHARGS INTEREST TOTAL
VARANASI 100000.00 100.00 49.64 149.64
VARANASI 403373.00 100.00 196.16 296.16
VARANASI 557367.00 100.00 271.05 371.05
VARANASI 337665.00 100.00 0.00 100.00
VARANASI 232607.00 100.00 0.00 100.00
VARANASI 118371.00 100.00 0.00 100.00
TOTAL 600.00 516.85 1116.85

Collection+Ret.Chargs 4015.32
SERVICE-TAX 12.36% 496.29
TOTAL 4511.62

CHARGED BY BANK 4510.47

HDFC-23-CMS BANK COLLECTION CHARGES FOR THE

M/O JAN-2010

LOCATION COLLECTION RATE COLL.CHGS. TOTAL

LUDHIANA 38454277.00 0.00005 1922.71 1922.71

73
BELAGUM 1427504.00 0.00005 71.38 71.38
ALIGARH 10883185.00 0.00005 544.16 544.16
MADRAS 14985828.75 0.00002 299.72 299.72
ALLAHABAD 3322628.30 0.00005 166.13 166.13
HALDWANI 16959326 0.00005 847.97 847.97
SRINAGAR 55499596.00 0.00005 2774.98 2774.98
CHANDIGARH 2291431.00 0.00004 91.66 91.66
TRIUPATHI 11889163.00 0.00005 594.46 594.46
PUNE 20702003.43 0.00004 828.08 828.08
MUZAFAR

NAGAR 6691780.06 0.00005 334.59 334.59

JAIPUR 34666128.00 0.00004 1386.65 1386.65
KANPUR 125790462.34 0.00004 5031.62 5031.62
GUWAHATI 100167375.00 0.00004 4006.70 4006.70
TOTAL 443730687.88 18900.79 18900.79

HDFC-23-CMS BANK -CH.RETURNS FOR THE M/O JAN-

2010

PER.C

LOCATION AMOUNT H INTEREST TOTAL

HALDWANI 69379.00 100.00 0.00 100.00
GUWAHATI 50000.00 100.00 0.00 100.00
PUNE 543524.00 100.00 0.00 100.00
KANPUR 1548306.00 100.00 0.00 100.00
GUWAHATI 942981.00 100.00 0.00 100.00
CHANDIGARH 208033.00 100.00 0.00 100.00
CHANDIGARH 209780.00 100.00 0.00 100.00
GUWAHATI 50000.00 100.00 0.00 100.00
GUWAHATI 1689504.00 100.00 0.00 100.00
MADRAS 1000000.00 25.00 250.00 275.00
MADRAS 1000000.00 25.00 250.00 275.00
MADRAS 1915491.00 25.00 478.87 503.87
TOTAL 9226998.00 975.00 978.87 1953.87

PARTICULARS AMOUNT
COLLECTION- 20854.66

74
CHARGES
SERVICE-TAX

12.36% 2577.64
TOTAL 23432.29

CHARGED BY

BANK 23432.27

HDFC-23-CMS BANK COLLECTION CHARGES FOR THE M/O

FEB-2010

LOCATION COLLECTION RATE COLL.CHGS. TOTAL

LUDHIANA 27997404.5 0.00005 1399.87 1399.87
BELAGUM 215478 0.00005 10.77 10.77
ALIGARH 9177777 0.00005 458.89 458.89
MADRAS 12472932.65 0.00002 249.46 249.46
ALLAHABAD 3621722 0.00005 181.09 181.09
HALDWANI 16396284 0.00005 819.81 819.81
SRINAGAR 61581320 0.00005 3079.07 3079.07
CHANDIGARH 1947787 0.00004 77.91 77.91
TRIUPATHI 22083026 0.00005 1104.15 1104.15
KOLHAPUR 301107.00 0.00005 15.06 15.06
BANGALORE 14803837.79 0.00003 444.12 444.12
INDORE 12695119.86 0.00003 380.85 380.85
PUNE 10233839.71 0.00004 409.35 409.35
MUZAFAR NAGAR 5541336.88 0.00005 277.07 277.07
JAIPUR 13648449.00 0.00004 545.94 545.94
KANPUR 105954613.72 0.00004 4238.18 4238.18

75
GUWAHATI 123780224 0.00004 4951.21 4951.21
TOTAL 442452259.11 18642.80 18642.80

HDFC-23-CMS BANK -CH.RETURNS FOR THE M/O FEB-2010

PER.C

LOCATION AMOUNT H INTEREST TOTAL

HALDWANI 184564.00 100.00 0.00 100.00
GUWAHATI 1004566.00 100.00 0.00 100.00
PUNE 301107.00 100.00 0.00 100.00
KANPUR 666888.00 100.00 0.00 100.00
GUWAHATI 1693781.00 100.00 0.00 100.00
GUWAHATI 1303746.00 100.00 0.00 100.00
GUWAHATI(COURIER) 0.00 800.00 0.00 800.00
GUWAHATI 1473642.00 100.00 0.00 100.00
MADRAS 667126.00 100.00 0.00 100.00
MADRAS 752655.00 100.00 0.00 100.00
MADRAS 667126.00 100.00 0.00 100.00
LUDHIANA 344719.00 100.00 0.00 100.00
LUDHIANA 901375.00 100.00 0.00 100.00
LUDHIANA 773857.00 100.00 0.00 100.00
KANPUR 200000.00 0.00 25.00 25.00
KANPUR 200000.00 100.00 25.00 125.00
MADRAS 595697.00 25.00 148.92 173.92
JAIPUR 400000.00 100.00 0.00 100.00
JAIPUR 423578.00 100.00 0.00 100.00
TOTAL 12554427.00 2425.00 198.92 2623.92

PARTICULARS AMOUNT
COLLECTION-

CHARGES 21266.72
SERVICE-TAX 10.30% 2190.47
TOTAL 23457.19

CHARGED BY BANK 23457.18

76
ICICI-CMS BANK SERVICE CHARGES FOR M/O

JAN-2010

LOCATION COLLECTION RATE TOTAL

AHMEDABAD 1172762.00 0.00004 1500.00
JALLANDHAR 2967710.00 0.0003 1500.00
LUDHIANA 10109515.00 0.0002 2021.90
TOTAL 14249987.00 5021.90

ICICI-CMS BANK CH.RET.CHARGES FOR M/O JAN-

2010
LOCATION AMOUNT TOTAL
JALLANDHAR 342816.00 100.00
TOTAL 100.00

PARTICULARS AMOUNT
Collection-Charges 5121.90
SERVICE TAX 12.36% 633.07
TOTAL 5754.97

ICICI-CMS BANK SERVICE CHARGES FOR M/O

FEB-2010

LOCATION COLLECTION RATE TOTAL

AHMEDABAD 1235827.00 0.00004 1500.00

77
 JALLANDHAR 2076661.00 0.0003 1500.00
LUDHIANA 5557843.00 0.0002 1500.00
TOTAL 8870331.00 4500.00

PARTICULARS AMOUNT
Collection-Charges 4500.00
SERVICE TAX 10.30% 463.50
TOTAL 4963.50

CONCLUSION

Cash Management Services has saved huge amount of cost which PEPSI had to

pay to procure funds from its customers. The savings have been nearly to the

tune of Rs 4800000. CMS has not only saved cost but have also ensured fast

realization of cash.

Earlier it used to take PEPSI at least 4-5 days to realize the payments made by

its customers whereas now it takes 24-48 hrs. The cost to PEPSI under

conventional method of collection (through drafts) is estimated by taking the

cash inflow through sale in cash only and current rates in the market is used for

the calculation e.g. BPEPSI has been availing the CC facility from Punjab

78
national bank and paying an interest @ 11% p.a. Also, the return charges are

ignored while doing all the calculations because there are very few cases of

return each month and most of the time the banks adjust the amount the very

same days so no interest is levied upon it. In such cases PEPSI has to pay Rs

100 flat as return charges. It would be in best interest of PEPSI to change the

banks from which it is availing CMS as the cost can be further reduced. The

above study leads us to the conclusion that HDFC and UTI are best suited for

PEPSI. The conclusion has not been made only on the grounds of financial

charges, while finalizing the banks the return interest rate, MIS report by banks

have also been taken into consideration. Any rate below 13.5% should be

acceptable to PEPSI. The MIS reports of all the banks are at par. Also, the

banks have ruled out the possibility of delayed credit as they have sophisticated

softwares to insure timely credit. Still PEPSI should insist on writing a clause in

the agreement stating that in case of delayed credit PEPSI is entitled to claim

an interest equivalent to the interest charged by the bank in case of instrument

return. Thus fresh negotiations with banks could save up to 70% of the cost.

Where as, Letter of Credit has been an important source of funds for PEPSI and

huge amount of transactions are carried out by way of Letter of credit in both

domestic and international market. It not only hedges the Industry against the

default risk but also ensures that the cash is realized much earlier than the due

date of payment. However, In many cases I have noticed that the party does not

default but delays the payment to the bank which in turn charges interest to

79
PEPSI for the period for which it has remained out of funds. This increases the

cost of financing. Provisions should be made while entering into agreement with

the party so as to avoid such costs. Also, at times it has been observed that the

party makes payment to its banker on the due date only and hence the transfer

of funds are delayed, again PEPSI ends up paying an interest for the same. This

does not make much of a difference if the credit period is anywhere between 60-

180 days. But in case the credit period is less than 60 say 30-45 the cost of

financing becomes high. Thus, while entering into agreement with the party

such costs must also be taken into consideration.

PEPSI has been managing the funds very well by employing latest management

techniques and have also ensured timely realization of funds.

RECOMMENDATION

• I would like to recommend PEPSI to negotiate with HDFC for location

suchasLudhiana,Aligarh,Allahabad,Mandi-

Gobindgarh,Kanpur,Pune,Guhawati as from these location PEPSI is

receiving a huge amount, so if negotiated at lower rates, then the saving

would increase at higher rates.

• PEPSI is doing business with UTI but not at a large, furthermore PEPSI

should negotiate with UTI for the rates which would suits the dealing.

• As regard business with Corporation Bank, Corporation Bank is having

very high rate as compared to HDFC and UTI.

80
 • ICICI Bank is another option but it charges high in case of delayed

payment

KEY FINDING

• Industry has an outstanding name in the field increasing of exports

as increament of around rs. 500 cr as compare to last financial year.

• The purchases made by the Industry are in cash whereas the sales

are in cash and credit both this makes the working capital

requirement of the Industry very high.

81
• The Industry has a conservative approach towards hedging exchange rate

risks.

• From the locations as varanasi, gorakhpur, kanpur, Allahabad compny is

receiving a huge amount.

BIBILOGRAPHY

1. www.google.com

2. www.pepsi.com

3. www.wikipedia.com

NEWSPAPERS

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1Business line

2Financial Express

3Economic Times

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