You are on page 1of 112


Submitted in partial fulfillment of the requirement for MBA Degree Programme of Uttar Pradesh Technical University, Lucknow.


Successfully accomplished project work and the completion of this report have been made possible by the significant contributions of many people.

I would like to express my sincere gratitude towards Mrs. Deepti Raj Sharma, my Project guider for giving me the support and encouragement that I needed, and providing many valuable suggestions and insights for my work.

Many data of my findings are the result of a collection from various sources, such as magazines and many insurance companies. Regardless of the source, I wish to express my gratitude to those who may have contributed to this work, even though anonymously.

Id also like to thank Mr. R.K.Verma (Finance Manager) of Brindavan Beverages Pvt. Ltd, for extending their support and assistance as and when I required it.

List Of Content
Page no. Brief of organization Objectives Methodology Generations of Coca Cola Claims Freight Payables Analysis of Balance Sheets Cash Flow Analysis Ratio Analysis Conclusion Annexure 4 9 10 12 36 41 49 60 78 96 98

BRIEF OF THE ORGANIZATION Brindavan Beverages Pvt. Ltd, a bottling company was started during the year 1986 in Bangalore due to the humble services by Mr. S. N. Ladhani, the Managing Director of the company, with and initial capital of Rs. 25 Lac. Brindavan Beverages Pvt. Ltd has a franchisee agreement with Parle exports for hundred years to manufacture and sell its products. During November 1993, Parle export sold all its 60 franchises to Coca-Cola in India in order to compete with Pepsi. Each franchisee can cover up 16 districts. The company is in business of manufacturing and selling Coca Cola and other soft drinks owned by Coca Cola like Thumsup, Limca, Fanta, Maaza, Kinley Soda in area allocated to Bareilly franchisee which covers districts such as Badaun, Moradabad, Rampur, Pilibhit, Shahjahanpur, Lakhimpur Khiri. M/s Brindavan Beverages Pvt. Ltd has its production unit having capacity of 600 bottles per minute, located at Parsakhera Industrial Estate, 12 Kilometer away from Bareilly town on Delhi highway. In state of Uttranchal the company establish a sales depot at Kichha. As the product of company is sold in returnable containers ( Glass bottles in plastic Shells) large area is required for storage of empty glass bottles as well as filled glass bottles. Company has maintained huge storage capacity in respect of bottles, which is located adjacent to the production unit. Brindavan Beverages Pvt. Ltd is owned by Ladhani Group which owns three more bottling plants located at Baranbanki, Faizabad, and Hathras having head office located at Bangalore.

The Managing Director, the head of the organization is in charge of all administration matters. The G.M. Sales and franchise Manager-sales is responsible for activities such as sales, promotions, advertisements and distribution etc. and Production & Plant Manager takes care of the production department.

Location of BBPL


Brindavan Beverages Private Limited is an Indian subsidiary of the US based Coca-Cola Company which is biggest among franchisees in INDIA. The company-owned Bottling arm of the Indian Operations, Brindavan Beverages Private Limited is responsible for the manufacture, sale and distribution of beverages across the country. Coca-Cola India is among the countrys top international investors, having invested more than US$ 1 billion in India within a decade of its presence and further pledged another US$ 100 million in 2003 for its operations. It is the worlds largest selling soft drink since 1886. The Coca-Cola Company returned to India in 1993 after a gap of 16 years giving new Thums up to the Indian Soft Drink Market and took over the ownership of the nation's top soft-drink brands and bottling network. The vast Indian operations comprises 25 wholly company owned bottling operations and another 24 franchisee owned bottling operations and a network of 21 contract packers also manufactures a range of products for the Company.


As stated earlier that this particular plant has been taken over by Brindavan Beverages P Limited from the Coca-Cola India. With the passage of time, company has extended its distribution network from 60 to 230 distributors alongwith 05 depots and covers over 16 districts under its belt and they are still growing. The names of the district are as follows. 1. Bareilly 3. Shahjahanpur 5. Rampur 7. Chamoli 9. Pitoragarh 11. Rudraprayag 13. Lakhimpur Khiri 15. Bageshwar 2. Badaun 4. Pilibhit 6. Moradabad 8. Chandausi 10. Karayanprayag 12. Kichha 14. Haldwani 16. Ranikhet

Right from the first year of the incorporation the company is running in top profit. This is because of many reasons. One of them is being excellent marketing strategy adopted by the company. Also the company gives goods margins to the retailers along with various lucrative from time to time.








OBJECTIVES Primary Objectives

To analyze the financial position of the company . To compare the financial position of the coca cola company with pepsi company To assess the profitability, liquidity, and solvency of companies To assess past performance of the company.

Secondary Objectives
The other objective of the study is to gain deep insight knowledge of balance sheets of the company. TO KNOW THE EFFICIENCY AND HOW TO MANAGE THE



Research methodology is a process of planning, acquiring, analyzing and disseminating relevant data and information.

WHY RESEARCH IS REQUIRED Conceptually, the purpose of research is to discover the answers for the questions through application of scientific procedures. The main aim of the research is to find out the truth which is hidden and which has not been discovered yet.

Data collection
Two types of data are collected, one is primary data and second one is secondary data. The primary data were collected from the Department of finance, BRINDAVAN BREVERAGES. The secondary data were collected from the International Annual Report of COCA COLA COMPANY, COCACOLA AND PEPSI, etc.

Analysis phase: After being familiar with the basics of the reports, the
next part of the project work includes balance sheets, profit and working capital analysis and ratio analysis. loss accounts,

Interpretation Phase:- After carefully analyzing the balance sheets profit and loss
accounts and after calculating various ratios interpretations and the recommendations have been given so that the organization can properly utilize its resources to the full extent and the organization can be benefitted.


1886-1892 Atlanta beginning

It was 1886, and in New York Harbor, workers were constructing the Statue of Liberty. Eight hundred miles away, another great American symbol was about to be unveiled. Like many people who change history, John Pemberton, an Atlanta pharmacist, was inspired by simple curiosity. One afternoon, he stirred up a fragrant, caramel-colored liquid and, when it was done, he carried it a few doors down to Jacobs' Pharmacy. Here, the mixture was combined with carbonated water and sampled by customers who all agreed -- this new drink was something special. So Jacobs' Pharmacy put it on sale for five cents a glass. Pemberton's bookkeeper, Frank Robinson, named the mixture Coca-Cola, and wrote it out in his distinct script. To this day, Coca-Cola is written the same way. In the first year, Pemberton sold just 9 glasses of Coca-Cola a day. A century later, The Coca-Cola Company has produced more than 10 billion gallons of syrup. Unfortunately for Pemberton, he died in 1888 without realizing the success of the beverage he had created. Over the course of three years, 1888-1891, Atlanta businessman Asa Griggs Candler secured rights to the business for a total of about $2,300. Candler would become the Company's first president, and the first to bring real vision to the business and the brand.

1893-1904 Beyond Atlanta

Coca cola hires first celebrity spoke person music hall performer Hilda Clark Asa G. Candler, a natural born salesman, transformed Coca-Cola from an invention into a business. He knew there were thirsty people out there, and Candler found brilliant and innovative ways to introduce them to this exciting new refreshment. He gave away coupons for complimentary first tastes of CocaCola, and outfitted distributing pharmacists with clocks, urns, calendars and apothecary scales bearing the Coca-Cola brand. People saw Coca-Cola everywhere, and the aggressive promotion worked. By 1895, Candler had built syrup plants in Chicago, Dallas and Los Angeles. Inevitably, the soda's popularity led to a demand for it to be enjoyed in new ways. In 1894, a Mississippi businessman named Joseph Biedenharn became the first to put Coca-Cola in bottles. He sent 12 of them to Candler, who responded without enthusiasm. Despite being a brilliant and innovative businessman, he didn't realize then that the future of Coca-Cola would be with portable, bottled beverages customers could take anywhere. He still didn't realize it five years later, when, in 1899, two Chattanooga lawyers, Benjamin F. Thomas and Joseph B. Whitehead, secured exclusive rights from Candler to bottle and sell the beverage - for the sum of only one dollar.

1905-1918 Safeguarding the brand

Coca cola enjoyed in 8 countries worldwide.To combat copycats coca cola develops unique bottle Imitation may be the sincerest form of flattery, but The Coca-Cola Company was none too pleased about the proliferation of copycat beverages taking advantage of its success. This was a great product, and a great brand. Both needed to be protected. Advertising focused on the authenticity of Coca-Cola, urging consumers to "Demand the genuine" and "Accept no substitute." The Company also decided to create a distinctive bottle shape to assure people they were actually getting a real Coca-Cola. The Root Glass Company of Terre Haute, Indiana, won a contest to design a bottle that could be recognized in the dark. In 1916, they began manufacturing the famous contour bottle. The contour bottle, which remains the signature shape of Coca-Cola today, was chosen for its attractive appearance, original design and the fact that, even in the dark, you could identify the genuine article. As the country roared into the new century, The Coca-Cola Company grew rapidly, moving into Canada, Panama, Cuba, Puerto Rico, France, and other countries and U.S. territories. In 1900, there were two bottlers of Coca-Cola; by 1920, there would be about 1,000.

1919-1940 The woodruff legacy

Coca cola enjoyed in 53 countries world wide. It introduced 6 packs. In 1925 6000000 drinks per day. Perhaps no person had more impact on The Coca-Cola Company than Robert Woodruff. In 1923, four years after his father Ernest purchased the Company from Asa Candler, Woodruff became the Company president. While Candler had introduced the U.S. to Coca-Cola, Woodruff would spend more than 60 years as Company leader introducing the beverage to the world beyond. Woodruff was a marketing genius who saw opportunities for expansion everywhere. He led the expansion of Coca-Cola overseas and in 1928 introduced Coca-Cola to the Olympic Games for the first time when Coca-Cola traveled with the U.S. team to the 1928 Amsterdam Olympics. Woodruff pushed development and distribution of the six-pack, the open top cooler, and many other innovations that made it easier for people to drink Coca-Cola at home or away. This new thinking made Coca-Cola not just a huge success, but a big part of people's lives.

1941-1959 The war and its legacy

Coca cola enjoyed in 120 countries world wide. Introducing Coke. In 1961 Sprite is introduced. 1963 Tab Companys first diet soft drink is introduced In 1941, America entered World War II. Thousands of men and women were sent overseas. The country, and Coca-Cola, rallied behind them. Woodruff ordered that "every man in uniform gets a bottle of Coca-Cola for 5 cents, wherever he is, and whatever it costs the Company." In 1943, General Dwight D. Eisenhower sent an urgent cablegram to Coca-Cola, requesting shipment of materials for 10 bottling plants. During the war, many people enjoyed their first taste of the beverage, and when peace finally came, the foundations were laid for Coca-Cola to do business overseas. Woodruffs vision that Coca-Cola be placed within "arm's reach of desire," was coming true -- from the mid-1940s until 1960, the number of countries with bottling operations nearly doubled. Post-war America was alive with optimism and prosperity. Coca-Cola was part of a fun, carefree American lifestyle, and his imagery of its advertising -- happy couples at the drive-in, carefree moms driving big yellow convertibles -- reflected the spirit of the times.

1960-1981 A world of customers

Coca cola enjoyed in 163 countries world wide. It introduced can in 1960. In 1981 Roberto c. Goizueta became chairman and CEO of the coca cola company After 70 years of success with one brand, Coca-Cola, the Company decided to expand with new flavors: Fanta, originally developed in the 1940s and introduced in the 1950s; Sprite followed in 1961, with TAB in 1963 and Fresca in 1966. In 1960, The Coca-Cola Company acquired The Minute Maid Company, adding an entirely new line of business -- juices -- to the Company. The Company's presence worldwide was growing rapidly, and year after year, Coca-Cola found a home in more and more places: Cambodia, Montserrat, Paraguay, Macau, Turkey and more. Advertising for Coca-Cola, always an important and exciting part of its business, really came into its own in the 1970s, and reflected a brand connected with fun, friends and good times. The international appeal of Coca-Cola was embodied by a 1971 commercial, where a group of young people from all over the world gathered on a hilltop in Italy to sing "I'd Like to Buy the World a Coke." In 1978, The Coca-Cola Company was selected as the only Company allowed to sell packaged cold drinks in the People's Republic of China.

1982-1989 Diet coke and new coke

Coca cola enjoyed in 165 countries world wide. In 1982 diet coke is introduced. The 1980s -- the era of legwarmers, headbands and the fitness craze, and a time of much change and innovation at The Coca-Cola Company. In 1981, Roberto C. Goizueta became chairman of The Board of Directors and CEO of The Coca-Cola Company. Goizueta, who fled Castro's Cuba in 1961, completely overhauled the Company with a strategy he called "intelligent risk taking." Among his bold moves was organizing the numerous U.S. bottling operations into a new public company, Coca-Cola Enterprises Inc. He also led the introduction of diet Coke, the very first extension of the Coca-Cola trademark; within two years, it had become the top low-calorie drink in the world, second in success only to CocaCola. One of Goizueta's other initiatives, in 1985, was the release of a new taste for Coca-Cola, the first change in formulation in 99 years. In taste tests, people loved the new formula, commonly called new Coke. In the real world, they had a deep emotional attachment to the original, and they begged and pleaded to get it back. Critics called it the biggest marketing blunder ever. But the Company listened, and the original formula was returned to the market as Coca-Cola classic, and the product began to increase its lead over the competition -- a lead that continues to this day

1990-1999 New markets and brands

In 1993 pet bottkles are introduced. Coca cola enjoyed in 200 countries world wide. The 1990s were a time of continued growth for The Coca-Cola Company. The Company's long association with sports was strengthened during this decade, with ongoing support of the Olympic Games, FIFA World Cup football (soccer), Rugby World Cup and the National Basketball Association. Coca-Cola classic became the Official Soft Drink of NASCAR racing, connecting the brand with one of the world's fastest growing and most popular spectator sports. And 1993 saw the introduction of the popular "Always Coca-Cola" advertising campaign, and the world met the lovable Coca-Cola Polar Bear for the first time. New markets opened up as Coca-Cola products were sold in East Germany in 1990 and returned to India in 1993. New beverages joined the Company's line-up, including Powerade sports drink, Qoo children's fruit drink and Dasani bottled water. The Company's family of brands further expanded through acquisitions, including Limca, Maaza and Thums Up in India, Barq's root beer in the U.S., Inca Kola in Peru, and Cadbury Schweppes' beverage brands in more than 120 countries around the world. By 1997, the Company already sold

1 billion servings of its products every day, yet knew that opportunity for growth was still around every corner.

2000 and Now Coca cola now

In 1886, Coca-Cola brought refreshment to patrons of a small Atlanta pharmacy. Now well into its second century, the Company's goal is to provide magic every time someone drinks one of its more than 400 brands. Coca-Cola has fans from Boston to Budapest to Bahrain, drinking brands such as Ambasa, Vegitabeta and Frescolita. In the remotest comers of the globe, you can still find Coca-Cola. Coca-Cola is committed to local markets, paying attention to what people from different cultures and backgrounds like to drink, and where and how they want to drink it. With its bottling partners, the Company reaches out to the local communities it serves, believing that Coca-Cola exists to benefit and refresh everyone it touches.From the early beginnings when just nine drinks a day were served, Coca-Cola has grown to the worlds most ubiquitous brand, with more than 1.4 billion beverage servings sold each day. When people choose to reach for one of The Coca-Cola Company brands, the Company wants that choice to be exciting and satisfying, every single time.


Indian soft drinks market is predominantly controlled by two major multinationals namely Coca- Cola and Pepsi, which have carefully stifled out the local competition here in India. Penetrating tough Indian psychology and making their products feel accepted was the toughest challenge in front of them. A brief overview of the soft drinks giant biggest competitor will help in gaining a better insight of the soft drinks market in totality.


There has been much controversy and debate on the market share standings between the two companies in the Indian subcontinent and a substantial and a consolidated figure has been unavailable for reference. This is mainly because both companies had approached different market research companies for making a study about the market share standings. Pepsi Co had approached IMRB while Coca- Cola had entrusted this responsibility on ORG. According to the survey done by IMRB Pepsis market share was found to have increased from 47% to 49% while according to the study conducted by ORG Coca- Colas market share was claimed to be 59%.


Seasonality: Seasonality is one of the most important factors that affect the soft
drink business. Seasonality is primarily influenced either by the weather, or by holidays and religious festivals. Within the Group, soft drink business has different seasonal cycles throughout the year.

Service frequency: This is another factor that affects the business. Service
frequency is the time gap between visiting a particular outlet again. Service frequency directly affects the rotation time which in turn affects the value of business.

Demand pattern for the market: Every product has a different demand
pattern and affects the business.

Price of the product: Price of the soft drinks also affects the business. Due to
perfect competition in soft drink market, price of a product plays a major role in business.

Disposable Income: Disposable Income of the consumers also affects the

business of the soft drink players. A high disposable income of the consumers ensures a high demand for the products in the market.

Demographic Profile: Demographic profile of consumer also affects the

business and needs to be considered.

Competitors Policy: The policies of the competitors also affect the working
of the business of other companies.

Government Policies: The government policies related to taxation or political

interference also affect the business of the players in the soft drink industry.


Coca-cola is the world's favorite drink. It is the world's most valuable brand and
the most recognizable word across the world. Coca-Cola has a truly remarkable heritage.

From a humble beginning in 1886, it is now the flagship brand of the largest manufacturer, marketer and distributor of non-alcoholic beverages in the world.

In India, Coca-Cola was the leading soft-drink till 1977 when govt. policies necessitated its departure. Coca-Cola made its return to the country in 1993 and made significant investments to ensure that the beverage is available to more and more people, even in the remote and inaccessible parts of the nation. Over the past ten years it has captured the imagination of the nation, building strong associations with cricket, the thriving cinema industry, music etc. Coca-Cola has been very strongly associated with cricket, sponsoring the World Cup in 1996 and various other tournaments, including the Coca-Cola Cup in Sharjah in the late nineties. Coca-Cola's advertising campaigns Jo Chaho Ho Jaye and Life ho to Aisi were very popular and had entered the youth's vocabulary. In 2002, Coca-Cola launched the campaign "Thanda Matlab Coca-Cola" which sky-rocketed the brand to make it India's favorite soft-drink brand. In 2003, Coke was available for just Rs. 5 across the country and this pricing initiative together with improved distribution ensured that all the brands in the portfolio grew leaps and bounds.

Coca-Cola had signed on various celebrities including movie stars such as Karishma Kapoor, cricketers such as Srinath, Sourav Ganguly, southern celebrities like Vijay in the past and today, its brand ambassadors are Aamir Khan and Hrithik Roshan.

Thums Up is a leading carbonated soft drink and most trusted brand in India.
Originally introduced in 1977, Thums Up was acquired by the Coca-Cola Company in 1993. Thums Up is known for its strong, fizzy taste and its confident, mature and uniquely masculine attitude. This brand clearly seeks to separate the men from the boys.

Fanta Internationally, Fanta - The 'orange' drink of the Coca-Cola Company, is

seen as one of the favorite drinks since 1940's. Fanta entered the Indian market in the year 1993. Over the years Fanta has occupied a strong market place and is identified as "The Fun Catalyst".

Fanta is perceived as a fun youth brand and stands for its vibrant color, tempting taste and tingling bubbles that not just uplifts feelings but also helps free spirit thus encouraging one to indulge in the moment. This positive imagery is associated with happy, cheerful and special times with friends.

Lime n' lemoni Limca , the drink that can cast a tangy refreshing spell on
anyone, anywhere. Born in 1971, Limca has been the original thirst choice, of millions of consumers for over 3 decades. The brand has been displaying healthy volume growths year on year and Limca continues to be the leading flavor soft drink in the country.

The sharp fizz and lemoni bite combined with the single minded positioning of the brand as the ultimate refresher has continuously strengthened the brand franchise. Limca energizes, refreshes and transforms. Dive into the zingy refreshment of Limca and walk away a new person.

Worldwide Sprite is ranked as the No. 4 soft drink & is sold in more than 190 countries. In India, Sprite was launched in year 1999 & today it has grown to be one of the fastest growing soft drinks, leading the Clear lime category. Today Sprite is perceived as a youth icon. With a strong appeal to the youth, Sprite has stood for a straight forward and honest attitude. Its clear crisp refresh hingtaste encourages the today's youth to trust their instincts, influence them to be true to who they are and to obey their thirst.

Maaza was launched in 1976. It is a drink which offered the same real taste of
fruit juices and was available throughout the year. In 1993, Maaza was acquired by CocaCola India and it currently dominates the fruit drink market. Over the years, brand Maaza has become synonymous with Mango. This has been the result of such successful campaigns like "Taaza Mango, Maaza Mango" and "Botal mein Aam, Maaza hain Naam". Consumers regard Maaza as wholesome, natural, fun drink which delivers the real experience of fruit. The current advertising of Maaza positions it as an enabler of fun friendship moments between moms and kids as moms trust the brand and the kids love its taste. The campaign builds on the existing equity of the brand and delivers a relevant emotional benefit to the moms rightly captured in the tagline "Yaari Dosti Taaza Maaza"

Kinley Water, a thirst quencher that refreshes, a life giving force that washes all
the toxins away. A ritual purifier that cleanses, purifies, transforms. Water, the most basic need of life, the very sustenance of life, a celebration of life itself.

The importance of water can never be understated. Particularly in a nation such as India where water governs the lives of the millions, be it as part of everyday rituals or as the monsoon which gives life to the sub-continent. Kinley water understands the importance and value of this life giving force. Kinley water thus promises water that is as pure as it is meant to be. Water you can trust to be truly safe and pure.

Kinley water comes with the assurance of safety from the Coca-Cola Company. That is why we introduced Kinley with reverse-osmosis along with the latest technology to ensure the purity of our product. That's why we go through rigorous testing procedures at each and every location where Kinley is produced. Because the company believes that right to pure, safe drinking water is fundamental. Its a universal need which cannot be left to chance.

The below table shows the brands and products of different pack sizes being sold by the company in UTTAR PRADESH and UTTARANCHAL region:

BRAND NAME Coca-cola






200 ml and 300ml

600 ml, 1.25l and 2l

330 ml

Various sizes

Thums up

200 ml and 300ml

350 ml, 600 ml, 1.25L and 2L

330 ml

Various sizes


200 ml and 300ml

600 ml, 1.25L and 2L

330 ml

Various sizes


200 ml

600 ml, 1.25L

330 ml


and 300 ml Sprite 200 ml and 300 ml -

and 2L


350 ml, 600 ml, 1.25L and 2L

330 ml

Various sizes


200 ml


600 ml, 1.2L

Diet Coke Kinley Water

500 ml, 1L

330 ml -

The different pack sizes on which discount is given by the company is: 200 ml RGB1 CSD2 250 ml juice3 300 ml RGB CSD 600 ml Pet4 CSD 1200 ml Pet Juice 2000 ml Pet CSD 330 ml Can CSD 200 ml Tetra Pack Juice

RGB Returnable Glass Bottles

CSD Concentrated Soft Drink

Juice Maaza


Plastic bottle

The below table shows the number of bottles in each case and brands available in different pack sizes.

Pack Sizes

No. of bottles per case


200 ml RGB 250 ml RGB 300 ml RGB

24 24 24

Coke, Fanta, Limca, Thums up and Sprite Maaza and Minute Maid Pulpy Orange Coke, Fanta, Limca, Thums up, Kinley Soda and Sprite

330 ml Can


Coke, Fanta, Limca, Thums up, Sprite and Diet Coke

400 ml 500 ml Pet 600 ml Pet

24 24 24

Minute Maid Pulpy Orange Diet Coke, Kinley Soda and Kinley water Coke, Fanta, Limca, Thums up, Sprite and Maaza

200 ml Tetra P 1 Ltr 1.2 ltr Pet 2 ltr Pet 2.25 ltr Pet

27 12 12 9

Maaza Kinley Water Maaza and Minute Maid Pulpy Orange Coke, Fanta, Limca, Thums up and Sprite Coke, Thums up and Sprite


Responsible for building and maintaining relationships with distributors in order to maximize sales and ensure proper execution of pricing and promotional programs. Claims are those which are effective to increase the sale of company. The claims are the promotional schemes given by the company to the distributors for the retailer in order to increase the sale. The distributors have some special agreements with company. There are pre decided sale volume agreement between company and distributors. They have monopoly outlets to sale the HCCBPLs products. They are not supposed to sale any other brand besides coca cola.

The claim is the amount which is to be reimbursed to the distributor on the scheme run by him in the market. These are the promotional scheme given to the distributor to give it to the retailer in order to increase the sales of the company. In order to earn more and more by the help of extra sale these scheme are very helpful and in order to survive from the competitors these schemes carry much importance. In this series of articles, I will highlight the importance and steps of Claims, an approach to segmentation and categorization of accounts.


The recommended approach is suggested below:

Step 1: Group our distributors according to the volume they do in the market and decide the budget according to the volume done by them and make an agreement with them.

Step 2: Include contribution margins and direct profit or any other financial matrices that make sense for our business.

Step 3: Identifying the profitable monopoly outlets of the distributors from their prospective and make an agreement with based on proposed budget to the ASM and SE and the understanding of the distributor.

Step 4: After the agreement is tied the MER is opened of each pack i.e 600 ml, 200ml, 1.25l, 2l and IL water.


Step 1: Company does 75 percent of its business by the help of distributors and the rest is done by the Direct Route Operation (DRO). In DRO what ever sale is made it is of cash not on credit so any sale made the discount is given at the spot to the retailer and a credit note is prepared and the amount is credited to the retailers account. But in case of Indirect selling sale is done to by the help of distributors. The are of operation is divided into various territories and each territory is appointed an Area Sales Manager (ASM), Senior Executive (SE) and Route To Market Executive (RTM). Each territory is appointed a budget based on the volume done by the area and ASM decides what budget is to be given to the distributors based on the volume done by them.

Step 2: once the budget is decided by the ASM the MER is blocked for each an every distributor. The MER is blocked in every fortnight i.e. in every 15 days. Claims are divided into various buckets, and there are two buckets in a month and 24 buckets in a year. The schemes are given of two types one is bottle scheme and other is the monopoly schemes. In bottle scheme the distributor gives free bottles on sale of 1 case or crate say scheme of 2 bottle of 200 ml on sale of 1 case of 200 ml. and in the monopoly a fixed amount is given on sale of 1 case of a particular pack say 200 ml, 600ml, 1.25L, 2 and many more. In monopoly the distributor

claim on of the free bottle given and in monopoly the claim is made on the discount given on sale of 1 case of any pack.

Step 3: odd buckets contain only bottle scheme claims i.e. 1, 3,5,7,9,11,13,15 etc and even contain both i.e. 2,4,6,8,10,12,14 etc, because the monopoly scheme is for a month and the bottle scheme is for a specific date or period. When the scheme is run by the distributor in the market he is specified of the scheme by the company and also about the period or the date. A top sheet is prepared in which the MER no is given and the details of the scheme and the date is given. Once the scheme is given to the retailers the distributor after the 15 of the month fills the top sheet and attach the secondary sheet which shows the sale made or not along with the bill and send it to the company for reimbursement.

Step 4: Then the executive in the finance team check the scheme given by verifying the sale made in the secondary sheet. If the claim is more than the secondary sheet then he deducts the excess amount and if the claim is equal or less then the sale then he passes the claim amount. If the claim made is more then the MER blocked volume then the claim is deducted and the blocked volume is passed and the rest is cut from the claim.

Step 5: In the monopoly claim if the distributor is claiming any amount more then the MER blocked then we have the right to pass it but till the limit i.e. not more than the agreement volume. But we have to look after the blocked volume in that bucket and if the claim volume is excess then we forward the volume to the net bucket say from 8th bucket to 10th bucket.

Freight is a major cost head of the company. Every company puts an extra effort to reduce this head to the best possible extent in order to reduce its cost of the product. The Company pays two types of freight which includes freight inward and freight outward

Freight inward is the amount that is paid by the company for acquiring goods like raw material, advertising goods or for bringing finished goods in the company. Like wise the company purchases sugar, Carbon Di Oxide for manufacturing various types of beverages in its product portfolio.

Freight Outward is the sum that is paid by the company for delivering goods by the transporters at the distributors outlet. The freight rates are previously determined by the company with the help of a contract/ agreement which is made to acquire services on a yearly basis.

The rates for various stations are negotiated and after the process of negotiation the agreement is made or renewed for providing services. The agreement includes various terms and conditions which is applicable from when the truck is hired for a station till the time it does not reaches the destination.

Like one of the condition is of detention which means that the truck should be unloaded by the distributor within 24 hours of reaching the distributors outlet if the truck is detained for more than 24 hours then the company has to pay extra charges to the transporter so as to remunerate the labour employed by the transporter.

The amount paid in lieu of detention depends upon the load size the truck is taking to the distributors outlet. Likewise if the load size of 300 350 cases (crates) the amount of detention is Rs.300 for the first three days and Rs. 400 there onwards. If the load size is of 351 600 cases then Rs. 450 for the first three days and Rs. 500 there onwards.

But the detention is not payable if the transporter writes in the invoice was detained for two days. On the invoice the distributor gives the receiving about the detail of goods and he writes the arrival time and departure time of the distributor. This in turn needs to be verified by the Territory Manager who in turn clarifies with the sales executive and then only authorizes the number of days the vehicle was detained.

The transporters bills have supporting invoices which are presented at the time when payment claims are made. The bill gives the detail about the Good Receipt Note Number, Invoice number, Invoice date, Name of the Distributor & station to which the vehicle was sent, vehicle number, load size, amount as per the contract and over load charges if any.

Over load charges means that the extra load than the actual capacity of the vehicle. The transporter uses two types of vehicle one of which is DCM Toyota and other one is the

normal size of the truck. The maximum load that the DCM can take is 350 cases and the maximum of 550 cases for the other one. Anything above that would be considered for both as overload and the company has to pay the overload charges.

Club load means if one vehicle at a time is taking goods to two stations. In this case of the company has to pay Rs. 400 for extra station and the freight rate will be applicable of the station whose fright rate is more amongst the two.

The part which takes the most attention while analyzing the freight bills of the company is when the transporter gives the bills it has the supporting invoices along with it which one by one is picked up. The analysis part is of carefully matching the goods receipt note number, invoice number, invoice date, the station to which the goods have been invoiced, the quantity as stated on the bill.

After this the invoice is seen through on which the distributor gives the receiving of filled bottles. If the distributor writes actual quantity received as per the invoice then no deductions are made and if the distributor writes quantity received in good condition, number of bottles short (bottles not received), number of leakages received, number of bottles found open, number of bursts received then it calls for deduction. There is actually a rebate slab in the contract which tells the maximum number of leakages, bursts, open and breakages allowed depending upon the load size. Short bottles are not allowed and if bottles are found short then the actual amount (glass and flavour) are deductible from the total bill amount.

Particulars Burst/ Breakages Leakage/ Open

0 - 350 6 -

351 - 550 10 -


Fulls mean bottles with flavors like ThumsUp, Coca-Cola, and Sprite etc If a bottle is found short then the amount of glass and flavour is deductible as there is no rebate allowed. Similar is in the case if a bottle is found Burst but the difference in Shortage and Burst is that in burst some relief is allowed to the transporter whereas in case of shortage no relief is allowed. In case of leakage or open relief is allowed but the amount deductible is only of flavour and not of glass. If a bottle is found short / burst then the amount deductible is Rs. 8 for the flavour and Rs. 7 for the glass i.e. 15. In case of Cans, Pet Bottles whole amount is deductible. In some cases when the load is like of 700 which includes 200 ml, 300 ml, 330 ml, 1.2 ltr., 2 ltr. And the distributor writes leakages, short, open, found while unloading in all the product varieties then the rebate that would be allowed on will be on 200 ml bottles and rest whole amount would be deductible.

In case of empty the Invoice is matched with Empty Receipt Advice (ERA) that the empty bottles that is being sent by the distributor is being received in full or not. The slab mentioned above is also applicable in this case. But only shortage and breakage of bottles is deductible. Sometimes fulls that are being invoiced in the name of the distributors firm turn out to be less when they are being unloaded in crates that means the bottle as well as the crates is received short. In this case the amount that is deductible is of Crate, Glass and Flavour. The total sum of all this turns out to Rs. 397 for 200 ml bottles and Rs. 420. The bifurcation is like Rs. 136 for the plastic crate, Rs. 144 for the glass & Rs. 117 for the flavour.

The plastic crates are known as Cases on Loans, glass bottles are known as Returnable glass bottles.


InvoiceNumber: 0020/2009-10

Date: 14/6/09

Name of Distributor: XYZ

Vehicle Number:

Transporters Name:

S.No. Particulars





1. ThumsUp (24)



2. Limca (9)



3. Maaza (24)







Name :

No :

Date :

Vehicle Number :

Transporters Name :

S.No. Particulars





1. Coca-Cola(24)



2. ThumsUp(24)



3. Fanta(24)



4. Maaza(24)







Self claims are made by the distributor when it does not uses the company vehicle in order to receive the goods instead of that it sends his own vehicle to the company and takes the goods on his own risk. In this case no shortages, open bottles, burst or breakage or leakages can be claimed.

The order that is received by the company from the distributor includes the freight and no extra charges are made. In case of self claims the company gives the credit into the distributors account in the tally but the total number of crates is matched. The rate at which the self claims are settled is mutual settlement between the company and the distributor. The rate at which the claim is settled is on a per case basis is far more than what it actually pays to the company hired transporter while delivering the goods at the distributors outlet.


PERIOD ENDING(cocacola Assets CURRENT ASSETS Cash and cash equivalents Short term investments Net receivables Inventory Other current assets TOTAL CURRENT ASSETS long term investments Property plants and equipments Goodwill Intangible assets Accumulated amortization Other assets deffered long term charges TOTAL ASSETS Liabilities CURRENT LIABILITIES


31-Dec07 31-Dec-08


2440000 150000 2704000 1614000 1506000

4093000 215000 3317000 2220000 2260000

4701000 278000 3090000 2187000 1920000

3744667 214333 3037000 2007000 1895333

8414000 12105000 6783000 7777000

12176000 10898333 5779000 6779667

6903000 1403000 3732000 0 2533000 168000

8493000 4256000 7963000 0 2675000

8326000 4029000 8476000 0 1733000

7907333 3229333 6723667 0 2313667 168000

29936000 43269000

40519000 38020000

Accounts payable Short/long term debt

5622000 3268000

7173000 6052000

6152000 6531000

6315667 5283667

Other current liabilities TOTAL CURRENT LIABILITES

0 305,000.00


8890000 13225000

12988000 11701000

Long term debt

1,314,000 3,277,000 2,781,000


Other liabilities deffered long term liabiity charges minority interest Negative goodwill TOTAL LIABILITIES

1,873,000 3,133,000 3,401,000


608,000 3,58,000 0

1,890,000 877,000 0 0

1125000 0 0

12685000 21525000

20047000 18085667

SHARE HOLDER'S EQUITY prefered stocks common stocks Retain earnings treasury stocks 0 807000 880000 880000 0 855667

33468000 36235000 -

38513000 36072000 -24213000 -

22118000 23375000 capital surplus Other stock holder equity 5983000 -1291000 7378000 626000 7966000 -2674000

23235333 7109000 -1113000

TOTAL STOCKHOLDER EQUITY NET TANGIBLE ASSETS 11785000 9525000 79670000 33660000 16920000 21744000 16920000 18528000

Balancesheet analysis

PERIOD ENDING pepsi Assets CURRENT ASSETS Cash and cash equivalents Short term investments Net receivables Inventory other current assets TOTAL CURRENT ASSETS long term investments Property plants and equipments Goodwill Intangible assets Accumulated amortization other assets 0 135,000 0 235,000 155,000 0 175,000 3,785,000 1,490,000 3,768,000 4,080,000 1,533,000 4,181,000 3,882,000 1,434,000 3,751,000 3,915,667 1,485,667 3,900,000 2,749,000 3,086,000 3,141,000 619000 2,992,000 619,000 1,332,000 533,000 255000 629,000 1,520,000 577000 342000 647,000 1,371,000 528000 276000 1,407,667 546,000 291,000 966,000 747,333 31-Dec-06 31-Dec-07 31-Dec-08 31-Dec-09

TOTAL ASSETS Liabilities

11,927,000 13,115,000 12,982,000 13,087,333

CURRENT LIABILITIES accounts payable short/long term debt other current liabilities TOTAL CURRENT LIABILITES Long term debt other liabilities deffered long term liabilities minority interest Negative goodwill TOTAL LIABILITIES 1,293,000 540,000 0 7,792,000 1,356,000 9,66,000 973,000 0 8,285,000 1,148,000 0 7,590,000 1,324,500 887,000 0 8,330,500 2,051,000 4,754,000 1,205,000 2,215,000 4,770,000 1,186,000 3,083,000 4,784,000 1,658,000 2,449,667 4,769,333 1,349,667 1,375,000 374,000 302,000 1,968,000 247,000 0 1,675,000 1,408,000 0 1,672,667 676,333 100,667

SHARE HOLDER'S EQUITY prefered stocks common stocks retain earnings treasury stocks capital surplus other stock holder equity (3,61,000) -48,000 (9,38,000) -48,000 0 3000 0 3000 0 3000 31,30,000 -2703000 1851000 0 3,000 2,708,000 -2,329,667 1,802,333

2,708,000 31,24,000 -2017000 1751000 -2269000 1805000

TOTAL STOCKHOLDER EQUITY NET TANGIBLE ASSETS -3174000 -3099000 -3842000 -3,371,667 2,084,000 26,15,000 13,43,000 2,084,000

The analysis of three years of balance sheet of coca cola and pepsi has been done. ASSETS:

Assets are the most important part of the company it provides resources to the company.companys position can be predicted by the assets holding capacity.larger the capacity ,stronger the position of the company.assets includes cash receivables,short term investment ,inventory which will come under title of current assets.other assets like goodwill,plant,intangible assets will also included in the non title of fixed assets

As per the projected data the cocacolas last 3 years assets are 29936000(in


2007) and 3802000 (in 2008).while the projected assets calculated with simple average method the assets of cocacola is increasing every year than past three 2009 the assets will be 40714667, which is highest for the cocacola.pepsi is having the assets as of half than cocacola. In the year 2006 pepsi is having assets of 11927000,in

2007(13115000)and in year 8 (12982000) that has decreased from the previous year. The main reason for the pepsi is having higher assets is its long term investment and property plant and equity more than 2008 cocacola is having 2% decrease in the assets while pepsi is having 8% decrease in the assets.from the projected data of 10 the assets of pepsi should be increased by 2% but cocacola will increase its assets more 7% in 2010.cocacola is having larger assets than pepsi so we can say that cocacola is very larger firm than pepsi.comparing the cash and cash equivalents cocacola is generating higher cash than pepsi.pepsis cash generation is very small and it will take long time to incease because it is almost 4 time lesser than of cocacola. Othe assets including inventory ,goodwill,intangible assets are more of cocacola than pepsi..


Liabilities are the application of the resource of assets liabilities are the responsibility of the has to pay all its liability with in certain time period.liabilites include two parts one is fixed liabilities and othe is current liabilities.account payabe,short term debt will come under title of current liabilities.long term debt and other liabilities will come under title of fixed liabilities. Pepsi is having less liabilities than cocacola.for the year 2006 it is of 7792000(in thousand) than it increase in 2007 to 8285000 because of increase in the deffered long term liabilitesand interest.than it again reduces to 759000 in 2008 this year company has reduced its deffered long term iabilies.for the year 2009 company had paid the amount of 100667 under title of other current liabilities.which has increased to the total liability for pepsi.cocacola is having more liabilities than pepsi which is almost of 2 times than pepsi. for the year 2006 to 2008 the lianilities are 12685000,21525000,20047000 respectively. Of which 21525000 is the highest even comparing with projected liability of the next five year.there has been consistent stability has been seen in the projected liability of cocacola .for the year 2009 it is of 18085607 it increases in the 2010 to 19885889 than there has not been much change in the liability of the year 2010 to 2013 as seen in the balance sheet above Comparing both companies liabilities The ratio of the liabilities of the both companies ate of 6:4 in the year of 2006 than the ratio incease to 7:3 in year 2008 it remains 7;3.for the projected years the ratio In 2009 the ratio is of 8:2 which tells how cocacola is having giant liabilities than pepsi.

working capital helps the company to maintain the level of cash for the day to day transactions. It helps to cycle of provide adequate cash for the working of firm.Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. It is calculated as current assets minus current liabilities. If current assets are less than current liabilities, an entity has a working capital deficiency, also called a working capital deficit. Working Capital = Current Assets Current Liabilities

A company can be endowed with assets and profitability but short of liquidity if its assets cannot readily be converted into cash. Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable and cash.

Working capital Pepsi 06 07 08 09 698,000 871,000 58,000 542,333 25%in 93%dec 83.5%in

Cocacola -476000 -1120000 -812000 -802667 135%dec 27.5%in 1.2%in

As from the table pepsi is having total increase increase in the working capital of 753% .cocacolas working capital is decreasing every year.major change in working capital of pepsi came in 2009 which is projected data.working capital in year 2008 is lowest after a year it will increase to 542333from just 58000.though cocacola is having more assets than pepsi it lack in working capital as importance of working capital mentioned above.

Cash flow analysis

The cash flow statement is partitioned into three segments, namely: cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities.

The money coming into the business is called cash inflow, and money going out from the business is called cash outflow.

Cash flow of cocacola.

31-DecPERIOD ENDING cocacola NET INCOME 07 5080000

31-Dec08 5981000

31-Dec09 5807000

Operating activity,cash flow provided by or Used in depriciation adjustments to net income changes in accounts receivables changes in liabilities changes in inventory change in other operating activity TOTAL CASH FLOW FROM OPERATING ACTIVITES 5957000 7150000 7571000 938000 1163000 1228000 1224000 -406000 914000 -258000 -244000 148000 -734000 -165000 63000

554000 -214000 -99000 -150000 -152000

investing activities,cash flows provided by or Used in capital expenditure Investmesnt 1407000 558000 1648000 349000 other cash flows from investing activities TOTAL CASH FLOWS FROM INVESTING ACTIVITIES Financing activities ,cash flows provided by or used in dividend paid 2911000 sale purchase of stock 2268000 net borrowings other cash flowsfrom financing activities 1404000 TOTAL CASH FROM FIANACING ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES 6583000 65000 CHANGE IN CASH AND EQUIVALENTS 2261000 1653000 608000 973000 249000 4341000 3985000 -615000 29000 -219000 -493000 3149000 3521000 -851000 1700000 5420000 6719000 2363000 155000 1968000 -240000

31-DecPERIOD ENDING pepsi NET INCOME 07 522000

31-Dec08 532000 31-Dec-09 162000

Operating activity,cash flow provided by or Used in

depriciation adjustments to net income changes in accounts receivables changes in liabilities changes in inventory TOTAL CASH FLOW FROM OPERATING ACTIVITES

649000 329000 -120000 86000 -57000

669000 404000 -110000 194000 -19000

673000 516000 40000 -120000 3000

1228000 1437000


investing activities,cash flows provided by or Used in capital expenditure Investmesnt other cash flows from investing activities TOTAL CASH FLOWS FROM INVESTING ACTIVITIES -731000 -883000 -1758000 -6000 -29000 -998000 -725000 -854000 -760000

Financing activities ,cash flows provided by or used in dividend paid sale purchase of stock net borrowings -109000 -385000 104000 -130000 -280000 -168000 -208000 -139000 1198000

other cash flowsfrom financing activities TOTAL CASH FROM FIANACING 19000 14000 -1000

Ope rati ng









acti vities





Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising, and shipping the product.

Under IAS 7, operating cash flows include:

Receipts from the sale of goods or services Receipts for the sale of loans, debt or equity instruments in a trading portfolio Interest received on loans Dividends received on equity securities Payments to suppliers for goods and services Payments to employees or on behalf of employees Interest payments (alternatively, this can be reported under financing activities in IAS 7, and US GAAP)

Items which are added back to [or subtracted from, as appropriate the net income figure (which is found on the Income Statement) to arrive at cash flows from operations generally include:

Depreciation (loss of tangible asset value over time) Deferred tax Amortization (loss of intangible asset value over time) Any gains or losses associated with the sale of a non-current asset, because associated cash flows do not belong in the operating section.(unrealized gains/losses are also added back from the income statement)

As cocacolas investment in the long term assets increasing its depreciation is also increasing .i has been increased 1163000 in 2007 from 938000 in 2006and it increase more in 2008 of 1228000,for the year 06 and 07 the amount receivable has been in negative.2008 has account receivable has been positive which is 148000.liabilites has been increased of 99000 in 2006.then it is decreased of 914000 in 2007 but then again increased of cash flow from operating activities has been increased over year. Cocacolas operating cash flow is more than pepsi.which shows that cocacola handles its cash operations more effectively. pepsis operating activity cashflow for the year 2009 is 1284000.while the projected amount is much more higher than 2009 and previous increases of 29445 than decreases in 2011 of 30408.again increase in 2012 and in 2013. the projected data of cocacola is very stable there has been not much change from 2010 to 2013.which remains around 7106654 to 7222741.

Investing activities:
Cocacola has purchased more assets in 2008 .the other investment has been decreasing evry year it remarks sharp decrease in 2009.projected investment is also decreasing .total cash flow from investing activities of cocacola is decreasing which tells total investment of company is reducing .pepsis capital expenditure includes the purchasing and selling of assets while there is no investment .total cash flow is positive in 2009 then it came neagative in 2013.

Financing activities:
Cocacolas dividend distribution increases every 2009 cocacola has paid 8% more dividend than 2008.while pepsi has reatained earnings for all years. Retain earning is increasing in the projected years.

Coca-Cola has paid uninterrupted dividends on its common stock since 1893 and increased payments to common shareholders every year for 47 years. rom the end of 1998 up until December 2009 this dividend growth stock has delivered a negative annual average total return of 2.10% to its shareholders. The stock has largely raded between $65 and $40 over the past decade.


The company has managed to deliver a 10.90% average annual increase in its EPS between 1999 and 2009. Analysts are expecting an increase in EPS to $3.05-$3.10 for 2010 and $3.25-$3.30 by 2011. This would be a nice increase from the 2009 earnings per share of $2.49. Future drivers for earnings could be the companys tea, coffee and water perations. Cost savings initiatives could also

add to the bottom line over time.

Source: morning Some analysts believe that Coca Cola could follow arch rival Pepsi Cos moves to acquire its own bottlers in an effort to gain more control over the production and distribution of its beverages in key markets. Coke holds a 35% interest in its largest manufacturer and distributor of Coca Cola products, Coca-Cola Enterprises In. . Coca- ola Enterprises Inc. accounts for about 40% of Cokes concentrate sales and 16% of the companys worldwide volume, which makes it a likely target of acquisition, The Return on Equity has been in a decline after hitting a high in 2001. Rather than focus on absolute values for this indicator, Investors generally want to see at least a stable return on equity over time.

Source: morning

Annual dividends have increased by an average of 10.10% annually since 1999, which is slightly lower than the growth in EPS. The company last raised its dividend by 8% in February 2009, for the 47th year in a row.

Source: morning

A 10 % growth in dividends translates into the dividend payment doubling every seven years. If we look at historical data, going as far back as 1969, The Coca Cola Company has indeed managed to double its dividend payment every seven years on average.

The dividend payout ratio remained above 50% for the majority of the past decade. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of shortterm fluctuations in earnings.

Source: morning

Currently Coca Cola is trading at 20 times earnings and yields 3.30%. In comparison arch rival in the cola wars Pepsi Co trades at a P/E multiple of 15 and yields 3.50%. thus,The Coca Cola Company is not as attractively valued at the moment as Pepsi Co

Dividend stock analysis of pepsi

PepsiCo has been consistently increasing its dividends for 36 consecutive years. From the end of 1998 up until December 2009 this dividend growth stock has delivered a 4.70% annual average total return to its shareholders.


At the same time company has managed to deliver a 9.90% average annual increase in its EPS since 1999.

Source: morning

The ROE has remained largely between 31% and 38%, with the exception of 2004, when it fell to as low as 22%.

Source: morning

Annual dividend payments have increased by an average of 13.50% annually since 1999, which is much higher than the growth in EPS. Analysts are expecting slight increase in EPS for 2009 compared to 2008; given the sluggish state of North American economies. The strong US dollar could potentially hurt sales, as over 44% of PepsiCos revenues are derived internationally.

A 13.50 % growth in dividends translates into the dividend payment doubling almost every five years. Since 1978 PepsiCo has actually managed to double its dividend payment every six years on average.

Source: morning

The dividend payout has remained in a range between 31% and 42%. In 2008 the dividend payout ratio has surged to 51%. A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings. The slow growth in earnings could put future dividend increases at risk.

Source: morning

PepsiCo is currently attractively valued. The stock trades at a price/earnings multiple of 15, has an adequately covered dividend payout and the current dividend yield at 3.50%,

Income statement analysis

Cocaco Cocacola NET Oin revenuePerat cost of goods sold gross profit 2007 24088 8164 15924 2008 28857 10406 18451 2009 las 31944 income 11374 statem 20570 ent

SELLING GENERAL AND administrative exp other operating charges Operating income

9431 185 6308

10945 254 7252

11774 350 8446

interst income




interest exp. equity income(loss) other income loss Pbt

220 102 195 6578

456 668 173 7873

438 -874 -28 7439

income tax





5080 5981 5807

Income statement of pepsi.

Pepsi net revenue Cogs selling,general exp. amortazation of intangible assets operating profit

2007 43251 20351 15901

2008 39474 18038 14208

2009 35137 15762 12711

64 6935

58 7170

162 6502

bottaling equit incomr int.exp int.income PBT

374 -329 41 7021

560 -224 125 7631

553 -239 173 6989





net income




Opearintg profit :

For the year 2009 operating profit for the cocacola is more than pepsi.cocacolas profit is increasing every year but there has not been any major change in the profit of pepsi.profit for cocacola in year 2009 is 8446 $ mill.pepsis profit in the same year is 6502.there has been defference of 7% in the profit of both companies.

Net income:

Cocacola is earning 165 mill $ more profit than pepsi which in % term 1.44 % more than pepsi. We can say that pepsi is earning very good profit though the assets of the pepsi is less than cocacola, pepsi is having almost similar profit.

Ratio analysis
Financial Ratios
Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firm's financials to those of other firms. In some cases, ratio analysis can predict future bankruptcy.

Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

Liquidity ratios Asset turnover ratios Financial leverage ratios Profitability ratios Dividend policy ratios

Liquidity Ratios
Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. They are of particular interest to those extending short-term credit to the firm. Two frequently-used liquidity ratios are the current ratio (or working capital ratio) and the quick ratio.

The current ratio is the ratio of current assets to current liabilities:

Current Assets Current Ratio = Current Liabilities

Short-term creditors prefer a high current ratio since it reduces their risk. Shareholders may prefer a lower current ratio so that more of the firm's assets are working to grow the business. Typical values for the current ratio vary by firm and industry. For example, firms in cyclical industries may maintain a higher current ratio in order to remain solvent during downturns.

One drawback of the current ratio is that inventory may include many items that are difficult to liquidate quickly and that have uncertain liquidation values. The quick ratio is an alternative measure of liquidity that does not include inventory in the current assets. The quick ratio is defined as follows:

Current Assets - Inventory Quick Ratio = Current Liabilities

The current assets used in the quick ratio are cash, accounts receivable, and notes receivable. These assets essentially are current assets less inventory. The quick ratio often is referred to as the acid test.

Finally, the cash ratio is the most conservative liquidity ratio. It excludes all current assets except the most liquid: cash and cash equivalents. The cash ratio is defined as follows:

Cash + Marketable Securities Cash Ratio = Current Liabilities

The cash ratio is an indication of the firm's ability to pay off its current liabilities if for some reason immediate payment were demanded.

Asset Turnover Ratios

Asset turnover ratios indicate of how efficiently the firm utilizes its assets. They sometimes are referred to as efficiency ratios, asset utilization ratios, or asset management ratios. Two commonly used asset turnover ratios are receivables turnover and inventory turnover.

Receivables turnover is an indication of how quickly the firm collects its accounts receivables and is defined as follows:

Annual Credit Sales Receivables Turnover = Accounts Receivable

The receivables turnover often is reported in terms of the number of days that credit sales remain in accounts receivable before they are collected. This number is known as the collection period. It is the accounts receivable balance divided by the average daily credit sales, calculated as follows:

Accounts Receivable = Average Collection Period Annual Credit Sales / 365

The collection period also can be written as:

365 Average Collection Period = Receivables Turnover

Another major asset turnover ratio is inventory turnover. It is the cost of goods sold in a time period divided by the average inventory level during that period:

Cost of Goods Sold Inventory Turnover = Average Inventory

The inventory turnover often is reported as the inventory period, which is the number of days worth of inventory on hand, calculated by dividing the inventory by the average daily cost of goods sold:

Average Inventory Inventory Period = Annual Cost of Goods Sold / 365

The inventory period also can be written as:

365 Inventory Period = Inventory Turnover

Other asset turnover ratios include fixed asset turnover and total asset turnover.

Financial Leverage Ratios

Financial leverage ratios provide an indication of the long-term solvency of the firm. Unlike liquidity ratios that are concerned with short-term assets and liabilities, financial leverage ratios measure the extent to which the firm is using long term debt.

The debt ratio is defined as total debt divided by total assets:

Total Debt =

Debt Ratio

Total Assets

The debt-to-equity ratio is total debt divided by total equity:

Total Debt Debt-to-Equity Ratio = Total Equity

Debt ratios depend on the classification of long-term leases and on the classification of some items as long-term debt or equity.

The times interest earned ratio indicates how well the firm's earnings can cover the interest payments on its debt. This ratio also is known as the interest coverage and is calculated as follows:

EBIT Interest Coverage = Interest Charges

where EBIT = Earnings Before Interest and Taxes

Profitability Ratios
Profitability ratios offer several different measures of the success of the firm at generating profits.

The gross profit margin is a measure of the gross profit earned on sales. The gross profit margin considers the firm's cost of goods sold, but does not include other costs. It is defined as follows:

Sales - Cost of Goods Sold Gross Profit Margin = Sales

Return on assets is a measure of how effectively the firm's assets are being used to generate profits. It is defined as:

Net Income Return on Assets = Total Assets

Return on equity is the bottom line measure for the shareholders, measuring the profits earned for each dollar invested in the firm's stock. Return on equity is defined as follows:

Net Income Return on Equity = Shareholder Equity

Dividend Policy Ratios

Dividend policy ratios provide insight into the dividend policy of the firm and the prospects for future growth. Two commonly used ratios are the dividend yield and payout ratio.

The dividend yield is defined as follows:

Dividends Per Share Dividend Yield = Share Price

A high dividend yield does not necessarily translate into a high future rate of return. It is important to consider the prospects for continuing and increasing the dividend in the future. The dividend payout ratio is helpful in this regard, and is defined as follows:

Dividends Per Share Payout Ratio = Earnings Per Share

Use and Limitations of Financial Ratios

Attention should be given to the following issues when using financial ratios:

A reference point is needed. To to be meaningful, most ratios must be compared to historical values of the same firm, the firm's forecasts, or ratios of similar firms.

Most ratios by themselves are not highly meaningful. They should be viewed as indicators, with several of them combined to paint a picture of the firm's situation.

Year-end values may not be representative. Certain account balances that are used to calculate ratios may increase or decrease at the end of the accounting period because of seasonal factors. Such changes may distort the value of the ratio. Average values should be used when they are available.

Ratios are subject to the limitations of accounting methods. Different accounting choices may result in significantly different ratio value

Ratio Analysis

To illustrate efficiency as a good investment choice, we will use data from the annual reports of PepsiCo, Coca-Cola, for the fiscal year 2008, in order to form comparative ratios. To realize the values of the ratios, it is necessary to compare them with benchmark values. One benchmark consists of similar firms in the same industry.


Liquidity refers to a company's ability to meet its requirements for cash. Liquidity is necessary to meet both expected and unexpected cash demands. All businesses need liquidity to operate. Inadequate liquidity can stunt growth and ultimately lead to bankruptcy if debts cannot be repaid. However, too much liquidity can detract from profits because liquid assets are low returning investments. The standard measure of liquidity is the current ratio, calculated by dividing "current assets" by "current liabilities. The current ratio for PepsiCo of 1.1 indicates it is the more liquid of coke, and also performing better than the beverage industry with a 1.00 figure. The ratios for Coca-Coca is close to 1.00. However, this is not the norm for high quality company with easy access to capital markets to finance unexpected cash requirements.

Pepsi Current ratio 1.1

Cocacola 1

industry 1


Two common measures of profitability are the net profit margin and the return on assets ratios. Each provides a different perspective about the firm's profits. To measure the profitability of a company's operations, you calculate the net profit margin (NPM) by dividing "net income" with "sales. Both entries come from the income statement. Net profit margin indicates the percentage of each dollar of sales that the firm is able to flow to the bottom line as profit. NPM is a function of the price of the product (which produces sales revenue) and efficiency of operations (cost of goods sold). A firm selling a unique product to a captive market may be able to charge a premium price and thus generate greater NPM. Conversely, a firm selling a generic product in a highly competitive market will have a low NPM. It must be a very efficient company, or it will not survive. The net profit margins of our 2 sample firms illustrate these concepts. CocaColas NPM of 8.8 percent is low compared with PepsiCos NPM of 16.6 percent.This is due primarily to its proprietary product and monopolies in certain foreign markets. PepsiCo derives the majority of its income from lower margin snack foods and restaurants. Less than half its sales come from soft drinks.

The Return on Assets ratio (ROA), which is also known as the Return on Investment ratio, is calculated by dividing "net profit" by "total assets. It indicates the rate of return provided by the book value of the company's assets. The higher the ROA, the more profitable the company is. Consistent with the NPM, PepsiCo has the highest ROA with

15.81 percent, making Coca-Cola's 14.46 percent second. This reflects PepsiCos ability to generate significant sales volume from its asset base.

Pepsi Net profit margin Return on assets Total asset turn over Inventory turn over 10.6 15.81 2 7.9

Cocacola 9.8 14.46 1.81 5.4

Industry 8.05 10.97 2.30 2.19

Total Asset Turnover Ratio:

Another indicator of a company's ability to generate profits is the total asset turnover ratio, calculated by dividing "sales" by "total assets. It indicates how effectively the company generates sales from its asset base. The more effective the company is in generating sales revenue, the higher the asset turnover ratio will be. However, PepsiCo and Coca-Cola's ratios are, 2.00 and 1.81 respectively. these are driven primarily by their high inventory turnover, and efficient use of fixed assets. Thus, cokes low NPM is offset to some extent by its ability to generate sales from its asset base (the company is a high volume, low overhead producer).

Inventory Turnover Ratio:

For companies that have a large investment in inventory, it is useful to calculate the Inventory turnover ratio, which is the "cost of goods sold" from the income statement divided by the "inventory" shown on the balance sheet. A low turnover ratio indicates too much investment in inventory. Whereas a high turnover ratio could cause lost sales due to lack of merchandise to meet customer demand. PepsiCo's is higher,This reflects

differences in their distribution methods, with Pepsi's snack foods driving the ratio higher than for typical merchandisers.

Financial Leverage:

Financial leverage is the use of fixed cost funds such as debt or preferred stock to increase the common stockholder's return. Using debt in the firm produces a stream of earnings that has greater volatility (risk) than would occur in the same firm if it had less debt. One major factor is management's willingness to accept financial risk. A second factor is earnings predictability. Two debt ratios that were computed are the debt to total assets ratio, or the "debt ratio," and the equity multiplier.

Debt Ratio:

The Debt ratio is calculated as the sum of all the liability accounts divided by "total assets." For our four sample firms, the numerator is the sum of everything on the right side of the balance sheet from "current liabilities" through "deferred income taxes. As you can see for our firms, their debt ratios vary from PepsiCos 71.2 percent. We can conclude that Pepsi is using more financial leverage in the firm and thus is exposed to more financial risk than cocacola.

Pepsi Debt ratio Equity multiplier 71.2 1.87

Cocacola 64.2 1.62

Industry 52 1.55

The Equity multiplier is a similar calculation, determined by dividing "total assets" by the "common equity" account. If a firm is totally financed by equity, the equity multiplier will equal 1.00. The larger the number, the more highly leveraged is the firm. Consistent with the "debt ratio," the equity multipliers of the 2 firms display that Pepsi has the greatest amount of leverage, and cocacola has lower.

Return on Equity:

Many would argue that the most important ratio to calculate for a company is its return on equity (ROE), which is "net income available to common stockholders" divided by "common equity. ROE represents the rate of return the company earned on the book value of its equity investment. The higher the number, the greater the return the company is earning for its shareholders. For our companies, PepsiCo has the greatest ROE, 39.84 percent, which is an exceptionally high number. Coca-Colas is 28.73 percent. Both are relatively high compared with industry, which is extremely low compared to the industrys 28.69% consensus.

Pepsi Return on equity 39.84

Cocacola 28.73

Industry 28.69

PepsiCo has an excellent ROE. It is a result of its high profit margin, effective asset utilization, and use of leverage. PepsiCo probably is pursuing an aggressive debt strategy because of the lower profitability of some of its product lines.

Return equity Pepsi Cocacola 39.64 28.73

on Net margin 10.6 9.8

profit Total turn over

Equity muliplier

2 1.81

1.86 1.62

Price/Earnings Ratio:
The Price/ Earnings Ratio is used to gauge the relative value of a security in the light of current market conditions. It is determined by dividing the price of a share of stock by its earnings per share for a 12-month period. Sometimes the P/E is referred to as the "multiple because it shows how much investors are willing to pay per dollar of earnings. PepsiCo has a high P/E, which means high projected earnings in the future, in comparison to its competitors in the beverage industry. Pepsi p/e 22.16 Cocacola 21.72 Industry 23.24

Price/Cash Flow:
The Price/ Cash Flow is calculated by dividing the closing price with the cash flow per share from the last 12 months. An alternative to the P/E ratio, this ratio removes depreciation and other non-cash charges from the equation. Another advantage of the Price/Cash Flow ratio is that it makes it easier to analyze various companies across the board. As displayed above, Coca-Cola has the most efficient Price/Cash Flow ratio than PepsiCos 17.28 ratio, which displays that three of the four companies have ample money available to spend on research and development, to expand operations, and to pay dividends to investors. Pepsi Price/cash flow 17.28 Cocacola 21.14 Industry 12.5

Gross Profit Margin Ratio:

The Gross Profit Margin ratio indicates how efficiently a business is using its materials and labor in the production process. In other words, gross margin is equal to gross income divided by net sales, and is expressed as a percentage. Coca- Cola and PepsiCo have the highest gross profit margin values of 63.68 and 53.67. Both are outperforming the industry, which indicates that the companies can make a reasonable profit on sales, as long as it keeps overhead costs in control.

Pepsi Gross margin 53.67

Cocacola 63.68

Industry 43

Total Debt-Equity Ratio:

Total debt-equity ratio is the ratio of a company's long-term liabilities to its equity. cocacola has the higher level of debt, making it very important for the company to have positive earnings and steady cash flow. Debt in and of itself is not harmful, but it does require the timely payout of interest to debt holders. PepsiCo has the chances of defaulting on debt. Pepsi Debt to equity .3 Cocacola .45 .24 Industry .63 .76

Long term debt to .23 total equity

Earnings per Share:

Earnings per share is the proportionate amount of a company's profit, or earnings, for each outstanding share of common stock. It is calculated as net income minus dividends divided by average outstanding shares. This is the single most popular variable in dictating a share's price. EPS indicates the profitability of a company. PepsiCo, CocaCola are outperforming the industry average of 1.52. Pepsi EPS 1.85 Cocacola 1.6 Industry 1.52

Return on Sales:
This ratio is a measure of profitability expressed as a percent of sales. It is the usual definition of percent profit. The calculation is net income divided by net sales. It can help you determine if you are making enough of a return on your sales effort. If your company is experiencing a cash flow crunch, it could be because its mark-up is not enough to cover expenses. Return on sales can help point this out, and allow you to adjust prices for an adequate profit. Also, be sure to look for trends in this figure. If it appears to be dropping over time, it could be a signal that you will soon be experiencing financial problems. Coca-Cola has the highest Return on Sales ratio, 20.32, detecting operational efficiency, accompanied by PepsiCos 13.19 ratio. Pepsi Return on sales 13.19 Cocacola 20.32 Industry 10.51


Coca Cola Co.:

current ratio is slightly increasing, under that of Pepsi Co. low volatility in ratios stable Debt ratios decreases TIE ratio lowers ability to cover interest expenses significantly high inventory turnover not as good inventory management as Pepsi Co. improvement in asset turnover capital intensity increases slightly profit margin decreases sharply

both ROA and ROE decrease greatly, starting around 1998 and reach a stage below those of Pepsi Co.

Pepsi Co.:
current ratio is high short-term solvency is favorable greater volatility in ratios greatly reduces D/E ratio increases TIE ratio solvency shorter days sales of inventory period better inventory management increases slightly asset turnover capital intensity increases better capital utilization to realize sales

profit margin increases significantly both ROA and ROE increase significantly and even exceed those of Coca Cola Co.

In conclusion, the ratios of Pepsi Co. significantly improve and lose their worrisome volatility with time. They reach levels as high, if not higher, than those of their main competitor, Coca Cola Co. These changes are evidence for the stable positioning of Pepsi Co. and their increase in market share compared to that of Coca Cola Co. Therefore, the comparative ratio analysis of the two competing companies supports the conclusion that Pepsi Co. is doing better within its internal operations and market penetration. Thus Pepsi Co. would be the more profitable investment






Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges 4,701,000 278,000 3,090,000 2,187,000 1,920,000 12,176,000 5,779,000 8,326,000 4,029,000 8,476,000 1,733,000 4,093,000 215,000 3,317,000 2,220,000 2,260,000 12,105,000 7,777,000 8,493,000 4,256,000 7,963,000 2,675,000 2,440,000 150,000 2,704,000 1,641,000 1,506,000 8,441,000 6,783,000 6,903,000 1,403,000 3,732,000 2,533,000 168,000

Total Assets

40,519,000 Liabilities Current Liabilities



Accounts Payable Short/Current Long Term Debt Other Current Liabilities Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Minority Interest Negative Goodwill

6,152,000 6,531,000 305,000 12,988,000 2,781,000 3,401,000 877,000 -

7,173,000 6,052,000 13,225,000 3,277,000 3,133,000 1,890,000 -

5,622,000 3,268,000 8,890,000 1,314,000 1,873,000 608,000 358,000 -

Total Liabilities




Balncesheet of cocacola.


31-Dec-09 5,807,000

31-Dec-08 5,981,000

31-Dec-07 5,080,000

Operating Activities, Cash Flows Provided By or Used In Depreciation Adjustments To Net Income Changes In Accounts Receivables Changes In Liabilities Changes In Inventories Changes In Other Operating Activities 1,228,000 1,224,000 148,000 (734,000) (165,000) 63,000 1,163,000 (406,000) 914,000 (258,000) (244,000) 938,000 554,000 (214,000) (99,000) (150,000) (152,000)

Total Cash Flow From Operating Activities




Investing Activities, Cash Flows Provided By or Used In Capital Expenditures Investments Other Cashflows from Investing Activities (1,968,000) (1,648,000) (240,000) 349,000 (1,407,000) 558,000 (851,000)

(155,000) (5,420,000)

Total Cash Flows From Investing Activities

(2,363,000) (6,719,000)


Financing Activities, Cash Flows Provided By or Used In Dividends Paid Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities (3,521,000) (3,149,000) (493,000) 29,000 (219,000) 4,341,000 (2,911,000) (2,268,000) (1,404,000) -

Total Cash Flows From Financing Activities (3,985,000) Effect Of Exchange Rate Changes (615,000)

973,000 249,000

(6,583,000) 65,000

Change In Cash and Cash Equivalents




Cashflow of cocacola

Income statement of cocacola

Cocacola NET Oin revenuePerat cost of goods sold Gross profit 2007 24088 8164 15924 2008 28857 10406 18451 2009 31944 11374 20570

SELLING GENERAL AND administrative exp Other operating chareges operating income

9431 185 6308

10945 254 7252

11774 350 8446

interst income interest exp. equity income(loss) Other income loss Pbt

193 220 102 195 6578

236 456 668 173 7873

333 438 -874 -28 7439

Income tax NET INCOME

1498 5080

1892 5981

1632 5807

Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity 880,000 38,513,000 (24,213,000) 7,966,000 (2,674,000) 880,000 36,235,000 (23,375,000) 7,378,000 626,000 878,000 33,468,000 (22,118,000) 5,983,000 (1,291,000)

Total Stockholder Equity




Net Tangible Assets




Equity of cocacola

Balancesheet of pepsi co.

Assets Current Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets 966,000 1,371,000 528,000 276,000 647,000 1,520,000 577,000 342,000 629,000 1,332,000 533,000 255,000

Total Current Assets Long Term Investments Property Plant and Equipment Goodwill Intangible Assets Accumulated Amortization Other Assets Deferred Long Term Asset Charges

3,141,000 619,000 3,882,000 1,434,000 3,751,000 155,000 -

3,086,000 4,080,000 1,533,000 4,181,000 235,000 -

2,749,000 3,785,000 1,490,000 3,768,000 135,000 -

Total Assets




Liabilities Current Liabilities Accounts Payable Short/Current Long Term Debt Other Current Liabilities 1,675,000 1,408,000 1,968,000 247,000 1,375,000 374,000 302,000

Total Current Liabilities Long Term Debt Other Liabilities Deferred Long Term Liability Charges Minority Interest Negative Goodwill

3,083,000 4,784,000 1,658,000 966,000 1,148,000 -

2,215,000 4,770,000 1,186,000 1,356,000 973,000 -

2,051,000 4,754,000 1,205,000 1,293,000 540,000 -

Total Liabilities




Cash flow of pepsi.

View: Annual DataQuarterly Data PERIOD ENDING Net Income

All numbers in thousands 27-Dec-09 29-Dec-08 30-Dec-07 162,000 532,000 522,000

Operating Activities, Cash Flows Provided By or Used In Depreciation Adjustments To Net Income Changes In Accounts Receivables Changes In Liabilities Changes In Inventories Changes In Other Operating Activities 673,000 516,000 40,000 (120,000) 3,000 10,000 669,000 404,000 (110,000) 194,000 (19,000) (233,000) 649,000 329,000 (120,000) 86,000 (57,000) (181,000)

Total Cash Flow From Operating Activities




Investing Activities, Cash Flows Provided By or Used In Capital Expenditures Investments (760,000) (854,000) (725,000) -

Other Cashflows from Investing Activities




Total Cash Flows From Investing Activities




Financing Activities, Cash Flows Provided By or Used In Dividends Paid Sale Purchase of Stock Net Borrowings Other Cash Flows from Financing Activities (208,000) (139,000) 1,198,000 (1,000) (130,000) (280,000) (168,000) 14,000 (109,000) (385,000) 104,000 19,000

Total Cash Flows From Financing Activities Effect Of Exchange Rate Changes

850,000 (57,000)

(564,000) 28,000

(371,000) 1,000

Change In Cash and Cash Equivalents




Incomestatement of pepsi.

Pepsi net revenue Cogs selling,general exp. amortazation of intangible assets operating profit




43251 39474 35137 20351 18038 15762 15901 14208 12711 64 6935 58 7170 162 6502

Bottaling equit incomr int.exp int.income PBT

374 -329 41 7021

560 -224 125 7631

553 -239 173 6989





net income




Equity of pepsi.

Stockholders' Equity Misc Stocks Options Warrants Redeemable Preferred Stock Preferred Stock Common Stock Retained Earnings Treasury Stock Capital Surplus Other Stockholder Equity 3,000 3,130,000 (2,703,000) 1,851,000 (938,000) 3,000 3,124,000 (2,269,000) 1,805,000 (48,000) 3,000 2,708,000 (2,017,000) 1,751,000 (361,000)

Total Stockholder Equity




Net Tangible Assets




Key ratios

Pepsi Current ratio Net profit margin Return on assets Total asset turn over Inventory turn over Debt ratio Equity multiplier Return on equity p/e Price/cash flow Gross margin Debt to equity Long term debt to total equity EPS Return on sales 1.85 13.19 71.2 1.87 39.84 22.16 17.28 53.67 .3 .23 7.9 1.1 10.6 15.81 2

Cocacola 1 9.8 14.46 1.81

Industry 1 8.05 10.97 2.30



64.2 1.62 28.73 21.72 21.14 63.68 .45 .24

52 1.55 28.69 23.24 12.5 43 .63 .76

1.6 20.32

1.52 10.51