financial management project , pepsi , financial ratios

Prepared byAbdalla Mohamed Khataan

GTA in AASTMT

INTRODUCTION TO

PEPSICO

History

PepsiCo, Incorporated is a Fortune 500, American global corporation headquartered in Purchase, Harrison, New York, with interests in the manufacturing, marketing and distribution of grain-based snack foods, beverages, and other products. PepsiCo was formed in 1965 with the merger of the Pepsi-Cola Company and Frito-Lay, Inc. PepsiCo has since expanded from its namesake product Pepsi to a broader range of food and beverage brands, the largest of which include an acquisition of Tropicana in 1998 and a merger with Quaker Oats in 2001 - which added the Gatorade brand to its portfolio as well.

As of 2009, 19 of PepsiCo's product lines generated retail sales of more than $1 billion each, and the company’s products were distributed across more than 200 countries, resulting in annual net revenues of $43.3 billion. Based on net revenue, PepsiCo is the second largest food & beverage business in the world. Within North America, PepsiCo is ranked (by net revenue) as the largest food and beverage business.

Indra Krishnamurthy Nooyi has been the chief executive of PepsiCo since 2006, and the company employed approximately 285,000 people worldwide as of 2010.The company’s beverage distribution and bottling is conducted by PepsiCo as well as by licensed bottlers in certain regions. PepsiCo is a SIC 2080 (beverage) company.

Origins

The recipe for Pepsi, the soft drink, was first developed in the 1890s by a New Bern, North Carolina pharmacist and industrialist, Caleb Bradham, who named it "Pepsi-Cola" in 1898. As the cola developed in popularity, he created the Pepsi-Cola Company in 1902 and registered a patent for his recipe in 1903. The Pepsi-Cola Company was first incorporated in the state of Delaware in 1919. Ownership of this company traded hands several times throughout the 1920s and 1930s, and in the early 1960s its product line expanded with the creation of Diet Pepsi and Mountain Dew.

Separately, the Frito Company and H.W. Lay & Company - two American potato and corn chip snack manufacturers - began working together in 1945 with a licensing agreement allowing H.W. Lay to distribute Fritos in the Southeastern United States. The companies merged to become Frito-Lay, Inc. in 1961.

In 1965, the Pepsi-Cola Company merged with Frito-Lay, Inc. to become PepsiCo, Inc., the company it is known as at present. At the time of its foundation, PepsiCo was incorporated in the state of Delaware and headquartered in Manhattan, New York. The company's headquarters were relocated to its still-current location of Purchase, New York in 1970, and in 1986 PepsiCo was reincorporated in the state of North Carolina.

Acquisitions and divestments

Between the late-1970s and the mid-1990s, PepsiCo expanded via acquisition of businesses outside of its core focus of packaged food and beverage brands; however it exited these non-core business lines largely in 1997, selling some, and spinning off others into a new company named Tricon Global Restaurants, which later became known as Yum! Brands, Inc.. PepsiCo also previously owned several other brands that it later sold, in order to allow it to return focus to its primary snack food and beverage lines, according to investment analysts reporting on the divestments in 1997. Brands formerly (no longer) owned by PepsiCo include: Pizza Hut, Taco Bell, KFC, Hot 'n Now, East Side Mario's, D'Angelo Sandwich Shops, Chevys Fresh Mex, California Pizza Kitchen, Stolichnaya (via licensed agreement), Wilson Sporting Goods and North American Van Lines.

The divestments concluding in 2007 were followed by multiple large-scale acquisitions, as PepsiCo began to extend its operations beyond soft drinks and snack foods into other lines of foods and beverages. PepsiCo purchased the orange juice company Tropicana Products in 1998, and merged with Quaker Oats Company in 2001, adding with it the Gatorade sports drink line and other Quaker Oats brands such as Chewy Granola Bars and Aunt Jemima, among others.

In August 2009, PepsiCo made a $7 billion offer to acquire the two largest bottlers of its products in North America: Pepsi Bottling Group and PepsiAmericas. In 2010 this acquisition was completed, resulting in the formation of a new wholly owned subsidiary of PepsiCo, Pepsi Beverages Company. Also in late 2010, the company made its largest international acquisition when it purchased a majority stake in Wimm-Bill-Dann Foods - a Russian food company which produces milk, yogurt, fruit juices and dairy products.

Competition

The Coca-Cola Company has historically been considered PepsiCo’s primary competitor in the beverage market, and in December 2005, PepsiCo surpassed The Coca-Cola Company in market value for the first time in 112 years since both companies began to compete. In 2009, the Coca-Cola Company held a higher market share in carbonated soft drink sales within the U.S. In the same year, PepsiCo maintained a higher share of the U.S. refreshment beverage market, however, reflecting the differences in product lines between the two companies. As a result of mergers, acquisitions and partnerships pursued by PepsiCo in the 1990s and 2000s, its business has shifted to include a broader product base, including foods, snacks and beverages. The majority of PepsiCo's revenues no longer come from the production and sale of carbonated soft drinks. Beverages accounted for less than 50 percent of its total revenue in 2009. In the same year, slightly more than 60 percent of PepsiCo's beverage sales came from its primary non-carbonated brands, namely Gatorade and Tropicana.

PepsiCo's Frito-Lay and Quaker Oats brands hold a significant share of the U.S. snack food market, accounting for approximately 39 percent of U.S. snack food sales in 2009. One of PepsiCo's primary competitors in the snack food market overall is Kraft Foods, which in the same year held 11 percent of the U.S. snack market share.

Products and brands

Largest PepsiCo Brands (based on 2009 retail sales)Pepsi

Mountain Dew

Lay's potato chips

Gatorade

Diet Pepsi

Tropicana beverages

7UP (outside U.S.)

Doritos tortilla chips

Lipton teas

Quaker foods and snacks

Cheetos

Mirinda

Ruffles potato chips

Aquafina bottled water

Pepsi Max

Tostitos tortilla chips

Sierra Mist

Fritatos corn chips

Walkers potato crisps

$0 $5b $10b $15b $20b

PepsiCo’s product mix as of 2009 (based on worldwide net revenue) consists of 63 percent foods, and 37 percent beverages. On a worldwide basis, the company’s current products lines include several

hundred brands that in 2009 were estimated to have generated approximately $108 billion in cumulative annual retail sales.

The primary identifier of companies' main brands within the food and beverage industry are those which generate annual sales exceeding $1 billion, and 19 of PepsiCo's brands met this description as of 2009: Pepsi-Cola, Mountain Dew, Lay's, Gatorade, Tropicana, 7Up, Doritos, Lipton Teas, Quaker Foods, Cheetos, Mirinda, Ruffles, Aquafina, Pepsi Max, Tostitos, Sierra Mist, Fritos, and Walker's.

Areas of business

The structure of PepsiCo's global operations has shifted multiple times in its history as a result of international expansion, and as of 2010 it is separated into four main divisions: PepsiCo Americas Foods, PepsiCo Americas Beverages, PepsiCo Europe, and PepsiCo Asia, Middle East and Africa. As of 2009, 71 percent of the company’s net revenues came from North and South America, 16 percent from Europe and 13 percent from Asia, the Middle East and Africa.

Corporate governance

Headquartered in Purchase, New York, with research and development headquarters in Valhalla, New York, PepsiCo’s Chairman and CEO is Indra Nooyi. The board of directors is composed of eleven outside directors as of 2010, including Ray Lee Hunt, Shona L. Brown, Victor Dzau, Arthur C. Martinez, Sharon Percy Rockefeller, Daniel Vasella, Dina Dublon, Ian M. Cook, Alberto Ibargüen, James J. Schiro and Lloyd G. Trotter. Former top executives at PepsiCo include Steven Reinemund, Roger Enrico, D. Wayne Calloway, John Sculley, Michael H. Jordan, Donald M. Kendall, Christopher A. Sinclair and Alfred Steele.

On October 1, 2006, former Chief Financial Officer and President Indra Nooyi replaced Steve Reinemund as Chief Executive Officer. Nooyi remained as the corporation's president, and became Chairman of the Board in May 2007, later (in 2010) being named #1 on Fortune's list of the "50 Most Powerful Women" and #6 on Forbes' list of the "World's 100 Most Powerful Women". PepsiCo received a 100 percent rating on the Corporate Equality Indexreleased by the LGBT-advocate group Human Rights Campaign starting in 2004, the third year of the report.

Charitable activities

PepsiCo has maintained a philanthropic program since 1962 called the PepsiCo Foundation, in which it primarily funds “nutrition and activity, safe water and water usage efficiencies, and education,” according to the foundation’s website. In 2009, $27.9 million was

contributed through this foundation, including grants to the United Way and YMCA, among others.

In 2009, PepsiCo launched an initiative which the company calls the Pepsi Refresh Project, in which individuals submit and vote on charitable and nonprofit collaborations. The main recipients of grants as part of the refresh project are community organizations with a local focus and nonprofit organizations, such as a high school in Michigan which - as a result of being selected - received $250,000 in 2010 towards construction of a fitness room for high school students. Following the Gulf of Mexico oil spill which occurred in the spring of 2010, PepsiCo donated $1.3 million to grant winners in determined by popular vote. As of October, 2010, the company had provided a cumulative total of $11.7 million in funding, spread across 287 ideas of participant projects from 203 cities in North America. In late 2010, the refresh project was reported to be expanding to include countries outside of North America in 2011.

Sustainability practices

According to its 2009 annual report, PepsiCo states that it is “committed to delivering sustainable growth by investing in a healthier future for people and our planet”, which it has defined in its mission statement since 2006 as “Performance with Purpose”. According to news and magazine coverage on the subject in 2010, the objective of this initiative is to increase the number and variety of healthier food and beverage products made available to its customers, employ a reduction in the company’s environmental impact, and to facilitate diversity and healthy lifestyles within its employee base. Its activities in regards to the pursuit of its goals - namely environmental impacts of production and the nutritional composition of its products - have been the subject of recognition from health and environmental advocates and organizations, and at times have raised concerns among its critics. As the result of a more recent focus on such efforts, “critics consider (PepsiCo) to be perhaps the most proactive and progressive of the food companies", according to former New York Times food industry writer Melanie Warner in 2010.

Environmental record

Water usage (India, U.S., U.K.)

PepsiCo’s usage of water was the subject of controversy in India in the early and mid 2000s in part because of the company’s alleged impact on water usage in a country where water shortages are a perennial issue. In this setting, PepsiCo was perceived by India-based environmental organizations as a company that diverted water to manufacture a discretionary product, making it a target for critics at the time.

As a result, in 2003 PepsiCo launched a country-wide program to achieve a “positive water balance” in India by 2009. In 2007, PepsiCo’s CEO Indra Nooyi made a trip to India to address water usage practices in the country, prompting prior critic Sunita Narain, director of the Centre for Science & Environment (CSE), to note that PepsiCo "seem(s) to be doing something serious about water now." According to the company’s 2009 corporate citizenship report, as well as media reports at the time, the company (in 2009) replenished nearly six billion liters of water within India, exceeding the aggregate water intake of approximately five billion liters by PepsiCo’s India manufacturing facilities.

Water usage concerns have arisen at times in other countries in which PepsiCo operates. In the U.S., water shortages in certain regions resulted in increased scrutiny on the company’s production facilities, which were cited in media reports as being among the largest water users in cities facing drought - such as Atlanta, Georgia. In response, the company formed partnerships with non-profit organizations such as the Earth Institute and Water.org, and in 2009 began cleaning new Gatorade bottles with purified air instead of rinsing with water, among other water conservation practices. In the United Kingdom, also in response to regional drought conditions, PepsiCo snacks brand Walkers' reduced water usage at its largest potato chip facility by 45 percent between the years 2001 and 2008. In doing so, the factory employed machinery which captured the water naturally contained in potatoes, and used that water to largely offset the need to bring in outside water to the factory.

As a result of water reduction practices and efficiency improvements, PepsiCo in 2009 saved more than more than 12 billion liters of water worldwide, compared to its 2006 water usage.

Environmental advocacy organizations including the Natural Resources Defense Council and individual critics such as Rocky Anderson (mayor of Salt Lake City, Utah) voiced concerns in 2009, noting that the company could conserve additional water by refraining from the production of discretionary products such as Aquafina. The company maintained its positioning of bottled water as “healthy and convenient”, while also beginning to partially offset environmental impacts of such products through alternate means, including packaging weight reduction.

Pesticide regulation (India)

PepsiCo’s India operations were met with substantial resistance in 2003 and again in 2006, when an environmental organization in New Delhi made the claim that, based on its research, it believed that the levels of pesticides in PepsiCo (along with those from rival Coca-Cola Company), exceeded a set of proposed safety standards on soft drink ingredients that had been developed by the Bureau of Indian Standards. PepsiCo denied the allegations, and India's health ministry has also dismissed the allegations - both questioning the accuracy of the data compiled by the CSE, as it was tested by its own internal laboratories without being verified by outside peer review. The ensuing dispute prompted a short-lived ban on the sale of PepsiCo and Coca-Cola Company soft drinks within India's southwestern state of Kerala in 2006; however this ban was reversed by the Kerala High Court one month later.

In November, 2010, the Supreme Court of India invalidated a criminal complaint filed against PepsiCo India by the Kerala government, on the basis that the beverages did meet local standards at the time of the allegations. The court ruling stated that the “percentage of pesticides” found in the tested beverages was “within the tolerance limits subsequently prescribed in respect of such product,” since at the time of testing “there was no provision governing pesticide adulteration in cold drinks.”

Packaging and recycling

Environmental advocates have raised concern over the environmental impacts surrounding the disposal of PepsiCo’s bottled beverage products in particular, as bottle recycling rates for the company’s products in 2009 averaged 34 percent within the U.S. The company has employed efforts to minimize these environmental impacts via packaging developments combined with recycling initiatives. In 2010, PepsiCo announced a goal to create partnerships that prompt an increase the beverage container recycling rate in the U.S. to 50 percent by 2018.

One strategy enacted to reach this goal has been the placement of interactive recycling kiosks called “Dream Machines” in supermarkets, convenience stores and gas stations, with the intent of increasing access to recycling receptacles. The use of resin to manufacture its plastic bottles has resulted in reduced packaging weight, which in turn reduces the volume of fossil fuels required to transport certain PepsiCo products. The weight of Aquafina bottles was reduced nearly 40 percent, to 15 grams, with a packaging redesign in 2009. Also in that year, PepsiCo brand Naked Juice began production and distribution of the first 100 percent post-consumer recycled plastic bottle.

Energy usage and carbon footprint

PepsiCo, along with other manufacturers in its industry, has drawn criticism from environmental advocacy groups for the production and distribution of plastic product packaging, which consumed an additional 1.5 billion gallons of petrochemicals in 2008. These critics have also expressed apprehension over the production volume of plastic packaging, which results in the emission of carbon dioxide. Beginning largely in 2006, PepsiCo began development of more efficient means of producing and distributing its products using less energy, while also placing a focus on emissions reduction. In a comparison of 2009 energy usage with recorded usage in 2006, the company’s per-unit use of energy was reduced by 16 percent in its beverage plants and 7 percent in snack plants.

In 2009, Tropicana (owned by PepsiCo) was the first brand in the U.S. to determine the carbon footprint of its orange juice product, as certified by the Carbon Trust, an outside auditor of carbon emmisions. Also in 2009, PepsiCo began the test deployment of so-called “green vending machines,” which reduce energy usage by 15 percent in comparison to average models in use. It developed these machines in coordination with Greenpeace, which described the initiative as “transforming the industry in a way that is going to be more climate-friendly to a great degree.”

Product diversity

From its founding in 1965 until the early 1990s, the majority of PepsiCo’s product line consisted of carbonated soft drinks and convenience snacks. PepsiCo broadened its product line substantially throughout the 1990s and 2000s with the acquisition and development of what its CEO deemed as “good-for-you” products, including Quaker Oats, Naked Juice and Tropicana orange juice.[92] Sales of such healthier-oriented PepsiCo brands totaled $10 billion in 2009, representing 18 percent of the company’s total revenue in that year. This movement into a broader, healthier product range has been moderately well received by nutrition advocates; though commentators in this field have also suggested that PepsiCo market its healthier items as aggressively as less-healthy core products.

In response to shifting consumer preferences and in part due to increasing governmental regulation, PepsiCo in 2010 indicated its intention to grow this segment of its business, forecasting that sales of fruit, vegetable, whole grain and fiber-based products will amount to $30 billion by 2020. To meet this intended target, the company has said that it plans to acquire additional health-oriented brands while also making changes to the composition of existing products that it sells.

Ingredient changes

Public health advocates have suggested that there may be a link between the ingredient makeup of PepsiCo’s core snack and carbonated soft drink products and rising rates of health conditions such as obesity

and diabetes. The company aligns with personal responsibility advocates, who assert that food and beverages with higher proportions of sugar or salt content are fit for consumption in moderation by individuals who also exercise on a regular basis.

Changes to the composition of its products with nutrition in mind have involved reducing fat content, moving away from trans-fats, and producing products in calorie-specific serving sizes to discourage overconsumption, among other changes. One of the earlier ingredient changes involved sugar and caloric reduction, with the introduction of Diet Pepsi in 1964 and Pepsi Max in 1993 - both of which are variants of their full-calorie counterpart, Pepsi. More recent changes have consisted of saturated fat reduction, which Frito-Lay reduced by 50% in Lay's and Ruffles potato chips in the U.S. between 2006 and 2009. Also in 2009, PepsiCo’s Tropicana brand introduced a new variation of orange juice (Trop50) sweetened in part by the plant Stevia, which reduced calories by half. Since 2007, the company also made available lower-calorie variants of Gatorade, which it calls “G2”.

PEPSICO

PERFORMANCE RATIO ANALYSES

Performance Ratio Analysis of PepsiCo

When we do performance ratios analysis for any firm we shouldn't do it only for the firm without considering two main factors which are the time and the market, so we should do it by one of the two ways below:

1. similar ratios for the firm being analyzed over a number of past operating periods.

2. similar ratios for firms which are in the same general industry or have similar product mix characteristics.

Since we are making Performance Ratio Analysis on "PepsiCo" we will face one big main problem which is "PepsiCo" is what some people call it (Peer Group) which mean it is a group of companies that deal with different products (Potato Chips "Lays") – (Tea "Lipton") – (Soft drinks "Pepsi") – (Juice "Tropicana") – (Rice "Rice Roni") – (Snacks "Cheetos") – and a lot of other Products in the same Categories or in other categories, that is why we did not find any other "Peer group" work in the same products to compare it, so the only way to do that analysis is by compare the firm by itself over a number of past periods and that was what we did.

We compare the firm "PepsiCo" by itself over five years starts with 2005 till 2009 to find up the changes on its performance and to find what does it mean.

Our analysis will be by using the four main types of Financial ratios which are:

1. Liquidity ratios are used to measure the ability of a firm to pay its bills on time.

2. Efficiency ratios reflect how effectively the firm has utilized its assets to generate sales.

3. Leverage ratios are used to measure the extent to which a firm has financed its assets with outside (non-owner) sources of funds times interest earned ratio.

4. Profitability ratios serve as overall measures of the effectiveness of the firm’s management relative to sales and/or to investment.

We will analyze it from the past to the present "2005 – 2006 – 2007 – 2008 - 2009" to have a clear picture of its performance.

Performance Ratio Analysis of 'PepsiCo' In 2005

All Numbers by Millions

A) Liquidity Ratios:

Current Ratio= Total current AssetsTotalcurrent liabilities

=104549406

=1.11×¿

Which mean that every 1$ of the liabilities in the firm face 1.11$ of the liquid assets.

AcidTest Ratio=Total current Assets−InventoriesTotal current liabilities

=10454−16939406

=0.93×¿

Which mean that PepsiCo has .93$ in current assets less inventories per 1$ of current debt.

AverageCollectionPoint= Accounts ReceivableSales ¿

= 326132562¿

=36 .5 Days

Which mean that PepsiCo takes about 36.5 days to collect its accounts receivable or credit sales.

Accounts ReceivableTurnover=Sales(Net Revenue)Accounts Receivable

=325623261

=9.98×¿

Which mean that PepsiCo collect its accounts receivable of sales or credit sales 9.98 times in the year (about 10 times).

Inventory Turnover=Cost of Goods SoldInventory

=141761693

=8.37×¿

Which mean that PepsiCo turnover the inventory 8.37 during the year.

B) Profitability Ratios:

ReturnonCommon Equity= Net IncomeTotal CommonEquity

= 407814320

=0.2847=28.48 %

Which mean that PepsiCo has .28$ of net income per 1$ of total common equity

C) Efficiency Ratios:

OIROI=Operating IncomeTotal Assets

= 592231727

=0.1866=18.67 %

Which mean that every 1$ of total assets generate .18 $as an operating income

Operating Profit Margin=Operating IncomeSales

= 592232562

=0.1818=18.19 % Which mean that every 1$ of the sales of PepsiCo generate .182 $as an operating income

Total AssetsTurnover= SalesTotal Assets

=3256231727

=1.02×¿

Which mean that PepsiCo generate 1.02$ in sales per dollar of total assets.


=325623261

=9.98×¿


¿ AssetsTurnover= SalesNet ¿

Assets¿=325628681

=3.75×¿

Which mean that PepsiCo generate 3.57$ of sales per dollar of fixed assets.

D) Leverage Ratios:

Dept Ratio=Total liabilitiesTotal Assets

=1747631727

=0.5508=55.08 %

Which mean that PepsiCo finance about 55% if its assets by its liabilities.

¿ Interest Earned=Operating Incomeinterest expense

=5922256

=23.13×¿

Which mean that PepsiCo have the ability to cover its interest expense 23.13 times.





=91306860

=1.33×¿



=9130−19266860

=1.05×¿

Which mean that PepsiCo has 1.05$ in current assets less inventories per 1$ of current debt.


= 372535137 ¿

=38.7 Days



=351373725

=9.43×¿

Which mean that PepsiCo collect its accounts receivable of sales or credit sales 9.43 times in the year (about 9.5 times).


=157621926

=8.18×¿




= 564215447

=0.3652=36.52 %




= 650229930

=0.2172=21.72 %

Which mean that every 1$ of total assets generate .21 $ as an operating income


= 650235137



=3513729930

=1.17×¿



=351373725

=9.43×¿

Which mean that PepsiCo collect its accounts receivable of sales or credit sales 9.43 times in the year.


Assets¿=351379687

=3.62×¿


D) Leverage Ratios:


=1456229930

=0.4865=48.65 %

Which mean that PepsiCo finance 48.65% if its assets by its liabilities.


=6502239

=27.20×¿






=101517753

=1.30×¿



=10151−22907753

=1.01×¿



= 438939474 ¿

=40.6 Days



=394744389

=8.99×¿



=180382290

=7.88×¿




= 565817325

=0.3265=32.66 %




= 717034628

=0.2070=20.71%



= 717039474



=3947434628

=1.14×¿



=394744389

=8.99×¿



Assets¿=3947411228

=3.51×¿


D) Leverage Ratios:


=1739434628

=0.5023=50.23 %



=7170224

=32.01×¿





=108068787

=1.22×¿



=10806−25228787

=0.94×¿



= 468343251¿

=39.52Days



= 432514683

=9.23×¿



=203512522

=8.06×¿




= 516612203

=0.4233=42.33 %




= 695935994

=0.1933=19.33 %



= 695943251



=4325135994

=1.20×¿



= 432514683

=9.23×¿



Assets¿=4325111663

=3.70×¿


D) Leverage Ratios:


=2341235994

=0.6504=65.04 %



=6959329

=21.15×¿





=125718756

=1.43×¿



=12571−26188756

=1.13×¿



= 462443232¿

=39.03 Days



= 432324624

=9.34×¿



=200992618

=7.67×¿




= 597916908

=0.43536=35.36 %




= 804439848

=0.2018=20.19 %



= 804443232



=4323239848

=1.08×¿



= 432324624

=9.34×¿



Assets¿=4323212671

=3.41×¿


D) Leverage Ratios:


=2240639848

=0.5622=56.23 %



=8044397

=20.26×¿

PROJECT

CONCLUTION

The Performance analysis of the last Five Years

To have a better view of the performance of PepsiCo we collected all the results in one big table to recognize the differences.

2005 2006 2007 2008 2009

Liquidity RatiosCurrent Ratio 1.11 1.33 1.31 1.23 1.44

Acid test Ratio 0.93 1.05 1.01 0.94 1.14

Average Collection Period 36.55 38.69 40.58 39.52 39.04

Acc. Receivable turnover 9.99 9.43 8.99 9.24 9.35

Inventory Turnover 8.37 8.18 7.88 8.07 7.68Efficiency Ratios

OIROI 18.67% 21.72% 20.71% 19.33% 20.19%

operating Profit Margin 18.19% 18.50% 18.16% 16.09% 18.61%

Total Assets Turnover 1.03 1.17 1.14 1.20 1.08

Acc. Receivable turnover 9.99 9.43 8.99 9.24 9.35

Fixed Assets Turnover 3.75 3.63 3.52 3.71 3.41

Leverage RatiosDept Ratio 55.08% 48.65% 50.23% 65.04% 56.23%Times Interest Earned 23.13 27.21 32.01 21.15 20.26

Profitability Ratios

Return on common Equity 28.48% 36.52% 32.66% 42.33% 35.36%

The Influence of the financial crises:

The financial crises affected all the industries all over the world

PepsiCo have branches all over the world but its products have a good advantage which is the verity between 'main products' and 'luxuries products'.

But it does not mean that the company didn’t effected by the financial crises which affect the company negatively not destroy it.

It is clear from the table above that a lot of ratios have been affected like (inventory turnover – accounts receivable turnover – average collection period – and others) and we will talk about them now.

Inventory turnover:

We can find that the inventory turnover is decreasing in 2007 which mean that the number of changing all the good on the inventory by anther is reduced in this year.

Accounts Receivable Turnover:

For sure the financial crises affected the company because the Accounts Receivable Turnover has been declined to the lowest level because of the decrease of the number of the credit sales and the accounts receivable increased.

Average Collection Period:

Because of the changes on accounts receivable turnover the average collection period also changed to be the highest average on the five years as a result of the decrease of sales and the bad level of the accounts receivable turnover.

2005 2006 2007 2008 20097.27.47.67.8

88.28.48.6

Inventory Turnover

2005 2006 2007 2008 20098.48.68.8

99.29.49.69.810

10.2

A.R. Turnover

2005 2006 2007 2008 200934

35

36

37

38

39

40

41

Average Collection Period

Operating Profit Margin

In a lot of firms the affections of the financial crises could be noticed on the following year and that was what happened on the operation profit margin, it start to decline on 2007 then the big crash in it on 2008.

Dept Ratio

Because of the financial crises many deals changed to be on debt to face its resbonsepilities starting from 2007 to 2008 which make dept ratio so high.

2005 2006 2007 2008 200914.5%15.0%15.5%16.0%16.5%17.0%17.5%18.0%18.5%19.0%

Operating Profit Margin

2005 2006 2007 2008 200940%

45%

50%

55%

60%

65%

70%

Dept Ratio

financial management project , pepsi , financial ratios

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