THIS IS AN ANALYTIC REPORT ON THE FUNCTIONS OF FINANCIAL MANAGER OF PEPSICO. THIS IS GIVEN IN CONTEXT WITH EACH FUNCTION OF A FINANCIAL MANAGER. EVRYTHING THEORITICAL THING HAS BEEN MENTIONED WITH LIVE AND PRACTICAL EXAMPLES FROM PEPSICO INC. ORGANISTATION . HOPE IT WOULD BE BENEFICIAL TO YOU.

1. PROJECT ON FINANCIAL MANAGEMENT
AN ANALYSIS OF THE FUNCTIONS OF
FINANCE MANAGER OF“PepsiCo“
NAME: RAJAT MORE
CLASS: B.COM,LLB (1ST SEM)
ROLL NO: 2

2. FINANCIAL MANAGEMENT
Finance is defined as the provision of money at the time when it
is required. It is the lifeblood of an enterprise without which no
enterprise can accomplish its objectives.
Financial Management can , therefore, be defined as the art of
procuring sources of money supply and allocating these
resources on the basis of the forecasted monetary requirements
of the business. It refers to planning, organization, co-ordination
and control of financial activities and resources for achieving the
objectives of an enterprise.
Financial Management is applicable to every type of
organization, irrespective of its size, kind or nature . It is as useful
to a small concern as to a big unit. A trading concern gets the
same utility from its application as a manufacturing unit may
expect.
It is completely devoted to a judicious use of capital and a
careful selection of sources of capital ,harmonising individual
motives and enterprise goals.
It can never be possible to substitute or eliminate the finance
function because the need for money is continous and the
business will close down in the absence of finance.
Financial Management allows the inflows and outflows of funds
to be properly matched.

3. PROFILE
The company whose financial functions I referred to for this
project is PEPSICO.
PepsiCo is a leading global food, snack and beverage company.
PepsiCo was formed in 1965 with the merger of the Pepsi-Cola
Company and Frito-Lay Inc. Their Major brands—which include
Quaker Oats, Tropicana, Gatorade, Frito-Lay and Pepsi—are
household names that stand for quality throughout the world.
As of January 2012, 22 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.
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 Inc. is listed on the New York Stock Exchange (NYSE) and
is infact it has been time and again included in the Dow Jones
Sustainability World Index and is also listed in the S & P 500 and
currently values around 73 $ per share.

4. Functions of a Financial Manager
The changing business model and environment has widened the
scope of financial manager. The increasing pace of
industrialization,innovative technology and cut-throat
competition have increased the need for financial planning and
control of resources.
In the present model, a finance manager has diverse functions
which can be classified under the following heads:
1. Financial Forecating and Planing
2. Deciding the Capital Structure of the Organisation
3. Acquistion of Funds
4. Investment of Funds
5. Proper Cash Management
6. Helping in Valuation Decisions
7. Implementing Financial Controls
8. Maintaining Proper Liquidity
9. Proper Use of Reserves and Surpluses
Moreover,a Financial Manager is also required to co-ordinate
with other disciplines of the business like purchase department,
production department etc. so that the funds are properly
utilized . Finance function should not limit itself as a basic
function of management as all important decisions of a business
enterprise are generally taken on the basis of the finance
manager’s report and with his consent.

5. Financial Forecasting and Planning
A Financial manager has to estimate the financial needs of a
business and estimate the money required for acquiring various
assets and meeting working capital needs. The estimation should
be such that neither there are inadequate nor excess funds .
In case of Pepsico Inc. they have got a diverse finance
requirements starting which are :
1. Raw Materials
2. Direct labour charges
3. Restructuring and Impairment Charges
4. Property,Plant and Equipment and Intangible Assets
5. Taxes
6. Advertising and Maintenance of warehouses
7. Pension,Retiree Medical and Savings Plan
Above all , the Financial Manager also needs to analyse every
financial requirement and sort them as per their nature.
Raw materials, direct labor and plant overhead, as well as
purchasing and receiving costs, costs directly related to
production planning, inspection costs and raw material handling
facilities,are included in cost of sales. The costs of moving,
storing and delivering finished product are included in selling,
general and administrative expenses.

6. DECIDING THE CAPITAL STRUCTURE
Capital Structure refers to the kind and proportion of different
securities for raising fund. After deciding the quantum of funds
required, it should be decided which type of securities should be
raised.
It is the function of the financial manager to decide among long-
term debt, short-term debt or equity , to be raised by the
company .
But the decision about various sources of fund should be linked to
the cost of raising funds. If the cost of raising funds is too high
,then it may not be useful for long .
The capital structure of Pepsico Inc. is :
Short term obligations 6205 *
Long term Obliagations 20568
Total Debt 26773
Pepsico share holders equity 20588
*Denotes figures in million dollar.

7. ACQUISITON OF FUNDS
After Financial planning ,the next step is to acquire funds. There
are many sources available for supplying funds. These may be
issuing shares or debentures,borrowing from financial
institutions nd commercial banks etc. The selection of the most
appropriate choice is a delicate task. The choice of a wrong
source for funds might creates much difficulties at any later
stage. The pros and cons should be very carefully analyzed
before making any final decision.
The various sources of funding for PepsiCo are :
Issuing Senior Unsecured Notes
Revolving credit from PBG,
Issuing Commercial Paper
Loans borrowed from various Commercial Banks
Issuance of Floating Rate Notes
Most long-term contractual commitments, except for the
long-term debt obligations, are not recorded on PepsiCo’s
balance sheet.

8. INVESTMENT OF FUNDS
Funds acquired by any organization should be used in the the
best possible way as to expect maximum returns. The foremost
thing to do while taking any investment decision is to compare
the cost of acquiring the funds and the returns on investment
(ROI). The channels which generate higher returns should be
preffered.The objective of maximizing profits will be achieved
only when funds are efficiently used and they do not remain idle
at any time. A financial manager needs to keep in minds all the
principles of safety , liquidity and soundness of the organization
while investing funds.
PepsiCo Inc. has invested funds throughout many sectors of the
economy.
In the recent development ,the company has invested funds in
the following sectors :
Investment for contract farming in Jharkand,India
A 2.5 billion $ investment in china to expand its presence
in the country
A considerable investment in O.N.E ( One Natural
Experience) , the Los Angeles based coconut water
company.

9. PROPER CASH MANAGEMENT
Cash Management is a very important task of finance manager.
He has to access various cash needs at different times and then
make arrangement for the cash. Cash may be required to
(a)Purchase raw materials (b) make payments to creditors
(c) meet employee wage bills.
The usual sources of finance are :
(a)Cash Sales (b) Collection of debts (c) short-term cash
arrangement from banks
The cash management should be such that neither there is
shortage of it and nor is it idle because any shortage of cash will
damage the credit-worthiness of the organization whereas any
idle cash in the business means that it is not properly used.
PepsiCo inc. follows a simple procedure for revenue recognition
and cash management. PepsiCo recognize revenue upon
shipment or delivery to their customers based on written sales
terms that do not allow for a right of return.
For short term cash requirements PepsiCo can issue floating debt
notes and approach local commercial banks of the operational
area .

10. HELPING IN VALUATION DECISIONS
A number of mergers and consolidations take place in the
present competitive industrial world. A finance manager is
supposed to assist management in making valuation and to see
that all the transactions are well reflected in the books . It also
needs to see if any change in the capital structure is required
inside the organization an to assist and advise the management
regarding the same.
He is the financial end of the organization and any transaction
within the organization.
PepsiCo has a good history of mergers and acquisition which has
helped the organization rise to the present stature of a multi-
national conglomerate.Some of the worthable mergers were-
The merger in 2000 with Quaker Oats
Acquistion on Tropicana in 1998
Merger with Pepsi Bottling Group (PBG) in 2009.
Merger with PepsiAmericas (PAC)
Partnership with Basix for contract farming for its frito-lay
division
Even , the company ,PepsiCo, itself was formed by a merger of
the Pepsi-cola company and Frito-lay .

11. IMPLEMENTING FINANCIAL CONTROLS
An efficient system of financial management necessitates use of
various control devices. Financial control devices generally used
are :
(a)Return on Investment
(b)Budgetary Control
(c)Break-even Analysis
(d)Cost Control
(e)Ratio analysis
(f) Cost and Internal Audit
Return on Investment is the best control device to evaluate the
performance of various financial policies. The higher this
percentage, the better the financial performance. The use of
various control techniques by the finance manager will help him
in evaluating the performance in various areas and take
corrective measures as and when required.
PepsiCo is responsible for the objectivity and integrity of their
consolidated financial statements. The Audit Committee of the
Board of Directors has engaged independent registered public
accounting firm, KPMG LLP, to audit their consolidated
financial statements, and they expressed an unbiased opinion.

12. MAINTAINING PROPER LIQUIDITY
Every concern is required to maintain some liquidity for meeting
day-to-day needs. Cash is the best source for maintaining
liquidity . It is required to purchase raw materials , pay workers,
meet other expenses , etc. A Finance Manager is required to
determine the need for liquid assets and then arrange them in
such a manner that there is no scarcity of funds.
For the need to have proper liquidity , the company
management quotes as follows:
“Global capital and credit markets, including the commercial
papermarkets, experienced considerable volatility . This volatility
did not have a material unfavorable impact on our liquidity, and
we continue to have access to the capital and credit markets. In
addition, we have revolving credit facilities . We believe that our cash
generating capability and financial condition, together with our
revolving credit facilities and other available methods of debt
financing, will be adequate to meet our operating, investing and
financing needs.”

13. PROPER USE OF RESERVES AND SURPLUSES
The utilisation of profits or surpluses and proper reserve creation
is also an important factor in financial management . A judicious
use of surpluses is essential for expansion and diversification
plans and also in protecting the interest of shareholders. The
ploughing back of profits is the best policy but it clashes with
interest of shareholders. It is the function of the finance
manager that a balance be struck in using funds for paying
dividends and retaining earnings for financing expansion plans,
financing Corporate Social Responsibility . The market value of
the shares is affected by each decision of the financial manager.
A judicious policy for distributing surpluses will be essential for
maintaining proper growth of the unit.
PepsiCo Inc. has got a good control over its surplus distribution
so as to create maximum benefit for both the organisation and
the share-holders.The company have taken special care to create
reserve for the benefit of its employees by providing them with
pension plans and medical plans. The company have also taken
due care to fulfil its Corporate Social Responsibilty (CSR) and has
a special reserve for the same.

14. CONCLUSION
Financial Management is an indispensible organ of any business
organisation. Its main aim is to use business funds in such a way that the
firms value is maximised. Financial Management provides a framework
for selecting a proper course of action and deciding a viable commercial
strategy.
In the context of PepsiCo , we have seen that it has evolved itself into a
giant conglomerate from a small beverage unit. It has come up as a great
business model which is now diversifying its interest into various sectors.
It has all been possible because of its strong managerial committee and
above all a strong financial model . It has been the finance managers
who truly proved to be the backbone of the organsiation and could
determine the future needs and were always to face any situation .