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EXECUTIVE SUMMARY
Pakistan is an agricultural country and most of the national economic targets
are dependent on the performance of the agricultural sector. Unfortunately, there is
low productivity in Pakistan as compared to developed countries. So, fertilizer is an
important input that can boost the agricultural production.
In 1962, the Government of Pakistan planted a big project to remove the
shortage of fertilizers in the country and setup a “Natural Gas Fertilizer” that was
expanded on March 07, 1973. Agreements was executed between West Pakistan
Industrial Development Corporation of Pakistan and Abu Dhabi National Oil
Company (ADNOC) to strength and improve the friendly relations between Pakistan
and state of Abu Dhabi for cooperation in the field of petroleum, industries and
natural resources available in both countries. which result Pakarab Fertilizer
Company as a joint venture.Pakarab is the only project of Pakistan that producing
compound fertilizers in the country. Head office of Pakarab Fertilizers Limited (PFL)
is National Fertilizer Corporation (NFC) located in Lahore. The National Fertilizer
Corporation (NFC) of Pakistan is a Government undertaking and is responsible for
the installation and efficient operation of the fertilizers plants in the public sector.
The basic objective of the PFL is to achieve self-sufficiency and self-
reliance in production and distribution of fertilizer to achieve prosperity of the
country.
The total employees of the company include:
Executives 151
Office Workers 180
Daily Wages Workers 4140
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OF INDUSTRY
Pakistan, since its creation has been relying on agriculture for the
sustainment of his economy. Pakistan is a totally agri based country. Almost
every industry is directly or indirectly related with agriculture. God has blessed
Pakistan with one of the most fertile land on the earth. This land is capable of
producing best quality crops. These crops provide a jack to boost up the industry.
Pakistan cannot afford to ignore the importance of agriculture and in
agriculture we cannot ignore the importance of fertilizer. Fertilizer is a tonic for
every type of land to improve its production capacity. With continuous cultivation,
the land becomes less and less fertile so to keep the land fertile it is necessary to use
fertilizer.
The increase in agricultural production leads towards the economic
prosperity and agricultural exports. It earns 455 of foreign exchange of total
exports. Almost 70% of population of Pakistan is directly related to agriculture.
The main source of earning of its population is through agriculture. Total area of
Pakistan is 796095 sq. Km of which 25.2% is cultivated area, 10.5% is cultural
waste and 3.6% is under forests total (40%). The remaining 60%consists of Deserts
Mountains and is unsuitable for agriculture &forestry. Its population is about 1450,
00,000.
The modern research proves that the soil needs the chemicals for the better
production of crops and this is only possible with the use of better fertilizers. A
better fertilizer can help the soil to recover its deficiencies ad to again prepare the
soil for another crop production. In Pakistan the productivity of agriculture is not
satisfactory because of many reasons and drawbacks.
There are lots of drawbacks in our agricultural system.
o Uses of old & traditional method of planting and farming.
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Currently, total fertilizer production of Pakistan is about 5.1 million tons per
annum comprising 4.3 million tons of urea and other nitrogenous fertilizers, and
671,000 tons of phosphorus based fertilizer. Of the total yearly fertilizer produced,
only 1.7 million tons (33.6%) is produced by the public sector, while the rest (3.360
million tons or 66.4%) is produced in the private sector.
PAKARAB FERTILIZERS (PVT) LTD MULTAN
ESTABLISHMENT
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HEAD OFFICE
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COMPANY
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PLANTS
Commissioning Dates
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PROJECT COST
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Fixed investment 1053460 1582.695 2636.155
Working capital 441.456 441.456
Total 1494.916 1582.695 3077.611
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(Rs in Millions)
FINANCING
Foreign Loan
LOCAL FOREIGN TOTAL
(Rs in Millions)
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PLANTS IN OPERATION
GENERAL INFORMATION
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No. of Employees:
Executives 151
Office Workers 180
Daily Wages Workers 4140
(According to Requirement)
Auditors: M/s Riaz Ahmad & Co.
M/s Taseer Hadi Khalid & Co.
Foreign Sources of Finance:
ADNOC
World Bank
Asian Development Bank
OPEC Special Funds
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Organizational Structure
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1.MANUFACTURING DIVISION
These both divisions are not further divided into sections or in the
departments.
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Board Of Directors
Managing Diector
Manufacturin
Finance Accounts Audit Corporate &Commercial
g
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PLANTS INTRODUCTION
Ammonia Plant
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The plant has a daily designed capacity of 1500 M.T of Prilled fertilizer
grade Calcium Ammonium Nitrate (CAN) containing 26.5% nitrogen
nutrient. Can is a product mix of calcium carbonate (CACO) and ammonium
nitrate (AN). Pure ammonium nitrate containing 35% nitrogen is diluted by
calcium carbonates addition, to eliminate its explosive nature.
Nitro phosphate (NP) Plant
The plant produces 1015 M.T per day of nitro phosphate(NP). NP is a
complex fertilizer containing 23% each of nitrogenous and phosphate nutrients. The
plant, which is the first complex fertilizer plant in paki9stan, is based on
stamicarbon process using rock phosphate, nitric acid and ammonia as raw
materials.
Urea Plant
The plant has daily capacity of 280 meter tons of Prilled urea. It utilizes
Snamprogetti’s ammonia stripping process. Ammonia and Carbon dioxide are the
raw material for the production of Urea. The Prilled Urea contains 46% of nitrogen
nutrient.
Departments
Finance Department
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1.FINANCE DIVISION
2.ACCOUNTS DIVISION
Sr.Manager Accounts
Superintendent ORGANOGRAM
S Accounts Assistant (FINANCE)
Sr. Office Assistant
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S. of Management
Account Assistant Sciences
Accounts IUB
Assistent
Account Assistant
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DEPARTMENTAL SKETCH
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There are also two assistant Managers and Supervisors working under Senior
Manager Accounts, those are:
Assistant Manager Cash
Superintendent Budget
PAYABLE SECTION
Payable section as the name shows is concerned with the payments of the
company. All the payments made by payable section fall under two
categories;
Factory cost
Administration cost
These payments mainly include:
General Supplies (Raw Material and Spare Parts etc)
Tax Payments
Packing Supply Payments
Local Freight/Railway Payments
Contactors payments for daily wage employees
Labor hired payments
Miscellaneous expenses (expenses occurred such as contracts of the services
or maintenance of the equipment, legal expenses, advertisement,
entertainment of executives, contract of canteen etc.)
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PAYMENTS
This activity starts when the raw material received by the material
department and prepared a material receiving report. This M.R.R is prepared in
reference to purchase order.
A copy of this M.R.R is sent to the supplier. The supplier in terms sends the
bill/invoice and a copy of purchase order to procurement department that prepares
the “memorandum” and sends it to the accounts payable section, where these
documents are tallied with the copy of M.R.R which is already sent by the material
department and then in payable section.
The payment voucher of bill is prepared and senior cashier makes payments
within 7 days through check /cash. The companies that provide raw material such
as oil, patrol and lubricants to Pakarab Fertilizer are PSO, SHELL and CALTAX.
TAX PAYMENTS
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2. Professional tax
3. Sales tax
1.INCOME TAX
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3.SALES TAX
As the name shows this payment is made when the company purchase
material form other firms within Pakistan. These may be three types of conditions
for payment of freight:
Freight Charges will be:
Paid by Pakarab
Paid by Supplier
Paid by Partially
The storekeeper of material department pay cash at the time of unloading of
material from trucks or other sources. In case of advance payment to the supplier,
journal voucher is made in payable section and approved by the General Manager
Finance But Journal voucher is made only for advance payment to the supplier.
SUPLIER/CIVIL CONTRACT AGREEMENTS
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issue tenders to parties. All these parties provide estimates of annual raw material
and other repair & maintenance expenses. These estimations are then approved by
the G.M Administrator and Managing Director. After approval a comparative
statement of all parties is made and whichever is less expensive, the contract
committee considers the party on behalf of its financial position and quality. After
that the approved party deposits the amount of security in Pakarab bank account.
Agreement is signed between Pakarab and Contractor that shows all the Terms &
Conditions made on a stamp paper. All the payments of contractors are made in
payable section.
LABOR HIRED PAYMENTS
TYPES OF VOUCHERS
There are two types of vouchers used for payments in payable section.
1) Cash Payment Voucher
2) Bank Payment Voucher
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Cashier can give cash Payment voucher id formed when the payment is
small up to Rs. 5000 and only it.
2) BANK PAYMENT VOUCHER
Bank payment voucher is formed the payment of supplier is exceed from Rs.
5000. The voucher is prepared by account payable clerk and checked by Manager
payable and senior Manager and then finally approved by General Manager
Finance. The voucher is sent to cashier who prepared the cheque and again cheque
along with the voucher is sent to G.M Finance for his authorized signature on the
cheque. After all the cheque is delivered to party either by hand or posted. Bank
payment voucher is of white color. While cash payment voucher is of green color.
CASH SECTION
Cash & Budget are two separate sections working under the finance
department. The G.M Finance is head of these sections. Pakarab maintained a
register that is called “CASH BOOK “in which every transaction which takes place
in terms of cash. This may be either the cash received from the customer or
disbursed to the venders is recorded. This record is helpful for the management to
determine the cash resources of the company for future planning.
WORK FLOW
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PAYMENTS
Cash receipts may be collection of cheque. So that, sales section prepares the
covering letter for cash receipts and forward both documents to cash section where
the cheque is entered in cheque receipt register after manually inspection of account
assistant.
FOREIGN RECEIPTS/PAYMENTS
If the company import raw material from abroad, the receipts and payments
are made at outstation that are Lahore and Karachi offices. All the payments are
made at these offices and bills are sent to the company at Multan, where they raise
debit in their books.
Most of the payments are made at Lahore. Main cash vouchers are prepared
at office and at the end of month, all the main vouchers along with all relevant
documents are filed in their respective files. According to these files monthly
payments and receipt summaries are prepared with the help of journal vouchers.
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For daily petty cash requirements G.M Finance approves an amount of Rs.
50000 or 100,000. All departments can make petty expenses up to 100, 000 in one
day. The payments are made according to the requirements and transactions are
entered in the petty cash book. On next day a voucher is prepared for the payments
of previous petty cash expenses. These expenses may be for medicines or other
miscellaneous purposes. At the end of month a daily petty cash report and monthly
petty cash report is prepared.
BUDGETING SECTION
Capital Budget shows the expenditure of all the sections of finance division
and other divisions. While revenue budget shows the income from marketing
department. An effective budgetary control and measurement of efficiency of
operations strengthens the system of internal control.
BUDGET PERIOD
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A budget for a short period of time usually a year divided into months may be
considered as short-range budget. That budget period should coincide with the
financial accounting period to compare actual results with budget estimates.
LONG RANGE BUDGET
These are usually the basis for planning over a period of years ranging from
5 to 10 years. It may be used for any one of the following purposes.
To determine long range plans for the capital expenditures
To plan profit potentials.
To forecast cash position in relation to anticipated cash needs by specific
dates.
To implement market development for a new product.
To guide in determining research products that may be initiated.
To schedule expansion and growth.
It is primarily the annual budget, which serves as the means to implement
the long-range development plan, because the content of the annual plan is
ultimately translated into annual segments and expressed in terms of annual
operating objectives.
SETTING UP THE BUDGET
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Budget is prepared, finalized and approved before the start of the financial year.
G.M (M)
The Budget Section on receipt of various budget formats from the cost
centers ensures that the estimates have been checked and reviewed by the General
Manager (M). The section re-allocates cost when necessary and carries out the
costing exercise in order to calculate intermediate and finished goods cost and
arrive at the MASTER BUDGET. The Master Budget represents a summary of all
budgets and forms the basis for preparation of Budgeted Operating Results.
REPORT GENERATED
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PAYROLL SECTION
Payroll section is concerned with the personnel operation time, leaves such as
casual, sick and medical etc. accruals, house rent conveyance allowance, plants
allowances etc. There are different types of deductions are also made for example,
income tax, telephone bills, transportation etc. There are two types of employees
work in PFL.
Workers
Executives
Time keeping section prepared clock cards for workers at the beginning of wage
period. Workers punch their cards mechanically by the time machine installed at
the time office. At the end of day the clock cards are collected by the timekeeper
and he after the entry of card fills the time in the register.
So as a major section of the company it handles the salaries of all temporary
and permanent employees. Senior Manager is an Incharge of this section who is
assisted by four employees.
Executives are required to note their attendance in monthly attendance
register to be maintained in each department by the head of the department.
Executives are paid no overtime. At the end of month the head of the department
sends the attendance register summary to payroll section.
All the allowances and deductions are organized in manner so that it can be
entered into computer. At the month end programs are run that update the employee
record and prints different reports as mentioned in the payroll system.
At Pakarab payroll system is divided into five sub systems.
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The following are the steps involved in operations of the payroll section:
Procedure
In the payroll section separate files are maintained for utilities and expenses.
These files are categorized according to ranks.
For example,
M1 For top management
M2 For middle executives
M3 For lower management
Pakarab providing lot of facilities to its employees e-g loan facilities are also
given to employees for house, car, motorcycle, household items (like furniture,
crockery, oven etc). Loan is given for a longer period of time and at a very low
interest rate.
TYPES OF LOAN
1. Refundable loan
2. Non-refundable loan
These both loans are from provident fund.
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Shift Allowance
Shift of day & night. Night shift workers are also given control room
allowance.
Washing Allowance
For washing purpose of uniform of plant workers.
Dust Allowance
For workers, for computer operators, Rs.100
Canteen Allowance Rs. 1000
Milk Allowance Rs. 150
Miscellaneous Allowance
`It is given from S1 to S4 i.e. Rs.100
Overtime Allowance
Overtime allowance depend upon scale, maximum is Rs. 65-95.
PROVIDENT FUND
Provident fund is contributed by the employees of PFL who are members of
fund, donation from any source to provide accumulate certain sums for the
employees and their families in the event of the employees termination of service,
resignation, retirement or death. The board of trustees according to the trust deed
and rules administers this fund.
Lahore trust of NFC deals with executive provident in Lahore. It is 8.33% of
basic salary. Provident fund of workers is maintained by Multan trust. It is 10% of
basic salary.
All the employees may become members of the fund by singing a written
declaration. After joining the fund employee can not be permitted to resign his
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PROCEDURE
Store accounts 1
Accounts payable 1
Supplier 1
Office copy 1
When the Lahore, Karachi office purchases some assets, it does not submit
the material requisition or receiving report but it only sends material inspection
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report along with the “Bank Payment Voucher” since the Lahore, Karachi office
payments are made directly through banks & not through accounts payable section
at Multan.
INSURANCE SECTION
Insurance section also comes under the finance department. This section
provides the services of insurance for factory assets of all kinds. It also deals with
transit insurance of incoming material. The matter related with providing loss of
equipment material and human beings, perusal of the filed cases and recovery of
claim, are deal by the insurance section. In the factory all the plants are insured at
their original cost.
INSURANCE INCLUDES:
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RECEIPTS
Storekeeper receives serially numbered first two copies of store requisition form
duly approved & signed by the department head.
Take out relevant bin Card of Material required to be used.
Ascertain whether quality in hand appearing in the Bin Card is adequate for
issues.
If balance in hand is inadequate, prepare purchase requisition for the materials
in short supply.
Amend quality to be issued against appropriate item in store requisition or
mention “items not available” if any issue is possible.
Tear off original purchase requisition and send to manager finance.
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Store keeper signs the recipients of the goods are obtained on all copies of store
requisition.
Signature of the recipients of the goods is obtained on all copies of store
requisition.
Separate original copy of store requisition and forward the entry in the stock
ledgers.
Second copy of store requisition are gathered for the day & posted to Bin Cards.
Storekeeper marks “posted in Bin Cards” and initials file second of store
requisition chronologically.
Update the Bin Cards balance & initials.
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INVISIBLE L/C
It is issued when an expert is hired from the foreign country to repair the
material. After detail m\negotiation with Ministry of Commerce, an approval note
is sent to the state bank that issues a certificate to local bank for issuance of L/C.
Repair L/C
This L/C is issued if the machinery is sent to foreign country for the repair
purpose. State bank issues a certificate to the local bank for the issuance of L/C
section pays undertaken to the custom for security that if they are unable to load the
material back. Undertaking is some percent of the value of the machinery. This
undertaking is taken back after the arrival of the items.
Site L/C
This L/C is issued when the payment is made on the counter.
Documents Acceptance (D.A) L/C
This L/C is not on counter but call for bank to verify the documents.
Company signs the bill of exchange for acceptance.
ACTIVITIES
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The job of L/C section starts when procurement department sends the
purchase order & quotation of supplier to L/C section. L/C section then writes an
application for the issuance of L/C to beginner bank (registered local bank licensed
by state bank to deal with foreign purchases) along with relevant documents.
The Government has divided items into three categories:
1. Freely importable
2. Restricted items
3. Batter items
Pakarab is dealing with freely importable items. All these imported items are
insured items.
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Beginner bank then issues L/C and sends four duplicates and one original copy
to L/C section. These copies are further distributed in concerned departments as:
DESCRIPTION COPIES
L/C section 2
Procurement section 1
Advisory bank 1
Beneficiary then sends the following documents to the advisory bank.
1. Certificate of origin
2. Air way Bill
3. Packing list invoice
4. Insurance certificate
Advisory bank then check the documents either they are according to the
specifications sent by the beginner bank.
Pakarab usually deals with two types of mode of consignment.
Through Air
Through Sea
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3. Every accounting transaction is posted to two sets of records i-e General ledger
and Sub ledger accounts to keep the accounts accurate and up to date. The
General ledger contains the control accounts and the sub ledger shows the
detailed description of the General ledger accounts.
4. Cost analysis
5. Co-ordination for external audit and internal audit.
6. Dealing of company income tax matters.
7. Controlling of trainees.
This section has close interaction with all other sections/departments such as
account payable, inventory, sales, payroll, cash, procurement and commercial etc.
Not only the cash transactions are reported to this section but also transfer of assets,
sales, purchase of assets, daily production and dispatches are also reported.
So, most of the reports and key information about the organization is available
in this section. In case of transfer assets to other units, debit/credit notes are
prepared and maintained. In this section, a register is maintained that is called
journal voucher (JV) control register. This register shows the record of all the
entries. Two types of Ledgers are maintained:
1. Main Ledger
2. Sub Ledger
Main Ledger is manual as well as computerized. In main Ledger, sub ledger
is also maintained that contains details of the amount paid to Pakarab and paid by
Pakarab. Then the balance is calculated by the difference between debit and credit
of sub-ledger account the code wise descriptions are given, as 2300 is main ledger
account 2300-01 or 2300-02 are Sub ledger accounts. Sub ledger is computerized
ledger which has data wise transaction as in the manual sub ledger. All the
transactions of one day are maintained under one date in sub ledger. A schedule is
also maintained that gives only the net balances of each account code.
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REPORTS
In book keeping section different type of reports are generated on monthly,
quarterly and annual basis include:
Trial Balance
Income Statement
Balance Sheet
Cost Sheets
The copy of these final reports is send to the following:
GM (Technical) NFC Lahore
GM (Planning) NFC Lahore
GM (Audit) PFL Multan
GM (Finance) PFL Multan
GM (Manufacturing) PFL Multan
GM (T & P) PFL Multan
Secretary PFL Lahore for Corporate office record
Managing Director
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the manual systems in order to reduce work load of the employees and get quick
and accurate results of the daily transactions.
In 1980, the manual system such as the General Ledger system, Cash Book
system and the Inventory system were processed at a sister Organization, Paksaudi
Fertilizers, which had data processing department working efficiently, with most of
its systems were fully computerized. The monthly data was sent to D.P department
of Fertilizer, at the end of the each month, where it was processed and the results
were handed over to Pakarab management. But, this was not fulfilling the needs of
the factory, as it was time consuming job and did not provide the quick and
effective results.
In 1986, the management of the Pakarab fertilizers decided to set up its own
data processing department and first of all purchases a personal computer of IBM
and a printer. Later on management decided to purchase the Mini computer system
36 and in 1987 PFL installed IBM System-36 at Multan which was purchased and
installed by IBM Lahore. This was basically for development of Inventory
Management System. However the inventory accounting system being developed
by IBM Lahore was also converted to System-36 at Multan.
In that era when information technology was growing very fast and
advanced, it became necessary to replace old system /36 machine by the new one,
because new computer called IBM AS/400 is an advance series in mini computers
it had faster processors , better Hard Disk with more memory and speed as
compared to S/36.So,in 1991 IBM AS/400 was purchased and installed in system
department .
About eServer iSeries 400.
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HARDWARE SPECIFICATIONS
Machine Name eServer iSeries 400Connectivity up to
240 workstations.
Machine Type 9406
Machine 270
Model
HardDisk 17.54*4=70GB Approx. 10Krpm with
(DASD) RAID5 Controller can be Max. of
DirectAccess 421.1GB
StoringDevice
Main Memory 256*2=512MB. Can be Max. of 8GB
ProcessorType 2248/Speed Measures in
CPW(Commercial Processing Workload)
DVD RAM 4.7GB RW
Tape Drive 4 GB ¼ Inch
Network Cards 2
Modem 2line WAN w/Modem
Integrated PC xSeries 855 MHz built in Server
Server
PCServer 128 MB
Memory
SOFTWARE SPECIFICATIONS
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Advantages
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Programmer services
System operator services
Communication Support
Security
PC Support
CONTROL LANGUAGE:
Control Language is the set of command used to talk with the
computer.
DATA MANAGEMENT:
Data management allows the user to define and use data
files.
WORK MANAGEMENT:
Work management controls many jobs, no matter if you are doing severals at
the same time , or if either people are usinf the system.
PROGRAMMING SERVICES:
It provides support for onlione program devolpment and testing
SYSTEM OPREATER SERVICES.
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DISPALYS
All of the work do with AS/400system center on displays. you have a l r e a d y
worked with two kinds of displays ,a manue and sign on
entry displays.menus help you to get started on a task by
showing you options. Entry display allows you to interact
with the computer.
They are four kinds of displays in all
Menue display
Entry display
List display
Information display
Although four kind sof displays seem and act differently, they have three things in
commen. They have
Titles
Active Function Keys
Purpose
FEATURES OF AS/400
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displays created are those an operator works with when using an application
program. On-line help also created for both display and menus.
REPORT LAYOUT UTILITY
This utility helps to make layouts for your reports without going into the
complex details of programming.
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Material forecasting system is run as part of this system at the month end to
classify the items on the inventory list on the consumption and current stock basis
into A, B and C categories. Also system forecasts the new order point and order
quantity after receiving the order points of all the items on inventory list, based on
the bad item and purchase point.
MATERIAL ACCOUNT SYSTEM
It is a batch system and runs at the month end. It basically used the files of
Inventory Management System. It helps to maintain not only the record of
Inventory stock but also to evaluate this stock in terms of its value. It generates
following reports.
Daily Movement Report (DMR)
Material Receiving (Local/Foreign Purchase)
Financial Report (Cost-center wise material issued in value)
Stock value summery report
AGING REPORTS
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It is a batch system and runs at the month end. It basically used the files of
Inventory Management System. It helps to maintain not only the record of
inventory stock but also to evaluate this stock in terms of its value.
REPORTS ON REQUIRMENT BASIS
Aging Reports
10 years and above items Movement/Non movement and so on
5 years and above items Movement/Non movement and so on
Master file evaluation report
ABC analysis report
On stock value basis
On usage basis
PAYROLL ACCOUNTING SYSTEM
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PROCUREMENT SYSTEM
Procurement system has been implemented since July 2001. The system
produces different reports.
Inquiry printing report
Comparative statement printing report
Purchase order report
Remainders
To convert program base reports to AS/400 utility RLU base reports
To link AS/400 Computer to other organizations. So that to have a
centralized data base environment.
To develop new system as per requirement.
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Managerial policy
Analysis
Financial Analysis
SWOT Analysis
Suggestions
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FINANCIAL ANALYSIS
RATIO ANALYSIS
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A complete ratio analysis shows a whole snap of the whole activities of the
company during the year. A ratio becomes meaning full when compared with other
standard and the ratio of the other years. So for this purpose I have calculate the
ratio of Pakarab Fertilizers Private Ltd and compare it with the previous year and
brief them according to my knowledge.
PURPOSES
The recommendation of ratio analysis depends upon the stakeholders position and
relation to the company for which the analysis is done. The following paragraph
briefly explains the purpose of ratio analysis stage by stage.
M a n a g e m e n t would like to know the operational efficiency during the year
and would think of such ratios as return on investment, turnover of fixed assets, net
profit to sales etc.
Creditors would like to know the ability of the company to meet it current
obligations and, therefore, would think of current and liquid ratios, turnover of
receivables, coverage of interest by the level of earnings, etc
Investors will be interested in such ratios as earnings per share, book value per
share and dividends per share etc.
CLASSIFICATION OF RATIOS
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1.Liquidity Ratios
Working capital:
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Interpretation:
This ratio indicates the short run solvency position of the business. As
shown above the net working capital is continuously increasing. This ratio was
decrease in 1999 but it is highest in 2003 comparatively. So the company is able to
full fill its financial requirements as the requirements arises in future.
Currant Ratio:
Current Ratio =
Interpretation:
The current ratio is the ratio of total current assets and total current
liabilities. The current ratio of a firm measures its short-term solvency, i.e. its
ability to meet short-term obligations. As a measure of short term/current financial
liquidity, it indicates the rupees of current assets available for each rupee of current
liability / obligation. The higher the current ratio, the large the amount of rupees
available per rupee of current liability, the more the firm’s ability to meet current
obligations and the greater the safety of funds of short term creditors. As shown
above this ratio is more then one which is a good sign. This ratio was 1.17 in 2002
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and increase to 1.32 in 2003. Thus, current ratio, in way, is a measure of margin of
safety to the creditors
Liquid/Quick Ratio:
Liquid/Quick Ratio =
Years 2003 2002 2001 2000 1999
Quick Ratio 45.47% 52% 34.9% 42.7% 70.4%
INTEPETATION:
The liquid/quick ratio is the ratio between quick current assets and current
liabilities. The term quick assets refers to current assets which can be converted into
cash immediately or at a short notice without dimension of value and will include
cash balances, bills receivable, sundry debtors and short-term investments. Thus,
the current assets that are excluded are prepaid expenses and inventory. In this
context we say that PFL has a normal capacity to pay receivables to debtors.
2.LEVERAGE RATIOS
Debt Ratio:
Debt Ratio =
Interpretation:
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Debit ratio is calculated to check the total asset financed by the firm
creditors. This ratio shows relation between total assets and total liabilities. This
ratio has been continuously increasing from 1998 to 2002 that indicates that more
then half of creditors contribute its assets but in 2003 it some lessened
comparatively.
Interpretation:
The debt equity ratio indicates the relationship between the long-term funds
provided by creditors and those provided by the firm’s owners.The standard debt
equity ratio is 60:40. The lower the debt equity ratio that is preferable.. The long-
term debt in all five years is zero because PFL get all loans from NFC and on short-
term basis. So this ratio is 0: 1 in all five years.
Interpretation:
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This ratio measures the firm’s ability to make contractual payments This
ratio is also calculated to know about long- term solvency position of the business.
This ratio indicates the company’s ability to pay interest. This ratio was abnormally
high in 1999 (214.69 times) because loan was not in large amount, which shows it
has good interest paying ability.
3.EFFIECIENCY RATIOS
Inventory Turnover:
Inventory Turnover =
Interpretation:
This ratio establishes relationship between cost of sold during a given period .
This ratio reveals the number of times finished stock is turned over during a given
accounting period. In other words this ratio indicates that how many times in a year
inventory can be converted into sales. High inventory turnover ratio is better than a
low ratio. A high ratio implies good inventory management. This ratio is
continuously increasing from previous three years. In 2003 this ratio is 19.53 times
means PFL has 19 times ability to sell the inventory in a year. So the company is
efficient in working.
Average Age of Inventory:
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Interpretation:
This ratio shows that the average amount of inventory held during that
period means that in how many days inventory can be sold out. It gives length of
time in which inventory can be sold out. The company’s position in 2003 is good
means the days to sale the inventory are less then previously years. It is good for
company because lower the days to convert inventory into sales better is the
position.
Accounts Receivable Turnover:
Interpretation:
This ratio measures the accounts receivables (trade debtors and bills
receivables) in terms of number of days of credit sales during a particular period. In
short we can say that it shows how quickly receivables or debtors are converted into
cash. It shows the credit management and collection management ability that how
much they are efficient to collect the receivables. This ratio was extra low in 2002
(8.02 times) and now this ratio is 15.99 times which is greater then last three years
and is more satisfactory.
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Interpretation:
This ratio indicates that how many days’ receivables are collected. It shows
credit collection management ability that how much they capable to get receivables.
Their credit term is 25 days by PFL and they collect their credit in more then 25
days except in 2003 current year which is more satisfactory then previous three
years.
Average Account Payable Turnover:
Interpretation:
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Interpretation:
This ratio shows that how many days are to be taken to pay the credit. These days
are more then 100 in all five years and it shows that mostly purchases are on credit.
Their paying ability is not very good.
Interpretation:
This ratio is based on the relationship between the sales and assets of a firm
indicates that how much is contributed by assets towards our sales. The higher the
turnover ratio, the more efficient the management and utilization of the assets while
low turnover ratios are indicative of under utilization of available resources and
presence of idle capacity. If turn over increases it means that assets are properly
used to generate sales and company’s position is very good. But this ratio is
continuously decreasing in four years that means assets are not properly used but in
2003 it some increased.
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4.PROFITABILITY RATIOS
Interpretation:
The gross profit ratio indicates the proportion of gross profit and sales. Gross
profit is calculated by deducting the cost of good sold from sales. Higher the ratio,
the better it is, and the lower the relative cost of merchandise sold and better would
be the company’s position.. A low ratio indicates unfavorable trends in the form of
reduction in selling prices or increase in cost of production. This ratio is 30.17% in
2003 which is higher then last three years, it means expenses are now in control but
it is less then 1999.
Interpretation:
The operating profit ratio represents what are often called the pure profits
earned on each sales rupee. This ratio indicates that how efficiently the expenses are
being controlled by management. The higher the margin the lower would be the
operating expenses and better would be management ability to control expenses.
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This margin in 2003 is 26.31%, which is greater then last three years and shows
good position of the company. This ratio is less then 1999 that is 29.68%.
Interpretation:
This measures the relationship between net profits and sales of a firm. This
ratio is calculated after deducting non-operating expenses, such as loss on sale of
fixed assets etc. from operating profit and adding non-operating income like interest
or dividends on investment, profit on sale of investments or fixed assets. The net
profit margin shows the net % age of sales after payment of interest and taxes from
operating profit. This ratio is 11.20% in 2003, which is higher then previous years
and is satisfactory. This ratio was low in pervious three years may be due to the
increase in tax rates or increase in profit.
Return on Investment:
Interpretation:
This ratio measures the profit generated per dollar/rupee of investment. This
ratio also provides an indicator of overall effectiveness of management in
generating profit with the available assets .If utilization of assets is productive the
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return would be high and position would be good. This ratio is 21.38% in 2003 and
is greater then previous three years.
Interpretation:
This ratio indicates as to what proportion of earning per share has been used
for paying dividend. If we can see the result of dividend payout ratio in the year
2001 the PFL pay nearly 127% dividend from its total earning. In the year 2003 the
PFL pay 89% dividend from it’s earning. The PFL pay less dividend in the year
2003 because the company want to make expansion in their business that’s why the
company pay less dividend then other years. The result of the dividend payment
ratio is good. The shareholder has more confidence on the company.
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SWOT ANALYSIS
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WEAKNESESS
Pakarab has no proper framework and policy for the recruitment of employees
which result inefficiency.
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OPPERTUNITIES
The company has its own internal audit system and Government also audits
the company. So, it is opportunity for company to check its performance yea
basis and reduce deficiencies regularly.
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Company can capture the market by moving fertilizer in the remote areas
through improving social marketing.
THREATS
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Product quality of Pakarab is not up to standard while FFC with almost the
same plant and machinery giving the standard product. So it should be improved.
Jobs should be assigned according to their caliber to develop their interest in
work, output and to enhance the efficiency of workers. It is also observed
that in some cases more than one department maintains the same record.
This is done all of over staffing and unbalanced distribution of work, which
results in de-motivation of the employee and decrease in efficiency.
In Pakarab there is lot of documentation and lengthy procedure of paper
work involved, which results in wastage of time and deficiency so each system
should be computerized through intranet work.
There should be a strict means to force the employees to take safety
measures and follow rules. Management should take necessary action to implement
the safety rules in the organization.
Employees should be transferred with in departments so there is job variety
that develops their interest, update their versatility in their performance. So proper
analysis should be done and explore those employees who can do better work in the
organization.
People working in one section or department from years are still with the
same knowledge and style of doing job. There should be proper career planning of
employee that not only sharpens the skills of the employee & improve its efficiency
but also results in better and improved output for the organization.
There should be delegation of authority up to certain extent that enables
manager to take timely decisions at the spot with confidence. Involvement of
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top management and reaching at the final decisions is time consuming and
some times result in heavy losses.
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