Final PFL

Internship Report
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
Department Of Management Sciences IUB

Internship Report
The management keeps supportive atmosphere for employees to work in the

company. Every one can approach to an management at any time for the solution of
its problems. Decisions are mostly made at top level but it is the good behavior of
management that they receive low resistance from employees. The governing body
of the organization is board of directors. Managing Director is the chief executive
officer of the company.
There are four divisions of the company headed by General Managers.
1. Finance Division
2. Manufacturing Division
3. Internal Audit Division
4. Corporate Affairs and Commercial Division
Under the Finance Department, Fixed Assets Section is responsible for the
proper management of the fixed assets of the company. Sales Department keeps the
records of sales, which is made by the National Fertilizers Marketing Limited
(NFML) on behalf of Pakarab. Insurance Section deals with insurance related
works either vehicles or employees.
Accounts Section keeps four sub sections. Cash section collects, pays and
maintains cash balances in the form of petty cash in office and through banks.
Budget Section forecast and implements budget for whole organization. Book
Keeping Section prepares and compiles the financial reports on monthly and
quarterly basis.
Pakarab Fertilizer is working efficiently with compound and complex
production and huge management. To maintain this efficiency, the company should
keep track on opportunities and strengths and should minimize its weaknesses.
Overall, Pakarab is a great production unit participating in the prosperity of the
country and strength the economy of Pakistan.
INTRODUCTION AND BACKGROUND
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Department of Management Sciences IUB
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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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o Fertilizers are used normally natural and chemical fertilizes not

available in huge amount every season.
o Improper guidelines about cultivation.
o No particular financing schemes for landless farmers.
o Low quality supply of seeds and slow progress is biological and
technologic fields.
For the fertilizers productivity first fertilizer plant of the country was
completed and started production at Daud Khail in the early 1950’s for the
manufacture of Ammonium Sulphate. The production capacity of this plant was too
small to fulfill the country fertilizers requirements.
So to get better results in field of agriculture and to enhance the national
economy, Government of Pakistan established industrial Development Corporation
PIDC (Pakistan Industrial Development Corporation) was formed, Pakistan
Government decided to improve the standards of agriculture. PIDC (Pakistan
Industrial Development Corporation) played a pioneering role in the country. The
full credit goes to PIDC that within the short span of time it is not only setup the
plants but it also arranged the training and supply of manpower for the operation
and maintenance of their factories.
The first urea plant of the country was setup at Multan by Western
Pakistan Industrial Development Corporation (WPIDC) in 1962 So NFC (National
Fertilizer Corporation) was established With an authorized share capital of Rs.
1000 billions which was entirely subscribed by the Government of Pakistan where
expansion took place in 1973 and 1979.
. Another plant was setup in 1968. These plants produce 750,000 M.T of urea
jointly. Then Daud Hercules built its plant in November 1997 ,with 34500 Million
Tons capacities, which increases to 445000 Million Tons in 1991.
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In 1981 NFC’s Pak Saudi fertilizer plant started production of 550,000

million tons of urea and in 1982 HariPur Hazara started producing 96,000 Million
Tons.
In the same year, FFC Machigot plant started its production with capacity of
570,000 Million Tons after that, which was increased to 1,330,000 Million Tons in
March 1993.
Presently, there are nine fertilizer-producing units in Pakistan. Four units are
state owned and are controlled by the National Fertilizer Corporation (NFC). The
remaining five units are managed by the private sector. The state owned units are
Hazara Phosphate Fertilizer (Pvt.) Limited, Lyallpur Chemical & Fertilizer Limited,
Pak Arab Fertilizer Limited, and Pak American Fertilizer Limited.
Units in the private sector are Engro Chemicals Pakistan Limited, Dawood
Hercules Chemicals Limited, Fauji Fertilizer Company Limited, FFC-Jordan
Fertilizer Company Limited, and now Pak Saudi Fertilizer Limited. Total
investment by the private sector in this industry is over Rs. 69.1 billion (US$ 1,273
million).
NFC is the only organization in the public sector, which is mainly
responsible for fertilizer production and marketing of public sector units that how
much fertilizer should be produced. Which will exactly meets the demand and how
to market it properly.
These are the fertilizers units in Pakistan, which are in production under FFC and
their production capacities.
FERTILIZERS PLANTS AND CAPACITY UNDER

NFC:
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Four fertilizer units are given production at present.
Unit Product Establ- Capacity (M. Capacity Current

Name shed ton/annum) in Increased/E capacity
Year 1973 stablished (M.ton/year
)
Pak Arab NP + - 1979 304500
Fertilizer CAN 1961 103000 1979 450000
Ltd Multan UREA 1961 59400 1986 92400
Pak
American
Fertilizer UREA 1957 90000 1998
Ltd. 346500
Daudkhail
Lyallpur
Chemical&
Fertilizer SSP (P) 1957 18000 72000
Ltd.
Jaranwala
Hazara
Phosphate
Fertilizer SSP (G) 1967 36000 1989 90000
Ltd.
Hari Pur
Total 306400 1355400
Capacity
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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With a vision to acquire self-sufficiency in fertilizer production in the

country in 1962, the Government of Pakistan planted a big project of fertilizers in
the country and setup a “Natural Gas Fertilizer” completed with the assistance
from Govt. of “France”.
The fertilizer factory had the capabilities to produce:
“Ammonia” 200 Metric Ton per Day
“Urea” 180 Metric Ton per Day
So in this context a protocol concluded and signed on Nov. 15,1972 in Abu Dhabi
by the two Governments Islamic Republic of Pakistan and Emirates of Abu Dhabi
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.
On march 07, 1973,the agreement was executed between West Pakistan
Industrial Development Corporation of Pakistan (WPIDC) and Abu Dhabi National
Oil Company (ADNOC) So, as a result of this agreement of participation Natural
Gas Fertilizer Factory (NGFF) established in 1961 was modernized and expanded
in the year 1978-79 as equity participation. The company with paid up capital of
Rs. 743.061 million was renamed as Pak Arab Fertilizer (Pvt.) Limited.
Modernization and expansion project included setting up of new ammonia.
Utility Nitric Acid, NP and CAN plants while Urea plant was retained as
operating.Ammonia / Urea rehabilitation /expansion and rationalization project was
implemented in 1986 through world bank loan that included setting up of new urea
plant and other energy conservation and pollution abatement measures. This is the
only factory, which has variety of products. This unit is currently producing three
types of fertilizers i.e. Calcium Ammonium Nitrate (CAN), Nitro Phosphate (NP),
and Urea with the daily design capacity of 1500, 1015 and 280 M.tons respectively.
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How ever the budget production of these products is determined keeping in

view marketing condition. After seeing the market conditions company determines
the budget for the production of each product separately.Twice increase in gas price
affected the profit of the company. Aging of the plant equipment and stringent
environment regulations and energy conservation necessitates replacement and
incorporation of some equipment, for the sustained production and profitability. A
five-year business plant is prepared to meet these objectives.
Pakarab Fertilizer limited is situated in Multan. Pakarab Fertilizer plant is
currently producing three types of products. CAN, NP and Urea. Its daily
production for each product is
CAN 1100 MT
NP 1100 MT
Urea 350 MT
Company approved six carriage contractors but only three carriage contractors are
working with this factory at the moment. All north Punjab is getting benefits from
its products.
Pakarab Fertilizer Company is the only project of Pakistan that producing
“compound” fertilizers in the country. The World Bank also helped in expansion
and modernization of factory in the shape of US $ 24.10 Millions as a loan and the
project completed at a total cost of Rs.359.164 Millions.
HEAD OFFICE
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Head Office of PFL is National Fertilizer Corporation (NFC) located in

Lahore. Organizational Chief is called the Chairman of the company heads this
office and there are four General Managers assist him to do the organizational
responsibilities.
INTRODUCTION TO NATIONAL FETILIZERS
COMPANY
National Fertilizer Public Company Limited, NFC is committed to developing the

agriculture sector and redressing the dependency on imported fertilizer products.
The government cabinet of General Prem Tinsulanonda the former Prime Minister
had the resolution to establish the National Fertilizer Public Company Limiter in
1982. Even though NFC's structure has partly reformed, the company devotes to the
production of good chemical fertilizer at reasonable prices, providing training and
education for Thai farmers as our company's important policy.
National Fertilizer's production plant utilizes some of the world's most
advanced technology, which is able to produce a higher quality of fertilizers from
basic raw materials. Phosphate Rock and Sulphuric acid are fed and reacted in the
reactor tank in Phosphoric Acid plant.
The modern technology production helps us to control the quality,
production capital and provide the farmers with a guarantee that they will have
standard fertilizers for continued use and readily available for the harvest season.
Nonetheless, National Fertilizer has high standard of pollution system and friendly
with environment Thai Environment Institute has issued the certificate of ISO
14001 to the factory.
Mission and Objectives
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Every company has some define objectives according to which make

strategies. 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”.
Major objectives of the company are as follows:
 To lessen the dependence of the country on fertilizer imports which
obviously save a lot of foreign exchange
 To enhance the productivity of agricultural sector. For this purpose the
farmers are also being provided with the modern technology through
technical services department.
 To maximize the profits of the company.
 To increase their markets share in the fertilizer industry.
 To train, motivate and inspire workers by giving them certain incentives to
company employees.
 To provide job opportunities to thousands of people within the country.
 To serve the country and uplift the economy by inducing more and more
investments in its business.
 To pay in time all government dues, taxes and Service charges.
 To achieve the efficient production by using existing fertilizer producing
plants.
 To establish the new Nitrogenous, Phosphoric and compound fertilizer
producing units in public sector.
 To build an efficient infrastructure for marketing and distribution of
fertilizers produced by new and old plants.
COMPANIES UNDER ADMINISTRATION
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National Fertilizer Corporation has the following companies and institutes

under its administrative control:
1. Pak Arab Fertilizer Ltd. Multan
2. Pak American fertilizer Iskandrabad
3. Hazara Phosphate Fertilizer HariPur Hazara
4. Lyallpur Chemicals and Fertilizer Faisalabad
5. NFC (Institute of Engineering Multan
And Technology (IET)
6. IEFR (Institute Of Engineering And Faisalabad
Research Fertilizer)
PLANTS
Commissioning Dates
Power Plant June 24, 1978

Nitric Acid Sep 11, 1978
Ammonia Sep 27, 1978
Urea Plant Oct 01, 1978
CAN Plant Nov 26, 1978
NP Plant Jan 12, 1979
Products and Capacities
PRODUCT FORM GRADE CAPACITIES
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Ammonia Liquid 99.5% 313,500T

Nitric acid Liquid 58-60% 441,600T
Categories
Nitro phosphate (NP)Number of Ordinary
Prilled Total
23%N value Percentage
304,500T
CalciumOfammoniumShareholders
Nitrate Prilled
Shares of Rs. 26.5%N(Rs.) 450,000T
Of Holding
Urea Prilled 46%N 924,00T
Shareholders 10/- each
Individuals 3 00000003 000000030

N.F.C 1 38639192 386391920 52
ADNOC 1 356669050 48
(IPIC)
Total 5 74306100 743061000 100
PATTERN OF HOLDING OF SHARES BY THE

SHAREHOLDERS AT JUNE 30, 1993
NUMBER OF SHAREHOLDING TOTAL ORDINARY
SHARE- HOLDERS SHARE HELD
3 One share each 00000003
2 More than one 74306097
Total 74306100
PROJECT COST
LOCAL FOREIGN TOTAL
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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
LOCAL FOREIGN TOTAL

(Rs in Millions)
Equity 96.921 96.921

National Fertilizer
Corporation of Pakistan 335.990 335.990
Abu Dhabi National Oil Co. - 310.150 310.150

Retained Earnings 40.180 19.410 59.590
Financing Through UHDE - 39.510 39.510
Foreign Loan
LOCAL FOREIGN TOTAL
(Rs in Millions)
World Bank Loan - 602.535 602.535

Asian Development Bank 267.300 267300
Opec Special Fund - 108.900 108.900
49.500 49.500
Exchange Fluctuation - 185.390 185.390
Local Loans 1,021.825 1.021.825
1,494.916 1,582.695 3,077.611
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PLANTS IN OPERATION
In Pakarab Fertilizers Multan efficiently working plants are:

 Urea plant
 Ammonia plant
 Nitro Phosphate plant
 Nitric Acid plant
 Calcium Ammonium Nitrate plant
 Power House
Along with this fertilizer's plant, Pakarab has its own Powerhouse, which has
the capacity to produce 27 Mega Watts (3 Turbo Generators of 9 MW each) of
electricity.
GENERAL INFORMATION
 Registered Name: Pakarab Fertilizers (Private) Ltd

 Status: A Private Limited Company
 Partners: Having only Two Partners
 Facility Location: Khanewal Road, Multan
 Brand Name of Product: KISAN (Urea, Nitro Phosphate (NP),
Calcium Ammonium Nitrate(CAN)
 Main Products: Urea, Can, NP
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 Intermediate Products: Ammonia, Nitric Acid, Ammonium

Nitrate Crystals
 Area Factory: 172 Acres
 Housing Colony: 130 Acres
 Raw Material : Natural Gas 52 M.Cubic feet (per day)
 Storage Capacity: NP (Unbagged) 30,000 Tons
CAN (Bagged) 27,000 Tons
Urea (Bagged) 12,000 Tons
 Water and Power: Self Generation
 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
Pakarab Fertilizer Company have a Board of Directors with 11 members, out

of these ADNOC (IPIC) from Abu Dhabi nominates five representing NFC and
four. The Chairman and the managing director, both are full time workers. The
Board of Director appoints them. Managing Director has an adequate power to
manage the day to day affairs of the company on sound commercial lines, efficient
management and operations of the plants. Four divisional heads assist him.
 GM Manufacturing
 GM Finance
 GM Corporate & Commercial
 GM Engineering or audit
It is the responsibility of the managing director of company to control the
management and to increase the efficiency of plants and workers as well.
There are four main divisions.
1) Manufacturing division
2) Internal Audit division
3) Finance division
4) Corporate affairs and commercial division
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1.MANUFACTURING DIVISION
Manufacturing division is further divided into following departments. Each

department is performing its own functions according to its requirements. These
departments are:
 Safety Operation and Environment Department
 Production Department
 Material Department
 Inspection Cell
 Technical & Planning Department
 Personnel & Industrial Relation Department
 Security Department
 General Administration Department
 Procurement/Commercial Department
2.FINANCE DIVISION
 Management System Department
 Education Department
 Finance Department
 Account Department
3&4. AUDIT AND COMMERCIL DIVISION
These both divisions are not further divided into sections or in the
departments.
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OVERALL ORGANIZATIONAL STRUCTUE
PAKARAB FERTILIZERS (PRIVATE) LIMITED

MULTAN
Board Of Directors
Managing Diector
Manufacturin
Finance Accounts Audit Corporate &Commercial
g
Finance Lahore Office Engineering Production Shipping Karachi
Security Gen. Gen. Service

Finance Multan Office Commercial
Admin LHR
Inspection Medical Service

Accounts Multan Office Commercial Lahore
Tech.&Planning Human Resource

Management System.
Safe Operation &Env.

Education Deptt.
HIERARCHIAL SETUP
The policy of Pakarab Fertilizer (Pvt.) Limited is governed by a board of

director consisting of 9 directors. These directors are nominated by the shareholders
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of the company NFC (NATIONAL FETILIZERS COPOATION) from Islamic

Republic Of Pakistan and IPIC (INTERNATIONAL PETROLEUM
INVESTMENT CORPORATION) of Abu Dhabi.
The Managing Director as a Chief Executive of the Company assisted by
following 10 divisional heads which are given below:
1) General Manager (Manufacturing)

2) General Manager (Finance)
3) General Manager (Technical & Planning)
4) General Manager (Safety Operation &Environment)
5) General Manager (Commercial)
6) General Manager (Audit)
7) General Manager (Company Security)
8) General Manager (Engineering)
9) General Manager (Production)
10) General Manager (Chief Medical Office)
Under each General Manager, there are Senior Managers, and those are
assisted by Managers, Deputy Managers, Assistant Managers and various
subordinates.
PLANTS INTRODUCTION
 Ammonia Plant
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The ammonia plant, which is based on Pullman Kellogg’s catalytic steam

hydrocarbon reforming process, was originally designed to produce 910 metric tons
per day of ammonia. The capacity has been enhanced to 960 M.T per day after the
installation of cryogenic purge gas recovery u n i t i n 1 9 8 6 . T h e p r o c e s s
uses steam, air and natural gas as raw materials.
Ammonia consisting of one part of nitrogen and three parts of hydrogen is
used as an intermediate for the production of all nitrogenous fertilize natural gas
containing about 92% of methane and steam provides the air.This plant was
however designed in mid seventies. Technological advancements have resulted in
the evolution of low energy consuming ammonia plants. In order to compete with
these newly designed plants, the management of Pakarab has planned the
replacement of existing quench type ammonia converter baskets with low energy,
high efficiency radial flow converter baskets.
Nitric Acid Plant
The nitric acid, required as an intermediate for the production of nitro

phosphate and calcium ammonia nitrate fertilizers, is produced in two plants. The
smaller C&I/Girdlers process plant have a capacity of 180 M.T per day of nitric
acid, calculated as 100. The large plant based on UHDE process produces acid in
two parallel lines each with a designed capacity of 600 M.T per day of acid
calculated as 100%. Both processes use ammonia and air as raw materials.
Platinum recovery system has been instated in 1988 on each line of the large
plant. The purpose of these recovery systems is to save volatile platinum on the
surface of recovery gauzes. These recovery systems have resulted in substantial
savings in consumption of platinum metal.
 Calcium Ammonium Nitrate (CAN) 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
Pakarab Fertilizer Company has a well a well-managed and well-organized

finance department. To achieve the company objectives an accounting department
plays a very important role in the organization particularly in very complex
corporations.
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Finance Department of Pakarab has to deal with overall financial activities

of the organization in order to achieve competency and efficiency. This is the
biggest department of the company concerned with receipts and payments of
company. Computer section and internal audit section are also working separately
in this Department. G.M (Finance) is the head of this Department.
This department is divided into two major divisions.
1) Finance division
2) Accounts Division
1.FINANCE DIVISION
The Finance Division is further divided into following sections:-

 Payable section
 Cash section
 Budgeting section
 Sales section
 Book keeping section
GM Finance
2.ACCOUNTS DIVISION
Sr.Manager Accounts
The account division is again divided into further sections:-

Dy Manager(inv,ins&F/A
 Payroll section
 Letter of credit (L/C) section
 Inventory section
Store Account Inv. Sec. Fixed Asset Section Insurance (Claims)
 Fixed assets and Insurance section
Superintendent ORGANOGRAM
S Accounts Assistant (FINANCE)
Sr. Office Assistant
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Department
S. of Management
Account Assistant Sciences
Accounts IUB
Assistent
Account Assistant
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DEPARTMENTAL SKETCH
In Finance Department the management is in the following sequence:

 GM Finance
 Senior Manager Finance
 Senior Manager Accounts
Senior Manager Finance
There are three Assistant Managers working under Senior Manager Finance,
who are following:
 Assistant Manager Inventory
 Assistant Manager Payable
 Assistant Manager Sales
SENIOR MANAGER ACCOUNTS
Under Senior Manager Accounts two managers are working as given below:
 Manager Accounts
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 Manager Fixed Assets
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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RAW MATERIAL AND SPARE PARTS
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
In payable section three types of tax payments are made.

1. Income tax
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2. Professional tax
3. Sales tax
1.INCOME TAX
Income tax is usually paid to the Federal Government. The payment of

income tax must be made within one week when supplier’s amount is 25000 or
more, and then tax is imposed. The calculation of Income tax is different for goods
and different for services. It is also different for the companies having NTN
(National Tax Number) and for those do not have NTN.
FOR GOODS
The formula for calculation of income tax is:

Material Value + Sales Tax * Income Tax Rate / 100 = Income Tax
 Income tax rate with NTN 3.5%

 Income tax rate with no NTN 5%
FOR SERVICES
 Income tax rate with NTN 5%

 Income tax rate with no NTN 7%
If the supplier is new then the first trip of loaded truck supply is free of tax. If
the company hired a building in city or outside the city, the Income tax will by
7.5%.
2.PROFESSIONAL TAX
Provincial Government receives professional tax from company two times in

financial year. The minimum tax amount is Rs. 200 on first time transaction.
 From Rs. 25000 to 10, 00,000 Rs. 2000 P.T
 From Rs. 10, 00,000 or above Rs. 3000 P.T
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3.SALES TAX
In case of sale of fertilizer (NFML) pay 15% Sales tax to Government on

behalf of Pakarab Fertilizer Company.
When company purchases direct material or indirect material form registered
firms 15% and in case of unregistered firms 18% sales tax deducted on behalf of
the Government and pay the balance of receivable and payable of sales tax to Govt.
indirect material include packing material, electricity, spare parts etc. On this
material company can’t receive any rebate. Direct material include material that is
directly used to produce the finished goods for example chemicals etc.
LOCAL FREIGHT PAYMENTS
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
Pakarab Fertilizer is a big production unit. It requires a huge amount of raw

material and other maintenance material which is supplied by contractors. So for
Pakarab there is a list of prequalified contractors for hiring their services. Company
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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
Pakarab Fertilizer is a big organization. It requires a large number of

manpower to fulfill this requirement. The company hires two types of employees.
 Permanent employees Ranges from 1000 to1100
 Temporary employees Ranges from 600 to 700
The contractors provide temporary employees to PFL according to requirements.
From these employees the company saves the extra expenses and allowances like
residence facilities, transportation, electricity, pension etc. Temporary employees
have opportunity to become permanent on the seniority bases. The contractors also
provide executives, engineers, doctors etc. to company. All the payments of hired
labor are made through payable section.
 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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1) CASH PAYMENT VOUCHER
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
At PFL two types of cashbooks are maintained.

1. Main Cash Book
2. Petty Cash Book
All the cash transactions are entered in cash book through vouchers. In case
of bank receipts Company maintained a separate register in which all the receipts
are entered according to the Voucher Number.
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PAYMENTS
Payable section prepares the payment voucher for purchase of any

department and signed by Deputy Manager Account payable. After approval it is
sent to cash section where senior cashier prepares the cheque and attach the
covering letter with the cheque. Covering letter includes the information about total
amount, deduction, net amount payable, cheque number, party name and date. If the
amount of cheque is more than Rs. 20,000 it will be signed by both G.M Finance
and returned to superintendent cash department in order to dispatch it.
RECEIPTS
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.
PETTY CASH BOOK
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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
Budgeting section is concerned with the preparation of annual budget &

long-rang developments plans followed by the accounts and other departments of
the company. When the budget for next year is prepared. All the departments
provide information about their input demand like how much their purchases and
consumption rate will be. On the bases of these need assumptions this section
prepares the budget. Two types of budgets are prepared in this section
1) CAPITAL BUDGET
2) REVENUE BUDGET
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
Two types of budgets are prepared in budget section.

1) Short-range budget
2) Long-range budget
SHORT RANGE BUDGET
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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
Annual budget of the company is prepared on the basis of estimates drawn

by the respective departments. The budget committee examines the estimates
prepared by each department, which recommend final proposals to the company
management for the approval. Finance division on the basis of approved estimates
develops budgeted financial statement.
BUDGET SCHEDULE:
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Budget is prepared, finalized and approved before the start of the financial year.
The schedule is as under:
December: Distribution of Budget Estimates Forms
January: Receipt of Forms and Review of the Budget Estimates by
G.M (M)
February: Receipt of Sales and Production Estimates
March: Annual Budget without Monthly Distribution Will Submit to NFC.
April May: Submission of Budget after Bifurcation into Monthly Budgets.
COMPILATION AND APPROVAL OF BUDGETS
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
Monthly Reports Produced and presented to the Management summarizing

the actual and budgeted variances. Quarterly budget performances for every
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functional budget are produced specifying percentages of every variances, which

may Management to taken any corrective action.
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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These are given below:

 Payroll for executives
 Payroll for supervisor
 Payroll for maintenance staff
 Payroll for subordinates
 Payroll for operation staff
Every payroll is processed separately one by one. The data received from different
resources is entered into the computer by accounts department at the end of month
and is processed.
Operations
Employee’s Transaction. One form is for allowance & other is In payroll

section different type of data is to be keyed. It is known as for deduction. These two
forms are filled on the basis of two different reports received by the payroll section.
In addition other statements regarding income tax, provident fund contribution and
loans are also prepared. All the above data is organized in a manner that it can be
fed into the computer. The main processing of the program is run. Formulas are
used to calculate the net pay containing full details of pays, allowances and
allocation to funds like provident fund, mosque fund, EOBI fund and income tax.
After the processing is over, seven different kinds of reports are generated which
are:
 Payroll Slip
 Bank Statement
 EOBI Statement
 Pension Statement
 Income Tax Statement
 Pay Allowance Summary
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The following are the steps involved in operations of the payroll section:
Procedure
Data about employees is collected from different departments and the

computation of this data takes place in computer section where different reports and
pay cheque have been generated. These are being checked by accounts section &
sent to chief manager finance for further checking. He checks and approves these
documents then these documents cashier prepares checks for the payment and send
to the assistant manager. He approves and send to different banks along with the
amount to the individual accounts. Other documents are sent to the concerned
department. One summary is routed to the general ledger for book keeping purpose.
Management Grades
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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Provident fund contribution
Company and employee pay equal amount of payment (basic + special +

Indri/special) 10%.
PFL provides the following loans to its employees.
 PF Loan
 Vehicle Loan
 House Building loan
 Soft Loan
 Wheat Loan
 Welfare Fund
 Fare-Price Shop
PAYMENTS
Company pays the following allowances and facilities to its employees.

Basic Pay
It is the basic pay, which the company has to pay.

House Rent
(Basic + 90%) 50%. This is deducted from salary.
Colony Allowance
It is fix i-e Rs.48.
Utility/Guard
Outside the resident 125, 150, 175(Scale wise).
Gardening
Each employee for colony resident is given Rs. 155.
Gas Allowance
Rs.200 for Each employee.
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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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membership of fund but immediately be terminated on member ceasing to be an

employee.
Contributed fund is invested by PFL in different banks like UBL, Union
Bank, Habib Bank and Alflah Bank. The profit is then distributed among the
trustees as calculated at the rate of 10% per annum from the first day of the
financial year up to date be ceases to be a member.
FIXED ASSETS SECTION
Fixed assets department is headed by Senior Manager Accounts. Fixed

assets are more important part of the organization property. And this section is
developed for the immediate information of assets of the company to make timely
decisions about the utilization of assets. Fixed assets of the PFL include:
 Freehold Land
 Building on freehold land
 Railway Siding
 Plant and Machinery
 Furniture and Fixture
 Tools and Equipment
 Vehicles
In Pakarab, the assets having value of more than Rs.5000 is categorized as fixed
asset. These are also called capital fixed assets. So
 Capital assets More than Rs.5000
 Non-capital assets Less than Rs.5000
If there is increase in existing fixed assets. It is called as “addition”. If there
is decrease in fixed assets then it is called as “deletion”.
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PROCEDURE
Whenever any department requires any asset, material requisition form is

filled there and approved by the head of that department. This is called the indent of
the department. It is sent to the stores for the purpose of receiving particular item/s.
if items are available; he hands over the items to the person and gets the form
signed. If the items are not available in stores, he writes “NA” on the form and
sends it back to the department. Then it prepares purchase requisition form Then
budget department check the availability of fixed asset fund for that department &
approved it.
After that this indent sent to commercial department with budget approval.
Now it is responsibility of commercial department to issue the requirements of
assets to registered companies and get demand quotation from them and place
purchasing order.
When the material is reached in the store, the inspection section check the
material whether the material is according to the specification, which is mentioned
in the purchase order. Then in store two reports are prepared:
 Material Inspection Report
 Material Receiving Report (MRR)
There are 4 copies of this MRR. These copies are distributed as follows:
DESCRIPTION COPIES
 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:
 Fire insurance (New plant, old plant & Stocks)

 General Insurance
 Insurance of vehicles
 Cash in transit/Cash in safe
 Insurance of machinery breakdown
 Insurance of pressure vessels
 Journey Insurance
 Insurance against building loans
 Insurance of goods in transit
 Fidelity Guarantee
• Person dealing with cash/store
• Person dealing with precious metal in safe
• Person dealing with precious metal in converter
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• Person dealing with precious metal in safe & in converter (Burglary

policy)
 Insurance of vehicles
 Group Insurance
 Marine import Rock Phosphate
 Insurance of employee’s cars against loans
 Life insurance (Accident, Death & Disability)
INVENTORY ACCOUNTING SECTION
Inventory department is headed by Senior Manager Accounts. Under him an

Inventory Manager is working. Inventory is one of most important assets of many
companies. It represents the substantial portion of the company. Good inventory
management is crucial for large companies. So that, the companies must strike a
balance between inventory, investment and customer service level.
DOCUMENTS INVOLVED
In Pakarab inventory section mainly these documents are practiced:

1. Purchase requisition (PR)
2. Material Receiving Report (MRR)
3. Material Return Note (MRN)
4. Material Requisition (MR)
5. Inter Store Transfer Note (ISTN)
6. Daily Movement Report (DMR)
Day to day inventory affairs include issuance & receipt of material to
different departments. So in this regard a specific procedure is adapted to
standardized every activity and have a good control over the inventory.
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RECEIPTS
 After the inspection of goods, the storekeeper prepares serially numbered

copy of goods receipt & inspection report.
 Storekeeper allocates item code in accordance with the coding scheme for
each item of store received.
 Storekeeper takes charge of materials purchased & records the quantity in
bin cards.
 In case materials are no more required by the department, the concerned
department prepares store run note.
 Storekeeper signs all copies of store return note & record the quantity in Bin
Code in Receipt column.
 Forwards original copy to finance department for valuation and entry in
store ledger.
 Calculates Bin Cards new balance & initial.
ISSUES
 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.
LETTER OF CREDIT (L/C) SECTION
Pakarab is a big manufacturing unit. It requires local purchases as well as

foreign purchases. L/C section deals with the purchase of foreign purchases of
materials and equipment. This section is also under the finance department.
TYPES OF L/C
There are four types of letter of credit:

1. Invisible L/C
2. Repair L/C
3. Site L/C
4. D.A L/C (Document Acceptance Basis)
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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
L/C section is responsible to perform the following functions:

1. Establishment of Letter of Credit.
2. Maintenance of L/C Ledger and import License register and
preparation of schedules.
3. Retirement and adjustment of bank documents and their dispatch to
Karachi for clearance of consignments.
4. Arranging shipping guarantees.
5. Checking bill of entries and submission to State Bank of Pakistan.
L/C REQUIREMENTS
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Following requirements are necessary for letter of credit:

1. Name and Address of beneficiary
2. Beneficiary’s bank name
3. Bank charges
4. Presentation/Negotiation of documents
5. Validity of letter of credit for shipment
6. type and items of credit
7. Advising bank (Name of the bank with address)
8. Confirming bank (Name of the bank with Address)
9. Value of letter of credit
10. Method of shipment
11. Shipment from (City name of the country)
12. Part shipment
13. Transshipment
14. Country of origin
OPERATION OF L/C SECTION
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
BOOK KEEPIING SECTION

Book keeping section comes under the finance division and the busiest
section of the department. The GM Finance heads this section. Under him two
assistants and two superintendents are working. This section performs the following
main functions:
1. Preparation of periodic and annual financial statements.
2. Book keeping
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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
MANAGEMNT SYSTEM DEPTT.

(MSD)
This is the age of information technology, no one can deny to this reality. To
survive in the ever changing environment of today, business organizations not only
need to control the external activities but also internal one. In the beginning, there
was no computing facility available in Pakarab all the activities were manually
performed. But, in today’s world of technology and computer like every other
business organization, the management of Pakarab, felt the need of computerization
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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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In November 2001 MSD purchased new IBM eServer iSerie400, machine by

replacing old AS/400. it is premier integrated business server and design for
complex business environment.
Now the following are the specifications of hardware and software in computer
section.
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
Operating System OS/400
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OS Version & Release Version % Release 1

Other Software IBM DB/2, Web Sphere Development
Studio, Client Access, Lotus Domino.
Advantages
 IBM is using 6th generation 64 bit microprocessor

 Technology based on copper and Silicon –on- insulator.
 Dynamic and shared logical Processing, easier to manage multiple
application in a single server.
 Run up to 4 Partition in a single Processor.
 Can run LINUX, JAVA/XML, LOTUS,DOMINO MICROSOFT
WINDOWS, UNIX.
 Easy connectivity and data sharing with other server like HP,
DEC, COMPAQ NT.
FUNCTION S OF OPREATING SYSTEM

(OS/400)
OS/400 program provides the tools you will use to run the AS/400 system. It
allows you to run multiple other programs running at the same time .major
functions of the AS/400 are as following :
 Control Language
 Data Management
 Work Manaement
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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.
It provides amenue for easy access to frequently used opreater functions.

COMMUNICATYION SUPPORT:
The OS/400 program supports a wide range of communication functions that
allow your AS/400 system to communicate with other types of systems as
well as other AS/400 systems.
SECURITY:
Security protects your valuable works.
PC SUPPORT:
The PC support program provides a means of attaching your personal
computer to your AS/400 system as programmable workstation.
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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
OPERATING SYSTEM 400

The Operating system 400 program includes extensive online help, on-line
education and on-line problem analysis.
 ON-LINE TRAINING
The on-line training is provided by AS/400, i-e tutorial that is segregated
into course modules about the system operations and concepts and takes about 30 to
40 minutes to complete and can be tailored to suit the user’s level.
 CUSTOMER SUPPORT SERVICE
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It helps you in dealing hardware and software problems and supplies

technical information and support.
This support includes:
 Resources and configuration support
 Problem management
 Network problem management
 Technical support and information access
 USER FRIENDLY
The system is designed to be operated entirely from built in menus, without
the user having to know complex terms or commands Experienced. users may
choose to use the AS/400 control language, which is made up of commands.
APPLICATION SUPPORT FOR AS/400

The migration aid is available to help you move many of your system
application to the AS/400 system.
DATA FILE UTILITY
The data file utility is a tool to help you meet some of programming needs
without knowing a programming language through a series of displays, DFU asks
questions about the program user want to create and the answers to create that
program.
SCREEN DESIGN AID (SDA)
SDA helps design menus and display, and create on-line help information.
SDA is available in an AS/400, system36/38 environment form. The manus
created present a list of options from which the operator can make a selection. The
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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.
COMPUTERIZED FINANCIAL SYSTEMS AT

A GLANCE
MSD Manager and operators runs a no. of systems on daily/monthly/yearly
and requirement basis providing services to different department.
Following is a brief discussion.
 INVENTORY MANAGEMENT SYSTEM
In this department system currently 42,562 store items are controlledfrom

the whole production systems. This system updated the inventory of organization
and maintained record properly that help management to take decision availability
of items to keep the operation smoothly.
Reports on daily basis after entry of above mentioned documents.
 Material Requisition
 Material Receiving
 Inter store Transfer Note
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 INDENT GENERATION SYSTEM
It is subsystem of inventory management system. Tasks are done by this

system. Demand item indents are generated daily basis as per requirement of
indenters. It has detailed information like item description, supplier address,
required quantity on hand, quantity ordered, usage in last five years, last purchase
order no. established unit price (Inventory price) and also equipment specifications
etc.
 MATERIAL FORECASTING SYSTEM
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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 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
 INVENTORY ACCOUNTING 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.
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
It is also batch system and runs monthly for preparation of monthly

payroll for the employees and also provides a lot of useful information to finance
department and the management.
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 PROVIDENT FUND SYSTEM

This is a batch system and the main purpose of the system is to take the
information about provident fund of employees from the payroll and post the values
in ledger.
This system produces the following general reports
 Provident fund balance report
 Provident fund statements report of the year
 Refundable loan statement report
 No-Member list/Member list report
 PETTY CASH ACCOUNTING SYSTEM
It is online and new developed system. It records daily transactions of cash

having value Rs.5000 or less. A key operator enters the daily vouchers to the
computer of MSD.
 CASH BOOK ACCOUNTING SYSTEM FOR
MULTAN
This is a batch system runs daily and monthly end. It maintain a register call
“Cash Book” by record every transaction which takes place in terms of cash. The
cashbook uses three types of documents (Vouchers) daily.
These are bank payments, receipts vouchers. Daily a key punch operator
enters three vouchers in to the computer.
 Cash book daily transactions report
 Cash book payment side report
 Cash book receipt side report
 Daily bank receipt side report
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 Cash book balance report

 Total monthly payment report
 Total monthly receipt report
 CASH BOOK ACCOUNTING SYSTEM FOR

LAHORE AND KARACHI
It is new developed and batch system. It records and processes vouchers
transactions concerning PFL accounts in Lahore and Karachi vouchers banks.
Its vouchers are entered into computer at MSD on fortnightly basis.
 GENERAL LEDGER ACCOUNTING SYSTEM

It is consolidated record of all financial activities. Two types of vouchers are
used for J.V & MCV Main cash vouchers. JVs are made for plant entry transaction
and for adjustment purpose. These adjustments are made against payments &
receipts. JVs number ranging from (1-487) are directly made by computer, when
general ledger system is run JV no. for Inventory accounting adjustment, JV
no.2&4 for payroll. General ledger system generates following reports.
 Trial Balance
 Main ledger
 Sub ledger
 Fixed cost report
 Variable cost report
 Schedule cost report
YEARLY BASIS REPORTS
 Complete Main Ledger
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 Complete Sub Ledger
 PAYABLE ACCOUNTING STSTEM

This batch system records detail of monthly payments paid to local
suppliers. It collect required information from Inventory Accounting System,
cashbook & general ledger system.
Payable system generates following reports.
 Yearly basis reports
 Complete Sub-ledger of suppliers.
 LETTER OF FCREDIT (L/C) SYSTEM

This is a small batch & new developed system dealing with issuance of L/C on
foreign purchase. It adjusts JV from cashbook too.
This system generates following reports.
 Schedule of L/C
 Sub-Ledger of L/C
YEARLY BASIS REPORTS

Complete Sub-ledger of L/C. it is a batch system designed to evaluate of net
worth of fixed assets. It provides necessary update information of net value of
assets, to management in making timely decision about the utilization of assets.
 PERSONNEL INFORMATION SYSTEM

It is a query based menu driven system. It runs on requirement basis &
produces following reports.
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 Seniority list of executive/workers

 Discipline wise report
 Cost center wise report
 Service, Age and Retirement report
 MEDICAL INFORMATION SYSTEM

 TELEPHONE BILLING INFORMATION
SYSTEM
 General reports
 Monthly based report of telephone bill of employees.
 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.
 FIXED ASSET SYSTEM
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It is a batch system designed to evaluate of net worth of fixed assets. It

provides necessary update information of net value of assets, to management in
making timely decision about the utilization of assets.
OTHER SERVICES
The management system department also has to provide training to the
trainee coming from various institutes/universities upon approval of the
management. It also helps the internee to complete their internship at MSD. It is not
an exaggeration that MSD of PFL is the only institution in Multan where the
students are getting education of AS/400. That is why trainee/internee is inducted
from universities/colleges time to time.
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Managerial policy
Analysis
Financial Analysis
SWOT Analysis
Suggestions
MANAGEMENT POLICY ANALYSIS.
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Management policies are necessary for the organizations for the

achievements of goals efficiently and effectively. Top management creat the
atmosphere in the organization which give direct others, How the subordinates
work in the offices. In Pakarab fertilizers, the management style is the mixture of
different styles. On one side we can see some decentralization that the all work is
done with the consent of workers.
Vision and goals should be achieved during the year are set with the
collaboration of the staff members and workers, while on the other hands we see
that the system is centralized. All the decisions are made at the top levels. If we
look towards the relationships between the management and workers, we fined
them informal, up to some extent. Both the managers and workers work with very
close to each other. The relationships are free and frank. Each of them can express
his interests and can discuss his problems with each other and the other realizes
them. The disputes are settled with the mutual understandings and dealings.
As said earlier that there is Centralization in Pakarab fertilizers like other
government owned organization. The policies are made at the top level of the
management. Higher management also makes all future decisions. No doubt, the
policies are imposed in the organization but the resistance against the policies is
very low. The reason is that when the policies are framed at the top level, the all
paper work is completed. All those who will be infected by the policy are contacted,
and their opinion is received and then the policy is made on the basis of these
opinions. That's why, the resistance is very low. The workers and staff members
honor all the policies.
OUTCOMES OF MANAGEMENT POLICY
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Pakarab fertilizers is successful in achieving its production goals due to its

outcomes of suitable management policy. These are the signs of its success. It also
shows the trend of the managers towards effective management.
The outflow of workers is very low. The person, who joins the organization once,
never leaves it.
 There is low degree of resistance is found against the policies of the
management.
 The working efficiency is also very high due to frankness and free
relationship between the management and workers.
 The high production is also a yardstick showing the success of management
policy because with the poor management, the workers are not satisfied and when
the workers are not satisfied; the production level is also decreased.
 There is a low rate of labor union and management clashes.
FINANCIAL ANALYSIS
RATIO ANALYSIS
Ratio analysis is a widely used tool of financial analysis. It is defined as the

systematic use of ratio to interpret the financial statements so that the strengths and
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weaknesses of a firm, as well as its historical performance and current financial

condition can be determined.
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
Ratios may be classified in a number of ways keeping in view the particular

purpose. To achieve the above purposes effectively ratios may be classified as:
1. Liquidity ratios.
 Current Ratio
 Liquidity Ratio
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2.Leverage /Solvency Ratios.

 Debt ratio
 Debt Equity Ratio
 Time Interest Earned Ratio
3.Efficiency/Activity Ratio Ratios.
 Inventory Turnover Ratio
 Age of inventory Ratio
 Account Receivable turnover Ratio
 Account Payable turnover Ratio
 Total Asset turnover Ratio
4.Profitability ratios.
 Gross Profit Margin
 Operating Profit Margin
 Net Profit Margin
 Earning Per Share
 Return On investment
 Dividend Payout Ratio
 Price Earning Ratio
 Dividend Yield Ratio
1.Liquidity Ratios
 Working capital:
Working Capital = Current Assets –Current Liabilities
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Years 2003 2002 2001 2000 1999

Working 475408279 408323235 320042089 408549447 355297306
Capital
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 =
Years 2003 2002 2001 2000 1999

Current Ratio 1.32 1.17 1.15 1.22 1.25
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 =
Years 2003 2002 2001 2000 1999

Debt Ratio 60.16% 72.79% 71.9% 67% 61.2%
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.
 Debt Equity Ratio:
Debt Equity Ratio = *100
Years 2003 2002 2001 2000 1999

D.E.R. 0:1 0:1 0:1 0:1 0:1
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.
 Time Interest Earned Ratio:
Time interest Earned Ratio =
Years 2003 2002 2001 2000 1999

T.I.E.R. 15.36times 9.45times 7.92times 19.27 times 214.69times
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 =
Years 2003 2002 2001 2000 1999

Inventory 19.53times 17.7times 11.12times 7.97times 20.17times
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:
Average Age Of Inventory =
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Years 2003 2002 2001 2000 1999

AAOI 18.69days 20.61days 32.81days 45.46days 18.09days
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:
Account Receivable Turnover =
Years 2003 2002 2001 2000 1999

A.R.T. 15.99times 8.02times 6.19times 7.79times 87.18times
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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 Average Collection Period:

Average collection period =
Years 2003 2002 2001 2000 1999

ACP 22.83days 45.49days 58.96days 46.85days 4.19days
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:
Account Payable Turnover =
Years 2003 2002 2001 2000 1999

A.P.T. 3.42times 3.13times 3.58yimes 3.12times 3.18times
Interpretation:
It is calculated to indicate the speed with which payments for credit

purchases are made to creditors means that how many times they can pay to their
creditors in a year. This ratio is not satisfactory in all five years means their ability
to pay to creditors is not satisfactory. They can just pay three times in a year.
 Average Payable Period:
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Average Payable Period=
Years 2003 2002 2001 2000 1999

APP 106.73days 116.6days 101.95days 114.7days 148.98days
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.
 Total Assets Turnover ratio:

Total Assets Turnover Ratio =
Years 2003 2002 2001 2000 1999

T.A.T.R. 1.91times 1.45times 1.50times 1.37times 1.69times
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
 Gross Profit Ratio:
Gross Profit Ratio = x 100
Years 2003 2002 2001 2000 1999

G.P.M. 30.17% 29.1% 24.5% 28.6% 35.6%
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.
 Operating Profit Ratio:

Operating Profit Ratio = x 100
Years 2003 2002 2001 2000 1999

O.P.M. 26.31% 26.04% 21.52% 25.32% 29.68%
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%.
 Net profit Margin:

Net Profit Ratio = x 100
Years 2003 2002 2001 2000 1999

N.P.M. 11.20% 10.04% 7.64% 9.62% 19.46%
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:
Return On Investment = x 100

Years 2003 2002 2001 2000 1999
ROI 21.38% 14.56% 11.48% 15.40% 28.17%
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.
 Dividend Payment ratio

Dividend payout Ratio = x 100
RATIO 2003 2002 2001 2000 1999

Dividend payout 85.96% 93.31% 126.32% 98.62% 101.20%
Ratio
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
Each organization existing in the market unanalyzed though external and

internal environment has some Strengths, Weaknesses, Opportunities and Threats
called SWOT analysis. SWOT analysis gives the overall competitive position of
industry. The basic purpose of this analysis is to identify the current strategies of
the organization and its potentials of competing in the competitive market and
capability of dealing with those changes, which are taking place in the business
environment sharply.
It gives the scenario regarding weaknesses and threats to the company and
offers the company that these should be eliminated or reduced at least as compared
to other competitors.
The complete sketch of SWOT analysis of Pakarab fertilizers limited is as
follows.
STRENGTHS
 Pakarab is going in profit successfully and it is gradually increasing day by

day.Company’s culture is environment friendly which support to make Good
will in the market.
 Company has strong government financial support which result in enjoying
economies of scale by increasing no of production units and acts as barrier
for new entrants
 Monopoly in Calcium Ammonium Nitrate and Nitro Phosphate production.
 Farmers trust on company brand name as KISAN.
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 Company gives different types of attractive incentives and benefits to its

employees like insurance, loan etc.
 Company is offering variety of products (fertilizers) to farmers like NP,
CAN and UREA.These Brands are highly recognized and Pakarab enjoy
considerable brand equity.
 After the achievement of targets Company entertain its employees in terms
of Bonuses, cash awards, increments etc.
 This is one and only company, which is providing fertilizer in 25 Kg
packing.
 Production plant is at central location due to which company has Strong
distribution network all over the country at less transportation costs. It has
competent staff working for the progress of the company
 It always sets new standards for quality and able to get 9001:2000
Certification a worldwide recognition.
WEAKNESESS
 The company is performing all the activities on traditional way of environment.

So there is some environmental problems and proximity to urban area.
 Pakarab has no proper framework and policy for the recruitment of employees
which result inefficiency.
 Too much centralization affects the timely decision-making and poduction of

the plants.
 Negative influence of employee union is hurdle in the prosperity of the

organization.
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 Due to Government organization there is no attention on work on working hours

create disturbance in official work.
 Product image in the sense of farmers due to disqualify of packing.
 Technology used is not updated as compare to competitors. It is the

organization, which originally set up for the working for ten years, but now it
has the completed twenty-five years. The condition of its plant is not
satisfactory.
 PFL mostly use imported feedstock, suppliers and special repair/maintenance

facilities.
 Improper placement of warehouses which cause lack of supply of products to

farmers.
 Pakarab is not independent in distribution of its products to its target market.
 Lesser societal marketing.

 No necessary measures are taken against the impending
dangers of free trade policies of WTO.
 Lack of long term planning, decisions are made keeping in
view the short-term benefits.
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.
 By privatization the company growth will be more and it lead toward

prosperity.
 Long term profits can be preferred over short term benefits.
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Internship Report
 To meet the increasing demand of products, plants can be expanded and

reconditioned through advance technology.
 Quality of Urea and other products can be improved by making qualitative

efforts.
 Company can capture the market by moving fertilizer in the remote areas
through improving social marketing.
THREATS
 A free trade policy of WTO implemented in Jan, 2005 is a

major threat to the company due to quality of products.
 Threat of entry of new competitors especially that of
Middle East through advancement of technology.
 Threat of privatization from the Government of Pakistan to
PFL employees for salary and incentives.
 Low product quality of competitive product (Urea) is a major threat from.
their competitors like FFC.
 There will be any substitute of PFL product available in the market, farmers
will avoid to use high price product with low quality such as Granular Urea.
 Company has not own distribution and marketing setup due to which PFL
cannot win the intense market competition.
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Internship Report
Suggestions and Recommendations
 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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Internship Report
top management and reaching at the final decisions is time consuming and
some times result in heavy losses.
84

Final PFL

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Final PFL

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Internship Report

Department Of Management Sciences IUB

The management keeps supportive atmosphere for employees to work in the

o Fertilizers are used normally natural and chemical fertilizes not

In 1981 NFC’s Pak Saudi fertilizer plant started production of 550,000

FERTILIZERS PLANTS AND CAPACITY UNDER

Four fertilizer units are given production at present.

Unit Product Establ- Capacity (M. Capacity Current

With a vision to acquire self-sufficiency in fertilizer production in the

How ever the budget production of these products is determined keeping in

Head Office of PFL is National Fertilizer Corporation (NFC) located in

National Fertilizer Public Company Limited, NFC is committed to developing the

Mission and Objectives

Every company has some define objectives according to which make

COMPANIES UNDER ADMINISTRATION

National Fertilizer Corporation has the following companies and institutes

Power Plant June 24, 1978

Products and Capacities

PRODUCT FORM GRADE CAPACITIES

Ammonia Liquid 99.5% 313,500T

Individuals 3 00000003 000000030

PATTERN OF HOLDING OF SHARES BY THE

LOCAL FOREIGN TOTAL

LOCAL FOREIGN TOTAL

Equity 96.921 96.921

Abu Dhabi National Oil Co. - 310.150 310.150

World Bank Loan - 602.535 602.535

In Pakarab Fertilizers Multan efficiently working plants are:

 Registered Name: Pakarab Fertilizers (Private) Ltd

 Intermediate Products: Ammonia, Nitric Acid, Ammonium

Pakarab Fertilizer Company have a Board of Directors with 11 members, out

Manufacturing division is further divided into following departments. Each

OVERALL ORGANIZATIONAL STRUCTUE

PAKARAB FERTILIZERS (PRIVATE) LIMITED

Finance Lahore Office Engineering Production Shipping Karachi

Security Gen. Gen. Service

Inspection Medical Service

Tech.&Planning Human Resource

Safe Operation &Env.

The policy of Pakarab Fertilizer (Pvt.) Limited is governed by a board of

of the company NFC (NATIONAL FETILIZERS COPOATION) from Islamic

1) General Manager (Manufacturing)

The ammonia plant, which is based on Pullman Kellogg’s catalytic steam

The nitric acid, required as an intermediate for the production of nitro

 Calcium Ammonium Nitrate (CAN) Plant

Pakarab Fertilizer Company has a well a well-managed and well-organized

Finance Department of Pakarab has to deal with overall financial activities

The Finance Division is further divided into following sections:-

The account division is again divided into further sections:-

In Finance Department the management is in the following sequence:

 Manager Fixed Assets

RAW MATERIAL AND SPARE PARTS

In payable section three types of tax payments are made.

Income tax is usually paid to the Federal Government. The payment of

The formula for calculation of income tax is:

 Income tax rate with NTN 3.5%

 Income tax rate with NTN 5%

Provincial Government receives professional tax from company two times in

In case of sale of fertilizer (NFML) pay 15% Sales tax to Government on

Pakarab Fertilizer is a big production unit. It requires a huge amount of raw

Pakarab Fertilizer is a big organization. It requires a large number of

1) CASH PAYMENT VOUCHER