Department of Business Administration.

Assignment 2

FINANCIAL MANAGEMENT (562)

Submitted To

Most Respectable,

Prof.Azhar Mehdi

Submitted By

Engr.Waseem Saeed

Roll AD-512530

Semester 3’ rd

ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD, PAKISTAN.Spring 2010

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DEDICATION

I dedicate it to my beloved parents and respected

teachers.

  

 

 

 

 

 

 

 

 

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ACKNOWLEDGMENT

All praise and thanks is due to ALLAH,

the Lord of mankind and all that exists, for His blessings,

benevolence, and guidance at every stage of our life.

I am deeply grateful to my course

coordinator, Prof.Azhar Mehdi, for his guidance, support,

and patience. He has been an invaluable source of

knowledge and has certainly helped inspire many of the

ideas expressed in this assignment.

My words will fail to express my deepest

heartfelt thanks to my family, especially my parents & my

Cousin, for all what they did, and still doing, to help me

be at this position and for their continuous support and

encouragement. Any mistakes that remain are mine! I

thank you all.

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The Financial Environment in Public sector of

Pakistan, Give a theoretical background of the

topic and then analyze its practical application

in an organization selected by you

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Table of Contacts

1. Title Page

2. Dedication

3. Acknowledgement

4. Topic

5. What is Public Sector?

6. Evolution of public sector in Pakistan

7. Objectives

8. Distinction Between Public Sector And Private Sector

Accounting

9. Financial Markets

10. Definitions of Financial Environment

11. Introduction of Financial Environment

12. What is Financial Environment?

13. World Financial Environment

14. Business & Financial Environment

15. The Financial Environment in Public Sector of

Pakistan

16. Production Innovation

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Case Study

1. COMPANY PROFILE

2. INTRODUCTION OF PARCO

3. MISSION STATEMENT OF PARCO

4. OBJECTIVES OF PARCO

5. FINANCIAL ENVIRONMENT IN PARCO

6. FIXED ASSETS AND CAPITAL WORK-IN-PROCESS :-

7. REVENUE RECOGNITION

8. SWOT ANALYSIS OF PARCO

9. CONCLUSION

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WHAT IS PUBLIC SECTOR?

The part of the economy concerned with

providing basic government services. The composition of the

public sector varies by country, but in most countries the public

sector includes such services as the police, military, public roads,

public transit, primary education and healthcare for the poor. The

public sector might provide services that non-payer cannot be

excluded from (such as street lighting), services which benefit all

of society rather than just the individual who uses the service

(such as public education), and services that encourage equal

opportunity.

Prospectus works with a wide range of public

sector organizations - including government departments, local

authorities and semi-state companies - to develop strategy and to

implement major organizational and transformational

programmers that are tailored to the specific demands of today's

market. At Prospectus we have an excellent understanding of the

particular environment within which public sector organizations

operate and the challenges they face. Indeed, a number of

Prospectus consultants have previously worked in the public

sector. This unique experience in the Irish public sector market -

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coupled with practical, concise, straight-talking and value-added

services.

EVOLUTION OF PUBLIC SECTOR IN PAKISTAN

The main objectives of setting up the Public Sector enterprises as

stated in Industrial policy Resolutions of 1956 were:

To help in the rapid economic growth and Industrialization of

the country and create necessary infrastructure for

economic development.

To earn return on investment and utilize resources for

development.

To promote redistribution of income and wealth.

To create employment opportunities.

To promote balanced regional development.

To promote import substitutions, save and earn foreign

exchanges for the economy.

The 2nd Five year Plan document clearly stated that “All

industries of basic and strategic importance or in the nature of

public utility services should be in the public sector. Other

industries, which are essential and require investment on a scale,

which only the state, in the present”

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OBJECTIVES

The objectives of public sector enterprises may be divided into

three categories:

1. Economic objectives:

I. ECONOMIC DEVELOPMENT - Public enterprises are

established to accelerate the rate or economic growth, by

setting up key and basic industries like iron and steel,

petroleum, power generation, chemicals, machine building,

etc. The public sector provides an essential base for faster

economic growth of the country. Expansion of capital goods

industries lead to the development of other industries.

II. PLANNED GROWTH - The private sector neglects the

industries with long gestation periods and low rate of

returns. Public enterprises step in to fill up gaps in the

industrial structure by setting up industries which are

economically unattractive, but nationally essential. Public

sector provides infrastructural facilities for diversified and

balanced growth.

III. BALANCED REGIONAL DEVELOPMENT - Public sector

concerns are designed to facilitate the growth of backward

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regions so as to reduce regional disparities in industrial

growth.

IV. GENERATION OF SURPLUS - Public enterprises is expected

to generate and distribute surplus for financing five-year

plans and other schemes of public welfare. V. Provide

employment - One of the important objectives of public

enterprises is to reduce the unemployment by creating

employment opportunities.

2. SOCIAL OBJECTIVES:

I. CONTROL MONOPOLY - Sometimes, public enterprises

seek to check private monopoly and restrictive practices and

the resulting evils like exploitation.

II. EQUITABLE DISTRIBUTION OF WEALTH - Public

enterprises is expected to reduce disparities in the

distribution of income and wealth. Reduction of economic

disparities is one of the objectives of our constitution and

public enterprises are helpful in checking concentration of

economic power.

III. PROVISION OF ESSENTIAL GOODS AND SERVICES - An

important objective of public undertakings is to provide

essential goods and services for consumption at reasonable

prices. This helps in improving the standard of living of the

people. Social control over industry ensures equitable

distribution of commodities and helps to protect the

consumer from exploitation by greedy businessmen.

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IV. TAKEOVER OF SICK UNITS - Closure of sick units may

result in loss of employment to a large number of people and

wastage of national resources. Public enterprises like the

National.

3. POLITICAL OBJECTIVES:

I. PUBLIC INTEREST - Public enterprises are established in

the interest of the country as a whole.

II. India has become an industrial power because of the

development of public sector concerns. They facilitate self-

reliance in strategic sectors.

III. NATIONAL DEFENSE - Public enterprises are set up for the

manufacture of arms, ammunition, telecommunications, oil,

etc., which are essential for the safety and security of the

country.

IV. SOCIALISM - Public enterprises are required to future the

political ideology of the Government as well as to serve the

constitutional objectives of socialistic pattern of society.

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DISTINCTION BETWEEN PUBLIC SECTOR AND PRIVATE

SECTOR ACCOUNTING

Public sector accounts are prepared to show the

accountability to the concerned department and private sector

accounts are prepared to find out operating results, profit or loss,

out of the commercial transactions undertaken to earn profit.

Other differences are as follows:

I. Different Accounting System - Private sector accounts

are prepared on accrual basis i.e. earning and spending etc.

Balance of both debit and credit side equates one another,

but public sector accounts are maintained on cash basis i.e.

cash receipt and cash payment for the respective period are

taken into consideration.

II. Profit or Loss - The purpose of public sector account is to

depict accountability to the legislature while private sector

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accounts try to depict commercial profit earned for the year

ended.

III. Balance Sheet - In private sector accounts, balance sheet

shows assets and liabilities on a cumulative basis but in case

of public sector accounting, the current year’s expenditures

as well as capital receipts are shown. In Private sector

accounting final accounts consists of profit and loss account,

balance sheet, and statement of changes in financial

position. In case of public sector accounts, final accounts

consist of public sector account and balancing accounts.

Under balancing account, all the balances of the public

sector accounts are shown along with receivables and

payables.

IV. Equation - In private sector accounting equation of assets

and liabilities takes the following form: Capital, Surplus,

Other liabilities; fixed assets, Current assets, Investments.

But in case of public sector accounting equation takes the

following form: Public sector account receivables-Payables.

V. System of Entry - Under private sector accounting, double

entry system is followed and journal, ledger, trial balance

can be prepared. But in the case of public sector accounting,

single entry system is followed because of its inability to

prepare trial balance for absence of full information.

VI. Depreciation - In private sector accounts, depreciation is

charged on income statement to arrive at true profit or loss,

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so that after the termination of the life of the asset they buy

a new asset for replacing the old asset; and also to claim tax

exemption from commercial profit. But in case of public

sector accounting, there is no provision for providing

depreciation. It lost its relevance in providing depreciation in

absence of proper value of asset; but in certain cases like

Transportation Company which charges depreciation for

maintaining its assets.

VII. Form of Accounts - In public sector accounting, the form of

accounts takes the following form: (i) Consolidated Fund; (ii)

Public Fund and (iii) Contingency Fund. In case of Private

sector accounting, concerns registered under the Companies

Act shall follow the form prescribed under the Companies

Act, 1956.

FINANCIAL MARKETS

Financial markets represent forums that

facilitate the flow of funds among investors, firms, and

government units and agencies. Each financial market is served

by financial institutions that act as intermediaries. The equity

market facilitates the sale of equity by firms to investors or

between investors. Some financial institutions serve as

intermediaries by executing transactions between willing buyers

and sellers of stock at agreed-upon prices. The debt markets

enable firms to obtain debt financing from institutional and

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individual investors or to transfer ownership of debt securities

between investors. Some financial institutions serve as

intermediaries by facilitating the exchange of funds in return for

debt securities at an agreed-upon price. Thus it is quite common

for one financial institution to act as the institutional investor

while another financial institution serves as the intermediary by

executing the transaction that transfers funds to a firm that needs

financing. Financial information is used to measure performance

and help make decisions about how an organization should

operate. Despite its importance, many managers do not fully

understand the financial information they use or how it fits into a

wider business context.

Financial Environment shows managers how to interpret

financial information and, in doing so, make better decisions. It

covers important elements of finance that affect organizations

large and small.

Definition of Financial Environment:-

“Market for a financial instrument, in which buyers and sellers

find each other and create or exchange financial assets”

Financial Environment is aimed at aspiring first time

managers who want to improve their understanding of financial

information. It does not focus on any particular industry, sector or

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size of business, making it relevant to the widest possible

audience. There are no formal entry requirements and the course

assumes no specialist knowledge, although an understanding of

basic accountancy terminology is essential.

The easy to follow, step-by-step format of this course means

participants can work at their own pace, making it ideal for

anyone new to financial information.

What is a market?

1. A market is a venue where goods and services are

exchanged.

2. A financial market is a place where individuals and

organizations

wanting to borrow funds are brought together with those

having a surplus of funds.

Types of financial markets

Spot vs. Futures

Spot markets are markets where assets are bought or sold for

‘on the spot’ delivery.

Futures markets are markets in which participants agree today

to buy or sell an asset at some future date.

Public vs. Private

Private markets are markets where transactions are between

two parties.

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Public markets are markets where standardized contracts are

traded on organized exchange.

Physical assets vs. financial assets

Physical markets deal with real assets such as wheat’s,

automobiles, computers, etc.

Financial assets deal with stocks, bonds, notes, derivatives

securities, etc.

Money vs. Capital

Money markets are markets for short term, highly liquid debt

securities.

Capital markets are for intermediate or long term debt or

corporate stocks.

Primary vs. Secondary

Primary markets are markets where corporations raise new

capital.

Secondary Market is markets where existing or outstanding

securities are traded among investors.

Types of financial intermediaries

Commercial banks

Savings and loan association

Pension funds

Life insurance companies

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What will you get from this topic?

When you have completed this course you will be able to:

a. Understand the important elements of finance that

affect all managers and team leaders.

b. Read and understand company accounts, balance

sheets and profit and loss accounts.

c. Identify sources of finance available to businesses and

be able to use key financial ratios to analyze

performance.

d. Understand the importance of managing cash flows.

INTRODUCTION TO FINANCIAL ENVIRONMENT

In every given environment, whether large or small, it

is easy to observe different economic functions taking place on

continuous basis. To maintain a healthy and acceptable

interaction among several economic units, a nation has its laid

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down rules and expected roles to be played by the citizens and

other investors.

            No nation would ever survive without a sound financial

system, which is the law and environment with an interchange of

wealth, asset and liabilities on regular basis for economic growth.

In fact, in the words of Herggott Beckhart, financial system is

defined as “the family of rules and regulations and the congeries

of financial arrangements, institutions, agents and the mechanism

whereby they relate to each other within the financial sector and

with the rest of the world.”Financial Environment will give you a

theoretical introduction to understanding and analyzing business

information.

WHAT IS FINANCIAL ENVIRONMENT?

Financial environment includes bond markets, stock

markets, commodity markets, OTC markets, Real estate markets

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and cash or spot markets. These markets act as a platform for the

buyers and the sellers to interact in the financial environment.

The buyers and sellers of the financial markets are known as

Market participants. These participants include investors,

speculators and institutional investors. There are certain

regulatory authorities (both private and government) who

determine some policies and rules which are applicable in a

financial environment.

All these markets play an important role in raising

finances for the companies and at the same time give profits to

the investors. Basically a financial environment comprises of the

public sector enterprises, legal authorities, fiscal authorities which

are directly or indirectly impact the financial system, monetary

institutions, financial institutions, and official organizations. All

these organizations have a direct impact on the financial system

of the companies including private and public. Therefore, in order

to give the money to the people who need it and to give the profit

to the people who want to invest it, financial markets play an

important role.

There are a number of bodies which are known as

financial markets, who are responsible for making financial

environment. Financial environment in an economy deals with the

monetary transactions which are based on money, time and risk.

Financial environment can be further classified into financial

markets which collectively constitute this environment.

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WORLD FINANCIAL ENVIRONMENT

1. Money

Powerful thing

Made twenty four hours a day

A commodity, that is officially recognized as a

medium of exchange that is widely accepted because

issued by a government or other public authority in

the form of coins of gold, silver, or other metal, or

paper bills, used as a measure of value of goods and

services and in settlement of debts.

2. Financial Markets

A financial market place where debt instruments,

primarily bonds, are bought and sold is called a bond

market also known as the debt market. The dealing in

a bond market is limited to a small group of

participants and lacks a central exchange.

3. Foreign Exchange

The exchange of one country’s money for that of

another country. When international transactions

occur, foreign exchange is the monetary mechanism

allowing the transfer of funds from one nation to

another.

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4. Stock Market

Stock Market is an organized market where shares are

issued and traded.

5. Commodity Market

Commodity trading is a kind of financial trading in

which primary products, such as food, metals and

energy, are bought and sold.

6. Real Estate Market

Real Estate Market is the market where exchange of

real estate property takes place between buyers and

sellers.

7. Share Market

Stock markets generally advocate the philosophy of

laissez-faire (free market) economy and always argue

in favor of less restrictive import and immigration

policies.

8. IMF

Dominique Strauss-Kahn (France) is the Managing

Director of IMF

186 members

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9. World Bank

International Bank for Reconstruction and

Development

Existence on December 27, 1945

The largest external fund provider for education and

HIV/AIDS programs, strongly supports debt relief, and

is responding to the voices of the poor people.

10. Balance of Payments

A Balance of payments (BOP) sheet is an accounting

record of all monetary transactions between a country

and the rest of the world.

These transactions include payments for the country

& appose exports and imports of goods, services, and

financial capital, as well as financial transfers.

BOP = Current Account - Capital Account

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FINANCIAL SECTOR OF PAKISTAN – THE ROADMAP

The financial system in Pakistan has grown substantially,

benefiting from multi-pronged financial reforms. These reforms

have been pursued persistently and vigorously over a decade or

so and have supported economic growth. The inefficiencies and

weaknesses, which were typical of banks’ operations in the pre-

reforms era, have been reduced radically. We have now started to

realize the dividends of reforms in the form of a healthier,

sounder and stronger banking system. Liberalization and

deregulation, core pillars of the reform measures, have served to

enhance the size of the banking system both in terms of the

number of banks and growth in credit, besides instilling a degree

of competition in the banking industry.

However, the task of financial sector reforms is far

from accomplished. Given the changing dynamics of the economy

and its growing complexities and accompanying associated risks,

the financial industry has to remain responsive and supportive of

the broader economic ambitions and agenda. The country can

neither afford slippages nor can we visualize the future

dispensation of the banking system of Pakistan. All the major

players and stakeholders in the banking system will have to strive

for continuity, broadening and deepening of reforms, build and

sustain the already implemented reforms and fill the remaining

fissures. The growing competition along with increasingly

diversified services, both across the regions and sectors, and

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improved access to customer-base on the back of progressive

reliance on technology, are the harbingers of the changing and

efficient intermediation role of banks in the days ahead.

In order to develop the future outlook, I will now

examine both the emerging domestic and external trends, which

potentially impact the future financial sector architecture: its

structure, texture and the operations of financial institutions. In

this respect, eight factors are generally believed to have been the

major drivers of change in the financial industry the world over.

They include:

1. Macroeconomic performance and priorities

2. Deregulation and market forces

3. Product innovation

4. Globalization

5. Technological advancements

6. Universal banking

7. Risk Management and Mitigation

8. Changing Role of and demands on the

Regulator

These forces, to a varying degree, will play a more

dominant role in shaping the future complexion of the financial

sector and its institutions and entail far reaching implications in

terms of stimulating increased competition, greater consolidation,

and increased diversification and enhanced dynamism in the

financial players and markets. The central bank, along with major

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players in the market, will continue to develop and refine the

mutual vision and plan for the financial system of Pakistan.

All key players will have to correspondingly position

themselves, change their attitudes, and be responsive to

collectively transform the financial system of Pakistan.

MACROECONOMIC PERFORMANCE AND PRIORITIES

Financial system of any country has an intrinsic

relationship and needs to be shaped in accordance with the

broader economic needs, structure and policies. Considering this

interdependence, it is imperative to assess the behavior and

trends of the key macroeconomic indicators while drawing the

emerging contours of the financial system. In this respect, the

major indicators of the economy during the last few years have

shown robust performance. GDP growth shot up to over 8 percent

in FY05 and the current year also promises higher than 6 percent

growth. Undoubtedly, consistent and stable economic policies

provided the businesses with confidence. However, easy

availability of funds on the back of historically low level of interest

rates proved to be the real catalyst for the subsequent sharp

growth in credit to the manufacturing sector and eventually

proved to be the real determinant of high GDP growth. Strong

credit demand of the manufacturing sector translated into a sharp

increase in the interest income of the banking system, giving rise

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to unprecedented profits and healthier balance sheets during the

last two years. Redeployment of these profits to augment

financial services will help meet the growing economic

requirements.

The near term economic prospects are promising.

The continued strong pace of economic activities, and plans to

launch widespread infrastructure reforms offer strong business

prospects for the financial sector. Real interest rates remain at

tolerable limits. Notwithstanding, there will be demand pressures

in particular if the trade deficit grows out of proportion and

inflationary tendencies continue to persist. A consequent fall in

demand for credit or a possible impairment of the debt

repayment capacity of borrowers does carry the risk of reversing

the current gains enjoyed by the banking system. But these risks

are being well managed and if the economy continues the growth

momentum for the next decade or so, the financial system of

Pakistan is expected to reap benefits out of rising incomes,

consumption and emerging investment demands.

Traditionally, infrastructure projects fell in the public

sector’s domain of activities. However, recent years have seen a

paradigm shift in this area, with the growing interest of the

private sector to undertake such projects. There exists immense

potential for the financial institutions to finance such

infrastructure projects built on public-private partnerships or even

exclusively in the private sector. This will help diversify their

activities as well as enhance their earnings. Similarly, financial

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institutions can take advantage of the changing demographic

patterns, rising incomes and enhancement of policy priorities for

various sectors. These trends are already visible as reflected by

the increasing proportion of urban population, rising literacy

rates, and the increasing share of the industrial and services

sectors in GDP.

The financing to SME, Agriculture, and Micro finance

segments of the economy carries special importance with respect

to future economic growth and diversification of banks’ loan

portfolios. The State Bank will accord further priority to improving

access of development finance to these segments and will work

with the provincial and local governments to facilitate a conducive

environment, and supportive financial and legal infrastructure to

give impetus to economic growth and poverty alleviation. The

banks will have to strengthen their systems to meet the

challenges and opportunities arising out of their venture into

these segments.

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DEREGULATION, MARKET FORCES AND CONSOLIDATION

The spate of liberalization and deregulation measures in

recent years has unleashed strong forces of competition. These

are fast defining the future course of Pakistan’s financial sector.

Emerging role of the private sector has displaced the public

sector from its dominant position, giving rise to aggressive

competition across the market operators, and the market

pressure by the stakeholders to perform is going to result in

fiercer competition. This is expected to change the business

landscape and chemistry of the competition as market players will

have to use fresh thinking on financial products and the structure

of the market, and focus on value creation to survive.

The stiffening licensing policy and regulatory capital

requirements are already posing a great challenge to the small

banks, and with gradual enhancement of the minimum capital

requirements in the coming years, they will have to either inject

more capital to become compliant or amalgamate with other

financial institutions, or as a last option, exit the market. The

current trend depicts that new entrants, only allowed by way of

strategic partnership in existing banks and/or new Islamic banks,

are coming in with higher capital. More so, consolidation of

financial institutions is well underway and is likely to lead to the

emergence of fewer but stronger institutions to meet the

challenges of the increasingly complicated financial environment

of the future. The competitive environment might also force

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financial institutions to specialize in offering certain types of

services based on their respective expertise and market niches.

PRODUCT INNOVATION

In a sharp contrast to international trends, the

financial system of Pakistan has been lacking in developing

innovative products to meet the diversified needs of different

customers. However, the emerging financial scenario

characterized by intense competition leaves little room for

complacency in developing new and attractive products on both

the asset and liability sides.

Product innovation and developing brand loyalty by

creating specialized products will decide the volumes of business

and market shares in the future. Presently, the absence of

specialized liability products is most conspicuous. The growing

awareness among investors and the expected development of

other avenues of funds’ deployment e.g. the long term fixed

income and mutual funds market provide attractive alternatives.

Thus the financial institutions which take initiative of these kinds

are likely to grab greater market share of funds in the future.

Ideally, greater liberalization with ensuing competition

should have led to a narrowing down of spreads. However, in case

of Pakistan, there appears to exist a somewhat paradoxical

situation, where banks are able to widen their spreads mainly

because they enjoy comparative

Advantage in offering unique banking services, primarily because

of the almost non-existent competition from non-bank finance

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companies and a dormant institutional finance industry as

pension and insurance sector reforms have yet to catch up with

other financial sector reforms.

However, the future promises emergence of

competitive non-bank companies which offer Alternative sources

of investments. And banks will need to generate fee-based

income to fill the gap created by declining interest incomes.

Pakistan’s market has a huge room for the

development of derivatives and synthetic products. The growing

financial engineering of services and products requires greater

attention to the hedging of risks. Financial institutions need to

increase their role as risk managers to corporate and other

entities by offering a variety of derivative products.

Financial institutions are also expected to employ processes and

practices, which could help them to become more cost effective

and efficient. Certain traditional services might also be

outsourced to gain efficiency and focus on core areas as

competition might not be the only rule of the game. The financial

institutions might also cooperate in offering certain types of

services.

Presently, this is reflected in the networking of ATMs.

This co-optation is expected to become the order of the day as

banks seek to enlarge their customer base and at the same time

realize cost reduction and greater efficiency.

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GLOBALIZATION

With the falling barriers to capital mobility and opening

up of financial services in the wake of WTO, globalization of

financial services is expected to accelerate in coming days. As the

financial institutions gains size, competitive edge and develop

their systems at par with the global practices, it would be

profitable to seek greater opportunities offered by the large

financial markets around the globe. Particularly, opportunities in

emerging and regional future economic power hubs are bright.

Moreover, higher trade activities are also likely to give boost to

banks’ role in forex business and their support to corporate

customers to expand their business across the borders.

So far, Pakistani banks have performed fairly well

against the foreign banks operating in the country. Lately, under

the intense competition put up by the local banks due to

significant improvement in their processes, foreign banks have

been on the retreat even in the areas where they used to enjoy

virtual monopoly. However, with the increasing trade volumes in

relation to GDP and growing overseas business opportunities for

Pakistani corporate, as well as increasing capital flows, the large

foreign banks would find considerable scope to capitalize on their

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expertise due to their established global position and awareness

of different markets around the world.

TECHNOLOGY

Technology helps to catalyze efficiency in the

provision of financial services and ultimately in determining the

winners in the intensely competitive financial markets of the

future. Technological breakthroughs have forced fundamental

changes in the financial industry: strategic business plans have

taken into account new ways of doing businesses, launching e-

banking, and using information and technology for developing

better internal controls, more sophisticated risk management

systems and better and convenient customer services. Hence it is

critical that Pakistan’s financial industry adopts an appropriate

organizational model that supports a customer-centric approach

and reengineers business processes to exploit technology to

derive economies of scale and create cost efficiencies.

The use of ATMs and e-banking products is gaining

currency and almost all banks have established networking of

their ATMs with the interconnectivity of switches. Better outreach

offered by ATMs will enhance the customer base and offer more

alternatives and choices to customers. Further development on e-

banking and internet banking will open up new avenues like on-

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line banking. Among others, the relatively smaller size banks will

be able to compete with the large banks and retain their market

presence by using technology more effectively.

Technology tends to have a high degree of

obsolescence. Thus, the financial institutions will have to invest

heavily in the development of their IT systems, which might

initially burden their resources. For this purpose, the financial

industry will have to optimize its resources for technology

applications. The immediate solution might lie in sharing of

facilities. Banks in Pakistan are already cooperating extensively

in using ATMs services. The future areas of cooperation might

involve payment and settlement, back-office processing, data

warehousing etc. At the same time, financial institutions will

also have to raise adequate safeguards to deal with the

associated operational risks. This would invite special focus of

their management in the future.

UNIVERSAL BANKING

Universal banking has gained sharp acceptance as

traditional boundaries of financial service provision have become

blurred. In addition to their conventional commercial banking

services, banks have withdrawn from specialization to offering a

broad menu of services. This presents the banks with

opportunities as well as challenges and requires constant

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development of their expertise in the new areas of their

operations.

The idea of universal banking, which is still evolving in Pakistan, is

likely to galvanize the non-banking financial sector in developing

competitive products and use modern technology to secure

themselves against banks making inroads into their traditional

areas of operations. This is likely to give further impetus to

competition in the financial sector for the provision of quality

financial services.

At the same time this might catalyze mergers

among banks and non-bank financial institutions for their mutual

survival. This trend may lead logically to promoting the concept of

a financial super market chain, making available all types of

credit and non-fund facilities under one roof or in terms of

specialized subsidiaries under one over-arching organization.

Consolidated accounting and supervisory

techniques would have to evolve and appropriate firewalls built to

address the risks underlying such large organizations and banking

conglomerates.

RISK MANAGEMENT

The above-mentioned forces of change have

significantly increased the importance of strengthening the risk-

management practices of the financial system. With the

proliferation of new techniques and financial institutions venturing

into new areas, a whole range of market related risks have

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surfaced. This will render the traditional risk-management

techniques obsolete as new derivative products and off-balance

sheet operations become more common. The hitherto neglected

area of operational risk management has also come to assume

greater importance and the pervasive use of technology has

multiplied the importance of managing this risk in tomorrow’s

more volatile banking environment. The financial institutions now

have to have enough paraphernalia to tackle these risks in line

with the international best practices.

In this respect, risk-management tools built upon the

latest technology would provide the financial institutions to

manage the host of new risks in a more efficient manner. This will

enable them to deploy resources more effectively.

The importance of sophisticated risk-management

practices will become even more pronounced as the banks strive

to implement the Basel II accord. The smooth switch over to Basel

II will be a challenging task before the banks, and this has far-

reaching implications for the future structure of the banking

system. Basel II would require a heavy investment in technology

and development of MIS tools to incorporate the internal risk-

based approach. The risk-based approach to capital allocation will

be the inherent theme, as each asset will be allocated a rating

both externally and internally. This will ultimately influence the

capital charge for each asset and would thus help minimize the

reckless risk-taking by banks on account of the heavy capital

charge.

37

As financial innovation becomes ubiquitous and new

technology and standards evolve to make financial transactions

more complex and volatile, the role of the regulators is going to

become tougher in the days ahead. This brings me to the

concluding, but not the least important section, i.e. the changing

role of and expectations and demands for regulators.

CHANGING ROLE OF REGULATOR

The central bank has been transformed substantially. It is

today a very user friendly institution, based on feedback of the

industry. It is candid in putting forth its views, and over the years

has withstood a number of political challenges.

Over the next few years, we plan to: First, with the

support of the Government, launch adequate initiatives to

strengthen the governance of the central bank. In this context,

SBP is in the process of benchmarking itself with the other central

banks that have attained good governance standards. The

evaluation of central banks’ governance practices is judged on

the basis of the roles and responsibilities of the Management and

the Board of Directors, and the appropriate interaction and

interface between the central bank and the government. In

deciding an appropriate balance in these roles and

responsibilities, it is critical that central bank’s independence is

38

not compromised in terms of the conduct of monetary policy as

well as the oversight of the financial sector. In all contexts, it has

to be recognized that independence has to be accompanied by

effective accountability of the central bank. The institution has to

be accountable to the Parliament and the Senate, and work in

conformity with the Federal Government’s goals, as the central

bank, among other functions, also serves as an advisor to the

Government.

Second, SBP needs to examine where there is further

need for internal strengthening. Few areas where SBP will gear

itself further would be in terms of increased responsive to

industry changes in order to align prudential regulations

accordingly. Among others, SBP needs to be equipped to assess

banks when they adopt higher standards of risk management

which will be promoted when Basel II is introduced. Another area

would be for the central bank to strengthen its oversight and

supervision, with particular emphasis on closer supervision of the

emerging conglomerate structures in the banking industry as

some of the commercial banks are now owned by industrial

groups and brokers.

Third, in conclusion, the central bank should energize

itself to finance the under-served areas, regions and segments.

And, the central bank would like to promote the Islamic Banking

Industry, as it has the potential to introduce innovations in the

market. As part of the reorganization of the central bank, which is

39

currently in process, we plan to set-up a separate department for

development finance, which will push for this objective.

Having assumed office in January, I am in the midst of

developing a strategy for the next ten years of the financial

sector, and my talk today presents some ideological thoughts on

the long-term vision paper for the central bank, which will be

developed in consultation with the stakeholders. We then need to

set up an implementation task force, which will be a combined

effort of the banking industry and the central bank to take

forward these reforms. There has been tremendous change in the

banking industry in the last few years and we need to fine-tune

our strategic direction as we go forward.

What’s Different about Sustainability for the Public

Sector?

“The private sector will move [to sustainable

technology and practices] when it makes sense from a revenue

and profit motive. The public sector has a two-pronged approach:

gaining efficiencies and in its role as a public steward of

resources.”

The public sector has additional incentives to adopt sustainable

technology and Business practices:

40

Improving service effectiveness: Savings from more

efficient power usage can be invested in government

and educational services.

Fulfilling government’s role as a public steward: The

public sector has a social and fiduciary responsibility to

conserve scarce resources.

Enhancing employee recruitment and retention: Public

sector employees are retiring in record numbers and

government needs to attract the best and brightest

workers to replace them. New college graduates tend to

prefer to work for employers committed to

sustainability.

Supporting continuity of operations

1. Vendor

41

BUSINESS & FINANCIAL ENVIRONMENT

The global economy has increased the interdependence

of national economies. Multinational companies dominate the

international economy. The integration of the financial markets

and the internet technology give access to investments in foreign

countries.

As investors increasingly buy assets in a high yield

foreign currency the exchange rates in this specific currency

rises. This leads to a reduction in exported and an increase in

imported goods. The balance is easily disturbed and governments

find it increasingly difficult to control rising inflation. The

economic relations between countries are very complex as each

country has its monetary policy. Japan for example exerts a

strong control on the exchange rates due to a high export

percentage, whereas the U.S. does not use the currency

operations as a tool of monetary policy.

Companies are confronted with different cultures and

markets and have to differentiate their products in order to

maximize their profit in clearly separated market segments.

Investments in foreign countries have become easier, and

multinational companies benefit from economy of scales and low

cost production using the cheapest resources available.

42

THE GLOBAL FACTORS

In a global economy, multinational companies

independent of national government, dominate the international

economy. This increases the interdependence of nations as each

multinational company invests their assets in several countries.

Those companies respond effectively to differing regional

demand. Furthermore, they benefit from economy of scales and

low cost production using the cheapest resources available. The

global economy has opened the market.

There are many weaknesses in the business

environment that constrain sources and uses of finance for

economic growth and development. These are cross-cutting

issues that involve both the public and the private sector.

Fortunately, with increasing stability in the macroeconomic

environment and efforts by government to implement anti-

corruption practices, there is a positive climate for reform.

Likewise, changes in the business environment will inevitably

reduce the problems currently faced with regard to many of the

market-based, firm-specific, or financial sector issues. However,

many of the challenges are institutional, complicated by traditions

and business culture, or inadequately addressed due to capacity

limitations. The required changes will take years as a result, with

many of the desired successes more likely to be medium- or long-

term objectives rather than quick fixes for rapid formalization of

income or employment generation. Major challenges and reform

43

needs encompass issues of policy, legal, regulatory, institutional,

informational, and infrastructure shortcomings.

44

COMPANY PROFILE

PAK ARAB REFINERY LTD (PARCO) is a Joint Venture

between Government of Pakistan and the Emirate of Abu Dhabi,

incorporated as a public limited company in 1974. 60% of the

share holding is by the Government of Pakistan and 40% by the

Emirate of Abu Dhabi through its Abu Dhabi Petroleum

Investment Company (ADPI), a subsidiary group of International

Petroleum Investment Company (IPIC).

PARCO's major business activities are:

Refining

Transportation

Storage

Marketing

PARCO is an integrated energy company, and is a key

player in the country’s strategic oil supply and logistics. With a

refining capacity of 100,000 BPD, combined storage capacity of

over one million tons, a marketing joint venture with TOTAL

45

(France), a technical support venture with OMV (Austria), and a

distribution agreement with SHV (Holland); PARCO has emerged

as the strategic fuel supplier to the country with a broad portfolio

of operational ventures. The organization encompasses Pakistan’s

largest refinery and 2000 kms of cross country pipeline network,

including its subsidiary PAPCO.

With continued support of the Emirate of Abu Dhabi,

PARCO has been able to realize a number of energy projects that

have contributed significantly in enhancing the country’s

economic growth, saving foreign exchange, transferring

technology and providing employment.

The performance of the company can be judged by the

fact that it has retained its AAA and A1+ long and short term

credit rating by PACRA for twelve consecutive years. The

company set another first when it obtained three simultaneous

international certifications: ISO 9001:2000 (Quality Management

System), ISO 14001:2004 (Environmental Management System)

and OHSAS 18001:2007 (Occupational Health and Safety

Management System).

46

INTRODUCTION OF PARCO

Petroleum energy plays a pivotal role in the socio

economic development of a country, especially for a developing

country like Pakistan, where demand for petroleum products is

fast increasing.

Incorporated in May 1974, Pak Arab Refinery Ltd.

(PARCO) has now been in existence for 27 years as a joint venture

between the government of Pakistan (GOP) and Abu Dhabi. Its

authorized capital is Rs. 5 billion and paid up capital is Rs. 2160

million of which 60% is held by the GOP and 40% by Abu Dhabi

petroleum investments of Abu Dhabi.

This long awaited project has been setup despite facing

numerous obstacles and hurdles during the 1998-99 periods and

despite international sanctions.

PARCO is presently engaged in the transportation of

petroleum product on behalf of oil marketing companies OMC’s

from Karachi to Mahmood Kot near Multan and to Faisalabad and

Machike near Lahore through its 1,230 kms. Pipeline. Parco’s

pipeline system includes a network of highly sophisticated

telecommunication facilities and a comprehensive supervisory

control and data acquisition system.

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Originally, Parco’s pipeline network was functioning

up to Mahmood Kot near Multan, a distance of 864 kms and

operating on the basis of two pumping stations at Karachi and

Shikarpur with an annual pumping capacity of 2.9 million tons.

Two additional intermediary pumping stations commissioned in

1994 at Bubak (Sindh) and at Fazilpur (Punjab) increased the

pumping capacity to 4.5 million tons per annum. Later, with

further technological upgrading of the system the pumping

capacity was increased to 6 million tons. This additional capacity

is a major step towards meeting the increasing requirements of

petroleum products in the central and northern areas of the

country, which account for over 60% of the country’s demand of

petroleum products. This increased capacity will also come in

extremely handy for transporting 4.5 million tons of crude and 1.5

million tons per year of products through the existing pipelines.

This timely initiative by PARCO will relieve a lot of pressure on

road movement.

In June 1997, PARCO completed its 364 Kms. MFM

pipeline extension project and extended its operations to

Faisalabad and Machike. The project design allows for further

expansion of the pipeline from Faisalabad at Kharian besides

Sahiwal and from Mahmood Kot to Peshawar.

48

All PARCO terminals and pumping stations have been

designed according to the latest international standards and laid

out in a standardized fashion for ease of operation. PARCO

crosses country installations have been adjudged to be

comparable to the best available in the international oil industry.

The refinery will be on stream by September 2000,

which will place PARCO in a unique position, with an additional

capability to exploit the future trends of the oil industry in

Pakistan.

MISSION STATEMENT OF PARCO

To provide the country and the oil marketing companies

(OMC’s) with as good a service in the area of product

transportation, as it has in the past with the pipeline

transportation.

To maximize production of middle distillates and full oil to

meet the national demands of petroleum products which is

currently around 18 million metric tons, increasing at rate of 5%

per annum.

VISSION STATEMENT OF PARCO

For PARCO to remain amongst tomorrow's corporate winners, it

not only needs to have a clear Vision but also a passion for

translating that Vision into reality. The big challenge is figuring

out what future will be the right one, a future that will give a

49

definite competitive advantage to the company over the long

term. We are creating a cause for action besides charting a

course on how to get there.

OBJECTIVES OF PARCO

The following long term corporate objective, which are

inherently embodied in the name of the company are:

(P) Professional and Progressive Corporate outlook.

(A) Aggressive Pursuit of Technical Excellence Advanced

Planning.

(R) Reliability of Service

(C) Consistency in performance

(O) Organized, Systematic Development.

FUTURE PROJECTS

I. EXPANSION OF THE REFINING BASE - (KHALIFA COASTAL

REFINERY)

Foreseeing the mounting demand of deficit POL products

in Pakistan, PARCO in alliance with International Petroleum

Investment Company (IPIC) of Abu Dhabi, is endeavoring on a

250,000 bpd deep conversion refinery with a foreign direct

investment of US $6 billion, at Khalifa point near Hub in Pakistan’s

province of Baluchistan. The IPIC and other UAE Government

institutions will have the majority of the shareholding i.e. 74%

50

shares in the project, whereas Pak-Arab Refinery Limited (PARCO)

will have 26% of the holding.

IMPORTANCE

The development of Khalifa Coastal Refinery at

Khalifa Point will be a strategic investment and will play a pivotal

role in ornamenting the country’s petroleum affluence. With the

construction of marine loading facilities to feed the refinery along

with catering to export requirements, Khalifa Point would also

develop into another port proficient in handling liquid petroleum

cargo. This would be significantly instrumental in supplementing

the economic development of Pakistan in general and Baluchistan

in particular.

Process selection and refinery configuration are

based on meeting regional as well as domestic “Middle

Distillates” requirements. The refinery will be producing

petroleum products of international quality based on “Euro IV”

specifications for improving environmental standards besides

ensuring the marketability of the products in the international

marketplace. Khalifa Coastal Refinery is a deep conversion

refinery, designed to process 250,000 bpd, and is being designed

to process Heavy Crude which will be procured from adjoining gulf

countries like UAE, Iran, and Saudi Arabia etc.

51

Benefits of Khalifa Coastal Refinery - (KCR)

Foreign Direct Investment of about US $6 billion, which is the

largest single Foreign Direct Investment (FDI) made in the

country so far. This will bolster the much needed economic

activity in a relatively less developed area.

Improvement of much needed petroleum infrastructure in

the country.

The deficits of Diesel faced by the country will either be

wiped out or reduced to minimal quantities.

Strengthen the supply chain integrity of petroleum products

in the country.

Generate direct and indirect employment during

construction as well as the operation phase.

Training and development of local human resource through

new opportunities and technology transfer.

The Human Resource employed for the project will be

technically trained and exposed to latest technology.

Enhancement of the productivity of local vendor and

material supply industry.

Another effort of Government and Private sector to bring

52

welfare to the people of Pakistan, especially in Baluchistan.

Development of other ancillary and support industry around

the refinery complex.

53

FINANCIAL ENVIRONMENT IN PARCO

Finance department is the backbone of every

organization. In MCR finance department has several sections.

The Finance department is responsible for the entire accounting

process of the organization, regarding the recording of the

transactions, designing the accounting, preparing of financial

statements and computer application to the accounting process.

In MCR only Trial Balance prepare, all Accounts are

maintained in Karachi head office. Sophisticated techniques are

used, LAN & WAN systems, Inter Com facility through MCR to

Head Office Karachi are very beneficial to maintain the accounts

of PARCO.

From this quick and better work is possible. These techniques are

very effective and prove efficient for growth and progress of this

organization. Now it will possible to check and collected the

information or routine work of any employee of PARCO.

54

SECTIONS OF FINANCE DEPARTMENT

Accounting matter of finance department is deal both

in the Refinery office and Head office. Head office deals Banking

section, Payroll section, Insurance Section, Import Section, Income

Tax accounting while Refinery office deals initial stage of business

transaction, recorded and maintained. Refinery finance

department consists of billing payable Section, Receive able

Section, Impressed or cash section, MIS Section, Invoice Section,

Cost, and Budget & Sales Section. Also other section which are

not directly linked with accounts but also necessary. I would like

to mention these sections Oil accounting Section, Purchase

Section or store or supplies, shipping Section, Commercial

department. All final accounts are maintained in Head Office

INCOME STATEMENT AND BALANCE SHEET. In the Refinery office

only Trial balance posting complete.

The main functions of these sections are record the

business transactions. Sections are restricted up to the recording

and maintaining the accounting data. For proper maintain the

accounts, used coding techniques on their voucher. There are

four kinds of vouchers.

1. CASH VOUCHER: These vouchers are prepared for payment

of petty cash.

2. CHEQUE VOUCHER: CHEQUE payments made by these

vouchers.

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3. PAYABLE VOUCHER: This voucher is prepared at the time

of making payment to any party. In accounting term, party

name will be debited and income, taxes and advances will

be credited.

4. JOURNAL VOUCHER: This is also known Adjustment

voucher. This voucher is prepared for adjusting any entry.

5. Vouchers are prepared after every transaction. Write

narration about these vouchers. These vouchers are signed

by certain authorities e.g. (prepared by, checked by,

approved by, punched by, Verified by).

IMPREST/CASH SECTION

Scrutinizing of vouchers / cash disbursements &

maintenance of record (REFINERY & PIPELINE) of the following

activities: -

1. Cash withdraw from Bank.

2. Payment of Medical Allowance

3. Payment Petrol Subsidy.

4. Payment Hardship Allowance

5. Payment of Out Station Allowance (Rs.100/= per day.)

6. Payment of Tea Allowance (Rs.8.4/= per day to every

employee.)

7. Payment of Office Entertainment & Refreshment

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8. Payment of Utilities

9. Advances to Employees against Expenses.(If necessary)

10. Statement of General Expenses (T.A & D.A, Suppliers

labor etc)

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1. Grade I – Payment made by the Head Office.

2. Grade II -- Entertainment 1000/= per month and current

value of 250 liters petrol paid.

3. Grade III – Rs.600/= per month as entertainment and

current value of 200 liters petrol are paid.

4. Grade IV-- Rs.400/=per month as entertainment and 175

liters petrol paid.

5. Grade V to IX-- Petrol subsidy 150 liters paid to the

employees.

Salaries of Refinery employees paid by Head Office.

Custom Staff payment and submission of Monthly summary to

corporate office to recoverable from OMCS.

Bloom field Hall School (Advances & Reimbursement of Expenses)

Payment of Salaries to casual Staff.

Preparation of journal Vouchers of Expenses Statement against

advance and maintenance of record.

Maintenance of Cash Book

Checking of Vouchers, coding and posting and dispatch to Head

Office.

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COST AND BUDGETING & SALES TAX

This Section deals the Budget control and Sales

taxes. Cost and Budget: Budget is allocated for every year. This

period start from 1st July to30th June. We can classify the budget

in to two main heads, Revenue Budget and Capital Budget.

Revenue Budget is allocated for operating expenses which are

helpful for generate the revenue e.g. telephone, store and

supplies etc. Capita Budget is allocated for fixed expenses e.g.

furniture and fixture, machinery etc.These are allocated in proper

heads, either about Revenue items or Capital items. This will

helpful in better coding and maintaining the record. Each

department demanded required budget. When ever any thing is

required Indent Sheet is prepared. This is written issue order

which is approved by finance department. To fulfill the need of

any thing which is mentioned in Indent Sheet, calls quotations

from various department. Suitable quotation accepted and place

purchase order. Purchase department prepares Material receipts

statement (MCR), when material received. From this received

material, issue to the demanded department, and prepare

Material Issue Requisition (MIR). Every department prepared the

coordinate, in the form of summary. This summary is send via

approval of Manager. Board of Director approved it. When

Managing Director singed it, and then sends to related

department.

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SALES TAX

Sales Tax has coordinated relationship between sales

output invoices and purchase input invoices. If amount of sales

output invoices increases, we will have to pay sales tax, and if the

amount purchase input invoices increase, we recover amount of

tax. So for we adjust either we pay or pay. In case of favorable

balance, we will not received and carry forward for next

transaction.

Four copies of Invoices are classified as such. First

original invoice, send to consignee, second duplicate copy send to

Parco commercial department, triplicate copy receive Parco

finance department and quadruplicate copy send to

shipping/clearance department. 99 % parties are registered that

pay the sales tax 15 % and remaining unregistered parties that

pay the sales tax 15 % plus 1.5 % deduct as sales tax, not as the

whole 16.5 % deduct as sales tax. Sales tax pays up to 15 th date

to next month. Head Office purchases the crude oil by the Letter

of Credit. We can refund the sales tax amount under Section

22(1) a, Sales tax act 1990. We adjust the favorable balance,

carry forward for next transactions.

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SIGNIFICANT OF ACCOUNTING

Summary of Significant Accounting Policies are as follow.

Basis of Presentation

These accounts have been prepared in accordance with

International Accounting Standards, as applicable in Pakistan.

Accounting Conversion

These accounts are prepared under the historical cost

‘convention’ as modified by capitalization of exchange

differences.

FIXED ASSETS AND CAPITAL WORK-IN-PROCESS

Fixed assets except land are stated at cost less

accumulated depreciation. Land and capital work in progress are

stated at cost. Cost in relation to certain fixed assets and capital

work –in- progress signifies in historical, exchange differences e.g.

(Assets and liabilities in foreign currencies are translated into

rupees at the specifics rate of exchange announce by the State

Bank of Pakistan. Prevailing on the balance date, except those

which are covered under exchange risk cover scheme, which are

translated at cover rate.

Exchange gain/loss on loan relating to assets that have

been fully depreciated is directly charge to profit and loss

account) and financial charges on borrowing for financing the

project until such projects are completed or become operational.

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Depreciated is charged to income applying the

straight line method, where by cost of an assets are written of

over its estimated useful life without taking into accounts any

residual value. Full year depreciated is charged on addition while

no depreciation is charged on items disposed off during the year.

Maintaining and repaired are charged to income as

and when incurred, major renewals and improvements are

capitalized and the assets so replace, if any, are retired. Gains

and losses are disposals of assets (If any) are included in income

currently.

Assets Subject to Finance lease

Assets subjects to finance lease are stated at the lower of present

value of minimum lease payments under the lease agreement

under the fair value of assets, the related obligation of the lease

are accounted for as liabilities. Assets acquired under the finance

lease are depreciated over the useful life of the assets on the

straight line method at the rate given:, Depreciation on lease

assets is taken to profit and loss accounts.

Borrowing Cost

Borrowing costs that are attributed to the acquisition,

construction, or production of fixed assets have been

capitalization as the part of cost of the relevant asset.

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INVESTMENT

Long Term

These are stated at cost. Provision is made for decline, other than

temporary, in the value of investment, if any.

Short Term

These are stated at the lower of cost or market value.

Stores & Spares

These are valued at the moving average cost, while items

considered obsolete are carried at nil value. Items in transit are

valued at cost comprising invoice value plus other charges paid

thereon.

REVENUE RECOGNITION

Revenue from Transportation

Revenue from transportation of petroleum is recognized on

delivering the products.

Investment

Return on investment recognized at the rate specified in the

respective investment scheme and accrued for the period. The

income is recognized on the assumption that such investments

will be held till the next terminal date.

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Ratio analysis

Ratio analysis of financial statements refers to the process

of Determining and presenting the relationship of items and group

of items in the statements.

Ratio analysis however is not an exact science but a

useful art. It is a Statistical yardstick providing a measure of

relationship between two Accounting figures. Ratio analysis can

be of use both in the trend or structural Analysis and static

analysis. Great care is needed while calculating meaningful ratios

and in interpreting them. Although there are several ratios which

can be employed by an analyst, yet the type of ratio, he would

use entirely depends on the purpose for which the analysis is

done i.e., a creditor would keep himself abreast about the ability

of a concern to cover up its current obligations and so would care

about current and liquid ratios, turnover of receivable, coverage

of interest by the level of earning etc.

So the Financial statement analysis is the process of

identifying of financial strengths and weaknesses of the firm by

properly establishing relationship between the items of the

balance sheet and the profit and loss account.

64

The need for ratios arises due to the fact that absolute

figures are often misleading. For example, if sale increases from

Rs.300, 000/= to Rs.350, 000/=, it may not be a good thing as

appears. The increase in sales may be affected at the cost of a

disproportionate rise in expenses. Absolute figures are only

valuable if they are studied in relation to each other.

EXPENSES OF RATIOS

Expenses of ratios are done in the following ways:

Actual ratios are arrived at by dividing one number by another

e.g. current asset to current liability is 2:1

Ratio between two numerical facts usually over a period of time

e.g. Stock turnover is three times a year.

Ratio between two numerical may be expressed in percentage.

65

SWOT ANALYSIS OF PARCO

Strength:-

Government Ownership

Pipeline Network

The Better Quality Brand

Strength is People

Strength Asset

Environmental Friendliness

Financial Strength

Weaknesses :-

Little Promotional Activity

Volatile and Inflammable Nature of the Products

Under Utilization Capacity

Opportunities :-

Growing Demand

Export Market

Threats :-

Substitute Products

Rising Input Costs

Governmental Regulations

Uncertain Political & Economic Conditions

Competition

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CONCLUSION

Every thing PARCO achieves is the product of team

effort. All PARCO employees share the achievements of the

company and have every reason to feel proud of what has been

achieving so far. However with the diversification in business

activity, especially in the finance department, PARCO meet the

new challenges, since success lies in better service and consumer

satisfaction.

PARCO’S future aim is therefore to consolidate a

significant account presence, as a major contender in the

petroleum sector of Pakistan, with a future that heralds bright

prospects.

There is need for proof any concept of refresher

courses for the employees. If directors would make arrangement

to provide training to the employees then they would work

efficiently. By this productivity will also increase.

I would like to recommend that the management should develop

some policies for the promotion of efficient workers. If no policy

for the promotion of workers so it will create unrest among the

workers. The management should make sound policies for the

promotion of efficient workers. This will not only increase the

productivity of workers but the management will also retain

efficient workers with them.

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