PEL

Pak Elektron Limited

“EXECUTIVE SUMMARY”

PAK ELEKTRON LIMITED (PEL) is the flag bearer of Saigol Group of Companies. The

products manufactured by PEL have always been of high standards and the name “PEL” is

synonymous with Quality all over Pakistan. Since its inception, the company has been working

for the advancement and development of engineering know how in Pakistan. The company has

been produced hundreds of engineers, skilled workers and technicians through its schemes and

training programs.

The company comprises of two divisions:

APPLIANCES DIVISION: This division of PEL consists of home appliances

manufacturing particularly Refrigerators and Air Conditions.

POWER DIVISION: PEL power division is one the major electrical equipment suppliers

to WAPDA & KESC. The company manufactures transformers, energy meters, switch

gears.

Pak Elektron Limited launched the new range of LG Electronics Home Appliances & Air-

conditioners in Pakistan. Pak Elektron Limited has been a leading local company in electrical

appliances for over five decades, they, together with LG Electronics, which is a global leader in

consumer electronics, will bring a new range of technologically advanced & health care conscious

products for the Pakistani consumers.

The summary of PEL’s market share (Product wise)

Refrigerator 32%

Split A/C 13%

Microwave Oven 22%

Water dispenser 8%

In 1956, the Saigol Group of Companies purchased the major shares of PEL. At this junction, the

company was only manufacturing transformers & switch gears. With the Saigols management,

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PEL expanded into refrigerators and air conditioner manufacturing and now it has become a Giant

in the world of Home Appliances.

PEL is serving the power utilities, industries, individual consumers, houses and commercial

projects by providing reliable, customized and cost effective solutions backed by the innovation

genius of Saigols group. PEL is now technology forerunner and market leader is providing new

products and services to meet ever changing and technology intensive needs of its customers. PEL

is creating new knowledge and adapting to global developments in technological changes and

product design by the continuous R & D. Ever increasing local market share, growing exports

orders, numerous successful power projects and greater than ever base of satisfied customers are

the evidence to these aspiration.

While working in PEL I got very broader vision about the Financial & Tax activities more than

those I had learned during my BBA program. I hope that this practice experience will create

glorious opportunities in future.

A committed team of highly qualified, experienced professionals, financially sound and reputed

sponsors manages the Company. Through sheer dedication, diligence and the Almighty’s

Beneficence the management team at Pak Elektron Limited have earned reputation for excellence

in manufacturing of electrical as well as home appliances and their marketing.

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“INTRODUCTION TO ELECTRONICS INDUSTRY”

Electronics is considered one of the world’s fastest growing industries with global revenue worth

trillions of dollars per annum. The sector basically focuses on consumer electronics, with

activities confined to assembly of conventional TV sets, radios, cassette recorders and other allied

consumer electronic products from imported Complete Knock Down (CKD) or Semi Knocked

Down (SKD) kits imported from mostly China.

Actually, electronics have won our hearts. We wake up with the ring of electronic clock, drink

coffee from an electronic coffee machine, work with computers, learn by using video

conferences, and listen to the music from a sound system and go to sleep while adjusting our

electronic watch for tomorrow morning. It is hard even to think that only a hundred years ago our

world seemed different at all from this point of view. But how did the electronics revolution

begin? Which research and discovery was the basis for this modification? Why was it so fast,

relatively to other developments in history?

The first and the second World Wars gave a considerable boost to the way the electronics science

has advanced. Governments of rival countries invested a lot of money in the technology of

military industry. On other hand, they wanted quick solution and were looking for long-range

developments. The first half of the 20th century was the era of the vacuum tubes in electronics.

Using the tube permitted the development of radio, long-distance telephony, television and even

the first computers. Therefore, the varieties of vacuumed electron tubes were the central device in

the electronics system of that time.

Recently we have witnessed the biggest event in the history of electronics – the invention of the

semiconductor devices. It made a real revolution in the world of electronics.

Since 1960, transistors have quickly supplanted vacuum tubes. Electronic system became more

complex and smart. This fact, together with the need for compact, lightweight electronic missile

guidance systems, led to the invention of the integrated circuit (IC).

This invention was the result of Early ICs contained about 10 individual semiconductor elements

but their number rapidly increased during next ten years. In 1970, the number was 1,000 in a chip

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and the result of hard work of physicists, electronics and mechanical engineers was developing

and producing of first microprocessor with memory interface in 1971. This event was the

beginning of computerization and smart digital electronics.

A few companies are involved in somewhat higher level of production/assembly of items like

payphones, energy meters, security systems and telecommunication equipment for defense

through reverse engineering but using imported components or sub-assemblies.

Unfortunately in Pakistan the electronics sector is still in infancy and never became a major

revenue generating industry. Despite the huge growth potential, Pakistan has lagged behind in the

development of its electronics industry. It is, thus, imperative that a coherent strategy is put in

place to develop this sector with a view to increasing the country’s growth potential as well as

achieving self-sufficiency by reducing dependence on foreign sources of products, materials,

components and equipment.

Government of Pakistan has included the electronics sector in its Medium Term Development

Framework (MTDF). The government has planned to help develop an international quality

indigenous supply chain and to raise the share of electronics in the output of the manufacturing

sector from under 3% at present to 10% in 2009 & to 20% in 2020.

Companies in Electronics Goods Sector in Pakistan

Pak Electron

Waves

Orient

Siemens Pak

Singer Pak

In conclusion, I can say that the science of electronics is one of most important science today. We

all witness the influence of electronics on our life in good and bad side as well. The process of

development was relatively quick and interesting. The best brains of 20th century were this

process. However, the history of electronics has not ended, as we see, and our using of electronics

is the best evidence for it.

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“INTRODUCTION TO PEL”

Pak Electron Ltd. (PEL) was established in 1956 with the technical collaboration of M/S AEG

Germany and is the oldest composite electrical equipment-manufacturing unit in Pakistan.

In October 1978, the company was taken over by the SAIGOL GROUP, which is one of the

leading industrial and commercial groups of Pakistan. The products manufactured by PEL have

always been of a high standard and the name “PEL is synonymous with quality all over Pakistan.”

PEL, since its inception, has been acting as an institution working for the advancement and

development of engineering and modern technology in Pakistan

Since its inception, the company has been working for the advancement and development of

engineering know-how in Pakistan. The company has produced hundreds of engineers and skilled

workers and technicians through its apprenticeship schemes & training programs.

PEL has been continuously adding new products to its range. As a result, PEL has registered a

significant increase in its sales volume, during the last ten years

In 1978, the Saigol Group of Companies purchased major shares of Pak Electron Limited. At that

juncture, the company was only manufacturing transformers and switchgears. With the Saigols in

management, PEL started expanding its product range by entering into Air Conditioner

manufacturing

In 1981, PEL window type air conditioners were introduced in technical collaboration with

General Corporation of Japan.

In 1986-87, the company started manufacturing of refrigerators in technical collaboration with

M/s IAR-SILTAL of Italy.

In 1987, PEL deep freezers were also introduced in technical collaboration with M/s Ariston of

Italy.

In 2005, the Company has started manufacturing of split type air conditioners of various

capacities as the customer choice has shifted from window type to split type. The product has

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been well received in the market. This encourages the company to multiply its production in the

coming year.

Today, PEL has become a household name. Its products are not only in great demand in the local

market but the Company has started exporting its appliances division products.

“PEL Profile”

Pak Elektron Limited (PEL) is the pioneer manufacturer of electrical goods in Pakistan. It was

established in 1956 in technical collaboration with M/s AEG of Germany. In October 1978, the

company was taken over by Saigol Group of Companies. Since its inception, the company has

always been contributing towards the advancement and development of the engineering sector in

Pakistan by introducing a range of quality electrical equipments and home appliances and by

producing hundreds of engineers, skilled workers and technicians through its apprenticeship

schemes and training programmers.

The company comprises of two divisions:

Appliances Division

Power Division

APPLIANCES DIVISION:

This Division of PEL consists of appliances manufacturing.

PEL Air Conditioners;

PEL window-type air conditioners were introduced in 1981 in technical collaboration with

General Corporation of Japan. Ever since their launch, PEL air conditioners have a leading

position in the market. PEL air conditioners cooling performance has been tested and approved by

Co PEL and ITS USA. With the shift of user’s preference from window type to split type air

conditioners, PEL has started manufacturing split type air conditioners.

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PEL Refrigerators;

The manufacturing of refrigerators started in 1986-87 in technical collaboration with M/s IAR-

SILTAL of Italy. Like the air conditioner, PEL's refrigerators are also in great demand. Today,

PEL Crystal has 30% market share. Its cooling performance is tested and approved by Danfoss,

Germany and its manufacturing facility is ISO 9002 certified by SGS Switzerland.

PEL Deep Freezers;

PEL deep freezers were introduced in 1987 in technical collaboration with M/s Ariston of Italy.

Because of durability and high quality, PEL deep freezers are the preferred choice of companies

like Unilever.

POWER DIVISION:

PEL Power Division manufactures energy meters, transformers, switchgears, Kiosks, compact

stations, shunt capacitor banks etc. All these electrical goods are manufactured under strict quality

control and in accordance with international standards.

PEL is one of the major electrical equipment suppliers to Water and Power Development

Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC), which are the largest

power utilities in Pakistan.

Over the years, PEL electrical equipment has been used in numerous power projects of national

importance within Pakistan. PEL has the privilege of getting its equipment approved and certified

by well-reputed international consultants such as:

Preece, Cardew and Rider, England

Harza Engineering Company, USA

Snam Progeti, Italy

Societe Dumezm, France

Miner & Miner International Inc. USA

Ensa, France

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In spite of stiff competition from emerging local and multinational brands, PEL Group's

appliances and electrical equipments have remained in the spotlight due to constant innovation.

Strategic partnership with multinationals of repute have enabled the PEL Group to incorporate

new technologies into existing product ranges, thus giving the Pakistani market access to

innovative, affordable and quality products.

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“Company Information”

Board of directors:

Mr. Naseem Saigol Chairman /Chief Executive

Mr. Azam Saigol

Mr. Murad Saigol

Mr. Muhammad Rafi Khan

Mr. Haroon Ahmed Khan Managing Director

Mr. Homaeer Waheed

Mr. Gul Nawaz NIT Nominee

Mr. Masood Karim Sheikh NBP Nominee u/s 182 of the Ordinance

Mr. Tajammal H.Bokharee NBP Nominee u/s 182 of the Ordinance

Mr. Wajahat A. Baqai NBP Nominee u/s 182 of the Ordinance

Audit Committee:

Mr. Azam Saigol Chairman / Member

Mr. Haroon A. Khan Member

Mr. Tajammal H. Bokharee Member

Mr. Gul Nawaz Member

Auditors:

M/s Yousaf Adil Saleem & Co. Chartered Accountant

Registered Office Work Site

17-Aziz Avenue Canal Bank, 14-Ferozepur Road,

Gulberg-V, Lahore. Lahore.

Tel: 042-5718274-5, 5717364-5 Tel: 042-5811951-7 (7 Lines)

Fax: 042-5715105 Website: www.PEL.com.pk

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http://www.pel.com.pk/


“VISION Statement”

To Excel in Providing Engineering Goods and Services through Continuous Improvement.

“MISSION Statement”

To provide quality products & services for complete customer satisfaction and to

maximize returns for all stakeholders through optimal use of resources

To focus on personal development of our employees to meet future challenges.

To promote good governance, corporate values and a safe working environment with a

strong sense of social responsibility

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“OBJECTIVES”

The objectives and mission for which the company is established are as following:

To carry on the business or businesses of manufacturing, selling, installing,

maintaining designing and dealing in all kinds of electrical equipment.

To carry on any business whether manufacturing or otherwise which maybe found

convenient to undertake in connection with or in addition to any of these objectives

mentioned above?

To do all such things that is incidental for the attainment of the above objectives or

any of them.

To produce high quality and standard products.

To produce equipment to be used in numerous projects of national importance.

To secure a high share / quota of WAPDA’s demand for power products.

To produce skilled workers and technicians through its apprenticeship schemes and

training programs for engineers and technicians.

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“ORGANOGRAM”

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“ACCOUNTS DEPARTMENT”

ACCOUNTS PAYABLE SECTION:

PEL always make the entries of his entire supplier. If new supplier comes than his name and

party account saved in the PEL software. The account payable section pays the amount against

these accounts.

PEL always make the payment to the supplier through their current account at Walton branch of

NBP. Payment always made through the GRN.

For every supplier provision account is created in his name in PEL computer data. Single

provision also maintained for all supplier but PEL maintained different accounts for different

suppliers.

They make entries at each stage as follows:

When the purchased material arrives at store entry is made against GRN (goods receipt note) as

following:

Purchased Material

Provision Account (party)

When bill received in account department then entry made as:

Provision Account (party)

Account payable

When payment made the entry made as:

Account Payable

Bank/Cash

Accountant prepares the Purchase Voucher for record keeping purpose. So method and detail of

the purchase voucher and GRN are as.

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Purchase Voucher:

In the account Department Purchase voucher is prepared which have these items as under:

Voucher Number

Date

Document Type

Invoice Number

Invoice date

Supplier ID.

GRN (Goods Receipt Note):

When purchased material reached in the factory, a gate pass is made at the gate and GRN is

prepared in the store against that gate pass. Storekeeper made the GRN that is sent to the different

department where it is needed. GRN includes the following elements:

Voucher Number

Date

Document Type

Invoice Number

Invoice date

Supplier ID:

BOOK KEEPING SECTION:

The record of internal expenses related to the employees is maintained in the book keeping

section. The incharge of the section first approve expense by checking the evidence. The expense

incurred is paid in the factory-by-factory accountant.

Different types of voucher are prepared in this section.

Cash payment Voucher:

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Bank payment Voucher:

Cash Receipt Voucher:

Bank Receipt Voucher:

Journal Voucher:

Expenses for which PEL has to pay are categorized as follows. Expenses, which are incurred,

recorded under the book keeping section. So the brief detail of the expenses explained under.

Admin Expenses:

PEL records Accounts Department Expenses, Finance Department Expenses, HR Department

Expenses and Gate Reception Expenses as Admin Expenses.

Selling Expenses:

All the expenses incurred by Selling Department, Advertising Department and warranty expenses

are treated as Selling Expenses.

Manufacturing Expenses:

All the expenses incurred by the Manufacturing Department, FOH Expense and expenses for raw

material are Manufacturing Expenses.

Trade Items:

All the items, which they purchase from others and do not incur any manufacturing expense, are

trade items. For example PEL purchase Air Conditioner, Heavy Generators from career and

punch the logo of PEL and pack them into the PEL packing and send them for sale.

Pay Roll Section:

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In payroll Section we make the payment against all general expenses. Basic expenses are salary

paid to the employees. In PEL salary and wages always paid by the cashier of payroll section not

by the bank.

Salaries And Wages Payable System:

PEL has established salaries and wages payable system very efficient. Cashier pays salaries to the

permanent employees after the job time. During the work time it is intended not to waste the work

time.

Wages to the workers are paid at working place. They continue their work while receiving the

wages. It is the responsibility of the cashier to pay wages to the employees at their working

position.

Inventory Control Section:

Inventory control department check the inventories all levels i.e opening and ending and in

process so inventory decrease under their required level than they make order for purchase

department for maintain the inventory level as set by the top management. The purchase

department for purchase of raw material uses all these methods.

Vendor purchase

Supplier direct purchase

Cash purchase

Credit purchase

COSTING SECTION:

Introduction:

Pak Elektron limited (PEL) production is divided into two divisions i.e. Power Division and

Appliances Division. So they assign different codes to every product raw material and job. For

their conveyance they use fabrication for this purpose.

System Flow Chart/ Job Order Costing:

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Input Documents:

Fabrication Number:

The production department for each new job will open the fabrication number and costing

Department will approve it. The fabrication number will be allocated according to the standard

procedure already defined.

If one should be prepare d but the client late so it is transferred to other client and new fabrication

number will be issued to the old client.

Work Order:

Production department (design section) will provide the Work Order mentioned in the fabrication

number. These work order always prepared after the sales department sent the requirement.

BOQ (Bill of Quantity):

Production department (design section) will provide the standard BOQ for each new FB. In case

of refrigerator and energy meter there should be one standard BOQ. Alternative material should

be given against each item mentioned in BOQ.

These BOQ number are fix for one order and new for the new order. On the basis of this number

material is allocated to the each job.

Material:

The input documents for material will be as follows:

Material Issue Voucher

Material Return Voucher

Substitute Material Issue Voucher

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Excess Material Voucher

Material Transfer Voucher

Goods completed and issued to Vendor

Direct Labor:

The process in charge will prepare a daily labor hour sheet and will enter in the system. Costing

department will approve daily hour’s sheet and post it. For the labor there is different costing

numbers and calculated separately for each department.

Factory Overheads:

Applied Factory Overheads

Actual Factory Overheads

Estimated Factory Overheads

FIXED ASSETS MANAGEMENT SECTION:

In this section companies all fixed asst maintain. The depreciation recorded periodically and

salvage value of asst all these functions are performed under the heads of fixed asset management

section.

This is very helpful in preparation of the financial reports because in these reports assets are

shown as their salvage value and their book value.

PURCHASE SECTION:

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While approving the quotations the quality is not compromised, quotations having high quality

material and low price is approved. At the arrival of the material quality is checked by the Quality

Control Department. After confirming the ordered quality payments are made.

“FINANCE DEPARTMENT”

The Finance department manages the financial resources of the Company. Finance Management

is the lifeblood of any industry. If this area of corporate activities is improperly handled, a

company may lead insolvency despite having all the resources and opportunities. Therefore

proper financial management is vital for every business concern and PEL is not lacking behind

over here.

It has the overall responsibility of preparing the Company’s operating results, maintenance of

financial records, preparation and monitoring of budgets targets, variance analysis, inventory

management financing arrangements and dealing with government agencies such as CBR etc.

At PEL finance department for both division (Appliance and Power) is separate but their

procedure are same. To control both another departments called “Finance Center” is established.

Sections In Finance Department:

Corporate Section

Pledge Release Section

Account Receivable Section

Treasury Section

Budgeting Section

Leasing section

Functions of finance are:

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Perform as a workstation and as an integrated circuit amongst all department of the

company.

Arrange monetary resources / funds at favorable prices and at proper time.

Allocate resources / funds throughout the organization.

Deal with banks, investment firms, government departments of Appliance and power

division calculate and keep employees salaries record.

Carry out final auditing of financial records prepared by Accounts department of

Appliances and power division.

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”OTHER DEPARTMENTS”

Human Resource Department:

Human resource department of the PEL Company is very much conscious of hiring the

employees for the company. The standards he set for hiring the new people. HRM department of

the company mainly makes the external recruitment .this is usually done through news paper web

sites extra. HRM department also set salaries, packages and TADA allowances.

Marketing Department:

Marketing department is the back bone of any firm. Marketing department generally analyze the

needs and wants of the customer. Then this department tells about the customer needs to the

company which in turn launches the products according to the needs of the customers. Marketing

department is responsible for making strong advertisement for the products.

Sales Department:

Sales department is responsible for making sales of the product. This department generally takes

orders from the market, gives information to the credit control department. Area credit control

department gives information to the head office. Head office discuss situation with the finance

department and then at last finance department gives authority to area credit control department to

settle term and conditions with dealers.

Customer Service Department:

This department is very much important for the company because it makes the good will of the

company. It’s provided services to the customers who have their clams and makes the customer

loyal. Its also gives the feed back to the head office to provide the required spare parts.

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Consumer Marketing Department:

Consumer marketing department gives packages to the person who has low income to attract

them to purchase their products. They have their own area offices.

Trading Department:

This department is involved for importing products. This department imports the required

products according to the demand of the customer such as split unit. This department is controlled

by its head, which works directly under the head office. This department sends terms and

condition of trade to the head office and finance department for the financing.

Production Department:

Production department is involved only producing the products. This department purchases raw

material from the suppliers. Then passes the raw material from various dyes machines. Modeling

machines etc…from the assembly line according to the required shapes of the products.

Distribution Department:

This department distributes the final products from the production department to the dealers and

then ultimately to the consumers. This department only responsible for distributing the products

according to the requirement and demand of the product.

Procurement Department:

PEL has state of the art methods of production and they also outsource the products and raw

material not only from Pakistan but also from Asia, America, Europe, and Africa. So for this

purpose PEL has two different departments for procurement, which are:

Local Procurement

Foreign Procurement

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Local Procurement:

Local Procurement department is responsible for all the raw materials that are required for

making various products in the factory. It includes from nails to large metal sheets. At the start of

each financial year they receive a major plan from the management, which highlights all the raw

material required for each product. Dates and maximum time limit for raw material requirement is

also mention in this major plan.

Foreign Procurement:

Responsibilities and duties are same as Local procurement but they vary in the dimension that,

they have to arrange the raw material from abroad. They also receive same plan as local

procurement for the whole financial year and develop milestones to carry out the plan execution

properly.

Administration (IR & A):

Key responsibilities of IR & A department are maintenance of attendance, maintenance of stores

check the material in & out from the factory, maintenance of factory, provide assistance to all

departments regarding material.

Research and Development Department:

A department of active and professional people, having distinctive characteristics, that always

remains engaged in designing goods better than before. This department experts fully co ordinate

with the marketing department and very efficiently and effectively interprets their findings for

introducing new features in the same products or designing and launching new products into the

markets. After interpreting plans and getting approvals it forwards the design and procedure to the

production department.

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“FINANCIAL ANALYSIS”

Profit and Loss Statement

For the period ended on 30 June 2009

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Note 2009 2008

(Rupees in Thousands)

Revenue 13,926,572 13,077,670

Less: Sales-Tax and Discount 27 1,274,579 1,261,183

Revenue - net 12,651,993 11,813,487

Cost of sales 28 9,814,594 9,223,623

Gross Profit 2,837,399 2,589,864

Other Operating Income 29 18,247 100,458

2,855,646 2,690,322

Distribution cost 30 676,452 618,981

Administrative expenses 31 514,122 386,556

Other operating expenses 32 46,697 52,429

Finance cost 33 993,565 937,109

Share of profit/(loss) of associate 5,585 12,162

Profit before tax 630,395 707,409

Provision for taxation 34 177,970 125,165

Profit for the year 452,425 582,244

Rupees Rupees

Earnings per share - -

Basic 37 4.14 5.50

Diluted 37 4.14 5.46


Balance Sheet

As at June 2009

Note 2009 2008

(Rupees in Thousands)

EQUITY AND LIABILITIES

SHARE CAPITAL & RESERVES

Authorized capital 3 2,500,000 2,500,000

Issued, subscribed and paid up capital 4 1,496,677 1,368,591

Reserves 5 131,931 69,118

Un-appropriated profits 5 2,048,783 1,803,565

3,677,391 3,241,274

SURPLUS ON REVALUATION OF PROPERTY, PLANT AND

EQUIPMENT6 1,940,365 823,341

NON CURRENT LIABILITIES

Long-term financing 7 2,480,238 1,314,219

Liabilities against assets subject to finance lease 8 169,954 187,027

Deferred Liabilities 9 1,438,405 736,309

Deferred Income 10 82,996 66,323

CURRENT LIABILITIES

Trade and other payables 11 2,084,351 1,572,732

Interest / mark-up accrued on loans and other payables 12 220,104 213,298

Short-term borrowings 13 3,868,988 3,043,650

Current portion of:

- long-term financing 7 331,701 245,501

- liabilities against assets subject to finance lease 8 100,286 103,105

6,605,430 5,178,779

CONTINGENCIES AND COMMITMENTS 14

16,394,779 11,546,779

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Note 2009 2008

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 15 6,332,705 4,046,378

Intangible assets 16 573,617 581,705

6,906,322 4,628,083

Long term investments 17 52,945 12,474

Long-term deposits 18 34,218 35,332

CURRENT ASSETS

Stores, spares and loose tools 19 81,990 64,376

Stock-in-trade 20 3,571,168 2,507,679

Trade debts 21 4,207,741 2,947,646

Advances 22 542,663 267,627

Deposits and short-term prepayments 23 321,574 306,775

Other receivables 32,437 25,543

Other financial assets 24 72,295 162,825

Sales tax refundable 25 49,620 3,831

Advance income tax 87,322 48,314

Cash and bank balances 26 434,484 536,574

9,401,294 6,870,890

16,394,779 11,546,779

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Financial Ratio:

It is a percentage that expresses a relationship between two pieces of financial information.

Or financial ratios are formed from two or more numbers taken from the financial statements

of businesses. The numbers may be taken from the Balance sheet, the Income statement, or

the Cash flow statement and combined in any number of combinations.

Calculations

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“LIQUIDITY RATIOS”

It is the company’s ability to pay its short-term obligations by using its assets. It must be greater

than 1 for the company to minimize its credit risks.

Current Ratio

Current Assets

Current Liabilities

9,401,294,000

6,605,430,000

1.42 : 1

Interpretation:

It means that how efficiently the current assets are being used in order to meet short term loans. In

the current year 1.42 is a satisfactory figure for the company. It is because the current assets have

been increased as compared to the previous year because of increase in credit sales.

Quick Ratio

Quick Assets

Current Liabilities

5,748,136,000

6,605,430,000

0.87 : 1

Interpretation:

It shows that how much a company is able to make the payments as cash in order to meet its

obligations. In this year the company has increased its cash purchases and on the other hand sales

are all credit except exports. So 0.87 is less which is risk for the company.

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Formula & Computation



Net Working Capital

Current Assets – Current liabilities

9,401,294,000 – 6,605,430,000

Rs. 2,795,864,000

Interpretation:

To run all the operations of the business, how much assets it has after paying all of its liabilities.

So it must be positive. In 2009 it shows a comprehensive amount which is greater than the

previous years.

Cash Ratio

Cash Equivalents + Marketable Securities

Current Liabilities

434,484,000

6,605,430,000

0.07 : 1

Interpretation:

In case of cash and bank balance the company is in a very poor position to meet its obligations

through cash. So 0.07 is a very risk full situation.

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“TURNOVER RATIOS”

Turnover ratio shows that how quickly the accounts are converted into cash or sales. It is used to

interpret the liquidity of various current accounts. It includes the ratio of inventory, account

receivables and fixed assets.

Inventory Turnover

Cost of Goods Sold

Average Stock at Cost

9,814,594,000

3,093,423,500

3.23 times

Interpretation:

It shows the no. of times the inventory completes the circle of consumption in a year. Company’s

inventory turnover is quite satisfactory. It shows that the inventory is consumed 3.23 times in a

year.

Average age of Inventory

No. of days in a year

Inventory Turnover

365

3.23

113 days

Interpretation:

It shows that after how much time the inventory is re purchased in a year. Current age of

inventory is 113 days. It means company is repurchasing the inventory after every 113 days in

each year. It is quite satisfactory figure for the company.

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Average Payment Period

Accounts Payables x # of days in a year

Net Credit Purchase

1,584,307,000 x 365

6,605,430,000

53 days

Interpretation:

Average Payment Period shows that after how much time the creditors are being paid by the

company. Company’s position in this respect is just below the average. It means as much the

payment period is high, it is better for the company.

Average Collection Period

Accounts Receivables x # of days in a year

Net Sales

4,207,741,000 x 365

12,561,896,000

122 days

Interpretation:

It means that in how much time the company receives the cash against its all credit sales. So in

the current year the figures of collection period for the company are highly unpredictable.

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Operating Cycle

Avg. age of Inventory + Avg. Collection Period

113 + 122

235 days

Interpretation:

It indicates that in how many days, the inventory is kept, consumed, finished, sold and the cash is

being received against these sales. The company’s operating cycle in this year is not showing

good figures.

Total Assets Turnover

Net Sales

Total Assets

12,651,993,000

16,394,779,000

0.77 times

Interpretation:

This ratio indicate that how the assets are being used to generate the sales. Turnover in respect of

assets is not up to the mark in the current year for the company.

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Fixed Assets Turnover

Net Sales

Net Fixed Assets

12,651,993,000

6,993,485,000

1.81 times

Interpretation:

It means that how efficiently the assets are used to generate the sales. In aspect of net fixed

assets, company’s position is quite satisfactory. It means that 1.81 times the sales are being

generated by using its fixed assets.

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“DEBT RATIOS”

The debt ratio compares the total liabilities to the total assets.

Debt Ratio

Total Liabilities x 100

Total Assets

10,777,023,000 x 100

16,394,779,000

66 %

Interpretation:

It indicates that whether the company is in the position to pay its short-term liabilities by using its

assets or not. So, company’s debt ratio 66% in very low it must be less then 50% of the total

assets.

Debt to Equity

Total Liabilities

Stock Holder Equity

10,777,023,000

3,677,391,000

2.93 times

Interpretation:

It indicates the portion of external debts of the company against those of internal debts. At the

time, company’s external debts are almost 3 times more then its internal debts, which not credible

for the company.

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Time Interest Earned Ratio

Earnings before Interest & Tax

Interest

1,580,102,000

949,707,000

1.66 times

Interpretation:

It indicates the ability of the company that whether it is earning the sufficient amount to pay the

interest on its debts. It must be between 3 to 5 times but the ratio of 1.66 is very low.

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“PROFITIBILITY RATIOS”

These ratios indicate the company’s profits at different stages that are generated against the sales.

Gross Profit Ratio

Gross Profit x 100

Net Sales

2,837,399,000 x 100

12,691,993,000

22.43 %

Interpretation:

Gross profit margin indicates the percentage of profit included in the net revenue, before all the

indirect expenses. In current year, 22.43 % is a minor portion of the net sales.

Operating Profit Ratio

Operating Profit x 100

Net Sales

1,580,102,000 x 100

12,651,993,000

12.49 %

Interpretation:

It indicates the portion of the profit over net sales after incurring all the indirect expenses to run

all the operations of the business. However current year’s operating profit ratio is very low.

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Net Profit Ratio

Net Profit x 100

Net Sales

452,425,000 x 100

12,651,993,000

3. 58 %

Interpretation:

It represents the percentage of profit after excluding all the expenses and including all the other

incomes. Company’s net profit margin in the current is just 3.58% which is very low.

Return on Equity

Net Profit x 100

Stock Holder Equity

4525,425,000 x 100

3,677,391,000

12. 3 %

Interpretation:

It shows that how much a company is gaining against the investments of the ordinary share

holders. Company’s return on equity in is 12.3 % which is showing a very little rate of return.

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Return on Assets

Net Profit x 100

Total Assets

452,425,000 x 100

16,394,779,000

2.76 %

Interpretation:

Return on assets ratio represents the profit earned by the utilization of company’s all the assets. In

2009 it is only 2.76 % which represents a very low margin.

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“MARKET RATIOS”

These are the ratios that represent company’s worth in the market. For an investor these ratios are

considered, it shows the share of profits that are distributed among the share holders.

Price Earnings Ratio

Market Price per Share

Earnings per Share

21.91

4.14

5.29 times

Interpretation:

It shows that how much amount an investor invests to get a rupee profit from the company. 5.29

times means that the investor is investing 5.29 rupees to earn 1 rupee which is not a bad option for

the investor.

Earnings Per Share

Earnings available for Common Stock

No. of Shares Outstanding

395,544,000

95,572,815

4.14 per share

Interpretation:

It represents that what a share holder is earning against its each share invested in the company.

4.14 per share is the company’s EPS in 2009 which a very low rate of earning.

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Dividend Yield

Dividend per Share


zero

(no dividend declared in 2009)

Interpretation:

In this year, company declared neither cash nor stock dividend.

Book Value

Common Stock Equity

No. of Shares Outstanding

1,496,677,000

97,042,687

15.42

Interpretation:

Book value is the value of each share issued in the market; either is issued at par or discount.

Company’s book value is favorable in the current period.

Market / Book Ratio


Book Value

21.91

15.42

1.42

Page | 40





Interpretation:

It shows the credit standing of the company’s share. Here 1.42 is positive which shows that its

market price is more than the book value. So it is favorable.

Dividend Payout Ratio

Dividend per Share

Earnings per Share

zero

(no dividend declared in 2009)

Interpretation:

In this year, company declared neither cash nor stock dividend.

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“COMMON SIZE ANALYSIS”

Common size analysis is used to indicate the company’s internal structure. It tells us about the

relationship between sales to income and expenditures. In it net revenues of the year are taken as

base and all the items fluctuations are determined on the basis of it.

VERTICAL ANALYSIS

Profit and Loss Account;

Profit & Loss Account Vertical Analysis

Description2005 2006 2007 2008 2009

% age % age % age % age % age

Revenue net 100.00 100.00 100.00 100.00 100.00

Cost of sales 78.29 78.06 78.23 78.58 77.57

Gross profit 21.71 21.94 21.77 21.42 22.43

Other operative income 0.99 0.88 1.20 0.85 0.14

Distribution cost 5.55 5.93 6.28 5.35 4.99

Administration 3.44 3.39 2.79 3.02 4.06

Other operative expense 0.35 0.35 0.27 0.44 0.37

Finance cost 7.69 6.64 8.31 7.93 7.85

Profit before taxation 5.68 6.52 5.49 5.99 4.98

Provision for taxation 0.06 1.41 0.79 1.06 1.41

Profit for the year 5.62 5.11 4.70 4.93 3.58

Interpretation:

In the Common Size analysis of the Profit and Loss Account of Pak Elektron Limited, it is shown

that there is a very minor difference in the cost of sales and gross profit. There is also a little bit

Page | 42


change in the Operating Income and Distribution Cost. The plus point of the company is that

distribution cost is cutting down as compared to the last 3 years. It is 5.35% in 2009 as compared

to, 4.99% in 2008 because of increase in operations. Administration cost increases to 4.06% of

revenue as compared to 3.02% in 2008.This cost is increasing from last 3 years whish must be

taken under consideration. Other operative expenses are showing minor fluctuations. Only in

2007 they were decreased but before it, there were at increasing trend.

The firm finance also shows minor changes as compared to previous years. It is because the

interest on short term borrowings is increased and on long term borrowings, it decreased. The

firm’s profit before tax increases to 5.99% in 2008 but in 2009, it is decreased to 4.98%. The

company has increased its provisions for taxation in relation to revenues. At the end, the net profit

is decreased in 2009, however it was improved in 2008 but due to increase in expenditure in 2009

it has been decreased.

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Balance Sheet: Vertical analysis of balance sheet is done to compute the %ages of the items under assets and

liabilities. To calculate the % of the items of assets, total assets are taken as base; similarly the

total liabilities are taken as base to calculate the % ages of liabilities.

Equity and Liabilities;

Equity & Liabilities Vertical Analysis

Description2005 2006 2007 2008 2009


Share Capital & Reserves

Share Capital 3.49 14.18 12.03 11.85 9.13

Reserves 1.14 3.76 14.52 16.22 0.80

Surplus on Revaluation 23.20 6.21 4.59 7.13 11.84

Non Current Liabilities

Liabilities Against Assets Subject to Finance Lease

1.10 1.54 1.81 1.62 1.04

Long Term Financing 10.36 4.86 2.48 11.38 15.13

Deferred Liabilities 3.81 4.32 4.05 6.38 8.77

Deferred Income 1.14 0.92 0.69 0.57 0.51

Current Liabilities

Trade and Other Payables 12.02 10.44 15.83 13.62 12.71

Interest/Markup Occurred on Loans and other Payable

1.67 1.75 2.24 1.85 1.34

Short Term Borrowings 27.92 35.95 37.55 26.36 23.60

Current Portion of Long Term Liabilities

5.96 5.37 4.22 3.02 2.63

Page | 44


Interpretation:

In the common size analysis of the Balance Sheet it is shows that in 2005 share capital is just

3.49% of total liabilities. But in 2006 it is increased by approximately 11% than the last year. It

means that company issue more shares in 2006 but after that firm continues to buy back its

ordinary shares till 2009. Reserves have been decreased up to 0.80% from 16.22% in 2009. It is

because the company has decreased its short term financing. Regarding the noncurrent liabilities,

long term financing is decreasing till 2007 but it in 2009 it has an increasing trend. Deferred

liabilities are also showing an increasing behavior in the last some years. However, the short term

borrowing has been decreased because the company has paid its short term debts every year.

Regarding current liabilities company paid 10% of its short term borrowing in 2008. However

there is a little variation in trade payables and interest payables. Regarding the current portion of

long term liabilities, it has a decreasing trend from 2005 to 2009, which is a positive factor.

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Assets;

Assets Vertical Analysis

Description

2005 2006 2007 2008 2009


Non-Current Assets

Property Plant and Equipment

49.06 33.91 31.11 35.04 38.63

Intangible Assets 3.89 3.12 5.96 5.04 3.50

Long Term Investment 1.42 0.76 0.11 0.11 0.32

Long Term Deposits 0.19 0.32 0.38 0.31 0.21

Current Assets

Stores Spares and Loose Tools

0.72 0.66 0.58 0.56 0.50

Stock in Trade 19.26 24.42 25.49 21.72 21.78

Trade Debt 13.37 23.14 25.87 25.53 25.67

Loans and Advances 2.87 2.72 2.23 2.73 3.31

Trade Deposit and Short Term Pre Payments

1.87 2.95 2.84 2.66 1.96

Other Receivables 4.27 3.38 0.09 0.25 0.20

Other Financial Assets 0.26 0.44 0.90 1.41 0.44

Cash and Bank Balances

1.74 4.18 4.44 4.65 2.65

Interpretation:

In the common size analysis of the Balance Sheet it is shows that in 2005 total noncurrent assets

are almost 53% of total assets company invest huge investment in the property plant and

equipment. But in next year’s it is decreased up to a minimum of 40%. Moreover, we can analyze

that there is an increase in long term investment instead of long term deposits. Company has very

minor %age in long term investment and long term deposit. Regarding the current assets company

has almost 66% investment in 2009. Investment in current assets shows that company has ability

Page | 46


to earn more and more. It is shown that there is a continuous decrease in store spares and loose

tools but there is also a continuous increase in stock in trade which is a good sign for company’s

growth. There is a little change in advances, trade debts and other pre-payments till 2009. Other

receivables are decreasing rapidly as compared to the previous years. Company’s cash and bank

balance situation in the last four years is just above 4% of the total assets except in 2009. It is

decreased very sharply is this year because company made the purchase payments from this.

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”HORIZONTAL ANALYSIS”

Profit and Loss Account:

Profit & Loss Account Horizontal Analysis

Description2005 2005-2006 2006-2007 2007-2008 2008-2009


Net Revenue 100.00 137.70 190.85 239.65 256.66

Cost of Sales 100.00 137.30 190.73 240.56 254.32

Gross Profit 100.00 139.15 191.30 236.35 265.08

Other Operative Income 100.00 122.98 230.65 205.95 37.39

Distribution Cost 100.00 147.01 215.72 226.16 247.16

Administration 100.00 135.92 155.01 210.57 304.30

Other Operative Expense

100.00 138.46 147.15 307.27 273.67

Finance Cost 100.00 118.97 206.37 247.26 262.15

Profit Before Taxation 100.00 157.94 184.50 252.55 225.06

Provision for Taxation 100.00 3,325.26 2,592.39 4,349.03 6,183.81

Profit for the Year 100.00 125.06 159.49 210.03 163.19

Interpretation:

The above analysis has been made by taking 2005 as a base year. There is incensement in revenue

at really greater rate as compared to 2005, which is showing a good sign for the company. Rapid

increase in Cost of Sales is not a good sign for the company; it must be reduced in order to make

good profit although Cost of sales is increasing but G.P is also increasing rapidly. We can analyze

that that as the sale is increasing; all kind of expenses are increasing which means company is not

becoming able to meet its all kind of expenses in a less ratio. Finance cost is increasing which is

showing that the firm’s long term borrowings are increasing. The firm has to reduce this cost. A

huge incensement in the provisions for taxation is due to the very low provisions in base

Page | 48


year2005.It is also a need for the company to make huge provisions as profit is increasing. Profits

of the company are also increasing as compared to 2005 which is a good sign.

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Balance Sheet:In the horizontal analysis of the balance sheet, we take 2005 as a base year on and on the basis of

which the changes in each item is calculated. In it we calculate the fluctuations in share capital,

current and noncurrent liabilities and on the assets side, fixed assets and current assets are being

analyzed.

Equity & Liabilities Horizontal Analysis

Description2005 2005-06 2006-07 2007-08 2008-09


Share Capital & Reserves

Share Capital 100.00 479.66 513.30 577.77 631.90

Reserves 100.00 387.93 1888.22 2409.37 169.74

Surplus on Revaluation 100.00 31.57 29.45 52.23 123.09

Non Current Liabilities

Liabilities Against Assets Subject to Finance Lease

100.00 164.90 244.47 250.55 224.35

Long Term Financing 100.00 55.29 35.57 186.70 352.35

Deferred Liabilities 100.00 133.60 157.99 284.31 555.41

Deferred Income 100.00 95.00 90.25 85.74 85.74

Current Liabilities

Trade and Other Payables 100.00 102.43 195.82 192.53 224.11

Interest/Markup Occurred on Loans and other Payable

100.00 123.85 200.26 188.42 194.43

Short Term Borrowings 100.00 151.76 200.01 160.40 203.89

Current Portion of Long Term Liabilities

100.00 106.20 105.40 86.12 106.72

Interpretation:

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In horizontal analysis trends are computed by taking 2005 as a base year. Company has more and

more reserves because by taking 2005 as base year reserves are almost 2000% more in 2008 than

2006. There is also handsome increase in long term financing. Management should decide to

reduce long term financing because it creates negative effect on the net income of the company.

Regarding the current liabilities, company’s current liabilities are increasing rapidly from 2005 to

2007 but in 2008 it is slightly decrease. Short term borrowing has also same situation like trade

payables.

Page | 51


Assets:

Assets Horizontal Analysis

Description2005 2005-06 2006-07 2007-08 2008-09


Non-Current Assets

Property Plant and Equipment

100.00 81.47 94.32 121.36 176.19

Intangible Assets 100.00 94.44 227.71 219.86 216.80

Long Term Investment 100.00 62.78 11.61 12.90 54.75

Long Term Deposits 100.00 195.37 296.88 270.27 405.00

Current Assets

Stores Spares and Loose Tools

100.00 107.23 119.09 130.96 166.79

Stock in Trade 100.00 149.46 196.77 191.55 272.79

Trade Debt 100.00 204.06 287.77 324.46 429.15

Loans and Advances 100.00 111.84 115.40 161.80 278.18

Trade Deposit and Short Term Pre Payments

100.00 185.75 225.45 240.96 252.58

Other Receivables 100.00 93.16 3.19 10.12 11.17

Other Financial Assets 100.00 203.06 519.24 928.84 412.41

Cash and Bank Balances

100.00 284.32 380.72 455.05 368.47

Interpretations:

There is an increasing trend almost in the items of the Balance sheet such as property and plant

equipment, Trade debt, Loans and advances trade deposits and short term pre payments other

financial assets. A huge increase in Cash and Bank Balances. There is a decreasing trend in

receivables which is a good sign for the company.

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“TIME SERIES ANALYSIS”

Analyzing Liquidity

Items 2005 2006 2007 2008 2009

Current Ratio 0.94 : 1 1.15 : 1 1.04 : 1 1.33 : 1 1.42

Acid Test Ratio 0.54 : 1 0.71 : 1 0..62 : 1 0.84 : 1 0.87

Working Capital(rupees in thousands)

(216,974) 675,832 262,077 1,692,604 2,795,864

Interpretation:

Page | 53


The liquidity position of PEL has been satisfactory in the last few years. As the above analysis

table indicates, in 2006 the liquidity position was 1.15 times which means that in 2006 the firm

has Rs. 1.15 to pay a liability of RS. 1 which is quite well but in 2007 it suddenly reduced to 1.04

times. This change in the liquidity position is due to higher increased percentage of current

liabilities in the balance sheet of year 2007. But in 2008 PEL has decreased its current liabilities

and is having an improved current ratio of 1.32 times which is much better in a sense that the

company has maintained a well managed level of assets to pay its liabilities.

Secondly, quick ratio is also indicating that in 2007 the higher increased percentage of

liabilities also cause quick ratio to decrease from 0.70 times to .62 times but in 2008 PEL

managed to gain quick ratio of .84 times by reducing level of stock in trade as well as its current

liabilities portion.

Thirdly, the Net working capital has increased in a marvelous percentage as compared to years

2007 and 2006 again due to reduced current liabilities in this year. So overall liquidity position of

PEL is quite satisfactory.

Turnover Analysis

Items 2005 2006 2007 2008 2009

Inventory Turnover (Time)

3.63 2.71 2.86 3.70 3.23

Average Collection Period (Days)

73 100 101 91 122

Average Payment Period (Days)

78 68 97 78 53

Total Assets Turnover (Times)

0.73 1.01 1.09 1.13 0.77

Fixed Assets Turnover (Times)

1.33 2.23 2.47 2.52 1.81

Page | 54


Interpretation:

The above inventory turnover table and graph shows an increased level of inventory turnover in

year 2008, which is a very good indicator that shows higher ability of the firm to utilize its

inventory to generate sales during the year 2008.

Secondly, average collection period of firm has also been reduced up to ten days as compared to

year 2007 which is also a good sign of firm performance in a way that they are collecting their

debts in less time as previous.

Debt Analysis

Page | 55


Items 2005 2006 2007 2008 2009

Debt Ratio (%) 64.77 55.29 68.38 64.02 66.03

Debt Equity Ratio (Times)

1.84 1.88 2.59 2.31 2.93

Time Interest Earned Ratio (Times)

1.66 1.73 1.57 1.75 1.66

Interpretation:

The above debt analysis table shows that in year 2008, the debt ratio of the firm has decreased as

compared with years 2007 and 2008 which seems to be a good indicator and it shows that the firm is

trying to maximize the utilization of its own business resources and minimizing the reliability on

outside sources of debt or financing for investment purposes. Debt equity means in capital structure

Page | 56


how much company has its own investment and how much from outsiders. In 2007 debt ratio is

increased by almost 0.75 time interest earned has mix behavior.

Profitability Ratios

Items 2005 2006 2007 2008 2009

Gross Profit (%) 21.71 21.94 21.76 21.42 22.43

Operating Profit (%) 13.37 13.16 13.38 13.92 12.49

Net Profit (%) 5.62 5.11 4.70 4.93 3.58

EPS (Rs.) 6.62 6.58 5.04 6.87 4.14

ROA (%) 4.08 4.33 4.37 5.04 2.76

Page | 57


Interpretation:

The above analysis shoes that there is a mix trend of Gross profit ratio in all years. Same behavior

is in profit %ages to sales but the variation is slightly more as compared to G.P %age to sales. Net

profit %age showing decreasing trend there is slightly upward movement in 2008. EPS has

increased at really grater rate.

Page | 58


“SWOT ANALYSIS”

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,

Opportunities, and Threats involved in a project or in a business venture. It involves specifying

the objective of the business venture or project and identifying the internal and external factors

that are favorable and unfavorable to achieving those objectives. The strengths, weaknesses,

opportunities and threats of PEL are discussed below;

Strengths:

Brand loyalty:

PEL has created a strong brand image in the mind of the customers through higher quality and

low prices. The customers of PEL always prefer its home appliances like Window AC, split AC

and refrigerators, during the time of purchase. PEL is a popular company in Pakistan and

everyone knows about the PEL products and its brand name.

Strong Dealer Network:

It is also the plus point for PEL that it has developed a strong dealer network in the market. The

dealers always try to sell the PEL products to the customers because, the company for its

products, gives them a high margin. The management of PEL also provides more incentives to

their dealers than their competitors.

After Sales Services:

PEL provides the after sale service to customers which increases the customers satisfaction. The

biggest strength of services department is that it handles a complaint within 24 hours in any part

of the country, which helps in increasing the satisfaction level of customers

Power division:

Power division is the unique strength for PEL. Most of electronics companies deal in only home

appliances but PEL is the only company which deals in home appliances and power appliances.

54 years of heritage:

Page | 59

http://en.wikipedia.org/wiki/Business

http://en.wikipedia.org/wiki/Project

http://en.wikipedia.org/wiki/Strategic_planning#Elements


As I discussed earlier that PEL was established in 1956 so they have a long time heritage, its

values and principles distinguish it from other organizations.

Weaknesses:

Lack of advertisement:

It is a second major weakness of PEL that it is not a vigorous advertiser. Only recently PEL has

invested a considerable amount in advertisement, but when we look at its competitors, PEL still

has to do a lot in this sector.

Less increment in salary:

The yearly increment in the salary is very low as compared to the inflation .as compared to their

competitors; PEL increases the salary not so much.

Too much dependence on imported material:

They are more dependent on the imported material rather than domestic but it causes problem

when there is slow supply or shortage of material from abroad.

Lack of Product Range:

PEL has introduced more products of consumer items but there are more needs to develop new

consumer items.

Price setting:

Price setting is also a main problem for PEL because it sets its prices on the bases of competition

and this strategy reduces its profit margin.

Less utilization of capacity:

Due to lack of finance a company cannot utilize all its resources on its full capacity. It increases

the cost of products per unit that decreases the profit margin of each consumer item. As the

production capacity and actual production of different products is given below (2008):

Production capacity Actual production

Refrigerators 3500000 2924905

Energy meters 1200000 986085

Transformers 2000 1356

Air conditioners 36250 6560

Page | 60


Opportunities:

Export opportunity:

PEL have also the opportunity to export their products in other international countries like UAE,

SAUDI ARABIA, AND OTHER ARABIC AND AFRICAN CUNTRIES.

Trends toward high quality:

There is a rapidly change in the technology with the time and every company is adopting new

technology so PEL has the opportunity to utilize the maximum new technology and capture more

and more customers.

Increasing the product line:

Company has the opportunity to increase their production line and will also increase the

efficiency of the employees and in this respect the cost of the company reduce. First of all, they

should look the conditions of the market and then they should produce their products.

Increase in product range:

PEL can increase its product range that will be more profitable for the company. There are more

needs to develop new consumer items like PEL washing Machines, Vacuum cleaner and other

items.

Threats:

World Trade Organization:

World trade organization given the permission in year 2005 to each company of home appliances

to export their products after paying less duties or duty free products. That increases the pressure

for the indigenous companies to reduce the prices and increase the quality. But PEL Company

also runs under uncertain conditions.

Strong competition:

There is very strong competition for the home appliances in the market so every company tries to

come in the no.1 position for achieving the maximum shares in the market.

Chinese product:

Chinese products are another threat for the Pakistani companies because these products are

cheaper than the Pakistani products. Chinese products stress the indigenous companies to lower

the quality and prices that will not be profitable in the long run.

Page | 61


Supplier’s growing bargaining power:

The supplier growing power is increasing due to more demand of the electronic industry due to

this phenomena the suppliers of raw material are charging high prices and it is reducing average

profit margin of companies.

“PEST ANALYSIS”

Political Factors:

Political or legal forces means law and order situation in the country. Country’s policies for the

trading companies. Political and legal situation regarding PEL Company is stated as

The political condition of Pakistan is highly uncertain and unstable but from few years we

have seen some consistency in government policies which encourage the foreign investors

to invest in Pakistan.

There is no check on importers by the Govt. any dealer can import anything and can sell it

with his own label on it. There is no quality check and brand authenticity. An example is

the FAST Home Appliances.

There are very few incentives for the manufactures in Pakistan by the Govt. as compared

to the upcoming giants like China. The cost of the manufacturing is very high because of

the electricity rates and other over heads so most of the type the manufacturers prefer to

outsource.

The said demand is met through imports from China, there is 15% subsidy given to the

importers in China.

Economic Factors:

Mean economic condition of the country such as change in dispose bale income, fluctuation in

market, inflation rate etc...Company sets the prices according to the economic situation of

Pakistan

Page | 62


There is great boom in construction sector now days and more houses and other building

are being constructed than ever before so there is a great demand for home appliances and

above all are split units.

At the back of stronger than expected performance of agriculture and manufacturing the

GDP growth is likely to exceed the target and may end up at around 8.4% the highest

growth in last 15 years. Pakistan is number 2 in the race of GDP growth after China.

According to per capita income, Pakistan is included in the middle income group and high

rates of electricity at commercial and residential areas are point of huge concern for

people. This is one big reason that people are shifting at a great speed from window type

air conditioners to split units. A window type air conditioners 1.5 Ton consume 11

amperes approximately 3 unit of electricity per hour and the split unit consume 8.5

amperes approximately 2 unit of electricity per hour.

Social Factors:

Now day’s people are becoming more and more price conscious. That is why window type

air conditioner is almost absolute because of high cost of electricity bills and splits are

becoming popular because of low electricity bills.

Consumer also prefers split units because they are considered energy savers. But the

traders are fleecing consumer by selling to them low capacity splits as high capacity units.

They are many chances that you get a 0.75 ton split if you go to the market to buy a one

ton unit without your knowing it, so the consumers have to pay the same amount of power

bill at the end of the day and with less cooling.

In countries like Pakistan air conditioning usage of maximum because of an extended

summer season of nearly eight months a year. In Pakistan the air conditions are used by

upper and middle class.

The companies are becoming socially responsible these days as they have introduced anti-

bacterial and anti-dust filter.

Page | 63


Our society has started considering split units as the status symbol and feels this graced if

split units are not installing in every room of their houses. A sizeable number of people

prefers to buy air conditioners on cash bases, there are many who want to procure A/Cs

through banks and leasing companies on consumers financing packages. Besides, many

dealers initiated their own scheme of selling air-conditioners and other domestic

appliances on easy installments.

Technological Factors:

With the introduction of split units, this new technology has made A/C more affordable

and easy to install and maintain.

Efficiency of an A/C depends on the outer part. If the outer part is bigger than the A/C will

be more efficient in sense of cooling. Window type A/C have smaller outer part as

compared to the split units, therefore they are less efficient as compared to the split units.

Another reason for being less efficient is that window type A/C has the cooling unit and

heat discharging unit at the same place so sometimes hot air tends to cause the cool air

lose its potential to work properly. Splits on the other hand have two separate parts and the

cooling unit is in no contact with the heat discharging unit which tends to improve the

efficiency of split units.

Another technical aspect is that rotary compressors are use in split units which are

soundless and do not heat up in extreme temperatures compare to the window A/Cs.

Because of being more efficient in cooling the compressor of split unit drips at proper time

and the set temperature is achieved at lesser time as compared to window type A/C. this is

one of the reason that split unit consumes approximately 2 units of electricity per hour and

a window A/C consumes approximately 3 units of electricity per hour.

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This is due to innovation in technology that now there is need to make a small whole

anywhere you want to install a split as compare to a window type A/C which need as a big

hole and a proper place to be installed.

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“APPLICATION OF CLASS LEARNING”

Accounts Department:

In accounts department I observed the practical implementation of accounting rules and GAAP

standards. I came into know about the whole procedure of recording administration expenses. I

came into know about the importance of team work and I noticed this thing also that how an

individual’s performance affects the whole teams work and efforts.

In payroll section I learnt that how the payrolls of employees in an organization are made. I learnt

how the employees can be motivated to the work.

Consumption Report:

In commercial department I learn another application of consumption report which I learn in my

class. The consumption report is maintained because of keeping record how much material is used

in production, which type of material is remaining for which type of products and how much

material is required to buy for further production? Consumption report keeps the record of item

and model number and material issued for these products. Consumption report is also contains the

portion of local and import raw material record. According to this consumption report the

production planned is made and this tells the foreign procurement department which type of raw

material shout import from other countries.

The consumption report contains types of units and their model numbers, production unit, serial

number, FB number, quantity, remaining balances and total production. This production report is

also send to account excise, finished goods store and GM (Finance).

“LEARNING FROM PEL”

During internship I worked in the accounts, finance department and local procurement department

of the company. I learnt about the basic operations, different terminologies and Documents used

in the department. Some other basic learning is given below;

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How to work individually as well as in groups under relaxed and stressful environment.

Patience is very important in dealings, as anger can lose your customer.

Working of production plant of PEL products (Air Conditioners, Refrigerators) by visiting

the production site.

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“SUGGESTIONS and RECOMMENDATIONS”

As I found brand name is very important factor in consumer buying behavior, thus it is

advised that PEL should work on the brand image. Although PEL has a strong brand

name, but it has to create much more stronger one, mainly through advertising, to compete

with Dawlance, Waves, and other international brands.

The company should take measures to improve the quality of their products by improving

the process. Thus the company is advised to take steps towards improving the quality of

its products; otherwise it will lose a lot of potential customers to their competitors.

To gain more competitive advantage over their competitors, PEL has to work on their

distribution network.

PEL more focus should be on electronic media to get competitive advantage over the

competitors. They have to increase their advertising expenditures.

The company must give more incentives to the dealers so that they remain loyal to the

company and promote the products.

The product line of PEL is not good as compared to others like Haier, Waves, Super Asia,

so it’s good for the company for more success if they work on it.

Let the employees to know about the cost of parts of machines which assembled after

repairing so that they realize about the value of that parts, and consequently they will use

that in sophisticated manner.

The company should announce two holidays in a week; it will not only help the company

in cost cutting but also increase efficiency of its employees.

Save time by minimizing the official procedures

Develop proper goals and objectives for every member of team and department.

Co-ordination should be developed between departments to departments. This can be done

through setting goals and objectives of the whole company not only for their different

departments.

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References:

Annual Reports of PEL for the years 2008-2009.

Mr. Sohail Ahmad

Accounts Executive

0333-4422095

0300-4080582

Mr. Masood Ahmad Khan

Data Control Officer

0321-4214298

0333-4214298

Company E-mail Address;

www.pelfinancials.com

www.pel.com.pk

Company Address;

14-Km, Ferozepur Road

Lahore-54760

Pakistan

Company Phone Numbers;

+92-42-5811951-59

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http://www.pel.com.pk/

http://www.pelfinancials.com/

PEL

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Transcript of PEL