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Telephone Indutries Of Pakistan

Telephone Indutries Of Pakistan

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Telephone Indutries Of Pakistan Telephone Indutries Of Pakistan Document Transcript

  • Internship Report on Telephone Industries of Pakistan Submitted by: Toheed Ahmad Registration # SP09-MBA-099 Supervised by: Mr. Assd Raffaq Department of Management Sciences COMSATS Institute of Information Technology Abbottabad January 2011
  • Internship Report on Telephone Industries of Pakistan Submitted by: Toheed Ahmed Registration # SP09-MBA-099 Supervised by: Assd RaffaqThis internship report is submitted in partial fulfillment of the requirements for the degree of Master of Business Administration awarded by the COMSATS Institute of Information Technology, Abbottabad. Department of Management Sciences COMSATS Institute of Information Technology Abbottabad January 2011 ii
  • Department of Management Sciences COMSATS Institute of Information Technology Abbottabad Approval Sheet . Approval Committee 1. External ExaminerMr. _____________________________________________ Signature_______________ 2. SupervisorMr. ____________________________________________ Signature_______________ 3. Head of DepartmentMr. ___________________________________________ Signature ________________ iii
  • Certificate iv
  • v
  • DEDICATION DEDICATED TO MY PARENTS WHO ALWAYS LOVED METo my Teachers who have been my source of inspiration, My siblings and finally my Friends who have always Supported and encouraged me in my Endeavour’s!&all those who have soft corner for me in their hearts. vi
  • AbstractFirst of all I am very thankful to ALLMIGHTY ALLAH who gives me strength to fulfill thelast requirement of the MBA COURSE. Keeping pace with the time is the key to success.Left behind means lost. Learning the emerging skill is one of the means to keep up with time.The internship required for MBA degree is much more than a formality, it is an opportunityto experience practical environment, real pressure and to develop an understanding of whatstudent have been studying in their courses. In real sense it is a challenge to match ourcreativity and vision with demand of challenging business environment, an endeavor to fireour imagination, challenge our thinking and give us a chance to look at what the future holds.Selection of TELEPHONE INDUSTRIES OF PAKISTAN for the internship in the year 2010was based on a desire to work in the challenging manufacturing industry and being able toput all efforts to understand, and absorb the corporate culture existing in the organization.This report presents extracts of initiator learning, and observation of TIP. The report attemptsto give a few but concrete facts figure, which would not challenge TIP limitation. The reportcan be very helpful for those interested in getting information about this great asset of ourcountry and especially for the students studying the management system and processes ofTIP. The management of TIP can find the ways to improve the performance of theorganization by studying the findings and the recommendations of TIP. Due to the shortageof time and space some areas are discussed very briefly and can be explained to the interestedreaders. vii
  • Table of ContentsDEDICATION.........................................................................................................................iiiAbstract ...................................................................................................................................vii ACKNOWLEDGEMENTS ................................................................................................... xLIST OF ABBREVIATIONS ................................................................................................ xiEXECUTIVE SUMMARY ...................................................................................................xiiCHAPTER 1 ............................................................................................................................. 1Introduction .............................................................................................................................. 1 1.1 Background of study: ....................................................................................................... 1 1.2 Objective of the report: .................................................................................................... 1 1.3 Purpose of study:.............................................................................................................. 2 1.4 Scope of study: ................................................................................................................. 2 1.5 Methodology: ................................................................................................................... 3 1.5.1 Secondary Source: ........................................................................................................ 3 1.6 Scheme of the Report ....................................................................................................... 3CHAPTER 2 ............................................................................................................................. 4Introduction of Telephone Industry of Pakistan................................................................... 4 2.1 History of TIP: ................................................................................................................. 4 2.2 TIP Mission Is: ................................................................................................................. 5 2.3 Some Important Objectives Of TIP Are: ......................................................................... 5 2.4 Organizational structure of TIP: ...................................................................................... 6 2.4.1 General Product Division:......................................................................................... 7 2.4.2 Digital Switching Division: ...................................................................................... 7 2.4.3 Finance & Personal Division: ................................................................................... 8CHAPTER 3 ............................................................................................................................. 9Product and Departments of TIP ........................................................................................... 9 3.1 Product: ............................................................................................................................ 9 3.2 Personal &Administration Department: ........................................................................ 10 3.2.1 Recruitment & Selection: ........................................................................................ 10 3.2.2 Training & Development: ....................................................................................... 10 3.2.3 Compensation & Benefit: ....................................................................................... 11 3.2.4 Promotion:............................................................................................................... 12 3.2.5 Retirement of Employee: ........................................................................................ 12 3.2.6 Disciplinary Policy: ................................................................................................ 12 3.2.7 Social Security & Welfare Fund: ............................................................................ 13 3.3 Finance Department: ...................................................................................................... 13 3.4 Accounts Department: ................................................................................................... 14 3.4.1 Costing Section: ...................................................................................................... 14 3.4.2 Stores Section: ........................................................................................................ 15 3.4.3 Book Keeping Section: ........................................................................................... 16 3.4.4 Books of Account: .................................................................................................. 16 3.4.5 Payroll Section: ....................................................................................................... 17 3.4.6 Payroll Work Procedure:......................................................................................... 17 3.5 Production & Purchase Department: ............................................................................. 19 3.5.1 Production Department: .......................................................................................... 19 viii
  • 3.5.2 Purchase Department: ............................................................................................. 20 3.5.2.1 BY CALLING TENDER ..................................................................................... 20 3.5.2.2 BY CALLING QUOTATION ............................................................................. 21 3.5.3 Permanent Purchase Committees:........................................................................... 22 3.6 Commercial Department (Sales) .................................................................................... 22 3.6.1 Sales Procedure of TIP: .......................................................................................... 22 3.6.2 Sales to PTCL: ........................................................................................................ 24 3.6.3 Purchase Order against Development Work: .......................................................... 24 3.6.4 Purchase Order of the Store Suspense Order: ......................................................... 24 3.6.5 Installation Order: ................................................................................................... 24CHAPTER 4 ........................................................................................................................... 254.1 FINANCIAL STATEMENTS ANALYSIS OF TIP ..................................................... 25 4.2 Common size analysis.................................................................................................... 25 4.2.1 Horizontal analysis...................................................................................................... 26 Common size (horizontal) analysis of balance sheet ....................................................... 26 4.2.2 Trend Analysis of Income Statement ...................................................................... 27 Trend analysis of income statement ................................................................................. 27 4.2.3 Vertical analysis ...................................................................................................... 284.3 Financial ratio analysis .................................................................................................... 30 4.3.1 Profitability Ratios .................................................................................................. 30 4.3.2 Overall profitability ratio ........................................................................................ 32 4.3.3 LIQUIDITY RATIO ............................................................................................... 34CHAPTER 5 ........................................................................................................................... 35 Main Findings and Recommendation: ................................................................................. 35 5.1 General Findings and Recommendation: ....................................................................... 35 5.1.1 Findings: ................................................................................................................. 35 5.1.2 Recommendation: ................................................................................................... 36 Downsizing .......................................................................................................................... 37 Organizational culture .......................................................................................................... 37 Marketing ............................................................................................................................. 37 Research and Development.................................................................................................. 37 Apprentice training .............................................................................................................. 37 5.2 Conclusion: .................................................................................................................... 39References:.............................................................................................................................. 40 Books ................................................................................................................................... 40 Reports ................................................................................................................................. 40 Internet ................................................................................................................................. 40ANNEXURES ......................................................................................................................... 41 (A) Telephone industries of Pakistan Profit & Loss Account ........................................ 41 (B) Telephone industries of Pakistan Balance Sheet ........................................................... 41 (C) Telephone industries of Pakistan Profit & Loss Account.............................................. 42 (D) Telephone industries of Pakistan Balance Sheet ........................................................... 44 ix
  • ACKNOWLEDGEMENTSIn the name of Allah, the most gracious, the most merciful who created the whole universeand who taught me what they I not know. I am extremely thankful to Allah Almighty whohas enabled me to complete the course of MBA and the internship report thereafter, the laststep towards the fulfillment of the requirements of MBA course.First of all I am very thankful to all of my teachers who taught us whole the MBA course. Ilearnt lot of things from them. I am thankful to Sir Assad Rafaq who helped me in thecompletion of report.My thanks are due to all the staff at TIP with whom I have been working during myinternship. I am thankful to all the concerned staff of P&A Department and other divisionsfor their full co-operation and guidance during my stay in the organization and tried their bestto guide me about the systems and processes at TIP. I have found all these people verydevoted to their work and cooperative to me. My thanks are also due to my senior supervisor,Sir Assad Rafaq Jan who helped me at all steps from the selection of topic to the preparationof the final report.Finally, I would be failing in my duty if I do not acknowledge the debt I owe to my parents,family members, teachers and friends who have played an important role in shaping mypersonality.May Allah bless and reward them all. Amen. x
  • LIST OF ABBREVIATIONS1. TIP Telephone Industries of Pakistan2. PTCL Pakistan Telecommunication Company Limited.3. F&P Finance and Personnel4. GP General Products5. DS Digital Switching6. PCB Printed Circuit Board7. P&I Planning and Installation8. CGS Cost of Goods Sold9. R&D Research and Development10. QAD Quality Assurance Department11. HRD Human Resources Department12. VSS Voluntary Separation Scheme13. CDS Computer Data System14. NRTC National Radio and Telecommunication Corporation xi
  • EXECUTIVE SUMMARYTelephone Industries of Pakistan Haripur is the result of the efforts done to promote andspread telecommunication in the country and to minimize the dependence on foreigncountries. The industry was established in 1953 in collaboration with SIEMENS Germany atHaripur (Hazara), N.W.F.P. and since its establishments it has contributed a lot to thedevelopment of telecommunication in the country.This report on the Telephone Industries of Pakistan (TIP), Haripur is written to fulfill therequirements of MBA course. The reports cover all the departments of the TIP.The findings of the study are as follows:Telephone industries of Pakistan have machinery for the production of many differentproducts but most of this machinery is technologically old and needs extra time and effortsfor production. Due to this reason its cost of goods sold is increasing which has resulted inthe decrease in its profit. Telephone industries of Pakistan has huge production capacity but ithas never produced at its full capacity due to which its per unit cost is high.TIP has been involved in research and development but the organization has never been ableto capture so much capable resources (human & physical) to introduce the best qualityproducts at cheaper rates.Personnel department of the telephone industries of Pakistan has got some very devoted andskilled employees and workers but they are not sufficient enough to meet the demands ofsuch a large organization. It is, therefore, very difficult for the organization to employ itslimited staff on new development projects.The managers at the top and middle level are not controlling the employees efficiently andhave developed a culture in which there is no motivation and role modeling of the superiorsand no share of the subordinates in the Decision Making process.Following recommendations are given to improve the performance of TIP:There is need for Telephone Industries to install new machinery and overhaul old machineryto work properly. It should also give training to its unskilled workers to become profitable forthe organization. This is necessary for the long-term survival of the organization and fordecreasing long term marginal cost.Telephone Industries of Pakistan is unable to take all the orders from PakistanTelecommunication Company Limited. Now, PTCL purchases its products by calling tendersor quotations in which TIP participates as a member. Many a time TIP is unable to receivethe orders because the other companies offer their products at lesser rates. There is need for xii
  • TIP to minimize its cost of goods sold so that it may be able to take all the order from itssister concern PTCL.In the downsizing operation a lot of loyal and skilled workers and engineers left theorganization. TIP should try to retain the remaining skilled and devoted employees andworkers because the workers are the most power full assets of any organization and atdifficult times the organization needs the people who are more committed and loyal to theorganization.There is no motivation, no job rotation and employees development should be changed for abetter culture in which there should be good and effective communication, motivation andfeedback for the employees. It is necessary for the betterment of the organization, for theachievement of the organizational goals, for the reduction of cost and expenses and forincreasing the efficiency of the workers and profit as well.Telephone Industries of Pakistan totally depended upon only one buyer i.e. PTCL and sold allof its products to it. This is not good policy and TIP has suffered a lot because of it. TIPshould expand its business beyond PTCL and should try to find out new markets for itsproducts.For expanding the market it is necessary for Telephone Industries of Pakistan to evolveeffective marketing campaign. xiii
  • CHAPTER 1 Introduction1.1 Background of study: At the time of independence, Pakistan had almost noindustries and infrastructure. The economy was mainly dependent on agriculture but thissector was also underdeveloped and was using the old techniques which were timeconsuming and less productive. Due to these and many other reasons, the development ofindustrial sector has remained the top priority of all the governments.The story of the industrialization of the country is unique and interesting one where theprimary motives behind the establishment of the new industries were not the general well-being of the country and the masses but safeguarding of the political interest, nepotism andmoney making of the governments. In this process of industrialization during the last 55years, many medium and large-scale industries have been established. Most of theseindustries failed in the long run when they had to face competition from the private investors.Some major reason behind the failure of these industries were the managerial inefficiency,lack of a check and balance system and corruption.One such industry, established in 1952 as a private limited company in the public sector, isthe Telephone Industries of Pakistan (TIP). The industry is situated at Haripur Hazara, in theprovince of Khyber Pakhtoonkhwa. This was one of the largest factories of Pakistan withdiverse production facilities but the management of TIP could never be efficient enough toutilize the resources up to their full extent. So, the industry which emerged as a great asset ofKhyber Pakhtoonkhwa could not contribute its due share to the economy and general well-being of the province and the country.The present report is about this factory the TIP. It is based mainly on a six weeks Internshipin TIP.1.2 Objective of the report: The main objective of this is to apply the theoreticalknowledge of management into practice and it is the requirement of MBA degree to have 8-weeks internship in any bank. Due to this I have selected the Telephone Industries of Pakistan(TIP). The industry which emerged as a great asset of Khyber Pakhtoonkhwa could notcontribute its due share to the economy and general well-being of the province and the 1
  • country. The present report is about this factory the TIP. It is based mainly on a six weeksInternship in TIP.1.3 Purpose of study:This study attempts to: Provide an overview of the TIP; Analyze TIP management structure/system; Analyze TIP financial statements; Appraise the organizations performance; Recommend policies/measures for making the organization more viable.1.4 Scope of study:This work is an effort to introduce the Telephone Industries of Pakistan in terms of its recentand past performance. This can be very useful for those interested in knowing bout theorganization in terms of its history and performance.The performance has further been analyzed by using different techniques. This analysis givesa true picture of the organization and shows its strengths and weaknesses. The peopleinterested in this organization can make a true image of the organization in their mind byreading it. It can also be helpful for the management of TIP who can easily know bout theirstrengths and weaknesses.The opportunities for the organization and the threats it faces have also been discussed andthese have been used to make the recommendations for the improvement of the performance.These recommendations can be very helpful for the top managers of the organization toremove the defects and to improve the performance. 2
  • 1.5 Methodology:The report is based on my six weeks internship program in TIP of Pakistan. The methodologyreported for collection of data is secondary data. The main source of information is mypersonal observation during work with staff and having discussion with them.1.5.1 Secondary Source:Secondary data is the one collected from other source and already processed throughmathematical and statistical techniques. Secondary data is comprised of annual report of TIP,manuals relevant materials, relevant books and newspapers etcFollowing secondary sources for data collection have been used for this report:  Brochures.  Company’s orientation manual.  Factorys Articles and Memorandum of Association  Internship Reports and assignments written on TIP in the past  Internet1.6 Scheme of the Report The scheme of the report is in such a way that: Chapter one gives brief introduction of report, purpose, scope, methodology and scheme. Chapter two gives an overview of the organizational structure of TIP. Chapter three is about Products and departments of TIP. Chapter four is Financial statement analysis of TIP. Chapter five gives feasible and constructive recommendations for different departments of TIP.During the period of internship, I studied the history and the background of the TelephoneIndustries of Pakistan in detail, side by side with the information, which I gathered during thedaily routine work by personal observation. In this work, I came across on problems, whichwere not defined in the previous works. So in order to clear my doubts; I visited theconcerned persons in all the departments. I took the help of interviews with different peopleat TIP to get the necessary information about the management structure and functions andpresent and past performance of TIP. 3
  • CHAPTER 2 Introduction of Telephone Industry of Pakistan2.1 History of TIP:Telephone Industries of Pakistan was established in 1952 with joint venture of PakistanTelecommunication Corporation and German vendor Siemens. Main objective of theorganization was to manufacture switching equipment for facilitation of country’stelecommunication needs. This was the first objective and then TIP started the manualplugging of cables into cards and lastly the computerized switching, and now even softswitches. After seventeen years the telephone industries of Pakistan had expanded itsmanufacturing capacity from 7,000 exchange lines up to 40,000 subscriber lines.In 1987, another agreement took place between Siemens and TIP and the investment pointershit the 1000 million mark. This brought, and thus, floated state-of-the-art digital switches andlatest models of telephones in to the market. (zambeel.03/02/2010.TIP)Digital switching system is the latest development and has features such as: Complete supply of Telecommunication services from a single source. Advanced Subscriber Services (AD-SS). Integrated Services Digital Network (ISDN). Internet Supplementary Services.Telephone Industries of Pakistan, an ISO certified company, the only local manufacturingcompany in telecommunication sector in the real sense. As a contributory to PTCL; it isengaged in providing state-of-the-art manufacturing and installation services for last 50 years.Its contribution towards the growth of telecommunication in the country is most significant.Even today when more multinational companies have entered into telecom sector itscontribution is 50% to the total installed network of PTCL. It is equipped with state of the arttechnologies and unmatchable product quality.TIP Located at Haripur Hazara (Khyber Pakhtoonkhwa), 80 kilometers north-west ofIslamabad, Telephone Industries of Pakistan (Private) Limited (TIP) was incorporated as aprivate limited company in 1953. The company is currently engaged in manufacturing andsale of Telephone Sets, Telephone Exchanges and associated equipment, Energy Meters andproviding services for setting up and commissioning of exchanges. 4
  • The Authorized Capital of the company as on 2003 is Rs 1,000 million, whereas, the issued,subscribed and paid up capital is Rs 759.753 million. There are two shareholders of thetelephone industries of Pakistan, Pakistan Telecommunication Company Limited (PTCL) andSiemens A.G of Germany with 70% and 30% shareholdings respectively.The board of directors comprises of eight members. Chairmen and managing director areappointed by the PTCL and two members of the director are appointed by the Siemens.TIP started its production in 1954 with an annual capacity of 7,000 Telephone sets and 7,000line units of F-1 type stronger system of exchanges. It continued with changes of technologyto build Electromechanical types of Exchanges (EMD). The production capacity wasincreased in different phases according to the requirements of the country.(Financial report, 2003, published by TIP)2.2 TIP Mission Is:  A bright communication future of Pakistan.  TIP commitment is a commitment to the pursuit of meaning life. It is meaning to Put quality and meaning to its work and its products.  Commitment is what character is made of, and commitment is what quality is all about. This commitment to quality permits to all aspect of TIPS product, its R&D, its service and people and is expressed in daily action.2.3 Some Important Objectives Of TIP Are:  To provide quality products at low price to country.  To fulfill the needs of the county for communication equipment.  To provide products.  To provide after sale service to its customers.  A sound communication system in all organizations of Pakistan.  To make research for modern telephone equipment and produce them at low cost.  To enter international market and compete international firms. To provide skilled labor in this field.  Increase the revenue of Government.  Building new skilled workers.All the activities of TIP are directed to achieve these objectives 5
  • 2.4 Organizational structure of TIP:The administrative responsibility of TIP lies under the federal ministry of science andtechnology. After the reformation of the recent past, TIP has been divided into three majorsubdivisions i.e. General products (GP) division, Digital Switching (DS) division, Financeand Personnel (F&P) division. BOARD OF DIRECTORS MANAGING DIRECTOR DGM Management Internal Audit Representative ISO 9001 General General General Manager Manager Manager Digital switching Finance and personnel General products division division division 6
  • 2.4.1 General Product Division:This is the division which has its own GM under whose supervision all the departments work.The General Manager reports directly to the Managing Director and the Board of Directorsand controls General Product Division. The division works in such a manner that it fulfills allits financial needs through its own Finance Department.Other departments in this division include sales and services, planning, procurement andstores, production, purchase, admin and personnel and the Quality Assurance. The sales ofthis department mainly depend on the production and sale of telephone sets, energy metersand drop wires etc.The sales and services department of General Product division receives orders for differentmaterial and parts of general products from production department against which purchasesare made. This department also makes arrangements for the sale of the goods produced by theproduction department. The quality of the products produced by the production department ischecked and controlled by Quality Assurance Department.The Finance department of this division provides funds for the purchase expenses. Salarieswages and other allowances are also paid to workers and employees by this department.Personnel section keeps track of the activities of the staff in the department and handlesdifferent administrative matters related to the department. This department also controlsannual reports of employees welfare activities and the records related to medical facilities.2.4.2 Digital Switching Division:The most important department of TIP produces permanent and the containerized exchanges.Digital switching division performs functions under the G.M who is responsible and report tothe managing director. There are different department such as: sales department deals all thematters related to the sales and services. Production department handle the matters related tothe production of exchanges and the quality assurance department assures that the productionmeets the standard.The personnel department handles the matters related to employees and the financedepartment deals with the financial problems. 7
  • 2.4.3 Finance & Personal Division:Finances or the monetary resources and personnel or the human resources are the mostimportant assets and resources of any business without which the existence of an organizationis impossible. In the Telephone Industries of Pakistan, therefore, there is a separate divisionfor handling the financial and human problems. The basic aim of this division is to monitorand control the actions and to make certain the smooth operations of the other two divisions(i.e. the G.P and D.S divisions).The finance department deals with the purchases and sales,receipts and payments and the income and expenditures etc. The personnel department dealswith the employees and workers recruitment to retirement policy which includes the selectionand placement, guidance and development, salaries and wages and the welfare policiesamong the many others. 8
  • CHAPTER 3 Product and Departments of TIP 3.1 Product: Telephone industries of Pakistan started production in 1954 with an annual capacity of 7,000 Telephone sets and 7,000 line units of F-1 type system of exchanges. It continued with changes of technology to build Electromechanical types of Exchanges (EMD). The production capacity was increased in different phases according to the requirements of the country (TIP official website, accessed 01/01/2011).Sr. No Product Description Year 1 AUTOMATIC PUBLIC EXCHANGES (SYSTEM) & TELEPHONE SETS 1954 2 SUBSCRIBER TRUNK DIALING EQUIPMENT 1962 3 PRIVATE MANUAL BRANCH EXCHANGES 1968 4 PRIVATE AUTOMATIC BRANCH EXCHANGES 1968 5 TYPE WRITER (Multi-lingual Portable / Slandered size ) 1974 6 MASTER SET TELEPHONE M-113 1981 7 ELECTRONIC TYPEWRITER / TELEPRINTER 1985 8 DIGITAL PUBLIC EXCHANGES EWSD 1987 9 TELEPHONE SET-210 1991 10 DIGITAL MOBILE EXCHANGES 1992 11 D. P. BOXES 1993 12 TELEPHONE SET-240 1994 13 ENERGY METERS 1994 14 CONTAINER SHELL 1994 15 DIVISION CABINETS 1995 16 TELEPHONE EURO SET-802 1996 17 DTMF STENO PHONE 1996 18 PILLAR TYPE D.P. BOXES 1997 19 CLI TELEPHONE SET 1999 20 DROP WIRE 1999 21 DIGITAL PUBLIC EXCHANGES EWSD (16 Line Card) 2001 22 CROSS CONNECTION CABINETS 2001 23 D.P BOX WITH IDC MODULES 2001 9
  • 3.2 Personal &Administration Department:At the time of establishment of any organization and starting work it accordance to the plansit necessary to have the skilled and unskilled employees to achieve the organization goals andobjectives. Personnel and administration department is therefore most important departmentto take care of the matters related with human resource of an organization. This departmentwas existed in the old organization and called health and happiness department now days it iscalled human resource department which ensures the well being of employees of organizationand provide the better environment for work. The responsibilities of this department arerecruitment, selection, training, placement, development, compensation, salaries, benefits andthe retirement of the employees of organization.The personnel section of TIP is deals with the management of human resources i.e. therecruitment and selection, training and development, compensation, salaries and benefits andthe maintenance of human resources, to accomplish organizational as well as individualobjectives. The personnel section deals primarily with the policies and procedural work. Theadministration section on the other hand deals with the day to day implementation ofpersonnel policies.Different functions performed by the personnel and administration department are:3.2.1 Recruitment & Selection:TIP is a manufacturing industry therefore it needs the services of engineers and the skilledlabor force. The process for the selection of labor force and the clerical staff is very simple itis usually based on the reference or recommendation of existing employees. TIP also has itsown training department from which student can be selected for the appropriate jobs. Thebasic education is needed for these candidate mostly S.S.C or intermediate. the candidateafter the interview and the demo work selected. Grade 15 or the above employees are selectedinside the concerned departments and dealt by the central P&A division.3.2.2 Training & Development:Usually workers and clerical staff don’t know their job description and capable of doingassigned task because of new environment and the work place therefore new employees needtraining. 10
  • TIP after selection of employees and worker, under grade 16 provide training them throughattaching them with the experienced workers of concerned department there is no specifictime period for training and development. Usually the first three to four months areconsidered as the training and development period. The period can be shorten and extendkeeping in view the time and capacity of employee.Following training programs are offered in TIP;1. Apprenticeship programs2. Computer training3.2.3 Compensation & Benefit:The compensation program of TIP consists of two type of compensations, i.e.1. Direct Compensation2. Indirect Compensation Direct compensation includes salary and wages of the employees and the workers.The payroll section of finance and personnel department deals with direct compensation. Thesalaries and wages are awarded on the basis of the Basic Pay Scale- 2001.Indirect compensation comprise of a number of schemes usually called the benefits. Thepayroll section of personnel and administration section is directly involved in indirectcompensation. TIP offers following indirect compensations/benefits to its employees:a. MEDICAL FACILITIESb. EDUCATIONc. RECREATION FACILITIESd. HOUSING FACILITY 11
  • e. GROUP INSURANCEf. WORKMEN COMPENSATIONg. SPECIAL ALLOWANCES3.2.4 Promotion:The personnel and administration section also handle the promotional policies and systems.The promotion will be on the basis ofi Seniority cum fitnessii. Length of service prescribediii. Shouldering capability of high responsibilityiv Availability of a higher post.If there is no superior post available but an employee is qualified for the promotion, then, the"Move-over" is granted to him, meaning that the grade not the post is improved and all thefacilities of that superior grade are given to that employee.3.2.5 Retirement of Employee: P & A department maintain the record of the employees service, which contain the date ofbirth, joining and the retirement dates of the workers and employees. As a worker reaches theage of 60, the department sends a notice to the GM that employees are near the retirementage. GM then issues the retirement letter.In case of casualty of any worker, TIP sends a letter of sympathy to his relatives and also theinsurance as soon as possible.3.2.6 Disciplinary Policy:Personnel department not only makes policies for selections but it also defines disciplinaryrules for TIP’s employees. When a mans character is not according to the codes of conductthen TIP takes the disciplinary actions against him or his Property. 12
  • 3.2.7 Social Security & Welfare Fund:A: SOCIAL SECURITY According to the provision of Social Security regulation allemployees whose wages are up to Rs.6000/- pm (inclusive of all allowances) is covered,irrespective of their designation, position or nature of work. TIP also contributes in the socialsecurity fund to provide facility to the eligible workers for their well being. The contractemployees of telephone industries of Pakistan use the medical facility and other benefits thatmay apply.B: WELFARE FUNDThe welfare fund is reserved in the welfare fund budget for allowing economic help to thesmall paid employees/workers. There is a board to distribute this endowment. The fundallowed to an individual who remains on leave without disburse due to illness or due tofamily problems. The welfare fund is also permissible in purchase of medicines, which arenot sheltered under the medical policy and are deducted from the statement ofemployees/workers. The board consists of Chief Engineer (production), Executive Personneland Executive Administration.3.3 Finance Department:After the initial development work of the organization is complete and the human resourcesnecessary to execute these plans. Available to perform their tasks, the next most significantfactor for the organization is the capital or the financial resources.Financial resources are very essential for the realization of the organizational plans. With theavailability of finances the human resources will quit the organization as the organizationwont have anything to pay them as compensation or a reward of their work. The accessibilityof raw material and other required inputs of the production can also be guaranteed only withthe availability of financial resources. At TIP, each division has its own separate departmentto arrangement of the financial matters of its departments. 13
  • 3.4 Accounts Department:To keep record of the financial transactions the accounts department plays a vital role in anyorganization. It performs the check and balance system and also keeps record of transactions.Telephone industries of Pakistan have its accounts department working under Financedepartment accounts department has further sub sections as following;3.4.1 Costing Section:Costing section is the most important section because the act of this Office may affect theprofit/loss of the business. A small inaccuracy in cost computation may upset the result anddemonstrate adverse picture of economic position of the organization. A vast arrangement ofattention on the branch of Cost Accounting is required for calculating the cost of products,because the removal of any cost factor may lead to failure of organization.There are two segments of costing office:1. Internal Accounting Value Section.2. Cost Calculation SectionI.A.V. (Internal Accounting Value) SectionThe major function of this Section is to keep the records of the raw material purchased locallyor from abroad. T.I.P is purchasing different types of parts in bulk from different vendors.For such massive purchases it is not probable to workout price of each article by taking intoaccount all additional expenses incurred on each item until they arrive at the T.I.P. Stores.Cost Calculation SectionFor the purpose of cost calculation this section organizes I.A.V. report, as stated below:Stores department submits demand slip to I.A.V. Section for the supply of price of freshpurchases. On the receipt of Demand Sheet from Store I.A.V. Section works out the price,enters it in same sheet and sends back to the Stores Department. Store clerk notes the price inthe Ledger Card. At the end of month Store Department put in orders consumption Book 14
  • Note for the material issued to the Production Department throughout the month on the basicprices projected by this section.At the end of each financial year, Costing Office carry outs twelve-monthly Stock-taking ofself manufactured parts in the stores or in the production departments in differentmanufacturing points, purchased parts and raw materials in the relevant stores. The StoresDepartment write down the balance quantity of each item on the Store Ledger Card andprepares list of parts and raw materials in the stores on the day of stock calculating fromLedger Cards sent to Costing office (CO.).Costing section checks the balance with the financial store ledgers balance. If there isdifference in Stock taking balance of Store ledger then costing section verify the receipts andissue of every item and generates discrepancy-booking reminder because the Stocktakingresult must be in accordance with the financial ledger. At the end of each year this sectionmatches stores balances with the financial ledgers and arranges financial lists of accounts thatget it checked by External Auditors.3.4.2 Stores Section:Telephone industries of Pakistan is a manufacturing concern so to production department’srequired different type of parts and raw material. TIP purchases raw material and parts inbulk quantity so that production function can run smoothly. Because of huge raw materialinventory TIP set up store section that keeps record of the inventory.Purchase of raw material and parts is the responsibility of purchase department. TIPmanufactures those components that can be produce in the factory. Purchase of parts is alsomade because of economic benefits instead of producing these parts. Some parts requirespecialized equipment that is costly and are not available in the factory. TIP therefore prefersto buy these parts from the markets where these parts are available at low cost.All these production materials are needed on the daily basis as the manufacturing goes on andtheir requirement is not periodic i.e. just once in a year or in a period. These materials area1so not easy to acquire through just-in-time supply system. So, there is a need to keep aninventory of those materials, which is used on regularly basis. For this reason stores havebeen established under a Stores Department at TIP. The Store department has the followingsub-stores: 15
  • 1. Raw Material Store2. Part Store3. Oil Store4. Overhead Store.3.4.3 Book Keeping Section:Book keeping is the record-keeping part of accounting system. It means to record and sum upthe business activities having financial effects in a set of books called books of accounts.3.4.4 Books of Account:The accounting books that are being used are as follows:  Cash book  Purchase book  Sales book  Bank book  General ledger  Subsidiary ledgerIn these books the original entries are posted by the book keepers. entries in thses booksmade through the bank voucher cash payment and received vouchers. the sales book ismaintain with the help of invoices. General ledger is also prepare and properly maintain inthis section. 16
  • Record keeping in TIP is based on the double entry system where every transaction have dualeffects one is called debit and second is credit which is the best system considered in theaccounting system.3.4.5 Payroll Section:Payroll section deals with the salaries and wages of the employees and performs differentfunction such as:  Preparation and Payment of monthly salaries.  Calculation and Payment of monthly allowances of workers  Payment of T.A D.A advances  Compensation of medical advances.  Payment of all indirect reimbursements.  Payment of overtime of workers.  Payment of vehicle advance.Payroll office keeps personal files of every one employee and worker. All documents relatingto employees and workers are kept in this record. Whole record of each employee since hisjoining till retirement is available in his personal file.3.4.6 Payroll Work Procedure:Main purpose of the payroll division is to prepare the salaries, wages and other variouspayments i.e.  Allowances to workers & bonuses  Medical bills  TA/DA bills  Advances  Welfare payments  Education grants  Workers participation fund etc. 17
  • Making revitalization of advances, income tax, electricity bills and other found etc. fromthe salaries, wages and allowances is also the job of pay roll section.Payroll office conducts this work in the following manner:a. SalaryThe employees appointed on monthly payment basis are paid salaries as per theirappointment letters. On joining their job, salaries are prepared at the end of month and sent tobanks for crediting to their personal accounts as per their requests.b. WagesWages are paid to workers after 15 days.There are two categories of workers:1. Fix rate workers2. Piece rate workers 1. Fix Rates WorkersFix rate workers means that their hourly or daily wage is fixed at certain amount. They aremainly the workers of overhead shops such as maintenance shop drivers and labors ofdifferent shops. As mentioned above that their wage rate is fixed at hourly or daily basis thesupervisors and timekeepers keep record of their presence at the work place and prepare theindividual record after 15 days they send this report to the payroll office where the wagesprepared according to the timekeepers record and made the voucher and payment is madethrough cash department.11. Piece Rates WorkersPiece rate workers are those workers that are paid by the wages on the basis of theirefficiency rate its mean that no of pieces determine the wage of worker (which is determinedthrough the number of units they produce in a certain time multiply by rate per piece). Theplanning department already computed the maximum and the minimum time for piecesmaking through Time & Motion Study.c. Allowances 18
  • Another duty of Pay roll office is to make payment of monthly allowances. The followingallowances are allowed to the employees and workers at the present time:  Special machine Allowances  Cold cream  House rent  Milk Allowance  Soap allowance  Conveyance Allowance.  Service Awards are granted:  On completion of 20 years of service  On completion of 25 years of service  On completion of 30 years of service  Service allowances paid on yearly basis.3.5 Production & Purchase Department:3.5.1 Production Department:After the collection of humane source, financial resource and the planning of the companysmission and objectives, the stage come for the production of the products (in amanufacturing concern). For a manufacturing firm the production department is a verysignificant because through this department firm can achieve and accomplish the companysmission and objectives in a true sense. The production department helps the firm to make thepolicies and successful implementation of the production plans.Telephone Industries of Pakistan (TIP) is a manufacturing concern industry, all of itsefficiency is based upon the efficient performance of this department.The production department of TIP is working efficiently and performing hard to meet thenecessities of the market, keeping in view the resources of the telephone industries ofPakistan. It has get in touch with the Sales Department to make the standard productsavailable at time. TIP’s workshops are fully operational and are equipped with the latest andstate of the art machines. Workshops can perform the task in efficient manner. There is also asystem for on the job training of technical personnel, so that they are able to work with thenew technology using the complicated machinery. 19
  • 3.5.2 Purchase Department:For a production oriented industry, the department of purchase has a great importance. Thereason is that no firm can get all the raw material and the equipment used in productionprocess by itself and without taking the help of any external supplier or manufacturer. Theraw material and the equipment not extracted and produced internally is purchased from theexternal suppliers and the producers. In order to ensure the in time availability of thematerials used and the smooth working of the purchase process, a purchase department isnecessary.TIP is a production-oriented company and it has a well-organized purchase department tosupport its production.TIP makes purchases of the raw material and components mostly from within the country butas all the materials and components are not available within the country, some are importedfrom outside. These materials are usually imported from the sharing partner Germany alongwith the U.S.A, Italy, France and Turkey etc.The aim of purchase is to get technically most suitable, easily available materials, parts andcomponents on cheaper rates without compromising on qualities by quickest means, undervery rigid Govt. policies within restrictive resources.Keeping in views the above aims and goals, the purchase department of TIP comprising ofengineers and Associate engineers, makes it possible to buy a right type of material at theright price from the right source of delivery at the right place.Purchases are made at TIP by the following three ways: i. by calling tender ii. by calling quotation iii. by cash.3.5.2.1 BY CALLING TENDERIn this purchase method, an order is drafted by the order section mentioning the requirements 20
  • of the company on the basis of the reports of the production and the stores departments. Thisdraft order is then presented before a committee comprising the following members: a) Deputy General Manager (DGM) /Assistant General Manager (AGM), the head of ordering department.b) Deputy General manager (Planning, Procurement, and stores)c) Deputy General Manager (Finance and Personal).3.5.2.2 BY CALLING QUOTATIONIf the amount of material required is less than Rs.50, 000, the quotations are invited from theregistered firms. The quotation committee consists of the following officers.1. Assistant General Manager (Plam1ing, Procurement and Stores).11. Executive (Budgets, Accounts, Payroll)lll. Executive (Quality Assurance Department).3.5.2.3 BY CASHCash -purchases are generally made for small quantity and for urgently required material bythe stores. After approval from the concerned committee, the following committees will makecash purchases.1). For the Purchase Cases above Rs. 50,000i. Assistant General Manager (AGM) of the concerned division.ii. Executive (Budget/Accounts/Tax).iii. Assistant General Manager (Quality Assurance Department) 21
  • 2). For the Purchase Cases below Rs. 50,000i. Assistant General Manager (Planning, Procurement and Stores)ii. Executive (Budget/Accounts/Tax).iii. Quality Assurance Department (QAD).3.5.3 Permanent Purchase Committees:There are the purchase committees established on permanent basis. These committees consistof the members from top management. These committees meet regularly on the pre-decideddated and the cases have to be decided in these meetings. The proper planning, correctexecution of the orders, full dedication and teamwork guarantees the successful achievementof the objectives.3.6 Commercial Department (Sales)The basic aim of all the (profit) organizations is the earning and the increase of profits. Theonly means of earning profits for the organizations is to sell the goods or services. produced.This profit is used to run the operations of the organization and to expand the business. Forthis purpose the sales or marketing department is one of the most important departments inany organization.The purpose of the sales or marketing department is to meet the existing and the prospectivecustomers who can be interested in the companys products and hence the products can besold to them. The scope of sales department is narrow and it only performs the functions ofmaking and facilitating the sales. Marketing department on the other hand has a wide scopeand it covers all aspects of sales from the products idea generation to its pricing, promotionand the distribution.3.6.1 Sales Procedure of TIP:Telephone Industries of Pakistan depends on the sale of its products produced for the purposeof earning profits. In order to facilitate sales, a separate department is established with the 22
  • name Commercial Department (sales). There is no marketing department at TIP.Commercial Department (sales) is the most important department of TIP. : Regular! Newcustomers place office orders with telephone industries of Pakistan. It is a, statement ofrequirements and is made to TIP through letter fax or telephone call. All inquires and ordersreceived from prospective customers are viewed keeping in mind the companys capacity tomeet the customer requirements. If the customer specifications Il1atch with the capacity ofthe company, further actions are taken to complete the sale as under:Sales Department forwards the copy of order to the Production Department asking it to startthe production according to the target fixed in purchase order. Production Departmentproduces the equipment and delivers the same to the Sales store on the delivery slip and alsoinforms the sales department. Now sales department: prepares six copies of advice/note forthe dispatch of material produced to consignee. The following colmlli1s are provided in theadvice/note1. Consignee Address11. Advice/note No. & Date111. Mode of DispatchIV. Quantityv. Drawing Designation of the Equipment.Sales Department (Liaison) sends six copies to Sales store for the issuance of material. Salesstore maintains Ledger Card of equipment either produced or Purchased from outside. Onreceipt of Advice/note sales store makes entry in the respective Ledger Card and sends theequipment along with five (05) copies of advice/note ( a/note) to the forwarding officer foronward dispatch to the Consignee and retains the one (01) copy of Advice/note (a/note) forthe booking purpose and officer record. Forwarding Office arranges the delivery ofequipment to consignees either by road or by train.The Consignee after having received the goods signs on the Advice/note (a/note) as a tokenof the receipt and sends back to the factory. 23
  • 3.6.2 Sales to PTCL:T.I.P. is a subsidiary of PTCL and supplies equipment to PTCL on no profit no loss basis.Assistant Manager (A.M.) Sales Department (liaison) and Commercial Officer CD (Sales)only sign the Quotation. It is the responsibility of Sales Department (Liaison) to get the Firmorder released from PTCL. On receipt of the firm order from PTCL manufacturing of theequipment are started. PTCL place three types of orders on TIP. Their detail is as follows:3.6.3 Purchase Order against Development Work:PTCL prepares Annual Development Programs. On the basis of Annual DevelopmentPrograms of PTCL, the Director General of PTCL calls for tender for 1he supply ofequipment and Installation charges thereof. TIP prepares Quotation and participates inTender. PTCL places order on the firm, which quotes the lowest price.3.6.4 Purchase Order of the Store Suspense Order:Controller of Telegraph Store places order for spare parts required for the 111faintenance ofexisting exchanges.3.6.5 Installation Order:PTCL also places separate orders for the Installation of Exchanges. On the basis of estimatedhours, TIP works out total Installation Charges at the end. At the end of each year this sectionalso prepares a list of turnover showing quantity and value of each part sold during the yearwhich is required by Costing Office for the valuation of work in process. 24
  • CHAPTER 44.1 FINANCIAL STATEMENTS ANALYSIS OF TIPFinancial statements are organized mainly for the use of investors, creditors and formanagerial decision making. They provide support to the managerial decision but theinformation provided in the financial statement is not complete and not show the certainresult. However, the information provided in the financial statements can be use in makingdecision after calculation the ratios and constructing results. Ratios can be calculated byestablishing a reasonable relationship between balance sheet items and profit and lossaccounts. It also helps us for measuring the end result from the operation of that firm. Thisanalysis also helps us in determining the strengths and weakness of a firm. Or in other wordswe can say that financial analyses are done for the purpose of identifying the financialstrength and weaknesses of an organization.“The ratios simply mean one number expressed in terms of another. A ratio is a statisticalyardstick by means of which relationship between two or various figures can be compared ormeasured” (Advanced Accounts by M.A Ghani)4.2 Common size analysisThe use of common size analysis makes comparisons of firms for different sizes mush moremeaningful. Common size analysis means that in this analysis result to be show in percentageall the items from the assets side of balance sheet will be divided by the total assets forexample if the cash is Rs 20,000 and the total assets are Rs. 100,000 then the cash will beshown in common analysis as 20% of assets. A small change in amount can results in a verysubstantial percentage change. This is the analysis where total assets are divided by allbalance sheet items, and all income statement items are divided by net sales or revenue iscalled common size analysis. Common size analysis gives analyst a view of firm’s financialtrend and to see the changes in the financial conditions. As common size analysis gives usrelative percentage of an item with respect to total, so the growth or decline in various itemsof balance sheet and income statement can not be detected from common size percentages. Ithas the following two types: 25
  • 4.2.1 Horizontal analysisHorizontal analysis compares each amount for a selected base year or we take each item ofbase year as 100% and compare with other items.Common size (horizontal) analysis of balance sheetFIXED ASSETS 2005 2006 2007 2008Plant, property and equipment 100% (23%) (45%) (62%)Long term advances 100% (42%) (51%) (52%)CURRENT ASSETSStores and spare parts 100% (43%) (38%) (62%)Trade debts 100% (2.7%) (15%) (36%)Stock in trade 100% (20%) (28%) (65%)Tax refund due from government 100% (71%) (45%) (75%)Bank balances 100% 31% (89%) (79%)Share capital and accumulated lossIssued subscribed and paid up 100% 0 0 0Share allotment deposit 100% 0 0 0Accumulated loss 100% 9.9% 53% 164%LiabilitiesPension and other staff benefits schemes 100% 10% 23% 32CURRENT LIABILITIESShort term loans 100% 0 (8%) 1%Deposits 100% (94%) 7% 1%Creditors 100% (86%) (95%) (93%)Accrued liabilities 100% (79%) (85%) 12%Advance payments 100% (78%) (81%) (81%)Provision for taxation 100% (15%) (24%) (30%) 26
  • 4.2.2 Trend Analysis of Income StatementThe trend analysis of the income statement shows the performance of an organization andcapability to meet the expenses. it also shows the future trend of organization. When we seethe trend analysis of Telephone industries of Pakistan it comes into our knowledge that TIPcontinuously suffering from loss. Why TIP going into loss it can be seen in the followingtable:Trend analysis of income statementHead of income statement 2005 2006 2007 2008Sales 100% (26%) (86%) (87%)Cost of goods sold 100% (33%) (78%) (69%)Gross (Loss)/profit 100% 8% (8%) (18%)Other income 100% (96%) (95%) (95%)Administrative expenses 100% 8% (36%) 83%Other operating expenses 100% (98%) (99%) (100%)Finance cost 100% 96% 1.02 times 1.22 times(Loss)/profit before taxation 100% (1.21) times (2.04) times (3.65) timesProvision for taxation 100% (94%) (98%) (99%)(Loss)/profit for the year 100% (1.36) times (2.60) times (5.059) timesAbove trend analysis shows that the sales in 2007 decline 86$% but it should be noted thatthe cost of goods sold in 2006 decline more then the sales that’s why in 2006 gross profit is8% after 2006 cost of goods sold incurred approximately in the same ratio. The amazingtrend is the administrative expenses with increase of 83% which shows the TIP is notcontrolling the administrative expenses.Telephone industries of Pakistan also incurring cost in respect of finance its cost is alsoincreasing continuously which must be noticed by the management of organization and takethe measure to reduce theses non-productive cost .the cost of goods sold and the salesrelationship also demand attention. Administrative cost and finance cost increasing trend iscautious and demands serious attention from the management policies and it will be in thebest interest of the organization. 27
  • 4.2.3 Vertical analysisVertical analysis compares each amount with a base amount selected from the same year.Simply, we compare the items of balance sheet or income statement vertically by taking oneitem as 100%.Common size (vertical) analysis of balance sheet (Assets side)ASSETS 2005 2006 2007 2008Cash and bank balances 7.20% 11.4% 1.09% 2.88%Stores and spare parts 0.59% 0.41% 0.52% 0.44%Loose tools 0.18% 0.22% 0.23% 0.23%Stock in trade 18.2% 17.4% 18.7% 12.6%Trade debts 43.0% 32.0% 29.4% 15.44%Loans and advances 2.58% 1.20% 1.11% 1.53%Trade deposits and short-term prepayments 2.00% 5.36% 4.14% 0.72%Other receivables 0.19% 0.51% 2.08% 0.13%Plant, property and equipment 3.10% 2.82% 2.37% 2.27%Tax refund due to Government 1.40% 0.47% 0.478% 0.71%Long term investments 20.25 28.3% 39.6% 63.0%Long term advances 0.18% 0.12% 0.12% 0.99%Interest accrued 0 0.007% 0.08% 0.003%TOTAL ASSETS 100% 100% 100% 100%GRAPHICALLY PRESENTATION of ASSETS Cash Stores Loose tools Stock in trade Trade debts Loans Trade deposits Other receivables Plant Tax refund Advances Interest accrued Investments 28
  • Common size (vertical) analysis of balance sheet (Liability side)LIABILITTIES 2005 2006 2007 2008Issued, subscribed and paid up 28% 37% 40% 56%Share allotment deposit 0.40% 0.49% 0 0Accumulated loss (25%) (34%) (56%) (1.34) timesPension and gratuity 32% 42% 56% 84%Short term loans 33% 40% 44% 68%Deposits 0.08% 0.09% 0.13% 0.17%Creditors 14% 2.3% 0.8% 1.9%Accrued liabilities 2.3% 0.57% 0.48% 5.1%Advance payments 2.7% 0.7% 0.76% 1.06%Other liabilities 2.5% 2.7% 3.19% 4.58%Provision for taxation 10.3% 10.4% 11.0% 14.4% TOTAL LIABILITIES 100% 100% 100% 100%GRAPHICALLY PRESENTATION of LIABILITIES Issued, subscribed and paid up Share allotment deposit Accumulated loss Pension and gratuity Short term loans Deposits Creditors Accrued liabilities Advance payments Other liabilities Provision for taxation 29
  • 4.3 Financial ratio analysisA financial ratio is an index that relates two accounting numbers and is obtain by dividingone number by other. One may consider that why there is a need to mingle with these ratiosand not take the actual figures straightforwardly. Among various reasons one strong reasoncan be put forward that ratios help in comparison. When analysis is two compare the internalperformance of the organization in relation to time, only ratios analysis is the viable optionfor them. Along with it, comparison with the other competitors in the same industry can onlybe carried out with the help of financial ratios.The number of financial ratios can be calculated to analyze the financial position of the firm.4.3.1 Profitability Ratios(i) Gross profit ratio Gross profit ratio is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and net sales. Formula: Gross profit ratio = Gross Profit / Net Sales x 100 Gross profit ratio 2005 = 329,938,790 / 1896279378 x 100 = 17.34 % Gross profit ratio 2006 = 355,823,114 / 1,394,220,093 x 100 = 25.52 % Gross profit ratio 2007 = (66,838,891) / 269,287,786 x 100 = (24.8%) Gross profit ratio 2008 = (237,454,080) / 244,619,694 x 100 = (97%) 30
  • (ii) Net profit ratio Net profit ratio is the ratio of net profit to net sales expressed as a percentage. It expresses the relationship between net profit and net sales. Formula: Net profit ratio = Net Profit / Net Sales x 100 Net profit ratio 2005 = 223,581,137 / 1896279378 x 100 = 11.79 % Net profit ratio 2006 = (81,175,922) / 1,394,220,093 x 100 = (5.82%) Net profit ratio 2007 = (359,643,447) / 269,287,786 x 100 = (133%) Net profit ratio 2008 = (907,627,898) / 244,619,694 x 100 = (371%)(iii) Operating ratio This is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. It measures the cost of operations per rupee of sales. This is closely related to the ratio of operating profit ratio to net sales. Formula: Operating ratio = CGS + Operating expenses / Net Sales x 100 Operating ratio 2005 = 1,566,340,588 + 336,907,108 / 1896279378 x 100 = 100% Operating ratio 2006 = 1,038,396,979 + 332,260,375 / 1,394,220,093 x 100 = (98.3%) 31
  • Operating ratio 2007 = 336126677 + 196,031,775 / 269,287,786 x 100 = (198%) Operating ratio 2008 = 482,073,774 + 560,393,075 / 244,619,694 x 100 = (426%) 200 100 0 -100 2005 2006 2007 2008 -200 -300 -400 -500 -600 -700 Gross profit ratio Net profit ratio Operating ratio4.3.2 Overall profitability ratio(i) Return on shareholder’s investment or net worth It is the ratio of net profit to shareholder’s investment. It is the relationship between net profit (after interest and tax) and shareholder’s funds. This ratio establishes the profitability from the shareholder’s point of view. This ratio generally calculated in percentage.Formula:Return on shareholder’s investment = Net Profit (after interest & tax) / shareholder’sfunds x 100 For 2005 = 223,581,137 / 896,193,000 x 100 = 25 % 2006 = (81,175,922) / 896,193,000 x 100 = (9.05%) 2007 = (359,643,447) / 896,193,000 x 100 = (40.01%) 32
  • 2008 = (907,627,898) / 896,193,000 x 100 = (101.2%)(ii) Earnings per share (E.P.S)Earning per share is a small variation of return on equity capital and is calculated by dividingthe net profit after taxes and preference dividend by the total number of equity shares.Formula:Earnings per share = Net Profit (after interest & tax) / No of equity shares Earnings per share 2005 = 223,581,137 / 896,193 = Rs. 249 Earnings per share 2006 = (81,175,922) / 896,193 = Rs. (90.5) Earnings per share 2007 = (359,643,447) / 896,193 = Rs. (401.30) Earnings per share 2008 = (907,627,898) / 896,193 = Rs. (1012.76) Earning per share 400 200 0 -200 2005 2006 2007 2008 -400 -600 -800 -1000 -1200 Earning per share 33
  • 4.3.3 LIQUIDITY RATIOThis analysis is also called analysis for short term solvency or short term financial position.(i)Current ratioCurrent ratio may be defined as the relationship between current assets and current liabilities.This ratio is also known as working capital ratio.Formula: Current ratio = Current assets / Current liabilities Current ratio for 2005 = 2,458,397,660 / 2,095,666,199 = 1.17 : 1 Current ratio for 2006 =1,829,311,852 / 1,523,772,094 = 1.20 : 1 Current ratio for 2007 = 1,305,186,678 / 1,360,964,642 = 0.95 :1 Current ratio for 2008 = 557,781,167 / 1,524,429,471 = 0.37 : 1 Current Assets to Current Liabilities 1.5 1 Current Assets to Current Liabilities 0.5 0 2005 2006 2007 2008 34
  • CHAPTER 5Main Findings and Recommendation:The study of the organizational structure, systems and the performance of an organization andthen the analysis of its different departments reveal some important facts about the company.These are the facts revealing the true picture of the organization including all the positive andnegative points on the basis of which the position of the organization is determined and themanagement can decide about the future of the organization e.g. about the change in themanagement structure, systems and processes etc.This report is also organized on the same patters where the beginning sections discuss thehistorical background; departmental review and Pakistan while the current section deals withthe Findings and Recommendations. Findings are given on the basis of my personalobservations during my time spent in the Telephone Industries and the written materialreflecting the performance of TIP, which I have collected in this period WhileRecommendations are based on the analysis and findings about the organizationalperformance and are solid points given to overcome the problems and weaknesses of theorganization (TIP).The analysis of TIP tells that there are some basic problems with the organizational design,human resource, R&D and some other departments, which should be removed immediatelyfor the successful working of the organization. The details are given as under:5.1 General Findings and Recommendation:5.1.1 Findings:By analyzing the different departments of Telephone Industries of Pakistan for their functionsand processes, I come across certain facts which are given below: TIP has nothing to dealwith the fraud cases. TIP a big organization, but has not its marketing department which isthe need of an organization.Telephone industries of Pakistan have machinery for the production of many differentproducts but most of this machinery is technologically old and needs extra time and effortsfor production. Due to this reason its cost of goods sold is increasing which has resulted inthe decrease in its profit.Telephone industries of Pakistan has huge production capacity but it has never produced at itsfull capacity due to which its per unit cost is high. TIP has been involved in research and 35
  • development but the organization has never been able to capture so much capable resources(human & physical) to introduce the best quality products at cheaper rates.Personnel department of the telephone industries of Pakistan has got some very devoted andskilled employees and workers but they are not sufficient enough to meet the demands ofsuch a large organization. It is, therefore, very difficult for the organization to employ itslimited staff on new development projects.The managers at the top m1d middle level are not controlling the employees efficiently andhave developed a culture in which there is no motivation and role modeling of the superiorsand no share of the subordinates in the Decision Making process.Telephone industries of Pakistan depend mostly upon only one buyer that is PakistanTelecommunication Company Limited and has not sold its products in open market. Tip hasnever been involved in any type of marketing activity.The Quality Assurance Department of TIP has remained active in the past when the R&Dwas efficiently working but now it has also become inactive and the rate of defects in theproducts or their performance have increased.5.1.2 Recommendation:TIP should have a proper system to deal with the fraud corruption by the upper managementso that these types of events can never be happen again. As soon as possible TIP should startits on full fledged marketing department as it is age of marketing and competition.Telephone industries of Pakistan we found that telephone industry of Pakistan have old,machinery and insufficient workers. With the passage of time new technologies are broughtin the market and the organizations which adopt new and better technologies have cost ofproduction much lower than the other firms having old technologies. There is need forTelephone Industries to install new machinery and overhaul old machinery to work properly.It should also give training to its unskilled workers to become profitable for the organization.This is very necessary for the long term survival of the organization.Telephone industries of Pakistan are unable to take all the orders from PakistanTelecommunication Company Limited. Now, PTCL purchases its products by calling tendersor quotations in which TIP participates as a member. Many times TIP remains unable toreceive the orders because the other companies offer their products at lesser rates. There isneed for TIP to minimize its cost of goods sold so that it may be able to take all the orderfrom its sister concern PTCL. 36
  • DownsizingIn the downsizing operation a lot of loyal and skilled workers and engineers left theorganization. TIP should try to retain the remaining skilled and devoted employees andworkers because the workers are the most power full asset of any organization and at difficulttimes the organization needs the people who are more committed and loyal to theorganization.Organizational cultureTIP should also change its organizational culture. The existing culture in which there is nomotivation, no job rotation and employees development should be changed for a betterculture in which there should be good and effective communication, motivation and feedbackfor the employees. It is necessary for the betterment of the organization, for the achievementof the organizational goals, for the reduction of cost and expenses and for increasing theefficiency of the workers and profit as well.MarketingTelephone Industries of Pakistan totally depended upon only one buyer i.e. PTCL and sold allof its products on it. This is not a good policy and TIP has suffered a lot because of it. TIPshould expand its business beyond PTCL and should try to find out new markets for itsproducts.For expanding the market it is necessary for Telephone Industries of Pakistan to involve inthe effective marketing campaign. The website developed by TIP is not meeting to the needsof global world they should try to provide more information and make it interactive from thecustomer point of view. Tip was established as a production unit of PTC but afterprivatization of PTCL, TIP facing order problem due to lack of effective marketingcampaign.Research and DevelopmentTIP aims at self-sufficiency and has therefore set-up its own Research and Developmentwing. This wing has already done considerable work in the development of new circuits andequipment and in exploring possibilities of applying new scientific knowledge. Various otheractivities are striving for the provision of more environmental procedures to manufactureequipment suitable for the local condition and requirements.Apprentice training 37
  • TIP created facilities for apprentice training in its premises at a very early stage. This wasnecessary because the rural area of HAZARA didnt offer sufficient number of technicallyexperiences workers. Practically the entire stat of the factory has been trained in the factoryitself, thus contributing towards the industrial and technical development of this particularregion, TIP has adopted the training scheme used in Siemens-Factories and adjusted inaccording to the condition, prevailing here. For skilled technicians, the normal period ofapprenticeship is 3 year with the possibility to shorten and pass the half yearly examinationswith good result.Lastly, we can say that;TIP has contributed toward the Industrial Development the country the fields of precisionmanufacturing. 38
  • 5.2 Conclusion:The products have reliability of service due to the standard of quality. The establishment of agood Research & Development is helping in the introduction of the advanced technology andchanges modifications in the running products.TIP manufacturing all parts according to the merit system. For maintenance of standards ofprecision TIP Measuring Laboratory. The production process is started after proper pre-planningby the Production Planning Branch and is finalized by a strict quality Control. The productionprocess itself is carried out by using means of modern techniques.The workers are mostly paid according to the piece-rate system, which enables them to earn theirwages in accordance with their efficiency and skill.TIP has qualified staff, huge production facilities and vast areas and opportunities to grow andexpand. There is need to adopt the suggestions given in this report, if TIP wants to regain its loststrength. With the proper implementation of these suggestions, effective control and efficientmanagement there will be the existence of fair organizational culture, the commitment ofworkers with the organization will increase, resources will be used efficiently, product line willexpand, market share will increase and all the resources will prove to be much more profitablethan ever before.If all this can be made possible and these precious human and non human resources are usedwith vigilance and proper planning TIP can certainly reach a point where it will be next to noother company in the country and Pakistan will be among the world leaders in the field oftelecommunication. 39
  • References:Books1: M.A. Ghani. Fourth Revised and Enlarged edition, My-Word Composing Center, Lahour 2003Reports 1) Idrees, Shahid. 2003. An Internship Report on TIP. Islamabad, Quaid-e-Azam University, Department of Administrative Sciences. 2) Rashid, Tayyiba. 2002. Internship Report on TIP. Peshawar, University of Peshawar, Institute of Management Studies. 3) Financial repot, Telephone Industries of Pakistan, 2006,2008Internet 1. http://www.ptcl.com.pk 2. http://www.pakistaneconomist.com/ 3. http://www.zumbeel.net/beta/news/details.php?rev_param=6808 4. http://www.tip.org.pk 5. www.alibaba.com/member/ajtip.htm 40
  • ANNEXURES (A) Telephone industries of Pakistan Profit & Loss Account For the year ended June 30, 2005, 2006(B) Telephone industries of Pakistan Balance Sheet For the year ended June 30, 2005, 2006 41
  • (C) Telephone industries of Pakistan Profit & Loss Account For the year ended June 30, 2007, 2008 42
  • 43
  • (D) Telephone industries of Pakistan Balance Sheet For the year ended June 30, 2007, 2008 44