The Financial Environment in Public sector of Pakistan, Give a theoretical background of the topic and then analyze its practical application in an organization selected by you.

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Department of Business Administration.
Assignment 2
FINANCIAL MANAGEMENT (562)
Submitted To
Most Respectable,
Prof.AzharMehdi
Submitted By
Engr.Waseem Saeed
Roll AD-512530
Semester 3’ rd
ALLAMA IQBAL OPEN UNIVERSITY ISLAMABAD,
PAKISTAN.
Spring 2010

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DEDICATION
I dedicate it to my beloved parents and respected teachers.

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ACKNOWLEDGMENT
All praise and thanks is due to ALLAH, the Lord of
mankind and all that exists, for His blessings, benevolence, and
guidance at every stage of our life.
I am deeply grateful to my course coordinator,
Prof.Azhar Mehdi, for his guidance, support, and patience. He
has been an invaluable source of knowledge and has certainly
helped inspire many of the ideas expressed in this assignment.
My words will fail to express my deepest heartfelt
thanks to my family, especially my parents & my Cousin, for all
what they did, and still doing, to help me be at this position and
for their continuous support and encouragement. Any mistakes
that remain are mine! I thank you all.

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The Financial Environment in Public sector of Pakistan,
Give a theoretical background of the topic and then analyze
its practical application in an organization selected by you

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Table of Contacts
1. Title Page
2. Dedication
3. Acknowledgement
4. Topic
5. What is Public Sector?
6. Evolution of public sector in Pakistan
7. Objectives
8. Distinction Between Public Sector And Private Sector
Accounting
9. Financial Markets
10.Definitions of Financial Environment
11.Introduction of Financial Environment
12.What is Financial Environment?
13.World Financial Environment
14.Business & Financial Environment
15.The Financial Environment in Public Sector of Pakistan
16.Production Innovation

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Case Study
1. COMPANY PROFILE
2. INTRODUCTION OF PARCO
3. MISSION STATEMENT OF PARCO
4. OBJECTIVES OF PARCO
5. FINANCIAL ENVIRONMENT IN PARCO
6. FIXED ASSETS AND CAPITAL WORK-IN-PROCESS :-
7. REVENUE RECOGNITION
8. SWOT ANALYSIS OF PARCO
9. CONCLUSION

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WHAT IS PUBLIC SECTOR?
The part of the economy concerned with providing basic
government services. The composition of the public sector varies by
country, but in most countries the public sector includes such services as
the police, military, public roads, public transit, primary education and
healthcare for the poor. The public sector might provide services that non-
payer cannot be excluded from (such as street lighting), services which
benefit all of society rather than just the individual who uses the service
(such as public education), and services that encourage equal opportunity.
Prospectus works with a wide range of public sector
organizations - including government departments, local authorities and
semi-state companies - to develop strategy and to implement major
organizational and transformational programmers that are tailored to the
specific demands of today's market. At Prospectus we have an excellent
understanding of the particular environment within which public sector
organizations operate and the challenges they face. Indeed, a number of
Prospectus consultants have previously worked in the public sector. This
unique experience in the Irish public sector market - coupled with practical,
concise, straight-talking and value-added services.

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EVOLUTION OF PUBLIC SECTOR IN PAKISTAN
The main objectives of setting up the Public Sector enterprises as stated in
Industrial policy Resolutions of 1956 were:
 To help in the rapid economic growth and Industrialization of the
country and create necessary infrastructure for economic
development.
 To earn return on investment and utilize resources for development.
 To promote redistribution of income and wealth.
 To create employment opportunities.
 To promote balanced regional development.
 To promote import substitutions, save and earn foreign exchanges for
the economy.
The 2nd Five year Plan document clearly stated that “All industries
of basic and strategic importance or in the nature of public utility services
should be in the public sector. Other industries, which are essential and
require investment on a scale, which only the state, in the present”

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OBJECTIVES
The objectives of public sector enterprises may be divided intothree
categories:
1. Economicobjectives:
I. ECONOMIC DEVELOPMENT- Publicenterprises are established
to accelerate the rate or economic growth, by setting up key and basic
industries like iron and steel, petroleum, power generation,
chemicals, machine building,etc. The publicsector provides an
essential base for faster economic growth of the country. Expansion
of capital goods industries lead to the developmentof other
industries.
II. PLANNEDGROWTH- The private sector neglects the industries
with long gestation periods and low rate of returns. Public
enterprises step in to fill up gaps in the industrialstructure by setting
up industries which are economically unattractive, butnationally
essential. Publicsector provides infrastructural facilities for
diversifiedand balanced growth.
III. BALANCED REGIONALDEVELOPMENT- Public sector concerns
are designed to facilitate the growth of backwardregions so as to
reduce regional disparities in industrialgrowth.
IV. GENERATION OF SURPLUS- Publicenterprises is expected to
generate and distribute surplus for financing five-year plans and
other schemes of public welfare. V. Provide employment - One of the
importantobjectives of publicenterprises is to reduce the
unemploymentby creating employmentopportunities.

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2. SOCIAL OBJECTIVES:
I. CONTROL MONOPOLY- Sometimes, publicenterprises seek to
check private monopoly and restrictive practices and the resulting
evils like exploitation.
II. EQUITABLEDISTRIBUTION OF WEALTH- Public enterprises is
expected to reduce disparities in the distribution ofincome and
wealth. Reduction of economic disparities is one of the objectives of
our constitution and public enterprises are helpful in checking
concentration of economic power.
III. PROVISION OF ESSENTIALGOODSAND SERVICES -An
importantobjective of publicundertakings is to provide essential
goods and services for consumption at reasonable prices. This helps
in improving the standard of living of the people. Social control over
industry ensures equitable distribution of commodities and helps to
protect the consumer from exploitation by greedy businessmen.
IV. TAKEOVER OF SICK UNITS - Closure of sick units may result in
loss of employmentto a large number of people and wastage of
national resources. Public enterprises like the National.

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3. POLITICALOBJECTIVES:
I. PUBLIC INTEREST -Public enterprises are established in the
interestof the country as a whole.
II. India has become an industrialpower because of the developmentof
public sector concerns. They facilitate self-reliance in strategicsectors.
III. NATIONAL DEFENSE -Public enterprises are set up for the
manufacture of arms, ammunition, telecommunications, oil, etc.,
which are essential for the safety and security of the country.
IV. SOCIALISM - Publicenterprises are required to future the political
ideology of the Governmentas well as to serve the constitutional
objectives of socialisticpattern of society.

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DISTINCTION BETWEEN PUBLIC SECTOR AND PRIVATE SECTOR
ACCOUNTING
Public sector accounts are prepared to show the accountability to
the concerned departmentand private sector accounts are prepared to find
out operating results, profit or loss, out of the commercial transactions
undertaken to earn profit. Other differences are as follows:
I. Different Accounting System - Private sector accounts are prepared
on accrual basis i.e. earning and spending etc. Balance of both debit
and credit side equates one another, but public sector accounts are
maintained on cash basis i.e. cash receipt and cash payment for the
respective period are taken into consideration.
II. Profit or Loss - The purpose of public sector account is to depict
accountability to the legislature while private sector accounts try to
depict commercial profit earned for the year ended.
III. Balance Sheet -In private sector accounts, balance sheet shows assets
and liabilities on a cumulative basis but in case of public sector
accounting, the current year’s expenditures as well as capital receipts
are shown. In Private sector accounting final accounts consists of
profit and loss account, balance sheet, and statement of changes in
financial position. In case of public sector accounts, final accounts
consist of public sector account and balancing accounts. Under
balancing account, all the balances of the public sector accounts are
shown along with receivables and payables.

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IV. Equation - In private sector accounting equation of assets and
liabilities takes the following form: Capital, Surplus, Other liabilities;
fixed assets, Current assets, Investments. But in case of public sector
accounting equation takes the following form: Public sector account
receivables-Payables.
V. System of Entry - Under private sector accounting, double entry
system is followed and journal, ledger, trialbalance can be prepared.
But in the case of public sector accounting, single entry system is
followed because of its inability toprepare trial balance for absence of
full information.
VI. Depreciation - In private sector accounts, depreciation is charged on
income statement to arrive at true profit or loss, so that after the
termination of the life of the asset they buy a new asset for replacing
the old asset; and also to claim tax exemption from commercial profit.
But in case of public sector accounting, there is no provision for
providing depreciation. Itlost its relevance in providing depreciation
in absence of proper value of asset; but in certain cases like
Transportation Company which charges depreciation for maintaining
its assets.
VII. Form of Accounts - In public sector accounting, the form of accounts
takes the following form: (i) Consolidated Fund; (ii) Public Fund and
(iii) Contingency Fund. In case of Private sector accounting, concerns
registered under the Companies Act shall follow the form prescribed
under the Companies Act, 1956.

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FINANCIAL MARKETS
Financialmarkets represent forums that facilitate the flow of
funds among investors, firms, and government units and agencies. Each
financial market is served by financial institutions that act as
intermediaries. The equity market facilitates the sale of equity by firms to
investors or between investors. Some financial institutions serve as
intermediaries by executing transactions between willing buyers and
sellers of stock at agreed-upon prices. The debt markets enable firms to
obtain debt financing from institutional and individual investors or to
transfer ownership of debt securities between investors. Some financial
institutions serve as intermediaries by facilitating the exchange of funds in
return for debtsecurities at an agreed-upon price. Thus it is quite common
for one financial institution to act as the institutional investor while another
financial institution serves as the intermediaryby executing the transaction
that transfers funds to a firm that needs financing. Financial information is
used to measure performance and help make decisions about how an
organization should operate. Despite its importance, many managers do
not fully understand the financial information they use or how it fits into a
wider business context.

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Financial Environment shows managers how to interpret financial
information and, in doing so, make better decisions. It covers important
elements of finance that affect organizations large and small.
Definition of FinancialEnvironment:-
“Market for a financial instrument, in which buyers and sellers find each
other and create or exchange financial assets”
Financial Environment is aimed at aspiring first time managers
who want to improve their understanding of financial information. It does
not focus on any particular industry, sector or size of business, making it
relevant to the widest possible audience. There are no formal entry
requirements and the course assumes no specialistknowledge, although an
understanding of basic accountancy terminology is essential.
The easy to follow, step-by-step format of this course means participants
can work at their own pace, making it ideal for anyone new to financial
information.
What is a market?
1. A market is a venue where goods and services are exchanged.
2. A financial market is a place where individuals and organizations
wanting to borrow funds are brought together with those having a
surplus of funds.

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Types of financial markets
Spot vs. Futures
Spotmarketsare markets where assets are bought or sold for ‘on the spot’
delivery.
Futures markets are markets in which participants agree today to buy or
sell an asset at some future date.
Public vs. Private
Private markets are markets where transactions are between two parties.
Public markets are markets where standardized contracts are traded on
organized exchange.
Physical assets vs. financial assets
Physical markets deal with real assets such as wheat’s, automobiles,
computers, etc.
Financial assets deal with stocks, bonds, notes, derivatives securities, etc.
Money vs. Capital
Money markets are markets for short term, highly liquid debt securities.
Capitalmarkets are for intermediate or long term debt or corporate stocks.
Primary vs. Secondary
Primary markets are markets where corporations raise new capital.
SecondaryMarketis markets where existing or outstanding securities are
traded among investors.

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Types of financial intermediaries
Commercial banks
 Savings and loan association
 Pension funds
 Life insurance companies
What will you get from this topic?
When you have completed this course you will be able to:
a. Understand the important elements of finance that affect all
managers and team leaders.
b. Read and understand company accounts, balance sheets and
profit and loss accounts.
c. Identify sources of finance available to businesses and be able
to use key financial ratios to analyze performance.
d. Understand the importance of managing cash flows.

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INTRODUCTION TO FINANCIAL ENVIRONMENT
In every given environment, whether large or small, it is easy to
observe different economic functions taking place on continuous basis. To
maintain a healthy and acceptable interaction among several economic
units, a nation has its laid down rules and expected roles to be played by
the citizens and other investors.
No nation would ever survive without a sound financial system,
which is the law and environmentwith an interchange of wealth, asset and
liabilities on regular basis for economic growth. In fact, in the words of
HerggottBeckhart, financial system is defined as “the family of rules and
regulations and the congeries of financial arrangements, institutions,
agents and the mechanism whereby they relate to each other within the
financial sector and with the rest of the world.”Financial Environment will
give you a theoretical introduction to understanding and analyzing
business information.

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WHAT IS FINANCIAL ENVIRONMENT?
Financial environment includes bond markets, stock markets,
commodity markets, OTC markets, Real estate markets and cash or spot
markets. These markets act as a platform for the buyers and the sellers to
interactin the financial environment. The buyers and sellers of the financial
markets are known as Market participants. These participants include
investors, speculators and institutional investors. There are certain
regulatory authorities(both private and government)who determine some
policies and rules which are applicable in a financial environment.
All these markets play an importantrole in raisingfinances for
the companies and at the same time give profits to the investors. Basicallya
financial environment comprises of the public sector enterprises, legal
authorities, fiscal authorities which are directly or indirectly impact the
financial system, monetary institutions, financial institutions, and official
organizations.All these organizations have a direct impact on the financial
system of the companies including private and public. Therefore, in order
to give the money to the people who need it and to give the profit to the
people who want to invest it, financial markets play an important role.
There are a number of bodies which are known as financial
markets, whoare responsible for making financial environment. Financial
environment in an economy deals with the monetary transactions which
are based on money, time and risk. Financial environment can be further
classified into financial markets which collectively constitute this
environment.

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WORLD FINANCIAL ENVIRONMENT
1. Money
 Powerful thing
 Made twenty four hours a day
 A commodity, that is officially recognized as a
medium of exchange that is widely accepted because issued
by a governmentor other public authority in the form of
coins of gold, silver, or other metal, or paper bills, used as a
measure of value of goods and services and in settlementof
debts.
2. FinancialMarkets
 A financial marketplace where debtinstruments, primarily
bonds, are bought and sold is called a bond marketalso
known as the debt market. The dealingin a bond marketis
limited to a small group of participants and lacks a central
exchange.
3. Foreign Exchange
 The exchange of one country’s money for that of another
country. When internationaltransactions occur, foreign
exchange is the monetary mechanism allowing the transfer of
funds from one nation to another.

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4. Stock Market
 Stock Marketis an organizedmarketwhere shares are issued
and traded.
5. Commodity Market
 Commodity trading is a kind of financial trading in which
primary products, such as food, metals and energy, are
bought and sold.
6. RealEstate Market
 Real Estate Marketis the marketwhere exchange of real
estate property takes place between buyers and sellers.
7. Share Market
 Stock markets generally advocate the philosophy of laissez-
faire (free market)economy and always argue in favor of less
restrictive importand immigration policies.
8. IMF
 Dominique Strauss-Kahn (France)is the Managing Director
of IMF
 186 members

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9. World Bank
 International Bank for Reconstruction and Development
 Existence on December 27, 1945
 The largestexternal fund provider for education and
HIV/AIDS programs,strongly supports debt relief, and is
responding to the voices of the poor people.
10.Balance ofPayments
 A Balance of payments (BOP) sheet is an accounting record of
all monetary transactions between a country and the rest of
the world.
 These transactions include payments for the country &
appose exports and imports of goods, services, and financial
capital, as well as financial transfers.
 BOP = Current Account - Capital Account

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FINANCIAL SECTOR OF PAKISTAN – THE ROADMAP
The financial system in Pakistan has grown substantially,
benefiting from multi-pronged financialreforms. These reforms have been
pursued persistently and vigorously over a decade or so and have
supported economic growth. The inefficiencies and weaknesses, which
were typical of banks’operations in the pre-reforms era, have been reduced
radically. We have now started to realize the dividends of reforms in the
form of a healthier, sounder and stronger banking system. Liberalization
and deregulation, core pillars of the reform measures, have served to
enhance the size of the banking system both in terms of the number of
banks and growth in credit, besides instilling a degree of competition in the
banking industry.
However, the task of financial sector reforms is far from
accomplished. Given the changing dynamics of the economy and its
growing complexities and accompanying associated risks, the financial
industry has to remain responsive and supportive of the broader economic
ambitions and agenda. The country can neither afford slippages nor can we
visualize the future dispensation of the bankingsystem of Pakistan. All the
major players and stakeholders in the banking system will have to strive
for continuity, broadening and deepening of reforms, build and sustain the
alreadyimplementedreforms and fill the remaining fissures. The growing
competition along with increasingly diversified services, both across the
regions and sectors, and improved access to customer-base on the back of

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progressive reliance on technology, are the harbingers of the changing and
efficient intermediation role of banks in the days ahead.
In order to develop the future outlook, I will now examine both
the emerging domestic and external trends, which potentially impact the
future financial sector architecture: its structure, texture and the operations
of financial institutions. In this respect, eightfactors are generally believed
to have been the major drivers of change in the financial industrythe world
over. They include:
1. Macroeconomic performance and priorities
2. Deregulation and market forces
3. Product innovation
4. Globalization
5. Technological advancements
6. Universal banking
7. Risk Management and Mitigation
8. Changing Role of and demands on the Regulator
These forces, to a varying degree, will play a more dominant
role in shaping the future complexion of the financial sector and its
institutions and entail far reaching implications in terms of stimulating
increased competition, greater consolidation,and increased diversification
and enhanced dynamism in the financial players and markets. The central
bank, along with major players in the market, will continue to develop and
refine the mutual vision and plan for the financial system of Pakistan.

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All key players will have to correspondingly position themselves,
change their attitudes, and be responsive to collectively transform the
financial system of Pakistan.
MACROECONOMIC PERFORMANCE AND PRIORITIES
Financial system of any country has an intrinsic relationship
and needs to be shaped in accordance with the broader economic needs,
structure and policies. Considering this interdependence, itis imperativeto
assess the behavior and trends of the key macroeconomic indicators while
drawingthe emerging contours of the financial system. In this respect, the
major indicators of the economy during the last few years have shown
robust performance. GDPgrowth shot up to over 8 percent in FY05 and the
current year also promises higher than 6 percent growth. Undoubtedly,
consistent and stable economic policies provided the businesses with
confidence. However, easy availability of funds on the back of historically
low level of interest rates proved to be the real catalyst for the subsequent
sharpgrowth in credit to the manufacturing sector and eventually proved
to be the real determinant of high GDP growth. Strong credit demand of
the manufacturing sector translated into a sharp increase in the interest
income of the banking system, giving rise to unprecedented profits and
healthier balance sheets during the last two years. Redeployment of these
profits to augmentfinancial services will help meet the growing economic
requirements.

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The near term economic prospects are promising. The
continued strong pace of economic activities, and plans to launch
widespread infrastructure reforms offer strong business prospects for the
financial sector. Real interest rates remain at tolerable limits.
Notwithstanding, there will be demand pressures in particular if the trade
deficit grows out of proportion and inflationary tendencies continue to
persist. A consequent fall in demand for credit or a possible impairment of
the debtrepayment capacity of borrowers does carry the risk of reversing
the currentgains enjoyed by the banking system. But these risks are being
well managed and ifthe economy continues the growth momentum for the
next decade or so, the financial system of Pakistan is expected to reap
benefits out of rising incomes, consumption and emerging investment
demands.
Traditionally, infrastructure projects fell in the public sector’s
domain of activities. However, recent years have seen a paradigm shift in
this area, with the growing interest of the private sector to undertake such
projects. There exists immense potential for the financial institutions to
finance such infrastructure projects built on public-private partnerships or
even exclusively in the private sector. This will help diversify their
activities as well as enhance their earnings. Similarly, financial institutions
can take advantage of the changing demographic patterns, rising incomes
and enhancement of policy priorities for various sectors. These trends are
already visible as reflected by the increasing proportion of urban
population, rising literacy rates, and the increasing share of the industrial
and services sectors in GDP.

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The financing to SME, Agriculture, and Micro finance segments of
the economy carries special importance with respect to future economic
growth and diversification of banks’ loan portfolios. The State Bank will
accord further priority to improvingaccess of developmentfinance to these
segments and will work with the provincial and local governments to
facilitate a conducive environment, and supportive financial and legal
infrastructure to give impetus to economic growth and poverty alleviation.
The banks will have to strengthen their systems to meet the challenges and
opportunities arising out of their venture into these segments.

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DEREGULATION, MARKET FORCES AND CONSOLIDATION
The spate of liberalization and deregulation measures in recent
years has unleashed strong forces of competition. These are fast defining
the future course of Pakistan’s financial sector. Emergingrole of the private
sector has displaced the public sector from its dominant position, giving
rise to aggressivecompetition across the market operators, and the market
pressure by the stakeholders to perform is going to result in fiercer
competition. This is expected to change the business landscape and
chemistry of the competition as market players will have to use fresh
thinking on financial products and the structure of the market, and focus
on value creation to survive.
The stiffening licensing policy and regulatory capital
requirements are alreadyposing a great challenge to the small banks, and
with gradual enhancement of the minimum capital requirements in the
coming years, they will have to either inject more capital to become
compliant or amalgamate with other financial institutions, or as a last
option, exit the market. The current trend depicts that new entrants, only
allowed by way of strategic partnership in existing banks and/or new
Islamicbanks, are coming in with higher capital. More so, consolidation of
financial institutions is well underway and is likely to lead to the
emergence of fewer but stronger institutions to meet the challenges of the
increasingly complicated financial environment of the future. The
competitive environment might also force financial institutions to
specialize in offering certain types of services based on their respective
expertise and market niches.

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PRODUCT INNOVATION
In a sharp contrast to international trends, the financial system
of Pakistan has been lacking in developing innovative products to meet the
diversifiedneeds of different customers. However, the emerging financial
scenario characterized by intense competition leaves little room for
complacency in developing new and attractive products on both the asset
and liability sides.
Product innovation and developing brand loyalty by creating
specialized products will decide the volumes of business and market
shares in the future. Presently, the absence of specialized liability products
is most conspicuous. The growing awareness among investors and the
expected developmentof other avenues of funds’ deployment e.g. the long
term fixed income and mutual funds marketprovide attractive alternatives.
Thus the financial institutions which take initiative ofthese kinds are likely
to grab greater market share of funds in the future.
Ideally, greater liberalization with ensuing competition should
have led to a narrowing down of spreads. However, in case of Pakistan,
there appears to exist a somewhat paradoxical situation, where banks are
able to widen their spreads mainly because they enjoy comparative
Advantage in offering unique banking services, primarily because of the
almost non-existent competition from non-bank finance companies and a
dormant institutional finance industry as pension and insurance sector
reforms have yet to catch up with other financial sector reforms.

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However, the future promises emergence of competitive non-
bank companies which offer Alternative sources of investments. And banks
will need to generate fee-based income to fill the gapcreated by declining
interest incomes.
Pakistan’s market has a huge room for the development of
derivatives and synthetic products. The growing financial engineering of
services and products requires greater attention to the hedging of risks.
Financial institutions need to increase their role as risk managers to
corporate and other entities by offering a variety of derivative products.
Financial institutions are also expected to employ processes and practices,
which could help them to become more cost effective and efficient. Certain
traditional services might also be outsourced to gain efficiency and focus
on core areas as competition might not be the only rule of the game. The
financial institutions might also cooperate in offering certain types of
services.
Presently, this is reflected in the networking of ATMs. This co-
optation is expected to become the order of the day as banks seek to
enlarge their customer base and at the same time realize costreduction and
greater efficiency.

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GLOBALIZATION
With the falling barriers to capital mobility and opening up of
financial services in the wake of WTO, globalization of financial services is
expected to accelerate in coming days. As the financial institutions gains
size, competitive edge and develop their systems at par with the global
practices, it would be profitable to seek greater opportunities offered by the
large financial markets around the globe. Particularly, opportunities in
emerging and regional future economic power hubs are bright. Moreover,
higher trade activities are also likely to give boost to banks’ role in forex
business and their support to corporate customers to expand their business
across the borders.
So far, Pakistani banks have performed fairly well against the
foreign banks operating in the country. Lately, under the intense
competition put up by the local banks due to significant improvement in
their processes, foreign banks have been on the retreat even in the areas
where they used to enjoy virtual monopoly. However, with the increasing
trade volumes in relation to GDP and growing overseas business
opportunities for Pakistani corporate, as well as increasing capital flows,
the large foreign banks would find considerable scope to capitalize on their
expertise due to their established global position and awareness of
different markets around the world.

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TECHNOLOGY
Technology helps to catalyze efficiency in the provision of
financial services and ultimately in determining the winners in the
intensely competitive financial markets of the future. Technological
breakthroughs have forced fundamental changes in the financial industry:
strategic business plans have taken into account new ways of doing
businesses, launching e-banking, and using information and technology for
developing better internal controls, more sophisticated risk management
systems and better and convenient customer services. Hence it is critical
that Pakistan’s financial industry adopts an appropriate organizational
model that supports a customer-centric approach and reengineers business
processes to exploit technology to derive economies of scale and create cost
efficiencies.
The use of ATMs and e-banking products is gaining currency
and almostall banks have established networking of their ATMs with the
interconnectivity of switches. Better outreach offered by ATMs will
enhance the customer base and offer more alternatives and choices to
customers. Further development on e-banking and internet banking will
open up new avenues like on-line banking. Among others, the relatively
smaller size banks willbe able to compete with the large banks and retain
their market presence by using technology more effectively.

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Technology tends to have a high degree of obsolescence.
Thus, the financial institutions will have to invest heavily in the
development of their IT systems, which might initially burden their
resources. For this purpose, the financial industry will have to optimize
its resources for technology applications. The immediate solution might
lie in sharing of facilities. Banks in Pakistan are already cooperating
extensively in using ATMs services. The future areas of cooperation
might involve payment and settlement, back-office processing, data
warehousing etc. At the same time, financial institutions will also have to
raise adequate safeguards to deal with the associated operational risks.
This would invite special focus of their management in the future.
UNIVERSAL BANKING
Universal banking has gained sharp acceptance as traditional
boundaries of financial service provision have become blurred. In addition
to their conventional commercial banking services,banks have withdrawn
from specialization to offering a broad menu of services. This presents the
banks with opportunities as well as challenges and requires constant
development of their expertise in the new areas of their operations.
The idea of universal banking, which is still evolving in Pakistan, is likely
to galvanize the non-banking financial sector in developing competitive
products and use modern technology to secure themselves against banks
making inroads into their traditional areas of operations. This is likely to
give further impetus to competition in the financial sector for the provision
of quality financial services.

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At the same time this might catalyze mergers among banks
and non-bank financial institutions for their mutual survival. This trend
may lead logically to promoting the concept of a financial super market
chain, making available all types of credit and non-fund facilities under
one roof or in terms of specialized subsidiaries under one over-arching
organization.
Consolidated accounting and supervisory techniques would
have to evolve and appropriate firewalls built to address the risks
underlying such large organizations and banking conglomerates.
RISK MANAGEMENT
The above-mentioned forces of change have significantly
increased the importance of strengthening the risk-management practices
of the financial system. With the proliferation of new techniques and
financial institutions venturing into new areas, a whole range of market
related risks have surfaced. This will render the traditional risk-
management techniques obsolete as new derivative products and off-
balance sheet operations become more common. The hitherto neglected
area of operational risk management has also come to assume greater
importance and the pervasive use of technology has multiplied the
importance of managing this risk in tomorrow’s more volatile banking
environment. The financial institutions now have to have enough
paraphernalia to tackle these risks in line with the international best
practices.

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In this respect, risk-management tools built upon the latest
technology would provide the financial institutions to manage the host of
new risks in a more efficient manner. This will enable them to deploy
resources more effectively.
The importance of sophisticated risk-management practices will
become even more pronounced as the banks strive to implement the Basel
II accord. The smooth switch over to Basel II will be a challenging task
before the banks, and this has far-reaching implications for the future
structure of the banking system. BaselII would require a heavy investment
in technology and development of MIS tools to incorporate the internal
risk-basedapproach. The risk-based approach to capital allocation will be
the inherenttheme, as each asset will be allocated a rating both externally
and internally. This will ultimately influence the capital charge for each
asset and would thus help minimize the reckless risk-taking by banks on
account of the heavy capital charge.
As financial innovation becomes ubiquitous and new technology
and standards evolve to make financial transactions more complex and
volatile, the role of the regulators is going to become tougher in the days
ahead. This brings me to the concluding, but not the least important
section, i.e. the changing role of and expectations and demands for
regulators.

37. 37
CHANGING ROLE OF REGULATOR
The central bank has been transformed substantially. It is today a
very user friendly institution, based on feedback of the industry. It is
candid in putting forth its views, and over the years has withstood a
number of political challenges.
Over the next few years, we plan to: First, with the support of the
Government, launch adequate initiatives to strengthen the governance of
the central bank. In this context, SBP is in the process of benchmarking
itself with the other central banks that have attained good governance
standards.The evaluation of central banks’ governance practices is judged
on the basis of the roles and responsibilities of the Management and the
Board of Directors, and the appropriate interaction and interface between
the central bank and the government. In deciding an appropriate balance in
these roles and responsibilities, it is critical that central bank’s
independence is not compromised in terms of the conduct of monetary
policy as well as the oversight of the financial sector. In all contexts, it has
to be recognized that independence has to be accompanied by effective
accountability of the central bank. The institution has to be accountable to
the Parliament and the Senate, and work in conformity with the Federal
Government’s goals, as the central bank, among other functions, also
serves as an advisor to the Government.
Second, SBP needs to examine where there is further need for
internal strengthening. Few areas where SBP will gear itself further would
be in terms of increased responsive to industry changes in order to align

38. 38
prudential regulations accordingly. Among others, SBP needs to be
equipped to assess banks when they adopt higher standards of risk
managementwhich will be promoted when Basel II is introduced. Another
area would be for the central bank to strengthen its oversight and
supervision, with particular emphasis on closer supervision of the
emerging conglomerate structures in the banking industry as some of the
commercial banks are now owned by industrial groups and brokers.
Third, in conclusion, the central bank should energize itself to
finance the under-served areas, regions and segments. And, the central
bank would like to promote the Islamic Banking Industry, as it has the
potential to introduce innovations in the market. As part of the
reorganization of the central bank, which is currently in process, we plan to
set-up a separate departmentfor developmentfinance, which will push for
this objective.
Having assumed office in January, I am in the midst of
developing a strategy for the next ten years of the financial sector, and my
talk today presents some ideological thoughts on the long-term vision
paper for the central bank, which will be developed in consultation with
the stakeholders. We then need to set up an implementation task force,
which will be a combined effort of the banking industry and the central
bank to take forward these reforms. There has been tremendous change in
the banking industry in the last few years and we need to fine-tune our
strategic direction as we go forward.

39. 39
What’s Different about Sustainability for the Public Sector?
“The private sector will move [to sustainable technology and
practices] when it makes sense from a revenue and profit motive. The
public sector has a two-pronged approach: gaining efficiencies and in its
role as a public steward of resources.”
The public sector has additional incentives toadopt sustainable technology
and Business practices:
 Improving service effectiveness: Savings from more efficient
power usage can be invested in government and educational
services.
 Fulfilling government’s role as a public steward: The public
sector has a social and fiduciary responsibility to conserve
scarce resources.
 Enhancing employee recruitment and retention: Public sector
employees are retiring in record numbers and government
needs to attractthe best and brightest workers to replace them.
New college graduates tend to prefer to work for employers
committed to sustainability.
 Supporting continuity of operations
1. Vendor

40. 40
BUSINESS& FINANCIAL ENVIRONMENT
The global economy has increased the interdependence of national
economies. Multinationalcompanies dominate the internationaleconomy.
The integration of the financial markets and the internet technology give
access to investments in foreign countries.
As investors increasinglybuy assets in a high yield foreign
currency the exchange rates in this specific currency rises. This leads to a
reduction in exported and an increase in imported goods. The balance is
easily disturbedand governments find itincreasinglydifficultto control
rising inflation. The economic relations between countries are very
complex as each country has its monetary policy. Japan for example exerts
a strong control on the exchange rates due to a high export percentage,
whereas the U.S. does not use the currency operations as a tool of monetary
policy.
Companies are confronted with differentcultures and markets and
have to differentiate their products in order to maximize their profitin
clearly separatedmarketsegments. Investments in foreign countries have
become easier, and multinational companies benefitfrom economy of
scales and low cost production using the cheapest resources available.

41. 41
THE GLOBAL FACTORS
In a global economy, multinationalcompanies independentof
national government, dominate the international economy. This increases
the interdependence of nations as each multinational company invests their
assets in several countries. Those companies respond effectively to
differing regionaldemand. Furthermore,they benefit from economy of
scales and low cost production using the cheapest resources available. The
global economy has opened the market.
There are many weaknesses in the business environmentthat
constrain sources and uses of finance for economic growth and
development. These are cross-cutting issues that involve both the public
and the private sector. Fortunately, with increasing stabilityin the
macroeconomicenvironmentand efforts by governmentto implement
anti-corruption practices, there is a positive climate for reform. Likewise,
changes in the business environmentwill inevitably reduce the problems
currently faced with regard to many of the market-based, firm-specific, or
financial sector issues. However, many of the challenges are institutional,
complicated by traditions and business culture, or inadequately addressed
due to capacity limitations. The required changes willtake years as a result,
with many of the desired successes more likely to be medium-or long-term
objectives rather than quick fixes for rapid formalization of income or
employment generation. Major challenges and reform needs encompass
issues of policy, legal, regulatory, institutional, informational,and
infrastructure shortcomings.

42. 42

43. 43
COMPANY PROFILE
PAK ARAB REFINERY LTD (PARCO)is a Joint Venture between
Governmentof Pakistan and the Emirate ofAbu Dhabi, incorporated as a
public limited company in 1974. 60% of the share holding is by the
Governmentof Pakistan and 40% by the Emirate of Abu Dhabi through its
Abu Dhabi Petroleum InvestmentCompany (ADPI), a subsidiary groupof
International Petroleum InvestmentCompany (IPIC).
PARCO's major business activities are:
 Refining
 Transportation
 Storage
 Marketing
PARCO is an integrated energy company, and is a key player in
the country’s strategicoil supply and logistics. With a refining capacity of
100,000 BPD, combined storage capacity of over one million tons, a
marketingjoint venture with TOTAL (France), a technical support venture
with OMV (Austria), and a distribution agreementwith SHV (Holland);
PARCO has emerged as the strategicfuel supplier to the country with a
broad portfolioof operational ventures. The organization encompasses
Pakistan’s largestrefineryand 2000kms of cross country pipeline network,
including its subsidiaryPAPCO.

44. 44
With continued support of the Emirate of AbuDhabi, PARCO
has been able to realize a number of energy projects that have contributed
significantlyin enhancing the country’s economic growth, saving foreign
exchange, transferring technology and providingemployment.
The performance of the company can be judged by the fact that it
has retained its AAA and A1+ long and short term creditrating by PACRA
for twelve consecutive years. The company set another first when it
obtained three simultaneous international certifications: ISO 9001:2000
(Quality Management System), ISO 14001:2004 (Environmental
Management System) and OHSAS 18001:2007 (Occupational Health and
Safety Management System).

45. 45
INTRODUCTION OF PARCO
Petroleum energy plays a pivotal role in the socio economic
development of a country, especially for a developing country like
Pakistan, where demand for petroleum products is fast increasing.
Incorporated in May 1974, Pak Arab Refinery Ltd. (PARCO) has
now been in existence for 27 years as a joint venture between the
governmentof Pakistan (GOP) and Abu Dhabi. Its authorized capital is Rs.
5 billion and paid up capital is Rs. 2160 million of which 60% is held by the
GOP and 40% by Abu Dhabi petroleum investments of Abu Dhabi.
This long awaited project has been setup despite facing numerous
obstacles and hurdles during the 1998-99 periods and despite international
sanctions.
PARCO is presently engaged in the transportation of petroleum
product on behalf of oil marketing companies OMC’s from Karachi to
Mahmood Kot near Multan and to Faisalabad and Machike near Lahore
through its 1,230 kms. Pipeline. Parco’s pipeline system includes a network
of highly sophisticated telecommunication facilities and a comprehensive
supervisory control and data acquisition system.

46. 46
Originally, Parco’s pipeline network was functioning up to
Mahmood Kot near Multan, a distance of 864 kms and operating on the
basis of two pumping stations at Karachi and Shikarpur with an annual
pumping capacity of 2.9 million tons. Two additional intermediary
pumping stations commissioned in 1994 at Bubak (Sindh) and at Fazilpur
(Punjab) increased the pumping capacity to 4.5 million tons per annum.
Later, with further technological upgrading of the system the pumping
capacity was increased to 6 million tons. This additionalcapacity is a major
step towards meeting the increasing requirements of petroleum products
in the central and northern areas of the country, which account for over
60% of the country’s demand of petroleum products. This increased
capacity will also come in extremely handy for transporting 4.5 million
tons of crude and 1.5 million tons per year of products through the existing
pipelines. This timely initiative by PARCO will relieve a lot of pressure on
road movement.
In June 1997, PARCO completed its 364 Kms. MFM pipeline
extension project and extended its operations to Faisalabad and Machike.
The project design allows for further expansion of the pipeline from
Faisalabad at Kharian besides Sahiwal and from Mahmood Kot to
Peshawar.

47. 47
All PARCO terminals and pumping stations have been designed
according to the latest international standards and laid out in a
standardized fashion for ease of operation. PARCO crosses country
installations have been adjudged to be comparable to the best available in
the international oil industry.
The refinery will be on stream by September 2000, which will
place PARCO in a unique position, with an additional capability to exploit
the future trends of the oil industry in Pakistan.
MISSION STATEMENT OF PARCO
To provide the country and the oil marketing companies (OMC’s)
with as good a service in the area of product transportation, as it has in the
past with the pipeline transportation.
To maximize production of middle distillates and full oil to meet
the national demands of petroleum products which is currently around 18
million metric tons, increasing at rate of 5% per annum.
VISSION STATEMENT OF PARCO
For PARCO to remain amongst tomorrow's corporate winners, it not only
needs to have a clear Vision but also a passion for translating that Vision
into reality. The big challenge is figuring out what future will be the right
one, a future that will give a definite competitive advantage to the
company over the long term. We are creating a cause for action besides
charting a course on how to get there.

48. 48
OBJECTIVES OF PARCO
The following long term corporate objective, which are inherently
embodied in the name of the company are:
(P) Professional and Progressive Corporate outlook.
(A) Aggressive Pursuit of Technical Excellence Advanced Planning.
(R) Reliability of Service
(C) Consistency in performance
(O) Organized, Systematic Development.
FUTURE PROJECTS
I. EXPANSION OF THE REFINING BASE - (KHALIFA COASTAL
REFINERY)
Foreseeing the mounting demand of deficit POL products in
Pakistan, PARCO in alliance with International Petroleum Investment
Company (IPIC) of Abu Dhabi, is endeavoring on a 250,000 bpd deep
conversion refinery with a foreign direct investment of US $6 billion, at
Khalifa pointnear Hub in Pakistan’s province of Baluchistan. The IPIC and
other UAE Government institutions will have the majority of the
shareholding i.e. 74% shares in the project, whereas Pak-Arab Refinery
Limited (PARCO) will have 26% of the holding.

49. 49
IMPORTANCE
The developmentof Khalifa Coastal Refinery atKhalifa
Point will be a strategicinvestmentand will play a pivotal role in
ornamenting the country’s petroleum affluence. With the construction of
marine loadingfacilities to feed the refinery along with catering to export
requirements, Khalifa Pointwould also developinto another port
proficient in handlingliquidpetroleum cargo. This would be significantly
instrumental in supplementing the economic developmentof Pakistan in
general and Baluchistan in particular.
Process selection and refinery configuration are based on
meeting regional as well as domestic “MiddleDistillates”requirements.
The refinery will be producing petroleum products of internationalquality
based on “Euro IV” specifications for improving environmentalstandards
besides ensuring the marketability of the products in the international
marketplace. KhalifaCoastal Refinery is a deep conversion refinery,
designed to process 250,000bpd, and is being designed to process Heavy
Crude which will be procured from adjoining gulfcountries like UAE, Iran,
and Saudi Arabia etc.

50. 50
Benefits of Khalifa Coastal Refinery - (KCR)
 Foreign DirectInvestmentof about US $6 billion,which is the largest
single Foreign Direct Investment (FDI) made in the country so far.
This will bolster the much needed economic activity in a relatively
less developed area.
 Improvement of much needed petroleum infrastructure in the
country.
 The deficits of Diesel faced by the country will either be wiped out or
reduced to minimal quantities.
 Strengthen the supply chain integrity of petroleum products in the
country.
 Generate directand indirectemploymentduring construction as well
as the operation phase.
 Training and development of local human resource through new
opportunities and technology transfer.
 The Human Resource employed for the project will be technically
trained and exposed to latest technology.
 Enhancementof the productivity of local vendor and material supply
industry.
 Another effort of Government and Private sector to bring welfare to
the people of Pakistan, especially in Baluchistan.
 Development of other ancillary and support industry around the
refinery complex.

51. 51
FINANCIAL ENVIRONMENT IN PARCO
Finance department is the backbone of every organization. In
MCR finance department has several sections. The Finance department is
responsible for the entire accounting process of the organization, regarding
the recording of the transactions, designing the accounting, preparing of
financial statements and computer application to the accounting process.
In MCR only Trial Balance prepare, all Accounts are
maintainedin Karachi head office. Sophisticated techniques are used, LAN
& WAN systems, Inter Com facility through MCR to Head Office Karachi
are very beneficial to maintain the accounts of PARCO.
From this quick and better work is possible. These techniques are very
effective and prove efficient for growth and progress of this organization.
Now it will possible to check and collected the information or routine work
of any employee of PARCO.

52. 52
SECTIONS OF FINANCE DEPARTMENT
Accounting matter of finance department is deal both in the
Refinery office and Head office. Head office deals Bankingsection, Payroll
section, Insurance Section, Import Section, Income Tax accounting while
Refinery office deals initial stage of business transaction, recorded and
maintained. Refinery finance department consists of billing payable
Section, Receive able Section, Impressed or cash section, MIS Section,
Invoice Section, Cost, and Budget & Sales Section. Also other section which
are not directly linked with accounts but also necessary. I would like to
mention these sections Oil accounting Section, Purchase Section or store or
supplies, shipping Section, Commercial department. All final accounts are
maintained in Head Office INCOME STATEMENT AND BALANCE
SHEET. In the Refinery office only Trial balance posting complete.
The main functions of these sections are record the business
transactions. Sections are restricted up to the recording and maintaining
the accounting data. For proper maintain the accounts, used coding
techniques on their voucher. There are four kinds of vouchers.
1. CASH VOUCHER: These vouchers are prepared for payment of
petty cash.
2. CHEQUE VOUCHER: CHEQUEpayments made by these vouchers.
3. PAYABLE VOUCHER: This voucher is prepared at the time of
making payment to any party. In accounting term, party name will
be debited and income, taxes and advances will be credited.

53. 53
4. JOURNAL VOUCHER: This is also known Adjustment voucher.
This voucher is prepared for adjusting any entry.
5. Vouchers are prepared after every transaction. Write narration about
these vouchers. These vouchers are signed by certain authorities e.g.
(prepared by, checked by, approved by, punched by, Verified by).
IMPREST/CASH SECTION
Scrutinizing of vouchers / cash disbursements & maintenance of
record (REFINERY & PIPELINE) of the following activities: -
1. Cash withdraw from Bank.
2. Payment of Medical Allowance
3. Payment Petrol Subsidy.
4. Payment Hardship Allowance
5. Payment of Out Station Allowance (Rs.100/= per day.)
6. Payment of Tea Allowance (Rs.8.4/= per day to every employee.)
7. Payment of Office Entertainment & Refreshment
8. Payment of Utilities
9. Advances to Employees against Expenses.(If necessary)
10.Statement of General Expenses (T.A & D.A, Suppliers labor etc)

54. 54
1. Grade I – Payment made by the Head Office.
2. Grade II -- Entertainment1000/=per month and current value of 250
liters petrol paid.
3. Grade III – Rs.600/= per month as entertainment and current value
of 200 liters petrol are paid.
4. Grade IV-- Rs.400/=per month as entertainmentand 175 liters petrol
paid.
5. Grade V to IX-- Petrol subsidy 150 liters paid to the employees.
Salaries of Refinery employees paid by Head Office. Custom Staff
payment and submission of Monthly summary to corporate office to
recoverable from OMCS.
Bloom field Hall School (Advances & Reimbursement of Expenses)
Payment of Salaries to casual Staff.
Preparation of journal Vouchers of Expenses Statement against advance
and maintenance of record.
Maintenance of Cash Book
Checking of Vouchers, coding and posting and dispatch to Head Office.

55. 55
COST AND BUDGETING & SALES TAX
This Section deals the Budget control and Sales taxes. Cost and
Budget: Budget is allocated for every year. This period start from 1st July
to30th June. We can classify the budget in to two main heads, Revenue
Budget and Capital Budget. Revenue Budget is allocated for operating
expenses which are helpful for generate the revenue e.g. telephone, store
and supplies etc. Capita Budget is allocated for fixed expenses e.g.
furniture and fixture, machinery etc.These are allocated in proper heads,
either about Revenue items or Capital items. This will helpful in better
coding and maintainingthe record. Each department demanded required
budget. When ever any thing is required Indent Sheet is prepared. This is
written issue order which is approved by finance department. Tofulfill the
need of any thing which is mentioned in Indent Sheet, calls quotations
from various department. Suitable quotation accepted and place purchase
order. Purchase department prepares Material receipts statement (MCR),
when material received. From this received material, issue to the
demanded department, and prepare Material Issue Requisition (MIR).
Every department prepared the coordinate, in the form of summary. This
summary is send via approval of Manager. Board of Director approved it.
When ManagingDirector singed it, and then sends to related department.

56. 56
SALES TAX
Sales Tax has coordinated relationship between sales output
invoices and purchase input invoices. If amount of sales output invoices
increases, we will have to pay sales tax, and if the amount purchase input
invoices increase, we recover amount of tax. So for we adjust either we pay
or pay. In case of favorable balance, we will not received and carry forward
for next transaction.
Four copies of Invoices are classified as such. First original
invoice, send to consignee, second duplicate copy send to Parco
commercial department, triplicate copy receive Parco finance department
and quadruplicate copy send to shipping/clearance department. 99 %
parties are registered that pay the sales tax 15 % and remaining
unregistered parties that pay the sales tax 15 % plus 1.5 % deduct as sales
tax, not as the whole 16.5 % deduct as sales tax. Sales tax pays up to 15th
date to next month. Head Office purchases the crude oil by the Letter of
Credit. We can refund the sales tax amountunder Section 22(1) a, Sales tax
act 1990. We adjust the favorable balance, carry forward for next
transactions.

57. 57
SIGNIFICANT OF ACCOUNTING
Summary of Significant Accounting Policies are as follow.
Basis of Presentation
These accounts have been prepared in accordance with International
Accounting Standards, as applicable in Pakistan.
Accounting Conversion
These accounts are prepared under the historical cost ‘convention’ as
modified by capitalization of exchange differences.
FIXED ASSETS AND CAPITAL WORK-IN-PROCESS
Fixed assets except land are stated at cost less accumulated
depreciation. Land and capital work in progress are stated at cost. Cost in
relation to certain fixed assets and capital work –in- progress signifies in
historical, exchange differences e.g. (Assets and liabilities in foreign
currencies are translated into rupees at the specifics rate of exchange
announce by the State Bank of Pakistan. Prevailing on the balance date,
except those which are covered under exchange risk cover scheme, which
are translated at cover rate.
Exchange gain/loss on loan relating to assets that have been fully
depreciated is directly charge to profit and loss account) and financial
charges on borrowing for financing the project until such projects are
completed or become operational.

58. 58
Depreciated is charged to income applying the straight line
method, where by cost of an assets are written of over its estimated useful
life without taking intoaccounts any residual value. Full year depreciated
is charged on addition while no depreciation is charged on items disposed
off during the year.
Maintaining and repaired are charged to income as and when
incurred, major renewals and improvements are capitalized and the assets
so replace, if any, are retired. Gains and losses are disposals of assets (If
any) are included in income currently.
Assets Subject to Finance lease
Assets subjects to finance lease are stated at the lower of present value of
minimum lease payments under the lease agreement under the fair value
of assets, the related obligation of the lease are accounted for as liabilities.
Assets acquired under the finance lease are depreciated over the useful life
of the assets on the straightline method at the rate given:, Depreciation on
lease assets is taken to profit and loss accounts.
Borrowing Cost
Borrowing costs that are attributed to the acquisition, construction, or
production of fixed assets have been capitalization as the part of cost of the
relevant asset.

59. 59
INVESTMENT
Long Term
These are stated at cost. Provision is made for decline, other than
temporary, in the value of investment, if any.
Short Term
These are stated at the lower of cost or market value.
Stores & Spares
These are valued at the moving average cost, while items considered
obsolete are carried at nil value. Items in transit are valued at cost
comprising invoice value plus other charges paid thereon.
REVENUE RECOGNITION
Revenue from Transportation
Revenue from transportation of petroleum is recognized on delivering the
products.
Investment
Return on investment recognized at the rate specified in the respective
investment scheme and accrued for the period. The income is recognized
on the assumption that such investments will be held till the next terminal
date.

60. 60
Ratio analysis
Ratio analysis of financial statements refers to the process of
Determiningand presenting the relationshipof items and group of items in
the statements.
Ratioanalysis however is not an exact science but a useful art. It is a
Statistical yardstick providing a measure of relationship between two
Accounting figures. Ratio analysis can be of use both in the trend or
structural Analysis and static analysis. Great care is needed while
calculating meaningful ratios and in interpreting them. Although there are
several ratios which can be employed by an analyst, yet the type of ratio,
he would use entirely depends on the purpose for which the analysis is
done i.e., a creditor would keep himself abreast about the ability of a
concern to cover up its current obligations and so would care about current
and liquid ratios, turnover of receivable, coverageof interest by the level of
earning etc.
So the Financial statement analysis is the process of identifying of
financial strengths and weaknesses of the firm by properly establishing
relationshipbetween the items of the balance sheet and the profit and loss
account.

61. 61
The need for ratios arises due to the fact that absolute figures are
often misleading. For example, if sale increases from Rs.300, 000/= to
Rs.350, 000/=, itmay not be a good thing as appears. The increase in sales
may be affected at the cost of a disproportionate rise in expenses. Absolute
figures are only valuable if they are studied in relation to each other.
EXPENSES OF RATIOS
Expenses of ratios are done in the following ways:
Actual ratios are arrivedatby dividingone number by another e.g. current
asset to current liability is 2:1
Ratiobetween two numerical facts usually over a period of time e.g. Stock
turnover is three times a year.
Ratio between two numerical may be expressed in percentage.

62. 62
SWOT ANALYSIS OF PARCO
 Strength:-
 Government Ownership
 Pipeline Network
 The Better Quality Brand
 Strength is People
 Strength Asset
 Environmental Friendliness
 Financial Strength
 Weaknesses :-
 Little Promotional Activity
 Volatile and Inflammable Nature of the Products
 Under Utilization Capacity
 Opportunities :-
 Growing Demand
 Export Market
 Threats :-
 Substitute Products
 Rising Input Costs
 Governmental Regulations
 Uncertain Political & Economic Conditions
 Competition

63. 63
CONCLUSION
Every thing PARCO achieves is the product of team effort. All
PARCO employees share the achievements of the company and have every
reason to feel proud of what has been achieving so far. However with the
diversification in business activity, especially in the finance department,
PARCO meet the new challenges, since success lies in better service and
consumer satisfaction.
PARCO’S future aim is therefore to consolidate a significant
account presence, as a major contender in the petroleum sector of Pakistan,
with a future that heralds bright prospects.
There is need for proof any concept of refresher courses for the
employees. If directors would make arrangement to provide training to
the employees then they would work efficiently. By this productivity will
also increase.
I would like to recommend that the management should develop some
policies for the promotion of efficient workers. If no policy for the
promotion of workers so it will create unrest among the workers. The
management should make sound policies for the promotion of efficient
workers. This will not only increase the productivity of workers but the
management will also retain efficient workers with them.