Final Report of Pel

PAK ELEKTRON LIMITED
DEDI CATI ON

I dedicate this report to my most valuable,
honorable &beloved parents and our teacher
Mr. Muhammad Muneer. By virtue of whos
Prayers, I have been able to reach at this position
and whose hands always rose for prayers and
wellbeing. I feel proud by having guidelines from
our Sir Muhammad Munir, I cannot forget their
cooperation.

Thanks
NadeemSabir
MBSE-10-08


ACKNOWLEDGMENT
All praises for almighty Allah. The Creator Whose uniqueness
oneness is unchallengeable countless thanks to the lords of lords
who blessed me with the courage and power to complete this
report and all respects and regards to Holy Prophet Hazrat
Muhammad (S.A.W.W) for giving me the faith paving me on the
right path with the essence of faith in ALLAH.
I truly express my gratitude towards my respected teacher, Mr.
MuhammadMunir who persuaded me to carry out this internship. I
would also like to thank my near and dear ones and many other
bosom friends of mine, who suffered uncomplainingly and plucked
my courage during my long working hours. Thus with great love
and appreciation, I dedicate this report to all the above-mentioned
people and to all the readers of this report.

NadeemSabir
MBA (Evening)
MBSE-10-08


PREFACE
BahauddinZakariya University is a leading institute which provides a lot of
knowledge, skills and research to its students and professors. The institute
provides legible and valuable candidates to almost all fields of study and
research who provide their services in local as well in the national markets.
The intention of the internship is to give expound to our knowledge towards
practical work in the organizations how they maintain their routine works
and uncertain events.
To achieve the purpose I choose the Pak Elektron Limited 18-KM Ferozpur
Road Lahore, which is one of the largest organizations of Pakistan. This
report describes almost all details that I got related to the company. This
report provides enough knowledge about the PEL organization and it is
beneficial to users.

TABLE OF CONTENTS

Executive Summary ........................................................................................................................ 1
Introduction to Electronics Industry ............................................................................................... 3
History of Pakelektron Limited ...................................................................................................... 5
Introduction of Pak Electron Limited ............................................................................................. 7
Introduction to Saigol Group .......................................................................................................... 8
Company Profile ......................................................................................................................... 8
Organizational Hierarchy .............................................................................................................. 10
Vision Statement ........................................................................................................................... 11
Mission Statement ......................................................................................................................... 11
Objectives ..................................................................................................................................... 12
Corporate Social Responsibility and Ethics .................................................................................. 13
Departmental Chart of PEL .......................................................................................................... 14
Business Divisions ........................................................................................................................ 15
Companys Major Products .......................................................................................................... 18
Marketing Department .................................................................................................................. 19
Production Department ................................................................................................................. 22
Research& Development Department .......................................................................................... 23
Information Technology ............................................................................................................... 23
Finance Department ...................................................................................................................... 24
Functions of Finance Department ............................................................................................. 25
Corporate Section ...................................................................................................................... 25
Leasing Section ......................................................................................................................... 26
Functions of Treasury Section................................................................................................... 26
Budgeting Section ..................................................................................................................... 27
Pledge Release Section.............................................................................................................. 27
Accounts Department.................................................................................................................... 28
Payable Section ......................................................................................................................... 28
Costing Section ......................................................................................................................... 30

Inventory Control Section ......................................................................................................... 31
Bookkeeping.............................................................................................................................. 33
Fixed Assets Management ........................................................................................................ 34
Letter of Credit Section ............................................................................................................. 34
Payroll Section .......................................................................................................................... 35
Human Resource Department ....................................................................................................... 37
Procurement Department .............................................................................................................. 37
Administration .............................................................................................................................. 37
SWOT Analysis ............................................................................................................................ 38
Strengths .................................................................................................................................... 39
Weaknesses ............................................................................................................................... 39
Opportunities ............................................................................................................................. 41
Threats ....................................................................................................................................... 41
PEST Analysis .............................................................................................................................. 43
Political Factors ......................................................................................................................... 43
Economic Factors ...................................................................................................................... 43
Social Factors ............................................................................................................................ 44
Technological Factors ............................................................................................................... 44
Financial Analysis ......................................................................................................................... 46
Horizontal Analysis ................................................................................................................... 47
Vertical Analysis ....................................................................................................................... 50
Financial Ratios ......................................................................................................................... 53
What I Have Learned in the Organization .................................................................................... 58
Suggestions and Recommendations .............................................................................................. 59
References ..................................................................................................................................... 60
Annexure ....................................................................................................................................... 61


1

EXECUTIVE SUMMARY
Pak Elektron Limited (PEL) is the flag bearer of Saigol Group of Companies. The products
manufactured by PEL have always been of high standards and the name PEL is synonymous
with Quality all over Pakistan. Since its inception, the company has been working for the
advancement and development of engineering know how in Pakistan. The company has been
produced hundreds of engineers, skilled workers and technicians through its schemes and
training programs.
Appliances Division of PEL consists of home appliances manufacturing particularly
Refrigerators and Air Conditions.
Power Division of PEL is one the major electrical equipment suppliers to WAPDA &
KESC. The company manufactures transformers, energy meters, and switch gears.
Pak Elektron Limited has launched the range of Home Appliances in Pakistan. Pak Elektron
Limited has been a leading local company in electrical appliances for over five decades, they, to
gather with LG Electronics, which is a global leader in consumer electronics, will bring a new
range of technologically advanced & health care conscious products for the Pakistani consumers.
The summary of PELs market share (Product wise)
Refrigerator 32%
Split A/C 13%
Microwave Oven 12%
Water dispenser 8%
In 1956, the Saigol Group of Companies purchased the major shares of PEL. At this junction, the
company was only manufacturing transformers & switch gears, with the Saigols
managementPEL expanded into refrigerators and air conditioner manufacturing and now it has
become a Giant in the world of Home Appliances.

2

PEL is serving the power utilities, industries, individual consumers, houses and commercial
projects by providing reliable, customized and cost effective solutions backed by the innovation
genius of Saigols group. PEL is now technology forerunner and market leader is providing new
products and services to meet ever changing and technology intensive needs of its customers.
PEL is creating new knowledge and adapting to global developments in technological changes
and product design by the continuous R & D. Ever increasing local market share, growing
exports orders, numerous successful power projects and greater than ever base of satisfied
customers are the evidence to these aspiration.
While working in PEL I got very broader vision about the Financial & Tax activities more than
those I had learned during my MBA program. I hope that this practice experience will create
glorious opportunities in future.
A committed team of highly qualified, experienced professionals, financially sound and reputed
sponsors manages the Company. Through sheer dedication, diligence and the Almightys
Beneficence the management team at Pak Elektron Limited have earned reputation for
excellence in manufacturing of electrical as well as home appliances and their marketing.


3

INTRODUCTION TO ELECTRONICS INDUSTRY
Electronics is considered one of the worlds fastest growing industries with global revenue worth
trillions of dollars per annum. The sector basically focuses on consumer electronics, with
activities confined to assembly of conventional TV sets, radios, cassette recorders and other
allied consumer electronic products from imported Complete Knock Down (CKD) or Semi
Knocked Down (SKD) kits imported from mostly China.
Actually, electronics have won our hearts. We wake up with the ring of electronic clock, drink
coffee from an electronic coffee machine, work with computers, learn by using video
conferences, and listen to the music from a sound system and go to sleep while adjusting our
electronic watch for tomorrow morning. It is hard even to think that only a hundred years ago our
world seemed different at all from this point of view. But how did the electronics revolution
begin? Which research and discovery was the basis for this modification? Why was it so fast,
relatively to other developments in history?
The first and the second World Wars gave a considerable boost to the way the electronics science
has advanced. Governments of rival countries invested a lot of money in the technology of
military industry. On other hand, they wanted quick solution and were looking for long-range
developments. The first half of the 20th century was the era of the vacuum tubes in electronics.
Using the tube permitted the development of radio, long-distance telephone, television and even
the first computers. Therefore, the varieties of vacuumed electron tubes were the central device
in the electronics system of that time.
Recently we have witnessed the biggest event in the history of electronics the invention of the
semiconductor devices. It made a real revolution in the world of electronics.Since1960,
transistors have quickly supplanted vacuum tubes. Electronic system became more complex and
smart. This fact, together with the need for compact, lightweight electronic missile guidance
systems, led to the invention of the integrated circuit (IC).
This invention was the result of Early ICs contained about 10 individual semiconductor elements
but their number rapidly increased during next ten years. In 1970, the number was 1,000 in a
chip and the result of hard work of physicists, electronics and mechanical engineers was

4

developing and producing of first microprocessor with memory interface in 1971. This event was
the beginning of computerization and smart digital electronics.
A few companies are involved in somewhat higher level of production/assembly of items like
payphones, energy meters, security systems and telecommunication equipment for defense
through reverse engineering but using imported components or sub-assemblies.
Unfortunately in Pakistan the electronics sector is still in infancy and never became a major
revenue generating industry. Despite the huge growth potential, Pakistan has lagged behind in
the development of its electronics industry. It is, thus, imperative that a coherent strategy is put
in place to develop this sector with a view to increasing the countrys growth potential as well as
achieving self-sufficiency by reducing dependence on foreign sources of products, materials,
components and equipment.
Government of Pakistan has included the electronics sector in its Medium Term Development
Framework (MTDF). The government has planned to help develop an international quality
indigenous supply chain and to raise the share of electronics in the output of the manufacturing
sector from under 3% at present to 10% in 2009 & to 20% in 2020.
Companies in Electronics Goods Sector in Pakistan
Pak Electron Limited
Waves
Orient
Siemens Pak
Singer Pak
In conclusion, I can say that the science of electronics is one of most important science today.
We all witness the influence of electronics on our life in good and bad side as well. The process
of development was relatively quick and interesting.


5

HISTORY OF PAKELEKTRON LIMITED
Pak Elektron Limited was set up in 1956 as a joint venture with one of the largest and renowned
manufacturers of electrical equipment Messrs. AEG of West Germany for manufacturing
Transformers, Switchgears and Electric Motors etc. The entire job of machinery requirements
and layout of the factory building was planned and implemented by AEG who produced very
well balanced facility for the design and manufacture of the above equipment and the
commercial production was commenced on 22 November 1956.
Up to 1962, when AEG finally phased out, the designing and manufacturing of all equipment
was carried out jointly by AEG experts and PEL personnel. PEL staff, in the meantime, had
received specialized training in USA and West Germany which enabled PEL to establish itself as
the leading manufacturers of electrical equipment in the country with an excellent reputation for
high quality and thus PEL came to be known as "The Quality Conscious Company".After
conclusion of agreement with AEG, total shareholding of AEG was purchased by the then
sponsors Malik Brothers.
The production continued with AEG designs with much greater emphasis on the quality and
reliability of the products which earned unique distinction of supplying electrical equipment to
projects of paramount national importance like Mangla Dam and Tarbela Dam Projects. PEL
equipment was approved by consultants of international repute including PreeceCardew& Rider
(England), Binnie& Partners (England), Harza Engineering International (USA) and Miner &
Miner International Inc. (USA).
The majority shares were acquired from Malik Brothers by Saigol Group on 11 October 1978
and immediately on takeover the new management chalked out both long term and short term
plans to put the company back on the path of progress. As a part of first phase of its BMR
Programmer the new management injected the additional working capital of Rupees 8.98 million
and Bridge Loan of Rupees 7.50 million (against the public issue of its shares) was provided by
the ICP-led Consortium. As a part of long term plans, the manufacturing of window type Air
conditioners was taken up in 1981 and was immediately established for quality.

6

The company launched the second phase of its BMR and expansion of the existing product line
in the year 1987 and imported machinery for the manufacture of Refrigerators and Deep-freezers
for a total value of Rupees 22.11 million. For the project National Bank of Pakistan - the leading
bank of the company provided the financing. Like Air conditioners these products have also been
well received by the local market which speaks highly of the confidence the consumer has
developed in the quality products manufactured by the company.
During the year 1990 the company had signed an agreement with Messrs HITACHI of Japan for
the manufacture of Vacuum Circuit Breakers.The company has entered into an agreement with
Pakistan Industrial Credit and Investment Corporation (PICIC) for a foreign currency as well as
local currency loan of Rupees 25 million for the expansion, balancing, modernization and
replacement of the existing plant. The machinery has come into operation in October 1991 and
with the balancing, modernization and replacement of machinery, the production capacity of
Refrigerator Section will reach a level of 252,450 cubic feet.
The management of the Company decided to further expand its operation by establishing a plant
for the manufacture of compressors for refrigerators and deep freezers. The technical know-how
agreement has been signed with M/S NECCHI Compressors, Italy for the assembly and
progressive manufacturing of compressors for refrigerators and deep freezers.


7

INTRODUCTION OF PAK ELECTRON LIMITED
Pak Electron Limited (PEL) is the well renowned company in home appliances sector. It is the
journey of years to reach this position. PEL was established in 1956 with the technical
collaboration of M/s AEG Germany with object of initially producing transformers, switchgears
and electric motors. AEG experts and PEL personnel carried out the designing and production of
these equipment jointly. It is the oldest composite electrical equipment-manufacturing unit of
Pakistan producing power and consumer products.
The present range of power products includes Transformers up to 33KV 5MVA capacity,
Switchgears up to 33KV, Cage Induction Motors up to 40HP, Single Phase Energy Motors,
Small Generators, Shunt Capacitor, Banks and Reclosed etc. In the year 1980 the company
expanded into consumer products with the introduction of Window Type Air Conditioners and
today also manufactures Split Air Conditioners, Refrigerators, Microwave ovens, Deep Freezers
and Compressors etc.
PEL products right from the beginning have been of a high standard and the name PEL is
synonymous with quality all over Pakistan. Since its inception, the company has been acting as
an institution working for the advancement and development of engineering know how in
Pakistan. The company has produced hundreds of engineers, skilled workers and technicians
through its apprenticeship schemes and training programs.
In October 1978, the company was taken over by the SAIGOL GROUP, which is one of the
leading industrial groups in PAKISTAN, having diversified business activities.
Pak Electrons Limited is known for its continuous research and development and transfer of
technology from abroad. The Company commissioned its plant for the manufacture of
Electricity Meters in Pakistan in June 1994 with the technical collaboration and under license
from M/S Asea Brown Boveri United State of America (A.B.B. USA). The plant consists of
most modern and latest numerically controlled electronic machines with robotics technology and
is capable to produce 960,000 single phase electricity meters per annum in accordance with the
international standards and specifications using the latest and most modern techniques available
in the world.

8

INTRODUCTION TO SAIGOL GROUP
The Saigol Group is one of the leading industrial groups in Pakistan. The Saigol Group belongs
to the Saigol Family, which is an old business family and has contributed a lot towards
Pakistans industrial development. Saigol Group remains a leading and forward-looking group
and believes in continuous development and growth. The result is a global business activity
monitored through various offices worldwide. They are serving nation in diversified business
activities in the fields of:
List of Associated Companies / Undertakings
1. Pak Elektron Limited (PEL) 2. Guarantee Life Employment Limited
3. Saigols Brothers Limited 4. Saritow (Pakistan) Limited
5. PEL Marketing Private Limited 6. Kohinoor Tractors (Private) Limited
7. Kohinoor Energy Limited 8. Kohinoor Autos (Private) Limited
9. Kohinoor Power Company Limited 10. Con-force (Private) Limited
11. Kohinoor Industries Limited 12. Progressive Industries (Private) Limited
13. Azam Textile Mills Limited 14. Art Centre (Private) Limited
15. Saritow Spinning Mills Limited 16. Kohinoor Airwaves (Private) Limited
Company Profile
Board of Directors
Mr. M. NaseemSaigol Chairman / Chief Executive Officer
Mr. M. AzamSaigol
Mr. M. MuradSaigol
Mr. Muhammad ZeidYousafSaigol
Mr. Muhammad Abdullah HaroonSaigol
Mr. Haroon Ahmad Khan Managing Director
Mr. Syed Zubair Ahmad Shah NIT Nominee
Mr. Akbar Hassan Khan NBP Nominee U/S 182 of the Ordinance

9

Ms. TahiraRaza NBP Nominee U/S 182 of the Ordinancerdinance
Mr. Khalid SiddiqTirmizi BOP Nominee U/S 182 of the Ordinance
Mr. M.Khurram Khawaja NBP Nominee U/S 182 of the Ordinance

Registered Head Office
17-Aziz Avenue, Canal Bank,
Gulberg-V, Lahore.
Tel: 042-35718274-5, 35717364-5
Fax: 042-35715105
E-mail:shares@saigols.com


10

ORGANIZATIONAL HIERARCHY

Chairman/CEO
Managing
Director
GM
Finance
GM
Manufactring
Power
Division
GM
Marketing
Power
Divisipon
GM
Manufactring
Appliances
Division
GM
Marketing
Appliances
Division
Sr. Manager
QC
(AD & PD)
Sr. Manager
HR & A

11

VISION STATEMENT

To Excel in providing engineering goods and services through continuous improvement

MISSION STATEMENT

To provide quality products and services to the complete satisfaction of our customers and
maximize returns for all stake holders through optimal use of resources.
To promote good governance, corporate values, and safe working environment with strong sense
of social responsibility


12

OBJECTIVES
The Objectives and Missions for which the company is established are as following:
The purchase and acquire from Messrs. Malik Brother Limited on Ferozepur Road
(Near Walton) in the district of Lahore under the name of Pak Elektron and all plant,
machinery, goodwill and all the subsisting contracts in respect thereof with right,
privileges and obligations relating to the sold properties and with a view there of to
enter into the agreement and to carry the same into effect with or without
modifications.
To carry on the business or business of manufacturing, selling, installing, maintaining
designing and dealing in all kinds of electrical equipment.
To carryon any business whether manufacturing or otherwise which may be found
convenient to undertake in connection with or in addition to any of these objectives
mentioned above.
To do all such things that are incidental or conductive for the attainment of the above
objectives or any of them.
To produce high quality and standard products.
To produce equipment to be used in numerous projects of national importance.
To secure a high share / quota of WAPDAs demand for power products.
To produce skilled workers and technicians through its apprenticeship schemes and
training programmed for engineers and technicians.


13

CORPORATE SOCIAL RESPONSIBILITY AND ETHICS
At PEL, were making life a little brighter as we share the hopes of local communities around the
world. Were building a better tomorrow as we grow and prosper together with our partners.
Were making the world a little greener as we practice the principles of sustainability. Pak
Elektron Limited (PEL) has been awarded for the second time with 4th CSR National
Excellence Award 2009 for best efforts within the multi-dimensional scope of CSR and a
special award for Best Information Material on CSR. Our social contribution initiatives focus on
following areas.
Academics and Education
Sports
Childrens Villages of Pakistan
Statement of Ethics
We are serving the nation through electrical goods, home appliances manufacturing, sales and
committed to represent the ethical responsibilities of company operations .In recognition of this,
our commitment reflects the value statements.
Commitment to Principles, Laws & Contracts
As directors, and employees, we all are passionate to our contents and strive to be model of the
principles. It is an organization of people who are united to achieve the common goal. We are
accountable for all our actions both individually and as a company. We act with absolute
honesty, integrity and fairness in the way we conduct our business and in the way we live and
act.
Safety the Utmost Priority
We realize the importance of the human life and companys all other resources. We are
committed, all the time, to the safe and reliable operations of our power complex, and to the
incident-free workplace. We ensure that this commitment shall remain one of our utmost
priorities.

14

DEPARTMENTAL CHART OF PEL

Appliances Division
Marketing Appliances
After Sale
Services
Production AD
Consumer Marketing
Power Division
Marketing Power
Production SG
Production TR
Production EM
Internal
Audit
Accounts
HR &
Admin.
Finance
Material
Planning
Packaging
Trading
R & D

15

BUSINESS DIVISIONS
The Company comprises of two divisions; each offering a wide range of products as follows:
Power Division Appliances Division
Power Transformers Refrigerators
EPC Air Conditioners
Distribution Transformers Deep Freezers
Energy Meters Microwave Ovens
Switchgears Trading
Power division
The second but the most powerful revenue generating business division of PAK Elektron,
produces Transformers, Switchgears and Energy Meters for the public sector such as KESC
Karachi Electric Supply Corporation, LESCO Lahore Electric Supply Corporation, IESCO
Islamabad Electric Supply Corporation, PESCO Peshawar Electric Supply Corporation, etc and
for public sector as well.
This division is comprised for four departments.
Marketing Power Division
Production Transformers
Production Switchgears
Production Energy Meters
Marketing Power Division
Marketing department of power division consists of most professional engineers who market all
the power products, seeks new customers and supervise all these three departments to ensure best
quality and reliable products every time.
Production Power Division
The General manager Production (Power division), who is working under command of the
Chairman, supervises three Production managers. These production managers are responsible for
separate power products. The products are Transformers, Switchgear, and Energy meters.

16

Another department that consists of purely technically professional staffs, called Design
department, is also working under GM Production. The job of this department is to draw
specified products structure, calculate material requirements for production of such product.
Production Transformers
PEL has vast experience in design and manufacturing of standard and special purpose
transformers up to 33kV and up to 6000kVA ratings. This department make oil immersed
transformers with natural cooling are suitable for both indoor and outdoor installations. These are
manufactured according to BSS-171, IEC-76 or VDE-0532 and tropicalized to meet adverse
environmental conditions. All transformers are offered with tabular tank, having a conservator
and breather. This department manufactures following types of transformers.
Distribution transformers (pole mounted or pad mounted design)
Auto transformers
Furnace transformers
Welding transformers
Chokes for furnace transformers
Any other special requirement
Production Energy Meters
Another successful and most powerful department of power division is its energy meter
production department that manufactures Electro-mechanical Energy Meters under license from
ABB-USA. The quality of PEL meters has been certified by KEMA Laboratories (Holland) and
conforms to IEC 521, SGS Yarsley, and U.K, has certified PEL Energy Meter plant for ISO
9002.
This department also manufactures MC8 type a direct connection single-phase meter, which is
commonly used for each home. Its design and constructional features include overload
compensation and temperature compensation, thus providing maintenance-free operation over a
long period and accurate measurement of electrical energy. The frame is sturdy in construction
and the covers are available in unbreakable polycarbonate plastic material.

17

Production Switchgears
MV & LV Switchgear being one of the major power products of PEL is produced for indoor
installations company with the latest international standards by this department, i.e. IEC, BSS or
VDE PEL's Switchboards are steel sheet fabricated, totally enclosed, floor mounting and vermin
& dust proof. These are supplied with factory fitted relevant components and copper bus bars,
internal wiring, terminal blocks etc.
Appliances Division
The Appliances Division was established in 198081 when company introduced its first
consumer product i.e. Window room Air conditioner in Pakistan. Refrigerators and Deep
Freezers followed this in the year 1986-87, Fractional Horse Power Compressors in 1993 and
carrier window and split air conditioners in 1997 and Samsung window and split air conditioners
in 2001.
Refrigerators
Deep Freezer
Microwave Ovens
Split And Window Air Conditioners
Washing Machine
Water Dispenser


18

COMPANYS MAJOR PRODUCTS


19

MARKETING DEPARTMENT
Marketing and sales manager (M&S manager) is head of marketing department, appliance
division. M&S manager has a span of management of four people. Those are performing
different group of activities. The organizational chart of marketing department (appliance
division) is under:
Marketing & Sales Manager
Conventionally, M&S manager involves in all those activities that could fall under marketing
territory of a company. M&S manager formulates marketing strategies and enhances the
probabilities for their implementation. M&S manager sets targets for his team. He diffused his
sales force into different regions. He visits them periodically for their motivations and assists
them for the betterment of their performance.
Financial matters, such as budgeting for marketing department including planning for future
promotional and incentive schemes are handled with the conspiracy of M&S manager. M&S
manager plays an important role in hiring and terminating of companys executives and other
personnel of concerned department.
His entrepreneurial charge is also creditable. He arranges foreign business tours for
theInternationalization of companys image.
Sales Support Manager
Primarily, Sales Support Manager involves in sales concerned activities, such as sales
budgeting and planning, coordination and monitoring sales forces performance through out the
country are those matters for which Sales support manager takes responsibilities. He is also
responsible for institutional sales of the company. On the next page, chart shows countrywide
hierarchy.
Product Manager
He manages promotional schemes. Coordination with advertising agencies is another
responsibility. He also plans for advertising and gives budgeted figure for advertising Product

20

Manager plays an important role in launching a new product. He scans competitors activities.
Their price trends, promotional activities including advertisements, their outdoor promotions and
incentive schemes are the examples of those activities.
Manager Customer Services
Company is looking for creating an image of Service Oriented Firm. Thats why Manager
Customer Services plays an important role in this marketing organization. Basically, he is
responsible for all the activities concerning after sales services.
Credit & Distribution Manager
Credit and distribution team performs two types of activities one is to set and monitoring credit
limits for credit sales in order to maintain required level of cash flow for the company. He is
responsible to assess sales performance in regions and their recoveries. Sales force performance
in terms of sale figures are evaluated against budgeted sales. Dealership matters are also falls
under his responsibility. Secondly, dispatching and delivering goods to different sales regions.
Consumer Marketing Department (CMD)
This department is basically under the marketing department. At the start this department did not
exist in the hierarchy but with the passage of time and with the success of easy installment
scheme, this department came into being. The reason is that in the start this departments target
market was Lahore and its workforce had only 8 persons and now after 2 years of its
establishment it has covers major cities of Pakistan and it has workforce of 45 and they are
recruiting more to cover these areas fully.
There are many regional offices in major cities for example in Multan, Sahiwal, Karachi,
Hyderabad, Faisalabad, Gujranwala, Hattar, Rawalpindi, Sialkot, Bahawalpur, Sukker, Sargodha
and AJK (Azad Jammu Kashmir) and the head-office is in the factory that is Consumer
Marketing Department.This scheme is well received so its now on expansion. This scheme is
only in big cities. The target market of this scheme is Government employees or the employees
of those companies, which have signed Memorandum of Understanding (MOU) with the bank
who is financing. Why so?

21

It is because those Govt. offices make sure to the bank that their employees salary will go to
their hands after the deduction of installment of the bank and MOU also make sure that
employees who got financing will get salary after deduction of banks installment. Askari Bank
Limited is financing the PEL employees and Soneri Bank and Bank of Punjab to the others
employees of Govt. or company which has been signed MOU with the bank.
Dealers
There are about 1500 dealers dealing in PEL appliance. The Company has to look many different
aspects of a dealer before deciding to give him the dealer ship. The different criteria, which a
dealer has to fulfill, are:
The dealer must have a good reputation in the market in which he is operating.
Those dealers are preferred who do business on cash basis with the company. Even if
they take credit they must be financially strong enough to make the payment within one
month.
The dealer who gives a prominent shelf space to PEL appliance without much persuasion
or does not demand a high price for shelf place is preferred.
Location of dealer's shops is another important factor. The place should be reachable by
customers and easily accessible by them such as Abid Market Lahore.
The dealers must promote PEL appliances through point of purchase promotional
material provided by PEL at their shops. These materials should be displayed at
prominent places.


22

General Manager
Production
(Appliances Division)
Material &
Planning
Department
Buying
Department

R & D
Department
B& D Manager
PRODUCTION DEPARTMENT
General Manager is a man who handles all sorts of hazards regarding production operation in
Appliances division of PEL. Together with PELs Appliances division, General Manager
Production also gives directions to PEL Appliances Limited (PAL) which is a subsidiary
company of PEL. PAL is situated at Gadoon, NWFP. His responsibility spread over the
supervision of all those departments and personnel, which facilitates in product.PEL engages in
production of Refrigerators and Air conditioner motors and Washing machine, while Deep
freezers and Air conditioners are manufactured in PAL.

Material & Planning Department
This department was established under an idea of Just in Time. This department keeps check
on inventory level, including raw material and finished goods. In other duties, estimating
ordering level (the level, since company will have to place an order), and determining the lead-
time for order processing. This department plays a key role for production department.
Buying Department
Buying department arranges goods from local markets. Duties for this department start from
negotiation with suppliers to receipts right goods at right time. He is also responsible for
clearance for the suppliers cheques.


23

RESEARCH & DEVELOPMENT DEPARTMENT
This department is also working under GM Production. R&D department plays an innovative
role for the company. R&D staff put their effort to improve their current product line and
introduce new models in following the company policy of Giving multiple choice to their
customers.
Business and Development Manager
B&D manager seeks opportunities for PEL, which exist in surroundings. On the bases of critical
analysis, he makes profile for each project and gives proposal to higher authorities. Entitled
person is designated in recent days.
INFORMATION TECHNOLOGY
IT departments key responsibilities are as follows:
Troubleshooting and problems facing in computers.
Installing and deletion of softwares.
Right protection and issuance.
Developed and maintain internal network.
Developed and maintain domain of each person.
Create and enhance internal softwares running currently.
Hardware and all software issues.


24

FINANCE DEPARTMENT

Finance manager and Accounts manager work under General Manager Finance and he reports to
CFO. Finance manager span of management contains five assistant finance officers who repot
their about their sections on daily basis. Major function of this department, obviously, is to
arrange funds for company and also allocate funds. These officers perform significant role at
their stead.
General Manager Finance
His duty is to take major financial decisions and report to CFO. GM Finance takes the reports
from his subordinates and controls both accounts and finance sections. Check on working capital
of the company is another task that falls in his job description. What are the receipts and due
payments for a day is also a matter of concern. Moreover, he also coordinates with other
departments.
Manager Finance
Rate negotiations
Handling cash in & out
Chief
Finance
Officer
General
Manager
(Finance)
Accounts
Manager
Finance
Manager

25

Bank relations
Handling short term and long term funds requirements
Assistant Manager Finance
Reports to manager finance
Arranging funds for production
Preparation of Budget
Sections in Finance Department
Corporate Section
Leasing section
Treasury Section
Budgeting Section
Pledge Release Section
Account Receivable Section
Functions of Finance Department
Perform as a workstation and as an integrated circuit amongst all department of the
company.
Arrange monetary resources / funds at favorable prices and at proper time.
Allocate resources / funds throughout the organization.
Deal with banks, investment firms, government departments of Appliance and power
division calculate and keep employees salaries record.
Carry out final auditing of financial records prepared by Accounts department of
Appliances and power division.
Corporate Section
I met with Mr. Asad who is the section incharge of corporate finance. He told me about this
section that corporate section mainly deals and coordinates with banks, opening new accounts of
PEL and borrowings from different banks. They also maintain the interest or markup on loans

26

and fulfill the material requirement for production area. As per company policy most material is
imported then they open the letter of credit and it is also a type of short term loan.
Leasing Section
This section of finance deals when company needed funds for the purpose of purchasing
vehicles, then this section contacts with leasing companies. PEL acquires the leasing vehicles
against securities, personal guarantee, assets or shares. First of all PEL sends the demand letter to
leasing company, against it leasing company sends the offer letter to PEL and after negotiation
the company get the vehicles.
Documents for the approval of leasing
1. Basic borrowing fact sheet (BBFS)
2. Annual return of company having share capital Form-A
3. Particulars of directors, CEO, managing director, chief accountant and legal advisor or of
any change their in
Markup in Lease Payments
=KIBOR + 600 Basic Points
Here 600 Basic points means 6%, it was an example. Determination of markup depends upon the
nature of contract with leasing company. Normally after six months markup is revised as per
deal.
Functions of Treasury Section
Collection from marketing and selling department and then deposit those funds into
different bank accounts of PEL based on priority
It allocates the funds to each section and department of the company
It manages the cash outflow and inflow of company
Made the payments to vendors / suppliers
Make the bank reconciliation statement

27

Report to GM Finance as Daily Fund Position Report and it includes payments and
receipts of company
Budgeting Section
Starting with budgeting section that forecasts the annual sales, expenditures and cost for the
company after getting production estimates and sales plan from the marketing and then tell the
amount to be arranged for production in order to finance either for power divisions production
or appliances divisions production.
Pledge Release Section
Company acquires finance against the pledged stock; Pledging stock includes imported raw
material, components of air conditioner and refrigerator, transformers, energy meters,
refrigerators etc. These stocks will be pledged in bond housed that situated in companys
premises, which is under-control of ban authorities.
Bank opens an account in the name of company, said as Cash Finance Account. But as per
requirement stock will have to be released for production purpose or sales purpose. Bank sets
limits in this regard, so each replacement requires bank permission. The difference between
borrowed money and pledged stock would have to adjust either by pledging more stock or by
making payments equivalent to the value of released stock.


28

ACCOUNTS DEPARTMENT
All matters, starting from Book keeping to formulation of financial statements which are
supervised by Head of Department (HOD), Mr. Masood. He directly reports to General finance
manager. He has divided his staff into seven sections.
i. Payable
ii. Costing
iii. Inventory
iv. Book keeping
v. Fixed assets
vi. Letter of credit
vii. Payroll
On the basis of these bookkeeping activities financial statements and relevant statements are
prepared, which necessitate in decision making at corporate level.
Payable Section
Procedure of Purchase Module
1. Material indent receive from workshop Inventory
2. Store check the balance of material & provide the code Inventory
3. Approving authority approves the purchase indent Inventory
4. If regular item purchase order is prepared Purchase/Buying
5. If non regular item, quotation called & negotiation made Purchase Manager
6. Preparation of purchase order Purchase Manager
7. On receiving of material purchase challan is prepared Inventory
8. Inspection & quality control department check the material Inventory
9. On the basis of purchase challan, GRN is prepared Inventory
10. On receipt of bill in accounts department, invoice recorded in payable Payable Manager
11. After booking of invoice payment is made Payable Manager


29

Following Transaction is Made in Accounts Department:
On Receipt of Material in the Store
Raw material & component A/C Debit
Party provision A/C Credit
On Receipt of Bill in Accounts Department
Party provision A/C Debit
Advances sales tax A/C Debit
Federal excise duty A/C Debit
Party provision A/C Credit
On Payment of Bill
Party provision A/C Debit
Bank A/C Credit
Withholding taxA/C Credit
On Payment of Withholding Tax
Withholding taxA/C Debit
Bank A/C Credit
Payments to Suppliers
How does Accounts Department make payments to the companys suppliers?Supplier sends
Commercial Invoice to buying department for the purpose of recovery. Buying department put
it forward to Accounts department. Purchase section officer checks Commercial Invoice against

30

the computer report (store) to see what material have been received that either supplier has valid
right of title or not. After confirmation, cheque is drawn in favor of supplier. Bank payment
voucher is used for the internal records against the drawn Cheques.
Input and Output Sales Tax
Input tax means which is refundable from FBR, because the company has already paid on its
payments to suppliers in the account name of general sales tax (GST). Whereas the output tam
means the tax amount which company has to pay to Federal Board of Revenue Pakistan. After
the calculation of input and output sales tax, company pays or claims the tax from tax authority.
Withholding Tax
It is deducted on all payments and submitted to tax authority (FBR). Withholding tax percentage
varies on the account nature. Such like 3.5% on goods or products, 6% on services, and 2% on
transport expenses payments.
Costing Section
Cost section deals in production-concerned matters. This section maintains records of production
element i.e. material, labor and factory overhead. These things facilitate in fixing of price and
also in control of cost of production.
Documentation for Costing
As far as costing is concerned, three types of documents are used in Accounts department:
Material Analysis Card.
Cost Card.
Expense Sheet.
Material Analysis Card (MAC)
MAC is used for of direct material and indirect material. Usually, a finished product is made-up
of two or more raw materials. MAC is useful to exhibit all sort of material together with their

31

quantity and their costs in Rupees. Each card is furnished against each job order/fabrication
number.
Cost Card (CC)
CC is used for specific job. Final figure of each production element are abstracted from various
sources and compiled here. For instance, material cost is taken from MAC, wages from
production sheet (PC) and factory overhead expenses from Bookkeeping records.
Expense Sheet
Up till now, recording was concerned with only one job. Expense sheet exhibits present status of
various jobs.
Direct Labor Cost
The process in charge will prepare a daily labor hour sheet and will enter in the system. Costing
department will approve daily hours sheet and post it. For the labor there is different costing
numbers and calculated separately for each department and estimated labor per hour rate for the
year of 2011 was Rs. 52.16.
Factory Overheads
Estimated FOH was 300% of labor cost for the year of 2011.
Applied Factory Overheads
Actual Factory Overheads
Estimated Factory Overheads
Inventory Control Section
Here inventory means all raw materials which is used for production purpose. There are two
divisions of production at PEL, Power Division & Appliances Division. So for every division
there is a separate store, even for each product there is a separate store which is handled by
concerned store keeper.

32

Material Arrival at PEL
Material received at receiving store from suppliers or companys own sources. Here inspection
and quality is checked by I& QC department. If the material is according to standard, check the
physically of material and as per purchase order then they approve it.
When the inspection process is completed then store keeper makes good receipt note (GRN) and
allot the good receipt number. Such like R0348, here R representing a part of refrigerator. After
it material is sent to relevant department, and relevant store keeper maintain Bin Card for issuing
of material to production.
Bin Card Performa
Date Issue voucher
number
Order
number
Receipt Issue Balances Total
PEL NBP

BOP
--- --- --- --- --- --- --- --- ---
After GRN, invoice is sent to accounts department. Accounts department also make a bin card so
that inventory balances can be maintain on daily basis. Here bin card also includes rates of
material as per unit and total. The quantity balances must matches with store keeper bin card.
Systems used by the inventory section are Material Issue Control System (MICS) and Material
Receipt Control System (MRCS). PEL is using the First in First out (FIFO) method for issuing of
material from store to production departments.
Inventory control department check the inventories all levels i.e opening and ending and in
process so inventory decrease under their required level than they make order for purchase
department for maintain the inventory level as set by the top management. The purchase
department for purchase of raw material uses all these methods.
Vendor purchase
Supplier direct purchase
Cash purchase

33

Credit purchase
Bookkeeping
The record of internal expenses related to the employees is maintained in the book keeping
section. The incharge of the section first approve expense by checking the evidence. The expense
incurred is paid in the factory-by-factory accountant.Different types of voucher are prepared in
this section.
Cash payment Voucher
Bank payment Voucher
Cash Receipt Voucher
Bank Receipt Voucher
Journal Voucher
Expenses for which PEL has to pay are categorized as follows. Expenses, which are incurred,
recorded under the book keeping section. So the brief detail of the expenses explained under.
Admin Expenses
PEL records Accounts Department Expenses, Finance Department Expenses, HR Department
Expenses and Gate Reception Expenses as Admin Expenses.
Selling Expenses
All the expenses incurred by Selling Department, Advertising Department and warranty
expenses are treated as Selling Expenses.
Travelling and Daily Allowances (TA/DA)
PEL is compensating to its employees as three different types of travelling.
Local Travelling
Inland Travelling
Foreign Travelling

34

Daily allowances are also paid in three different ways.
Diem
PGA
Hotel Stay
Diem means imbursement for lunch and dinner, PGA means Paying Guest, and hotel stay. Staff
can claim these all allowances according to the company policies as per grade wise.
Fixed Assets Management
In this section companies all fixed asst maintain. The depreciation recorded periodically and
salvages value of asst all these functions are performed under the heads of fixed asset
management section.This is very helpful in preparation of the financial reports because in these
reports assets are shown as their salvage value and their book value.
Letter of Credit Section (LC)
The company is engaged in importing the material for the production of power and appliances
products. Two employees in accounts department record the transactions, related to import of
material for production. PEL is using two systems as Import Monitoring System and Oracle for
the purpose of letter of credit.
Simply LC means guarantee, because LC is opened by importer to its bank, and bank made the
payment to exporters bank on the behalf of importer. There are two different types of LC as
Sight and Usuance. There are two different types of dry ports as Karachi Dry Port and Lahore
Dry Port.
LC includes these documents:
Journal Voucher
It includes all type of expenses on letter of credit from opening to closing date.


35

Goods Receipt Note
Code Description Quantity
Received
Quantity
Rejected
Quantity
Approved
Rate Per
Unit
Value
--- --- --- --- --- --- ---
Landed Cost Sheet
P.O. No. Date LC No. Quantity LC Value in
FC
LC Opening
Ex. Rate
LC value in
Rupees
Supplier
--- --- --- --- --- --- --- ---
Shipment
It includes all items which are related to shipment such like shipment charges, insurance and
other expenses.
Payroll Section
This section handles and maintains the records of salaries and wages of all employees, working
in PEL. Mr. Mirza Imran Khan (Account Officer) who has told me about this section.
Salary means fixed amount paid by the company against employee services. In includes two
heads as allowances and deductions.
Allowances
It includes basic salary, house rent, cost of living allowances (CLA), utility allowances, special
allowances, and special pay.
Deductions
In involves provident fund, employee over age benefit income (EOBI), mess, travelling, medical,
telephone charges.


36

How to Make Salary
Standard Month 30.5 days
Standard Day 08 hours
Gross Salary All allowances Deductions
Overtime Calculation
It is paid on two bases as Basic salary and CLA, and overtime payment is made only for workers.
suppose an employee works 60hours as overtime then calculation will be as follows:

Shift Day Allowances
If one shift is working against the nature of work time (day time) then shift day allowance is to
be paid by PEL. Suppose night shift is working against the nature of work (day time), because
night is for rest and day is for working. So company pays some incentive for night shift.
Calculation for Shift Day Allowances:

Leave Encashment
1. Casual leave (10 days per annum)
2. Sick leave (08 days per annum)
3. Encashment leave (14 days per annum)
Provident Fund
Company deducts 10% of basic salary from each employees salary, and also contributes with
equal amount by employer. And then invest this amount anywhere, after a specified duration
employee can withdraw his provident fund.

37

HUMAN RESOURCE DEPARTMENT
Human resource department of the PEL Company is very much conscious of hiring the
employees for the company. The standards he set for hiring the new people. HRM department of
the company mainly makes the external recruitment .this is usually done through newspaper web
sites extra. HRM department also set salaries, packages and TADA allowances.
PROCUREMENT DEPARTMENT
PEL has state of the art methods of production and they also outsource the products and raw
material not only from Pakistan but also from Asia, America, Europe, and Africa. So for this
purpose PEL has two different departments for procurement, which are:
Local Procurement
Local Procurement department is responsible for all the raw materials that are required for
making various products in the factory. It includes from nails to large metal sheets. At the start of
each financial year they receive a major plan from the management, which highlights all the raw
material required for each product. Dates and maximum time limit for raw material requirement
is also mention in this major plan.
Foreign Procurement
Responsibilities and duties are same as Local procurement but they vary in the dimension that,
they have to arrange the raw material from abroad. They also receive same plan as local
procurement for the whole financial year and develop milestones to carry out the plan execution
properly.
ADMINISTRATION (IR & A)
Key responsibilities of IR & A department are maintenance of attendance, maintenance of stores
check the material in & out from the factory, maintenance of factory, provide assistance to all
departments regarding material.


38

Strengths
Brand Loyalty
After Sales Services
Power Division
56 Years of Heritage

Weaknesses
Less utilization of capacity
Price Setting
Lack of Product Range
Too much dependence on
imported material
Less increment in salary
Lack of advertisement

Helpful Harmful
I
n
t
e
r
n
a
l

Opportunities
Export Opportunity
Trends Toward High
Quality
Increasing the Product
Line
Increase in Product
Range

Threats
World Trade Organization
Strong Competition
Chinese Product
Suppliers Growing
Bargaining Power

E
x
t
e
r
n
a
l

SWOT ANALYSIS


39

SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying
the objective of the business venture or project and identifying the internal and external factors
that are favorable and unfavorable to achieving those objectives. The strengths, weaknesses,
opportunities and threats of PEL are discussed below.
Strengths
Brand Loyalty:
PEL has created a strong brand image in the mind of the customers through higher quality and
low prices. The customers of PEL always prefer its home appliances like Window AC, split AC
and refrigerators, during the time ofpurchase. PEL is a popular company inPakistan and
everyone knows about the PEL products and its brand name.
After Sales Services:
PEL provides the after sale service to customers which increases the customers satisfaction. The
biggest strength of services department is that it handles a complaint within 24 hours in any part
of the country, which helps in increasing the satisfaction level of customers
Power Division:
Power division is the unique strength for PEL. Most of electronics companies deal in only home
appliances but PEL is the only company which deals in home appliances and power appliances.
56 Years of Heritage:
As I discussed earlier that PEL was established in 1956 so they have a long time heritage, its
values and principles distinguish it from other organizations.
Weaknesses
Lack of Advertisement:

40

It is a second major weakness of PEL that it is not a vigorous advertiser. Only recently PEL has
invested a considerable amount in advertisement, but when we look at its competitors, PEL still
has to do a lot in this sector.
Less Increment in Salary:
The yearly increment in the salary is very low as compared to the inflation .as compared to their
competitors; PEL increases the salary not so much.
Too Much Dependence on Imported Material:
They are more dependent on the imported material rather than domestic but it causes problem
when there is slow supply or shortage of material from abroad.
Lack of Product Range:
PEL has introduced more products of consumer items but there are more needs to develop new
consumer items.
Price Setting:
Price setting is also a main problem for PEL because it sets its prices on the bases of competition
and this strategy reduces its profit margin.
Less Utilization of Capacity:
Due to lack of finance a company cannot utilize all its resources on its full capacity. It increases
the cost of products per unit that decreases the profit margin of each consumer item. As the
production capacity and actual production of different products is given below (2008).
Production Capacity Actual Production
Refrigerators 3500000 2924905
Energy meters 1200000 986085

41

Transformers 2000 1356
Air conditioners 36250 6560
Opportunities
Export Opportunity:
PEL have also the opportunity to export their products in other international countries like UAE,
Saudi Arabia, and other Arabic and African Countries.
Trends Toward High Quality:
There is a rapidly change in the technology with the time and every company is adopting new
technology so PEL has the opportunity to utilize the maximum new technology and capture more
and more customers.
Increasing the Product Line:
Company has the opportunity to increase their production line and will also increase the
efficiency of the employees and in this respect the cost of the company reduce. First of all, they
should look the conditions of the market and then they should produce their products.
Increase in Product Range:
PEL can increase its product range that will be more profitable for the company. There are more
needs to develop new consumer items like PEL washing Machines, Vacuum cleaner and other
items.
Threats
World Trade Organization:
World trade organization given the permission in year 2005 to each company of home appliances
to export their products after paying less duties or duty free products. That increases the pressure

42

for the indigenous companies to reduce the prices and increase the quality. But PEL Company
also runs under uncertain conditions.
Strong Competition:
There is very strong competition for the home appliances in the market so every company tries to
come in the no.1 position for achieving the maximum shares in the market.
Chinese Product:
Chinese products are another threat for the Pakistani companies because these products are
cheaper than the Pakistani products. Chinese products stress the indigenous companies to lower
the quality and prices that will not be profitable in the long run.
Suppliers Growing Bargaining Power:
The supplier growing power is increasing due to more demand of the electronic industry due to
this phenomena the suppliers of raw material are charging high prices and it is reducing average
profit margin of companies.


43

PEST ANALYSIS
Political Factors
Political or legal forces means law and order situation in the country. Countrys policies for the
trading companies, Political and legal situation regarding PEL Company is stated as
The political condition of Pakistan is highly uncertain and unstable but from few years
we have seen some consistency in government policies which encourage the foreign
investors to invest in Pakistan.
There is no check on importers by the Govt. any dealer can import anything and can sell
it with his own label on it. There is no quality check and brand authenticity. An example
is the Fast Home Appliances.
There are very few incentives for the manufactures in Pakistan by the Govt. as compared
to the upcoming giants like China. The cost of the manufacturing is very high because of
the electricity rates and other over heads so most of the type the manufacturers prefer to
outsource.
The said demand is met through imports from China, there is 15% subsidy given to the
importers in China.
Economic Factors
Mean economic condition of the country such as change in dispose bale income, fluctuation in
market, inflation rate etc...Company sets the prices according to the economic situation of
Pakistan
There is great boom in construction sector now days and more houses and other building
are being constructed than ever before so there is a great demand for home appliances
and above all are split units.
At the back of stronger than expected performance of agriculture and manufacturing the
GDP growth is likely to exceed the target and may end up at around 8.4% the highest
growth in last 15 years. Pakistan is number 2 in the race of GDP growth after China.
According to per capita income, Pakistan is included in the middle income group and
high rates of electricity at commercial and residential areas are point of huge concern for

44

people. This is one big reason that people are shifting at a great speed from window type
air conditioners to split units. A window type air conditioners 1.5 Ton consume 11
amperes approximately 3 unit of electricity per hour and the split unit consume 8.5
amperes approximately 2 unit of electricity per hour.
Social Factors
Now days people are becoming more and more price conscious. That is why window
type air conditioner is almost absolute because of high cost of electricity bills and splits
are becoming popular because of low electricity bills.
Consumer also prefers split units because they are considered energy savers. But the
traders are fleecing consumer by selling to them low capacity splits as high capacity
units. They are many chances that you get a 0.75 ton split if you go to the market to buy a
one ton unit without your knowing it, so the consumers have to pay the same amount of
power bill at the end of the day and with less cooling.
In countries like Pakistan air conditioning usage of maximum because of an extended
summer season of nearly eight months a year. In Pakistan the air conditions are used by
upper and middle class.
The companies are becoming socially responsible these days as they have introduced
anti-bacterial and anti-dust filter.
Our society has started considering split units as the status symbol and feels this graced if
split units are not installing in every room of their houses. A sizeable number of people
prefers to buy air conditioners on cash bases, there are many who want to procure A/Cs
through banks and leasing companies on consumers financing packages. Besides, many
dealers initiated their own scheme of selling air-conditioners and other domestic
appliances on easy installments.
Technological Factors
With the introduction of split units, this new technology has made A/C more affordable
and easy to install and maintain.

45

Efficiency of an A/C depends on the outer part. If the outer part is bigger than the A/C
will be more efficient in sense of cooling. Window type A/C have smaller outer part as
compared to the split units, therefore they are less efficient as compared to the split units.
Another reason for being less efficient is that window type A/C has the cooling unit and
heat discharging unit at the same place so sometimes hot air tends to cause the cool air
lose its potential to work properly. Splits on the other hand have two separate parts and
the cooling unit is in no contact with the heat discharging unit which tends to improve the
efficiency of split units.
Another technical aspect is that rotary compressors are use in split units which are
soundless and do not heat up in extreme temperatures compare to the window A/Cs.
Because of being more efficient in cooling the compressor of split unit drips at proper
time and the set temperature is achieved at lesser time as compared to window type A/C.
this is one of the reason that split unit consumes approximately 2 units of electricity per
hour and a window A/C consumes approximately 3 units of electricity per hour.
This is due to innovation in technology that now there is need to make a small whole anywhere
you want to install a split as compare to a window type A/C which need as a big hole and a
proper place to be installed.


46

FINANCIAL ANALYSIS


47

Horizontal Analysis
Income Statement

Interpretation
In common size analysis, horizontal analysis of income statement shows that year 2007 is as base
year. Net revenue over the next years in 2008 to 2011, having fluctuation trend. Cost of sale
showing increase trend except of 2009. Gross profit is showing fluctuation trend, but the total
operating expenses are showing increasing trend, and due to this reason company has faced
tremendous loss in 2011. Provision for taxation is showing imbalanced trend over the total
period of time. So the profit for the after deducting all expenses and taxes is very high in 2008
but in 2011 PEL faced a huge loss due to low sales volume as comparing to its overall
expenditures.

31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07
In Percentage (%)
Revenue net 96.02 148.33
39.20 107.10
100
Cost of sales 111.43 149.78
34.13 106.41 100
Gross profit 41.12 143.17
57.26 109.56
100
Other operating income 36.97 50.70
40.52 18.16 100
40.96 139.72
56.64 106.15
100
Distribution cost 128.08 170.77
50.92 109.28
100
Administrative expenses 176.72 194.30
90.40 133.00
100
Other operating expenses 9.23 135.85
37.67 89.07
100
Financing Cost 150.81 173.26
66.15 106.02
100
Total Operating Expenses 145.06 175.58
65.38 111.82
100
(Loss)/ Profit before taxation (257.75) 36.81
31.57 89.87
100
Share of (loss) / profit of associate (83.56) 43.49
20.05 45.92 100
(Loss) / profit before taxation (254.76) 36.92
31.37 89.11
100
Provision for taxation (510.28) 57.67
48.45 142.19 100
(Loss) / profit for the year (199.82) 32.46
27.69 77.70
100

48

Balance Sheet


In Percentage (%)
EQUITY AND LIABILITIES
Share Capital & Reserves

Issued, subscribed and paid up capital 121.90
121.90 116.45 109.36
100
Reserves 237.47
237.47 190.88 190.88
100
Un-appropriated profits 98.18
151.57 136.47 113.60
100
Surplus on Revaluation of Property, Plant
and Equipment
481.21 505.58 531.22 235.67 100
Non-Current Liabilities

Long-term financing secured 346.13 376.98
310.39
188.72 100
Liabilities against assets lease 11.68 7.90
63.82
90.87 100
Deferred taxation 268.01 373.69
391.63
195.35 100
Deferred income 84.54 112.98 152.45 125.14 100
Total Non-Current Liabilities 286.48 338.37 311.79 181.07 100
Current Liabilities

Trade and other payables 94.42 95.15
81.65
132.53 100
Interest accrued on loans payables 386.27 178.25
156.48
103.19 100
Short-term borrowings 202.88 193.68
154.65
127.12 100
Current portion of:

100
- long-term financing 450.66 463.55
319.18
135.11 100
- liabilities against assets finance lease 37.24 93.29 80.46 97.27 100
Total Current Liabilities 185.94 173.92 138.87 127.56 100
Total Liabilities 216.90 224.55 192.12 144.04 100
Total Liabilities and Owner's Equity 206.06 221.10 198.63 141.99
100
ASSETS
Non-Current Assets

Property, plant and equipment 348.19 332.02 332.57 156.50 100
Intangible assets 54.13 78.69 87.87 98.61 100
Long term investments 35.22 108 183.63 424 100
Long-term deposits 154.64 214.19 261.89 97.09 100
Current Assets
Stores, spares and loose tools 170.22 168.39
140.92
127.36 100
Stock-in-trade 169.36 225.39
152.60
142.41 100
Trade debts unsecured 127.11 133.15
109.48
142.75 100
Advances 234.01 254.60
308.91
203.00 100
Trade deposits and prepayments 74.18 80.60
63.23
104.82 100

49

Interpretation
In horizontal analysis trends are computed by taking 2007 as a base year. Company has increased
its share capital but in very minor ratio. Company has more and more reserves because by taking
2007 as base year reserves are almost 90% more in 2008& 2009 than 2007. There is also
handsome increase in long term financing and other non-current liabilities but in 2011 it
decreases. Management should decide to reduce long term financing because it creates negative
effect on the profitability of the company.
Regarding the current liabilities, companys current liabilities are increasing rapidly from 2008
to 2011. Companys non-current assets showing increasing trend includes property and deposits
but long term investments and intangible assets decreases slightly after 2008 to 2011. Current
assets of PEL are showing inconsistent over the time after 2008. Companys overall total assets
are showing growing tendency but in 2011 it decreases slightly.

Other receivables 67.50 179.58
58.54
126.99 100
Other financial assets 4.60 16.47
16.90
44.40 100
Sales tax refundable - 4,426.76
4,029.60
1,295.22 100
Income tax refundable 34.94 723.52
760.29
180.74 100
Cash and bank balances 30.17 64.06
22.97
80.97 100
Total Current Assets
135.80 168.08 128.83 136.83 100
Total Assets 206.06 221.10 198.63 141.99 100

50

Vertical Analysis
Income Statement

Interpretation
In the Common Size analysis of the Profit and Loss Account of Pak Elektron Limited, it is
shown that there is a very minor difference in the cost of sales and net revenue for the year of
2011 but in remaining years Company having better difference in cost of sale and net revenue.
Other operating income has a very minor share with respect to net revenue.Total operating
expenses are displaying ups and downs trend,and in this company has faced a huge loss in 2011.
Because operating expenses are very higher than gross profit. So in this way company has set
aside provision for taxation more in 2011 as comparing to all other years. PEL has enjoyed a
good profit as 4.93% of sale in 2007.


In Percentage (%)
Revenue Net 100.00 100.00 100.00 100.00 100.00
Cost of sales 90.61 78.84 67.98 77.57 78.08
Gross profit 9.39 21.16 32.02 22.43 21.92
Other operating income 0.33 0.29 0.88 0.14 0.85
9.72 21.45 32.90 22.57 22.77
Distribution cost 6.99 6.03 6.81 5.35 5.24
Administrative expenses 6.02 4.29 7.55 4.06 3.27
Other operating expenses 0.04 0.41 0.43 0.37 0.44
Financing Cost 12.46 9.27 13.38 7.85 7.93
Total Operating Expenses 25.51 19.99 28.16 17.63 16.89
(Loss)/ Profit before taxation (15.80) 1.46 4.74 4.94 5.89
Share of (loss) / profit of associate (0.09) 0.03 0.05 0.04 0.10
(Loss) / profit before taxation (15.89) 1.49 4.79 4.98 5.99
Provision for taxation (5.63) 0.41 1.31 1.41 1.06
(Loss) / profit for the year (10.26) 1.08 3.48 3.58 4.93

51

Balance Sheet


In Percentage (%)

Issued, subscribed and paid up capital 7.01 6.53 6.95 9.13 11.85
Reserves 0.69 0.64 0.58 0.80 0.60
Un-appropriated profits 7.44 10.71 10.73 12.50 15.62
and Equipment
16.65 16.30 19.07 11.84 7.13

Long-term financing secured 19.12 19.41 17.79 15.13 11.38
Liabilities against assets to finance lease 0.09 0.06 0.52 1.04 1.62
Deferred taxation 8.29 10.78 12.57 8.77 6.38
Deferred income 0.24 0.29 0.44 0.51 0.57
Total Non-Current Liabilities 27.74 30.53
31.32
25.44 19.95
CURRENT LIABILITIES
Trade and other payables 6.24 5.86 5.60 12.71 13.62
Interest / mark-up accrued on loans
payables
3.46 1.49 1.46 1.34 1.85
Short-term borrowings 25.95 23.09 20.52 23.60 26.36
Current portion of:

- long-term financing 4.65 4.46 3.42 2.02 2.13
- liabilities against assets to finance lease 0.16 0.38 0.36 0.61 0.89
40.47 35.28 31.35 40.29 44.85

68.21 65.81 62.67
65.73 64.80
Total Liabilities and Owner's Equity
100.00 100.00 100.00 100.00 100.00
ASSETS
Non-Current Assets

Property, plant and equipment 59.21 52.62 58.67 38.63 35.04
Intangible assets 1.32 1.79 2.23 3.50 5.04
Long term investments 0.02 0.05 0.10 0.32 0.11
Long-term deposits 0.23 0.30 0.40 0.21 0.31
Total Non-Current Assets 60.79 54.76 61.40 42.66 40.50
CURRENT ASSETS

Stores, spares and loose tools 0.46 0.42 0.40 0.50 0.56
Stock-in-trade 17.85 22.14 16.69 21.78 21.72

52

Trade debts unsecured 15.75 15.37 14.07 25.67 25.53
Advances 2.63 2.67 3.60 3.31 2.32
Trade deposits and short-term
prepayments
0.96 0.97 0.85 1.96 2.66
Other receivables 0.07 0.18 0.07 0.20 0.22
Other financial assets 0.03 0.11 0.12 0.44 1.41
Sales tax refundable - 0.71 0.60 0.22 0.02
Income tax refundable 0.79 1.37 1.60 0.53 0.42
Cash and bank balances 0.68 1.35 0.54 2.65 4.65
Total Current Assets
39.21 45.24 38.60 57.34 59.50
Total Assets
100.00 100.00 100.00 100.00 100.00
Interpretation
In the common size analysis of the Balance Sheet it shows that in 2007 share capital is 11.85%
of total assetsand in upcoming years share capital of total assets ratio decreased but in 2011 it
increased minor. It means that company issued more shares in 2007 but after that firm continues
to buy back its ordinary shares till 2010. Reserves are showing varied tendency and long term
financing shows increasing trend with respect to total assets. Total non-current assets are
showing ups and downs when it compared to total assets of that particular year.Deferred taxation
showing fluctuation but deferred income is showing an increasing behavior after 2007.


53

0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-11
Current Ratio
Quick Acid-Test Ratio
Financial Ratios
Liquidity Ratios

Interpretation:
The liquidity position of PEL has been satisfactory in the preceding years but in 2011 it declined.
As the above analysis table indicates, in 2008 the liquidity position was 1.48 times which means
that in 2008 the firm has RS. 1.48 to pay a liability of RS. 1 which is quite well but in 2011 it
reduced to 0.97 times. This change in the liquidity position is due to higher increased percentage
of Current liabilities in the balance sheet of year 2011. Current ratio also effects profitability and
credibility of company in the sense of dont put at large current assets for fulfilling the current
liabilities, because the excess money is useful for investing in short term and long term
securities. But in case of not fulfilling the liabilities on time, companys credibility disturbs.
Secondly, quick ratio is calculated for the purpose of checking most quickly and liquid table
assets that can be easily and speedily convert into cash. PELs quick ratio is showing decreasing
Current Ratio 0.97 1.28 1.23 1.42 1.33
Quick Acid-Test Ratio 0.50 0.63 0.67 0.83 0.78

54

-0.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Debt to Equity Ratio
Debt Ratio
Interest Coverage Ratio
trend after 2008 due to advances and huge inventory stock,which is not very beneficial for the
company
Debt Ratio

Interpretation
Debt ratio is a financial ratio that indicates the percentage of a company's assets that are provided
via debt. The higher the ratio, the greater risk will be associated with the firm's operation. In
addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn
will lower the firm's financial flexibility.
Interest coverage ratio is a calculation of a company's ability to meet its interest payments on its
outstanding debt. While debt to equity is a measure of a company's financial leverage, Investing
in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest
rates, due to the additional interest that has to be paid out for the debt. In PEL debt to equity ratio
Debt to Equity Ratio 2.74 2.98 2.63 1.77 1.10
Debt Ratio 0.68 0.66 0.63 0.66 0.65
Interest Coverage Ratio -0.27 1.16 1.35 1.63 1.74

55

0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Inventory Turnover
Total Assets Turnover
0.00
50.00
100.00
150.00
200.00
250.00
300.00
Average Collection Period
Average Payment Period
is upward but debt ratio remained very minor variation and interest coverage ratio is showing
declining tendency which means the larger the debt burden on the company.
Activity Ratios

Inventory Turnover 2.42 2.44 0.82 2.75 3.68
Total Assets Turnover 0.48 0.69 0.20 0.77 1.02
Average Collection Period 118.92 80.63 250.85 119.73 89.83
Average Payment Period 52.74 39.54 148.87 77.52 62.24

56

-0.80
-0.60
-0.40
-0.20
0.00
0.20
0.40
0.60
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return on Assets
Return on Equity
Interpretation
Average collection period measure how long a firm's average sales dollar remains in the hands of
its customers. A longer collection period automatically creates a larger investment in assets.
Inventory turnover ratio measures the number of times a company's investment in inventory is
turned over during a given year. The higher the turnover ratio, the better, since a company with a
high turnover requires a smaller investment in inventory than one producing the same level of
sales with a low turnover rate. Company management has to be sure, however, to keep inventory
at a level that is just right in order not to miss sales.The graph is showing fluctuating for
inventory turnover and total asset turn over. Average collection period and payment period
having same in trend as ups and down.
Profitability Ratios

Gross Profit Margin 0.09 0.21 0.32 0.22 0.22
Operating Profit Margin -0.03 0.11 0.18 0.13 0.14
Net Profit Margin -0.10 0.01 0.03 0.04 0.05
Return on Assets -0.05 0.01 0.01 0.03 0.05
Return on Equity -0.70 0.11 0.10 0.30 0.43
Earning Per Share -9.55 1.55 1.01 3.02 4.25

57

-12.00
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
Earning Per Share
Interpretation
Profitability ratios (also referred to as profit margin ratios) compare components of income with
sales. They give us the idea of what makes up a companys income and are usually expressed as
a portion of each rupee of sale. Gross profit margin indicates how much of every rupee of sale is
left after cost of goods sold. Same as net profit margin shows how of each rupee of sale
isleftover after all expenses. Return on equity is showing tremendous decline in 2011 but all
other profitability ratios changed very few in the last five years.
earning per share is the amount of income earned during a period per share of common stock.
PELs EPS is showing almost decreasing trend because the company has issued more shares but
earning didnt increase as the same ratio, and in 2011 due to huge loss EPS declined up to -9.55
which is very alarming situation for the management.


58

WHAT I HAVE LEARNED IN THE ORGANIZATION
During internship I worked in the accounts and finance department of the company. I learnt
about the basic operations, different terminologies and documents used in the department. Some
other basic learning is given below.
How to work individually as well as in groups under relaxed and stressful environment
Patience is very important in dealings, as anger can lose your customer
Working of production plant of PEL products (Air Conditioners, Refrigerators) by
visiting the production site
How does Accounts Department make payments to the companys suppliers
How does the company calculate its input and output tax
How does cost section deals in production-concerned matters
I learned that record of internal expenses related to the employees is maintained in the
book keeping section
How the different types of vouchers are prepared, such like Cash payment Voucher Bank
payment Voucher, Cash Receipt Voucher, Bank Receipt Voucher, Journal Voucher


59

SUGGESTIONS AND RECOMMENDATIONS
As I found brand name is very important factor in consumer buying behavior, thus it is
advised that PEL should work on the brand image. Although PEL has a strong brand
name, but it has to create much more stronger one, mainly through advertising, to
compete with Dawlance, Waves,and other international brands.
The company should take measures to improve the quality of their products by improving
the process. Thus the company is advised to take steps towards improving the quality of
its products; otherwise it will lose a lot of potential customers to their competitors.
To gain more competitive advantage over their competitors, PEL has to work on their
distribution network.
PEL more focus should be on electronic media to get competitive advantage over the
competitors. They have to increase their advertising expenditures.
The company must give more incentives to the dealers so that they remain loyal to the
company and promote the products.
The product line of PEL is not good as compared to others like Haier, Waves, Super
Asia, so its good for the company for more success if they work on it.
Let the employees to know about the cost of parts of machines which assembled after
repairing so that they realize about the value of that parts, and consequently they will use
that in sophisticated manner.
The company should announce two holidays in a week; it will not only help the company
in cost cutting but also increase efficiency of its employees.
Save time by minimizing the official procedures
Develop proper goals and objectives for every member of team and department.
Co-ordination should be developed between departments to departments. This can be
done through setting goals and objectives of the whole company not only for their
different departments.


60

REFERENCES
The sources from where I have gathered data for my report:
www.pel.com.pk
Mr. Muhammad Masood (HOD of Accounts Department)
Mr. Arshad Ali (Accounts Manager)
Mr. Nadeem-Ud-Din Qureshi (Assistant Manger Finance)
Mr. Mirza Imran Khan (Account Officer)
Mr. Muhammad Asad (Corporate Finance Section Incharge)


61

ANNEXURE
Attached Documents include:
Financial Statements of Pak Elektron Limited
Comprehensive Income Statement
Statement of Financial Position
Internship Program Letter
Internship Completion Letter


COMPREHENSIVE STATEMENT OF INCOME
For the Year 2007-2011

Rupees in Thousands
Revenue 13,723,169 19,895,448
5,203,152 13,926,572 13077670
Sales-tax and discount 2,380,339 2,372,792
571,721 1274579 1264183
Revenue net 11,342,830 17,522,656 4,631,431 12,651,993 11,813,487
Cost of sales 10,277,948 13,814,754
3,148,401 9814594 9223623
Gross profit 1,064,882 3,707,902 1,483,030 2,837,399 2,589,864
Other operating income 37,140 50,936
40,708 18247 100458
1,102,022 3,758,838 1,523,738 2,855,646 2,690,322
Distribution cost 792,803 1,057,011
315,170
676,452 618,981
Administrative expenses 683,115 751,074
349,450
514,122 386,556
Other operating expenses 4,838 71,223
19,751
46,697 52,429
Financing Cost 1,413,264 1,623,611
619,911
993,565 937,109
Total Operating Expenses 2,894,020 3,502,919 1,304,282 2,230,836 1,995,075
(Loss)/ Profit before taxation (1,791,998) 255,919 219,456 624,810 695,247
Share of (loss) / profit of associate (10,162) 5,289
2,438 5585 12162
(Loss) / profit before taxation (1,802,160) 261,208 221,894 630,395 707,409
Provision for taxation (638,698) 72,184
60,643 177970 125165
(Loss) / Profit for the year (1,163,462) 189,024 161,251 452,425 582,244


STATEMENT OF FINANCIAL POSITION
For the Year 2007-2011


Rupees in Thousands

Authorized capital 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000
Issued, subscribed and paid up capital 1,668,264 1,668,264 1,593,720 1,496,677 1,368,591
Reserves 164,134 164,134 131,931 131,931 69,118
Un-appropriated profits 1,770,706 2,733,582 2,461,255 2,048,783 1,803,565

3,603,104 4,565,980 4,186,906 3,677,391 3,241,274
and Equipment
3,962,040 4,162,626 4,373,769 1,940,365 823,341
Long-term financing secured 4,548,852 4,954,333 4,079,149 2,480,238 1,314,219
Liabilities against assets to finance lease 21,841 14,776 119,368 169,954 187,027
Deferred taxation 1,973,350 2,751,515 2,883,631 1,438,405 736,309
Deferred income 56,069 74,935 101,108 82,996 66,323
Total Non-Current Liabilities 6,600,112 7,795,559 7,183,256 4,171,593 2,303,878
Current Liabilities
Trade and other payables 1,485,002 1,496,489 1,284,080 2,084,351 1,572,732
Interest accrued on loans payables 823,896 380,197 333,763 220,104 213,298
Short-term borrowings 6,174,860 5,895,077 4,706,890 3,868,988 3,043,650
Current portion of:

- long-term financing 1,106,375 1,138,026 783,597 331,701 245,501
- liabilities against assets subject to
finance lease
38,393 96,185 82,959 100,286 103,105
Total Current Liabilities 9,628,526 9,005,974 7,191,289 6,605,430 5,178,286
Total Liabilities 16,228,638 16,801,533 14,374,545 10,777,023 7,482,164
Total Liabilities and Owner's Equity 23,793,782 25,530,139 22,935,220 16,394,779 11,546,779
ASSETS
Non-Current Assets
Property, plant and equipment 14,089,185 13,434,709 13,457,138 6,332,705 4,046,378
Intangible assets 314,874 457,744 511,134 573,617 581,705
14,404,059 13,892,453 3,968,272 6,906,322 4,628,083
Long term investments 4,393 13,447 22906 52,945 12,474
Long-term deposits 54,636 75,515 92,152 34,218 35,332
Current Assets
Stores, spares and loose tools 109,582 108,405 90,721 81,990 64,376
Stock-in-trade 4,247,023 5,652,089 3,826,744 3,571,168 2,507,679
Trade debts unsecured 3,746,881 3,924,772 3,227,219 4,207,741 2,947,646
Advances 625,559 680,611 825,807 542,663 267,327
Trade deposits and short-term prepayments 227,555 247,266 193,963 321,574 306,775
Other receivables 17,241 45,869 14,952 32,437 25,543

Other financial assets 7,491 26,810 27,522 72,295 162,825
Sales tax refundable - 169,589 154,374 49,620 3,831
Income tax refundable 187,496 349,560 367,325 87,322 48,314
Cash and bank balances 161,866 343,753 123,263 434,484 536,574
Total Current Assets 9,330,694 11,548,724 8,851,890 9,401,294 6,870,890
Total Assets 23,793,782 25,530,139 22,935,220 16,394,779 11,546,779

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