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COST ACCOUNTING SUBMITTED BY NAME ENROLLMENT NO

1) MIAN MUHAMMAD SAJAWAL 2) IBRAHIM GHAZNAVI 3) MYRA RABBANI

01-111101-157 01-111101-113 01-111102-108

4) Arshad Bhukari 5) Husaifa CLASS: BBA 5-C DEPARTMENT: MANAGEMENT SCIENCES

SUBMITTED TO SIR SHAHZAD BUTT DATE: 21-MAY-2012

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ABSTRACT
This report contains an introduction to the Pakistan Tobacco Company (PTC); and an analysis of its Profit and Loss statement and Balance Sheet, which helps to analysis the financial position of the Company. Moreover, this report encompasses on the interpretation of its financial statement; Ratio Analysis. In our report we have discussed each of the above elements and given some suggestions to the Company to improve its financial position and we hope that it will be of considerable use by those who review it

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ACKNOWLEDGEMENT
First and foremost, we thank God Almighty for everything, and for enabling us to accomplish making this report. We would like to thank Sir Shahzad Butt, who has guided us throughout the course; he is a true mentor and we sincerely appreciate her patience, assistance and guidance and humor and secondly we would like to thank Mr. Faisal Saif, who is the Senior Manager at Pakistan Tobacco Company

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CONTENTS
INTRODUCTION PTC EMPLOYMENT PRINCIPLE VISION MISSION STRATEGIC OBJECTIVES 5 RATIO ANALYSIS 6
A) GROSS PROFIT RATIO TO SALES B) GROSS PROFIT TO COST C) GROSS PROFIT PER UNIT D) INCOME TO SALES PERCENTAGE E) INCOME PER UNIT

4 4 5 5

6 7 8 9 10

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FINAL PROJECT F) INVENTORY TURNOVER IN TIMES G) INVENTORY TURNOVER IN DAYS

PAKISTAN TOBACCO COMPANY 11 12 13

PROFIT & LOSS ACCOUNT BALANCE SHEET 14

INTRODUCTION

Pakistan Tobacco Company Limited was incorporated in 1947 immediately after independence, when it took over the business of the Imperial Tobacco Company of British India which had been operational in the South Asia since 1905. Pakistan Tobacco Company is part of the British American Tobacco Group, one of the world's most international business groups, with brands sold in 180 markets around the world. It is located in Jhelum, Pakistan. From being just a single factory operation to a company which is involved in every aspect of cigarette production, from tobacco cultivation to packaging we have evolved and grown with Pakistan. However, what is significant about these sixty-two years is the effort that PTC has demonstrated in the development of the country. By being instrumental in the campaign for modern agricultural and industrial practices, we have helped in the development and progress of the agricultural & industrial sector in the country. PTC is the largest excise tax generator in the private sector in the country. In 2004 alone, PTC paid the government close to Rs.16 billion in excise and sales taxes. This amounts to over Rs. 50 million per working day. Over one million people are economically dependent on the industry in Pakistan.

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PTC EMPLOYMENT PRINCIPLE

Our Guiding Principles describe the organisation we are and the organisation we want to be. They represent the common values at the heart of our success. Our Employment Principles build on our commitment to good employment practices and workplace related human rights.

VISION STATEMENT
The vision statement of Pakistan Tobacco Company is First Choice for Everyone

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MISSION
Their mission statement is to transform PTC to perform responsibly with the speed, flexibility and enterprising spirit of an innovative, consumer focused Company

STRATEGIC OBJECTIVE
Our strategy reflects our vision of being the champions of growth, productivity, responsibility and winning organization.

RATION ANALYSIS

GROSS PROFIT RATIO TO SALES

Gross Profit / Net Sales * 100

2010:

6,204,912 / 20,952,629 * 100 = 29.61 %

2011:

6,240,701 / 22,949,974 * 100 = 27.19 %

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10.40% 10.20% 10.00% 9.80% 9.60% 9.40% 9.20% 9.00% 8.80% 8.60%

2010 2011

INTERPRETATION:
The Gross Profit Ratio to sales has decreased from 29.61% in 2010 to 27.19% in 2011. Decline in the ratio shows that PTC effectiveness of business is decreasing in terms of profit which it has made on COGS. PTC should improve its Cost Management and Pricing Decisions.

GROSS PROFIT RATIO TO COST

Gross Profit / COGS * 100

2010:

6,204,912 / 14,747,717 * 100 = 42.1 %

2011:

6,240,701 / 16,709,273 * 100 = 37.3 %

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43.00% 42.00% 41.00% 40.00% 39.00% 38.00% 37.00% 36.00% 35.00% 34.00%

2010 2011

INTERPRETATION:
PTC Gross Profit Ratio to Cost is decreasing from 42.1% in 2011 to 37.3% in 2011, which shows that PTC Cost of Sales is not in line with Gross Profit. If PTC can not improve its sales due to market competitiveness so PTC should improve its Cost Management.

GROSS PROFIT RATIO PER UNIT

Total Gross Profit / No. of Units Sold

2010:

6,204,912,000 / 36,831,000,000 = 0.168 Per unit

2011:

6,240,701,000 / 39,795,000,000

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= 0.1568 Per unit

0.17 0.165 0.16 0.155 0.15 2010 2011

per unit

INTERPRETATION:
The Gross Profit Ratio is decreasing from 0.168 per unit in 2010 to 0.1568 per unit in 2011 which shows that PTC Cost of Sales is increasing more than Net Turn over. PTC should be efficient in its Cost Management and Pricing decisions.

INCOME TO SALES PERCENTAGE

Net Income / Net Sales * 100

2010:

925,100 / 60,195,535 * 100 = 1.54 %

2011:

363,785 / 60,491,816 * 100

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= 0.54 %

1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 2010 2011

INTERPRETATION:
PTC net Profit Margin has decline from 1.54% in 2010 to 0.54% in 2011 primarily due to increase in other operating Expenses company might has incurred cost on different projects. PTC must ensure that on the projects it has invested should deliver financial results

INCOME PER UNIT

Net Income / No. of Units Sold

2010:

925,100,000 / 36,831,000,000 = 0.025 per unit

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2011:

363,785,000 / 39,795,000,000 = 0.009 per unit

0.0 25 0 .02 0.0 15 0 .01 0.0 05 0 20 10 20 11

INTERPRETATION:
Inventory Turnover in Times is also decresing by 0.23 per unit in 2010 to 0.009 per unit in 2011. It could br of two reasons: 1. PTC has reduced its size of inventory 2. Or it is managing its Inventory very efficiently.

INVENTORY TURNOVER IN TIMES

COGS / Avg. Inventory

2010:

4,915,788 + 5,318,558 / 2 Average Inventory For 2010 = 5,117,173 14,747,717 / 5,117,173 = 2.88 Times 1 8

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2011:

5,318,558 + 5,376,669 / 2 Average Inventory For 2011 = 5,347,613.5 16,709,273 / 5,347,613.5 = 3.12 Times

3.15 3.1 3.05 3 2.95 2.9 2.85 2.8 2.75 2010 2011

INTERPRETATION:
Inventory Turnover in Times is Increasing from 2.88 Times in 2010 to 3.12 Times in 2011 which shows that PTC is efficiently managing its Inventory

INVENTORY TURNOVER IN DAYS

(Inventory * Days in Year) / COGS

2010:

4,915,788 + 5,318,558 / 2 Average Inventory For 2010 = 5,117,173 (5,117,173 * 360) / 14,747,717

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= 125 Days

2011:

5,318,558 + 5,376,669 / 2 Average Inventory For 2011 = 5,347,613.5

(5,347,613.5 * 360) / 16,709,273

= 115 Days

126 124 122 120 118 116 114 112 110 D ys a 2010 2011

INTERPRETATION:
Inventory days have decreased from 125 in 2010 to 115 in 2011, which shows Increase in efficiency in managing the inventories & converting them in sales. As the firm is improving its sales of inventory, the firm has reduced time for its inventory conversion.

PROFIT & LOSS ACCOUNT

For the year ended December 31, 2011

2011 Rs. 000

2010 Rs. 000

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FINAL PROJECT Gross turnover Excise duties Sales tax Net turnover Cost of sales Gross profit Selling and distribution expenses Administration expenses Other operating expenses Other operating incomes Operating profit Finance income Finance cost Net finance cost Profit before income tax Income tax expenses Profit for the year 67,491,816

PAKISTAN TOBACCO COMPANY

60,195,535 (30,476,421) (8,766,485) 20,952,629 20,952,629 6,204,912 (3,279,390) (1,233,165) (208,211) 46,610 (4,674,156) 1,530,756 36,933 (149,680) (112,747) 1,418,009 (492,909) 925,100

(34,719,661) (9,822,181) 22,949,974 (16,709,273) 6,240,701 (3,129,938) (1,321,713) (1,182,363) 53,967 (5,580,047) 660,654 39,160 (140,539) (101,379) 559,275 (195,490) 363,785

BALANCE SHEET
For the year ended December 31, 2011

----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Non current assets Property, plant and equipment 6,092,284 5,823,688

2011 Rs. 000

2010 Rs. 000

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FINAL PROJECT Long term investment in subsidiary company Long term loans Long term deposits and prepayments Currents assets Stock in trade Stores and spares Trade debts Loans and advances Short term prepayments Other receivables Income tax paid in advances Cash and bank balances 5,000 1,260 22,640

PAKISTAN TOBACCO COMPANY

5,000 3,417 15,375

6,462,330 6,002,823 190,110 199,207 1,202 1,597 64,310 48,267 94,052 118,329 196,249 93,546 79,419 15,206 109,631 51,945 -----------------------------------------------------------7,197,303 6,530,920

Current liabilities Trade and other payables Accrued interest / mark-up Short term running finances 7,067,704 5,339,725 51,187 46,789 1,783,623 2,252,218 -------------------------------8,902,514 7,638,732 -----------------------------------------------------------(1,705,211) (1,107,812)

Net current liabilities Non current liabilities Deferred income tax liability Net assets (1,082,038) 3,333,935 (1,137,581) 3,602,087

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