complete internship report ali mehdi
TRANSCRIPT
Pharma Zone Pvt. Ltd. Internship Report
DEDICATEDTO
My Parents
AND All My Teachers
Who taught me the first word to speak
The first alphabet to write and
The first step to take
Hailey College of Commerce i
Pharma Zone Pvt. Ltd. Internship Report
Preface
The business world today is considerably different and more complex than it was just some years ago. Today, we experience private-equity firms acquiring hundreds of companies. Both the challenges and opportunities facing organizations of all sizes today are greater than ever.
This internship report prepared on one of the company in printing of aluminum foils, gives you a complete over view of that company what is its accounting cycle, what is its opportunities and etc.
I have given the ratio analysis of Pharma Zone Pvt. Limited. Ratios are made for 2007, 2008. These ratios are depicted graphically through line chart. Analysis of ratio shows that the ratios of Pharma Zone are satisfactory except average collection period.
Hailey College of Commerce ii
Pharma Zone Pvt. Ltd. Internship Report
Executive summary
Pharma Zone, the leading company in the printing of foil, is situated in PCSIR Colony, College Road Lahore. It was a sole proprietorship named as Pharma Link but in 2002 it was converted into private Limited Corporation. Mr. Arshad Mehmood and his wife are the director of Pharma Zone.
Pharma Zone has acquired a plot in Shaikhupura to start the work in the year 2010. It has also acquired new machineries to improve its functions. Currently Pharma Zone has 50 gravure (printing) machines.
Pharma zone currently manufactures following products:
Aluminum Foil Blister
Strip Foil
Poly Coated Paper
Blister Pouches
Alu Alu Foil Plain
Company keeps its quality at the peak of the business.
There are high levels of professionals in all departments of Pharma Zone and it is continuously keeping an eye over their growth.
There is a proper channel of communication between the departments of the Pharma Zone. There is a proper organizational chart issued by the organization.
Accounting system adopted by Pharma zone is single entry system. Pharma Zone adopted this system because it is an easy approach towards accounting.
Ratios of Pharma Zone are good except average collection period which is very poor for Pharma Zone.
Ali Mehdi
Hailey College of Commerce iii
Pharma Zone Pvt. Ltd. Internship Report
Acknowledgement
I was home when I heard the news from my cousin that you can do your training in his friend’s company, the Pharma Zone Pvt. Limited. After one week
I got into my career first opportunity and went to the company with my cousin. Initially there was little bit work to do in the Pharma Zone but Manger Accounts and Finance very kind to me gave me some work of posting and other checking. I want to thanks Mr. Imran Shafi, Manager Accounts and Finance of Pharma Zone for his cooperativeness to me in the prepration of this internship report.
Mr. Quasim, the accountant, also assisted me in understanding the management and hierarchy of the organization and the relationship between departments.
Mr. Adeel Dawar gave me the Financial Statements of Pharma Zone Pvt. Limited very next day of my internsip to get the ratios and have a work on it.
Finally I want to thanks Mr. Arshad Mehmood, the CEO of Pharma Zone who also talked to me on much occasions do discuss any problems faced by me.
Ali Mehdi
Hailey College of Commerce iv
Pharma Zone Pvt. Ltd. Internship Report
Table of Contents
PREFACE II
EXECUTIVE SUMMARY III
ACKNOWLEDGEMENT IV
HISTORY OF ORGANIZATION 1
OORIGINRIGIN:: 1WWHYHY C CHANGEHANGE TOTO P PRIVATERIVATE L LIMITEDIMITED C COMPANYOMPANY?? 1
ORGANIZATIONAL CHART 2
MANAGEMENT OF ORGANIZATION 3
BBOARDOARD OFOF D DIRECTORSIRECTORS:: 3MMANAGEMENTANAGEMENT:: 3
FIELD OF ACTIVITIES 6
CUSTOMERS AND SUPPLIERS OF PHARMA ZONE 7
LLISTIST OFOF QUALITYQUALITY M MAJORAJOR C CUSTOMERSUSTOMERS:: 7LLISTIST OFOF MAJORMAJOR SUPPLIERSSUPPLIERS:: 8
PRODUCT INFORMATION 9
PPRODUCTRODUCT M MATRIXATRIX 9PPRODUCTRODUCT R RANGEANGE:: 9
FUTURE PLANS AND PROJECTIONS 10
MISSION & VISION STATEMENT 10
OFFICES AND FACTORY OF PHARMA ZONE 11
MAJOR FUNCTIONS PERFORMED BY ACCOUNTING DEPARTMENT 12
Hailey College of Commerce v
Pharma Zone Pvt. Ltd. Internship Report
SALES CYCLE 12
SSTEPTEP I: C I: COLLECTIONOLLECTION OFOF P PURCHASEURCHASE O ORDERRDER:: 13SSTEPTEP II: P II: PREPARATIONREPARATION OFOF S SALESALES O ORDERRDER:: 13SSTEPTEP III: P III: PREPARATIONREPARATION OFOF P PRINTINGRINTING JOBJOB CARDCARD:: 14SSTEPTEP IV: P IV: PREPARATIONREPARATION OFOF DELIVERYDELIVERY C CHALLANHALLAN:: 15SSTEPTEP V: P V: PREPARATIONREPARATION OFOF SALESSALES TAXTAX INVOICEINVOICE:: 16SSTEPTEP VI: P VI: PREPARATIONREPARATION OFOF J JOURNALOURNAL V VOUCHERSOUCHERS (JV): (JV): 17SSTEPTEP VII: P VII: POSTINGOSTING TOTO L LEDGERSEDGERS:: 17SSTEPTEP VIII: P VIII: PREPARATIONREPARATION OFOF J JOURNALOURNAL:: 18SSTEPTEP IX: T IX: TAXAX R RETURNETURN F FILINGILING:: 18
WHEN A CUSTOMER MAKES PAYMENT 18
WHEN PAYMENT IS MADE TO THE SUPPLIER 18
MY LEARNING 19
CCHEQUEHEQUE ONLINEONLINE TRANSFERTRANSFER ANDAND RECEIPTRECEIPT OFOF CHEQUESCHEQUES:: 19PPOSTINGOSTING INTOINTO DEBTORSDEBTORS’ ’ LEDGERLEDGER:: 19CCHECKINGHECKING THETHE ENTRIESENTRIES POSTEDPOSTED INTOINTO LEDGERLEDGER:: 20CCHECKINGHECKING OFOF JOURNALJOURNAL VOUCHERSVOUCHERS:: 20MMISCELLANEOUSISCELLANEOUS:: 20
PHARMA ZONE FINANCIAL STATEMENTS: 21
BBALANCEALANCE S SHEETHEET:: 21IINCOMENCOME S STATEMENTTATEMENT:: 22
RATIO ANALYSIS 23
CCATEGORIESATEGORIES OFOF F FINANCIALINANCIAL R RATIOSATIOS:: 23LLIQUIDITYIQUIDITY R RATIOSATIOS:: 23CURRENT RATIO: 23QUICK (ACID-TEST) RATIO: 24AACTIVITYCTIVITY R RATIOSATIOS:: 24INVENTORY TURNOVER: 24AVERAGE COLLECTION PERIOD: 24AVERAGE PAYMENT PERIOD: 25TOTAL ASSET TURNOVER: 25DDEBTEBT R RATIOSATIOS:: 25DEBT RATIO: 25TIMES INTEREST EARNED RATIO: 25PPROFITABILITYROFITABILITY R RATIOSATIOS:: 26GROSS PROFIT MARGIN: 26OPERATING PROFIT MARGIN: 26NET PROFIT MARGIN: 27
Hailey College of Commerce vi
Pharma Zone Pvt. Ltd. Internship Report
EARNING PER SHARE: 27RETURN ON ASSETS: 27RETURN ON EQUITY: 27MARKET RATIOS: 27PRICE/ EARNINGS (P/E) RATIO: 28MARKET/BOOK (M/B) RATIO: 28AADVANTAGESDVANTAGES OFOF R RATIOATIO A ANALYSISNALYSIS:: 28
RATIOS OF PHARMA ZONE PVT. LIMITED 2007-08 29
RATIOS PHARMA ZONE PVT. LIMITED (2007) 29
RATIOS PHARMA ZONE PVT. LIMITED (2008) 31
IMPORTANT NOTES & ASSUMPTION 33
LIMITATIONS: 33
RATIO ANALYSIS 2007-2008 34
LLIQUIDITYIQUIDITY R RATIOSATIOS:: 34
LIQUIDITY RATIOS ANALYSIS 35
CCURRENTURRENT R RATIOATIO:: 35QQUICKUICK (A (ACIDCID-T-TESTEST) R) RATIOATIO:: 35AACTIVITYCTIVITY R RATIOSATIOS:: 36
ACTIVITY RATIOS ANALYSIS 38
IINVENTORYNVENTORY T TURNOVERURNOVER:: 38AAVERAGEVERAGE C COLLECTIONOLLECTION P PERIODERIOD:: 38AAVERAGEVERAGE P PAYMENTAYMENT P PERIODERIOD:: 38TTOTALOTAL A ASSETSSET T TURNOVERURNOVER:: 38DDEBTEBT R RATIOSATIOS 39
DEBT RATIOS ANALYSIS 40
DDEBTEBT R RATIOATIO 40PPROFITABILITYROFITABILITY R RATIOSATIOS 41
PROFITABILITY RATIOS ANALYSIS 42
GGROSSROSS P PROFITROFIT M MARGINARGIN:: 42
Hailey College of Commerce vii
Pharma Zone Pvt. Ltd. Internship Report
OOPERATINGPERATING P PROFITROFIT M MARGINARGIN:: 42NNETET P PROFITROFIT M MARGINARGIN:: 42RRETURNETURN O ONN A ASSETSSSETS:: 42RRETURNETURN O ONN E EQUITYQUITY:: 42
SUMMARY OF ALL RATIOS 43
RATIO ANALYSIS CONCLUSION 45
HORIZONTAL AND VERTICAL ANALYSIS 46
VVERTICALERTICAL A ANALYSISNALYSIS:: 46HHORIZONTALORIZONTAL A ANALYSISNALYSIS:: 46
VERTICAL ANALYSIS 46
CCOMMONOMMON--SIZESIZE I INCOMENCOME S STATEMENTTATEMENT:: 46SSUPPORTINGUPPORTING C CALCULATIONALCULATION:: 47
GRAPHICAL REPRESENTATION OF COMMON-SIZE INCOME STATEMENT 48
COMMON-SIZE BALANCE SHEET: 49
SSUPPORTINGUPPORTING C CALCULATIONALCULATION:: 50
HORIZONTAL ANALYSIS 52
HORIZONTAL ANALYSIS OF BALANCE SHEET 52
SSUPPORTINGUPPORTING C CALCULATIONSALCULATIONS:: 53
HORIZONTAL ANALYSIS OF INCOME STATEMENT 55
SSUPPORTINGUPPORTING C CALCULATIONALCULATION:: 55
RECOMMENDATIONS 57
CONCLUSION 58
INDEX 59
References 61
Hailey College of Commerce viii
Pharma Zone Pvt. Ltd. Internship Report
Hailey College of Commerce ix
Pharma Zone Pvt. Ltd. Internship Report
History of organization
Origin:Origin:
Pharma Zone was established in 2002 with name of Pharma Link for manufacturing of Printed Aluminum Foil, Strip & Poly Coated Paper for Pharmaceutical Industries by:
Mr. Arshad Mahmood – Executive director since its inception a position holding bachelor of engineering from UET Lahore who served Material Manager Himont Pharmaceutical (Pvt.) Ltd, and National Sales Manager in Himont Chemicals Lahore for 10 years.
Mr. Arshad Mahmood – being a successful purchaser and Marketer has sufficient understanding of quality and commitments which are integral parts of a successful business by any supplier or vendor. This is the reason that in a short span of time Pharma Link has captured a big share of Printing Market for pharmaceutical industries.
We have established a private Limited company in the name of Pharma Zone (Pvt.) Limited to further improve the existing business in a corporate and systematic manner.
Why Change to Private Limited Company?Why Change to Private Limited Company?
Pharma Link was the sole proprietorship. Many of the customers of the Pharma Link were the Sales Tax Payer. They wanted to have the transactions secure. So for this reason Pharma Zone was formed. Now with the private limited company customers can be given sales tax invoice and tax can be deducted at source.
Hailey College of Commerce 1
Pharma Zone Pvt. Ltd. Internship Report
Organizational Chart
Hailey College of Commerce
CEO
Manager Operations
Production Manager
Marketing Manager
Assistant CEO/ Director
Operations
Accounts and Finance Manager
Assistant Operations
Manger
DesignerSales Order
MakerMarketing
OfficerSales Officer
Marketing Executive
Assistant Finance Manger
Accountant
Dispatch Manger
Assistant Dispatch Manger
2
Pharma Zone Pvt. Ltd. Internship Report
Management of Organization
Following is the experienced management of Pharma Zone Pvt. Ltd.:
Board of Directors:Board of Directors:
In private Limited company minimum directors should be 2. Mr. Arshad Mehmood and his wife are the two directors of Pharma Zone.
Management:Management:
1. Arshad Mehmood, CEO:
Arshad Mehmood is executive director/Chief executive Officer (CEO) since its inception. He has got position holding bachelor of engineering from UET Lahore who served Material Manager Himont Pharmaceutical (Pvt.) Ltd, and National Sales Manager in Himont Chemicals Lahore for 10 years.
2. Fahad Khalid, Assistant CEO/Director Operations:
3. Sarfraz A. Malik, Manager Operations:
Hailey College of Commerce 3
Pharma Zone Pvt. Ltd. Internship Report
4. Faraz Ali, Assistant Operations Manager:
5. Shehzad Ahmed, Designer:
6. Badar Munir, Production Manager:
7. Rana Azhar Jamshed, Marketing Manager:
8. Huma Qureshi, Marketing Executive:
Hailey College of Commerce 4
Pharma Zone Pvt. Ltd. Internship Report
9. Waseem Ahmed Jam , Sales Officer:
10. Liaqat Ali, Marketing Officer:
11. Muhammad Imran Shafi, Manager Finance & Accounts:
12. Muhammad Qasim, Accountant:
13. Adeel Dawar, Assistant Finance Manger14. Muhammad Kashif, Dispatch Manager
Hailey College of Commerce 5
Pharma Zone Pvt. Ltd. Internship Report
Field of activities
Recently, Pharma Zone (Pvt.) Limited is formally leading source of Printed and Plain Aluminum foil for blister, Strip, Poly Coated Paper & Alu Alu Foil.
Alu Alu Foil Plain Aluminum
Exhibit 1
It Prints Aluminum foil for more than 150 pharmaceutical Companies all over Pakistan and it always use best quality imported material for printing.
o It employees over 40 qualified manpower
o It prides itself on maintaining internal standards and quality
Pharma Zone secures product leadership by:
o Product differentiation
o Operational Competencies, and
o Customer intimacy
Hailey College of Commerce 6
Pharma Zone Pvt. Ltd. Internship Report
Printed Alu Alu Foil
Customers and Suppliers of Pharma Zone
List of quality Major Customers:List of quality Major Customers:
Servier Research and Pharmaceuticals (Pvt.) Ltd, Lahore
The Schazoo laboratories (Pvt.) Ltd, Lahore
Highnoon Laboratories (Pvt.) Ltd, Lahore
Wilshire Laboratories (Pvt.) Ltd, Lahore
Ferozsons Laboratories (Pvt.) Ltd, Noshera
Stand Pharm Pakistan (Pvt.) Ltd, Lahore
Pacific Pharmaceuticals (Pvt.) Ltd, Lahore
Askari Pharmaceuticals (Pvt.) Ltd, Lahore
Siza International (Pvt.) Ltd, Lahore
Hailey College of Commerce
Exhibit 2
7
Pharma Zone Pvt. Ltd. Internship Report
Raazee Therapeutics (Pvt.) Ltd, Lahore
Hansel Pharmaceuticals (Pvt.) Ltd, Lahore
Dyson Laboratories (Pvt.) Ltd, Lahore
Bryon Pharmaceuticals (Pvt.) Ltd, Peshawar
Paramount Pharmaceutical (Pvt.) Ltd, Islamabad
Polyfine Chem Pharmaceuticals (Pvt.) Ltd, Peshawar
Hammaz Pharmaceuticals (Pvt.) Ltd, Multan
Batala Pharmaceuticals (Pvt.) Ltd, Gujranwala
Qintat Pharmaceuticals (Pvt.) Ltd, Sargodha
Fynk Pharmaceuticals (Pvt.) Ltd, Lahore
NovaMed Pharmaceuticals (Pvt.) Ltd, Lahore
List of major suppliers:List of major suppliers:
Local:
Chemiaa Enterprises Ltd. (Packages Ltd.)
Aluminum Processing Industries, Karachi
Abbasi Chemicals (Pvt.) Ltd,
Bharay Bha Chemicals
Al-Pak Rubber Engineering
Descon Corporation (Pvt.) Ltd,
Khan Traders
Modern Packages
Asia Packages
Print n Pack
Imports:
Zibo Hengzbou Aluminum Plastic Packing Material Co Ltd. China
Jiangsu Zhongin Medical Packing Co. Ltd. China
Product Information
Hailey College of Commerce 8
Pharma Zone Pvt. Ltd. Internship Report
Product MatrixProduct Matrix
Aluminum Foil Blister
o Use in Blistering of Tablets, Capsules and Injections by Pharmaceuticals Industry
Strip Foil
o Use in making strips for tablets or capsules by different machine technology
Poly Coated Paper
o Use in making paper strips and powder sachets by pharmaceuticals and food industry.
Blister Pouches
o Use to protect blisters from heat, light and moisture
Alu Alu Foil Plain
o Use in Blister Making in Place of PVC. This is the most protection material used by pharmaceuticals
Product Range:Product Range:
According to Pharma Zone Sources the share of the company in the market is as follows:
Types of Products Share of Business in Market (%age)
Aluminum foil 60
Strip Foil 15
Poly Coated Paper 20
Hailey College of Commerce 9
Pharma Zone Pvt. Ltd. Internship Report
Pouches for Blister 5
Alu Alu Plain Foil 80/100
The aluminum foil is the most selling product of Pharma Zone with a market share of 60%. And the Alu Alu Plain foil is the least selling product of Pharma Zone with a market share of 0.8%.
Future Plans and ProjectionsCurrently, Pharma Zone has 50 gravure printing machines with the printing capacity
of 25000 kg/month. Pharma Zone has planned to import one fully computerized gravure machine in this year. Due to addition of new machine its printing capacity will be increased upto 36000 kg/month.
Pharma Zone has purchased a plot at Sheikhupura for installation of new unit for business and to relocate the current facility in larger premises to meet future demands.
Construction of building has been started and hopes to complete this building and the work will start there by the end of year 2010.
The current number of customers of Pharma Zone is over 150 and management is confident to add 50 more companies every year.
Mission & Vision Statement
Mission & Vision Statement of Pharma Zone is the same and is given as below:
To be the leading private company of printing foils in Pakistan
Delivering quality printing foils
Through innovative technology
In a modern and progressive organization
High ethical and professional standards,
With providing enhance value to all our staff and workers,
And contributing to society
Hailey College of Commerce 10
Pharma Zone Pvt. Ltd. Internship Report
Offices and Factory of Pharma Zone
Currently there is one head office and one factory of Pharma Zone, but it is in future plans that one factory should be in Shaikhupura. Currently the address of the office and factory is:
Pharma Zone (Pvt.) Ltd.102-D, PCSIR Staff ColonyCollege Road,Lahore
Phone: 0423-5110647E-mail: [email protected]
Hailey College of Commerce 11
Pharma Zone Pvt. Ltd. Internship Report
Major Functions performed by accounting department
Pharma Zone currently maintains its books of accounts according to single entry system. The accounting department has number of functions to do in the whole year but here are major functions of accounting department.
The following are given three cycles and processes. Each and every document is explained. It is also explained that which document goes into what department? In which department is prepared? How many copies are prepared?
First Cycle gives the details of Sales Cycle. Second describes when the customers of the Pharma Zone make payment what documents are prepared. Third one describes how payment is made to the Supplier and other party via different sources e.g. through cheques, or cash.
In the boxes these documents are explained little bit.
Sales Cycle
Here are some steps which tells exactly what’s the sale procedure of Pharma ZonePvt. Ltd.
Sales Cycle consists of following steps:
Step I: Collection of Purchase Order
Step II: Preparation of Sales Order
Step III: Preparation of Printing job card
Step IV: Preparation of delivery Challan
Step V: Preparation of sales tax invoice
Step VI: Preparation of Journal Vouchers (JV)
Step VII: Posting to Ledgers
Step VIII: Preparation of Journal
Step IX: Tax Return Filing
Here is the detail of each step.
Hailey College of Commerce 12
Pharma Zone Pvt. Ltd. Internship Report
Step I: Collection of Purchase OrderStep I: Collection of Purchase Order::
Sales cycle of any company starts with the collection of the purchase order from its customer. In the Pharma Zone purchase order is collected by head of the operations department. The original copy of purchase order is received by Pharma Zone. Mostly the head of the operations receives the purchase order. At times the chief executive officer (CEO) receives the purchase order from the company.
Purchase Order:
Purchase order or PO is the first communication of the customer to purchase a specified amount of goods at specified prices. There are different formats of purchase orders. One of the samples of purchase order is given in Appendix I.
Following is the brief description of purchase order:
It mentions the company name, address, phone and fax of the customer.
It mentions the company name, address, phone and fax of the vendor.
It describes the shipping location where the goods are to be ultimately brought.
It specifies the item/items which are to be purchased by the customer.
Their quantity, preferably in the case of Pharma Industry, their weight, is mentioned.
The price of the items is mentioned.
The total purchase amount is calculated.
If there is any sales tax or other duty such as in Pakistan there is 1% special excise duty is mentioned and the final total is calculated.
And finally there is signature of the manager operations of the customer and preferably stamp of the company.
Box 1
Step II: Preparation of SalesStep II: Preparation of Sales Order Order::
After receiving the purchase order, Sales order is created in the operations department. Sales order is prepared from purchase order but the prices may change and fluctuate from what the customer has sent in the purchase order. Box 2 gives a brief
Hailey College of Commerce 13
Pharma Zone Pvt. Ltd. Internship Report
description of Sales order. At the end of this report, the Sample of Sales order of Pharma Zone is also given.
Sales Order
Following are given brief contents of sales order:
It specifies the purchase order number from which it is made.
It has its own number which is Sales order number.
It tells the job name, order quantity, material, size and other specifications of the order.
It includes date of the sales order
Required date of the order is mentioned.
In the Pharma zone all aluminum foils are sent to the customer wrapping around a cylinder. So in the Pharma Zone Sales order Cylinder information is also given.
Blank spaces of different signatures are included.
Box 2
There are made three copies of Sales order one is kept in the files for future evidence. One is given to the production department for the manufacturing. And one is sent to the Accounting department.
Step III: Preparation of Printing job cardStep III: Preparation of Printing job card::
Printing job card is firstly prepared in the manufacturing department and it is moved in different departments. Job card is prepared actually to do that particular job. When job is done it is finished. Box 3 explains Printing Job Card.
Hailey College of Commerce 14
Pharma Zone Pvt. Ltd. Internship Report
Printing Job CardPrinting job card includes the following descriptions.
1. It includes machine name onto which the job is to be done.
2. It specifies the operator name
3. It includes, Sales Order Number, Purchase Order Number, Job card number and Date at which the sales order is received by the production department
For the Pharma Zone Pvt. Limited the job card has four sections and it travels into 4 different departments.
Production department portion includes
oCustomer Name
oType of material
oNumber of Colors, order quantity, etc.
Raw Material Store department portion includes
oGross weight issued
oSource of Material etc.
Quality Control Department portion includes
oQuality check during production
oQuality check after final production
Store Department includes
oWeight received
oWastage of material
Box 3
Step IV: Preparation of delivery Challan:Step IV: Preparation of delivery Challan:
Job card is moved in different department and when the total foils are printed and the job is done goods are sent to the dispatch department. Along with job card a copy of purchase order and a sample of foil are received by the dispatch department. The dispatch manager prepares the delivery challan (DC) from the following documents. Actually delivery challan is a document issued on the delivery of these goods to the customer. The original copy of DC is sent to the customer with the sales tax invoice. Another copy is sent to the accounting department with the purchase order and a specimen of the goods. In box 4 delivery challan specifications are given.
Hailey College of Commerce 15
Pharma Zone Pvt. Ltd. Internship Report
Delivery Challan (DC)
Delivery Challan includes
Purchaser name, address, sales tax registration number, purchase order number invoice number etc.
Its delivery challan number
It contains the description of the goods, their quantity, size etc.
The purchase price is not included in the delivery challan.
Box 4
Step V: Preparation of sales tax invoiceStep V: Preparation of sales tax invoice::
When one copy of DC, PO and a specimen of goods is received by the accounting department, it prepares sales tax invoice from these documents. There are made three copies of sales tax invoice in the accounting department. The original copy of sales tax invoice is sent to the customer via courier. One copy is kept in files. One copy is used for the preparation of journal vouchers and attached with it.
In box 5 Sales Tax invoice specifications are given. And in the annexed documents to the report Sales tax invoice of Pharma zone is given.
Hailey College of Commerce 16
Pharma Zone Pvt. Ltd. Internship Report
Sales tax invoice:
Sales tax invoice includes:
Invoice number
Date of invoice created
Sales tax registration number
National Tax Number
Purchase order Number
DC Number
Purchaser name, address and the sales tax registration number
The quantity of goods their prices their total prices
Sales tax of the goods
Any type of other duties
Box 5
Step VI: Preparation of JournalStep VI: Preparation of Journal Vouchers Vouchers (JV): (JV):
From the Sales tax invoice the vouchers are prepared. Because these sales are credit sales vouchers prepared are journal vouchers. Journal voucher of pharma zone is attached at the end of the internship report.
Step VII: Posting to Ledgers:Step VII: Posting to Ledgers:
The entries into journal vouchers are posted into debtors’ ledger. Pharma Zone adopts single entry system of book-keeping. In the single entry system
Single-entry bookkeeping system also known as Single-entry accounting system is a method of bookkeeping relying on a one sided accounting entry to maintain financial information.i
In this system, for example, in the posting of vouchers in ledger only debtors’ account is debited. Hence it considers only one aspect not the other aspect which is sales.
i http://en.wikipedia.org/wiki/Single-entry_bookkeeping_system
Hailey College of Commerce 17
Pharma Zone Pvt. Ltd. Internship Report
Step VIII: Preparation of JournalStep VIII: Preparation of Journal::
From the ledger, Pharma Zone accounts & finance department enters those amounts in computerized Accounting software named “AIMS”. Journal is prepared automatically in the Pharma Zone by this software.
Step IX: Tax ReturnStep IX: Tax Return Filing: Filing:
Every 15 of a month all the sales tax payable in the vouchers are filed to the FBR.
When a customer makes payment
After sales the customer makes payment by cheques. Cheque comes into accounting department and its Bank receipt voucher (BRV) is prepared.
BRV is posted into the ledger of that customer and that account is credited recognizing that his liability has been reduced.
From those debtors’ ledgers the input is given into AIMS and journal is obtained.
When Payment is made to the supplier
When any payment is made to the supplier via cheque, the cheque is issued in the name of the company. It comes into accounting department.
Then the Bank Payment voucher (BPV) is prepared. BPV is posted into ledger of that supplier and then ledger is entered into computerized accounting system to get journal and other financial statements.
Hailey College of Commerce 18
Pharma Zone Pvt. Ltd. Internship Report
My Learning
I have a good opportunity to having the internship of 2 months from the Pharma Zone pvt. Limited. All these 2 months were full of events. At start I have little bit work to do but when I got stuck with my job I gained much experience in my these two months.
Cheque online transfer and receipt of cheques:Cheque online transfer and receipt of cheques:
At my very first day at the internship I went with marketing Officer, Mr. Liaqat, to deposit some money and transfer online the cheques. Initially I have little bit problem over understanding of the online transfer but Marketing Officer gave me good support to understand this. We went to the Bank al-Habib Peco Road Branch Lahore. There we got slip of cheque online transfer to the payee account. We entered its information such as account number, name of account holder, name of online transferor etc. Then we got the token from the token counter. I still remember the token number I received was 232, I waited for my turn. When my token number was announced I went to the counter number 3, transferred the amount. I waited for at-least 20 minutes for the confirmation of online transfer. So after this we went to HBL Peco Road Branch and did almost the same thing.
Posting into debtors’ ledger:Posting into debtors’ ledger:
I have been given the task by Mr. Qasim the accountant to post the entries from journal vouchers to Debtors’ ledger. He gave a little bit help initially.
If there was debit in journal voucher I debited the amount of that customer account in ledger. If there was the credit in the journal vouchers I credited the amount of that customer account in the ledger book. I did some wrong in posting initially. There were mistakes in adding or subtracting initially. But these errors were rectified by the passing of time.
I have also posted Bank receipt voucher into the debtors’ ledger. Customer account is credited while posting into the ledger.
Hailey College of Commerce 19
Pharma Zone Pvt. Ltd. Internship Report
Checking the entries posted into ledger:Checking the entries posted into ledger:
I also checked the entries posted into ledger by tallying it from the vouchers (e.g. bank receipt voucher). This was easy task I had to check the amount entered, into specific customer account.
If these were correct I have to sign on the voucher below which ledger entries are referenced.
Checking of journal vouchers:Checking of journal vouchers:
I also checked journal vouchers. Actually journal vouchers are attached to the copy of invoice, Purchase order and Delivery Challan. I had to check from all these documents that all the amounts entered into journal vouchers are correct and there is no mistake.
Typical journal voucher entry for the sales was:
Debtor’s AccountTo SalesTo Sales Tax PayableTo Special Excise Duty
Sales, Sales Tax Payable, Special Excise Duty Accounts are tallied from Sales Tax invoice. These 3 accounts are totaled to get that particular debtor’s account.
After the checking of journal voucher I signed at the bottom of document.
Miscellaneous:Miscellaneous:
If there was no work to do sometimes I was called to do other than routine work. That’s sometimes I was said that “Get the USB net device from the operations department”.
Sometimes I have to copy the documents from the photocopy machines given by my superiors.
Hailey College of Commerce 20
Pharma Zone Pvt. Ltd. Internship Report
Pharma Zone Financial Statements:
Here are given two financial statements of Pharma Zone Pvt. Limited. One is balance sheet and other is income statement.
Balance Sheet:Balance Sheet:
PHARMA ZONE (PVT.) LIMITED Balance Sheet
AS AT JUNE 30, 2008
2008 2007
Capital and Liabilities
Share Capital and reserves
Authorized Share Capital: 2,500,00
0 2,500,00
0 25000/-ordinary Shares of 100/- eachIssued, Subscribed and Paid up Capital:
2,000/- Ordinary Shares of 100/- each fully paid up in cash 200,00
0 200,00
0
Accumulated Profit 1,627,03
9 627,24
4 1,827,03
9 827,24
4
Share Deposit Money 6,900,00
0 6,900,00
0
Current Liabilities
Director's Loan 2,928,93
9 2,574,72
2
Creditors 504,58
1 2,120,64
3
Accrued and other Liabilities 77,797 128,29
8
12,238,356
12,550,907
Property and Assets
Operating Fixed Assets 3,568,52 3,775,00
Hailey College of Commerce 21
Pharma Zone Pvt. Ltd. Internship Report
9 0
Deferred Cost 241,84
1 241,84
1
Current Assets:
Trade Debts 3,269,57
1 613,88
7
Stock in Trade 3,500,53
5 6,099,22
9
Advances, deposits, prepayments and other receivables 1,154,64
2 1,605,86
1
Cash and Bank Balances 503,23
8 215,08
9 8,427,98
6 8,534,06
6
12,238,356
12,550,907
Income Statement:Income Statement:The Pharma Zone Income statement is given below:
PHARMA ZONE (PVT.) LIMITED Income Statement
FOR THE YEAR ENDED JUNE 30, 2008
2008 2007Amount Amount
(Rupees) (Rupees) Sales 10442040 7292261
Less: Cost of Sales 8718676 5949751
Gross Profit/ (Loss) 1723364 1342510
Administrative, Selling and General Expenses 723570 683869Financial Charges 5064
Operating Profit 999794 663705
Provision for taxation -- 36461
Net Loss before Taxation 999794 627244
Accumulated profit - Transferred to Balance Sheet 1627038 627244
Hailey College of Commerce 22
Pharma Zone Pvt. Ltd. Internship Report
Ratio analysis
Categories of Financial Ratios:Categories of Financial Ratios:
Financial ratios are divided into five basic categories:
1. Liquidity Ratios
2. Activity Ratios
3. Debt Ratios
4. Profitability Ratios
5. Market Ratios
Liquidity Ratios:Liquidity Ratios:
A firm’s ability to satisfy its short-term obligations as they come due is called liquidity. Liquidity ratios measure the power of the firm to satisfy its short-term obligations.
The two basic sources of liquidity are:
1. Current Ratio
2. Quick Ratio
Current Ratio:
The current ratio is a measure of liquidity calculated by dividing the firm’s current assets by its current liabilities.ii
It is calculated by:
Although the current ratio depends on what type of industry the firm exists, but normally high current ratio is preferred.
ii Page 54, Principals of Managerial Finance, 10th edition
Hailey College of Commerce 23
Pharma Zone Pvt. Ltd. Internship Report
Quick (Acid-Test) Ratio:
It is similar to current ratio except that inventory is excluded from current assets. The higher the ratio is preferred.
It is calculated by
Activity Ratios:Activity Ratios:Following are the activity ratios:
1. Inventory Turnover
2. Average Collection Period
3. Average Payment Period
4. Total Asset Turnover
Activity ratios measure the speed with which various accounts are converted into sales or cash – inflows or outflows.iii
Inventory Turnover:
Inventory turnover measures the activity, or liquidity, of a firm’s inventory.iv
Average Collection Period:
The average collection period, or average age of accounts receivable, is useful in evaluating credit and collection policies.v
iii Page 55, Principals of Managerial Finance, 10th edition
iv Page 55, Principals of Managerial Finance, 10th edition
v Page 56, Principals of Managerial Finance, 10th edition
Hailey College of Commerce 24
Pharma Zone Pvt. Ltd. Internship Report
Average Payment Period:
The average payment period, or average age of accounts payable, is the average amount of time needed to pay accounts payable.vi
Total Asset Turnover:
It indicates the efficiency with which the firm uses its assets to generate sales.vii
Debt Ratios:Debt Ratios:
Following are three debt ratios:
1. Debt Ratio
2. Times Interest Earned Ratio
3. Fixed Payment Coverage Ratio
Debt Ratio:
It measures the proportion of total assets financed by the firm’s creditors.viii
Hailey College of Commerce 25
Pharma Zone Pvt. Ltd. Internship Report
Times Interest Earned Ratio:
Times interest earned ratio or interest coverage ratio measures the firm’s ability to make contractual interest payments.ix
Profitability Ratios:Profitability Ratios:
Following are the profitability ratios:
1. Gross Profit Margin
2. Operating Profit Margin
3. Net Profit Margin
4. Earning per Share
5. Return on Assets
6. Return on equity
Gross Profit Margin:
It measures the percentage of each sales dollar remaining after the firm has paid for its goods.x
Operating Profit Margin:
It measures the percentage of each sales dollar remaining after all costs and expenses other than interest, taxes, and preferred stock dividends are deducted: the “pure profits” earned on each sales dollar.xi
Hailey College of Commerce 26
Pharma Zone Pvt. Ltd. Internship Report
Net Profit Margin:
It measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes and preferred stock dividends, have been deducted.xii
Earning per Share:
The firm’s earnings per share (EPS) is generally of interest to present or prospective stockholders and management.xiii
Return on Assets:
It measures the overall effectiveness of management is generating profits with its available assets, also called the return on investment (ROI).
Return on equity:
It measures the return earned on the common stockholders’ investment in the firm.xiv
Market Ratios:
Following are the two market ratios:
Hailey College of Commerce 27
Pharma Zone Pvt. Ltd. Internship Report
1. Price/ earnings (P/E) Ratio:
2. Market/Book (M/B) Ratio:
Price/ earnings (P/E) Ratio:
It measures the amount that investors are willing to pay for each dollar of a firm’s earnings; the higher the P/E ratio, the greater is investor confidence.xv
Market/Book (M/B) Ratio:
It provides an assessment of how investors view the firm’s performance. Firms expected to earn higher returns relative to their risk typically sell at higher M/B multiples.xvi
Advantages of Ratio Analysis:Advantages of Ratio Analysis: Helpful in analysis of Financial Statements.
Helpful in comparative study.
Helpful in locating the weak spots of the business.
Helpful in forecasting.
Estimate about the trend of the business.
Hailey College of Commerce 28
Pharma Zone Pvt. Ltd. Internship Report
Ratios of Pharma Zone Pvt. Limited 2007-08
I have given the ratio analysis for the Pharma Zone for two years. These financial statements are audited by the Arman & Company.
Ratios Pharma Zone Pvt. Limited (2007)
Liquidity Ratios
Ratio Formula Calculation Valu
e
Current Ratio =
Current Assets =
Rs 8,534,066 =
1.77 Current Liabilities Rs 4,823,663
Quick (Acid-Test) Ratio =
Current Assets - Inventory =
Rs 2,434,767 =
0.50 Current Liabilities Rs 4,823,663
Activity Ratios
Inventory Turnover =
Cost of Goods Sold =
Rs 5,949,751 =
0.98 Inventory Rs 6,099,229
Average Collection Period =
Accounts Receivable =
Rs 613,887 =
30.31 Average Sales Per Day Rs 20,256
Average Payment Period =
Accounts Payable =
Rs 2,120,643 =
74.37 Average Purchases Per Day Rs 28,515
Total Asset Turnover =
Sales =
Rs 7,292,261 =
0.58 Total Assets Rs 12,550,907
Hailey College of Commerce 29
Pharma Zone Pvt. Ltd. Internship Report
Debt Ratios
Debt Ratio =
Total Liabilities =
Rs 11,723,663 =
0.93 Total Assets Rs 12,550,907
Profitability Ratios
Gross Profit Margin =
Gross Profits =
Rs 1,342,510 =
0.18 Sales Rs 7,292,261
Operating Profit Margin =
Operating Profits =
Rs 663,705 =
0.09 Sales Rs 7,292,261
Net Profit Margin =
Net Profits =
Rs 627,244 =
0.09 Sales Rs 7,292,261
Return On Assets =
Net Profits =
Rs 627,244 =
0.05 Total Assets Rs 12,550,907
Return On Equity =
Net Profits =
Rs 627,244 =
0.76 Common Stock Equity Rs 827,244
Hailey College of Commerce 30
Pharma Zone Pvt. Ltd. Internship Report
Ratios Pharma Zone Pvt. Limited (2008)
Liquidity Ratios
Ratio Formula Calculation Value
Current Ratio =
Current Assets =
Rs 8,427,986 =
2.40 Current Liabilities Rs 3,511,317
Quick (Acid-Test) Ratio =
Current Assets - Inventory
= Rs 4,927,451
= 1.4
0 Current Liabilities Rs 3,511,317
Activity Ratios
Inventory Turnover =
Cost of Goods Sold =
Rs 8,718,676 =
2.49 Inventory Rs 3,500,535
Average Collection Period =
Accounts Receivable =
Rs 3,269,571 =
112.72 Average Sales Per Day Rs 29,006
Average Payment Period =
Accounts Payable =
Rs 504,581 =
39.10 Average Purchases Per
Day Rs 12,905
Total Asset Turnover =
Sales =
Rs 10,442,040 =
0.85 Total Assets Rs 12,238,356
Debt Ratios
Debt Ratio =
Total Liabilities =
Rs 10,411,317 =
0.85 Total Assets Rs 12,238,356
Hailey College of Commerce 31
Pharma Zone Pvt. Ltd. Internship Report
Profitability Ratios
Gross Profit Margin =
Gross Profits =
Rs 1,723,364 =
0.17 Sales Rs 10,442,040
Operating Profit Margin =
Operating Profits =
Rs 999,795 =
0.10 Sales Rs 10,442,040
Net Profit Margin =
Net Profits =
Rs 1,627,039 =
0.16 Sales Rs 10,442,040
Return On Assets =
Net Profits =
Rs 1,627,039 =
0.13 Total Assets Rs 12,238,356
Return On Equity =
Net Profits =
Rs 1,627,039 =
0.89 Common Stock Equity Rs 1,827,039
Hailey College of Commerce 32
Pharma Zone Pvt. Ltd. Internship Report
Important Notes & Assumption
1. One year is considered to be comprised of 360 days.
2. Trade debts are accounts receivables.
3. Share deposit money is considered to be long term liability.
4. Creditors/ Accounts payables are excluded from notes to the financial statements.
Limitations:
1. Inflation can affect Ratios.
2. Only one ratio is not enough to give the company whole image.
3. Times interest earned ratio is not given because there is no interest.
4. Market ratios are unavailable.
Hailey College of Commerce 33
Pharma Zone Pvt. Ltd. Internship Report
Ratio analysis 2007-2008
Liquidity Ratios:Liquidity Ratios:
Hailey College of Commerce 34
Pharma Zone Pvt. Ltd. Internship Report
Liquidity Ratios Analysis
Current RatioCurrent Ratio::
Normally the higher the current ratio is preferred. According to some observations if it is above two for a company, it is well enough depending on its nature of the business.
Current ratio of Pharma Zone was good in 2007, it increased in 2008. So totally it looks satisfactory for Pharma Zone to have the current ratio around that value.
Quick (Acid-Test) Ratio:Quick (Acid-Test) Ratio:
As we know that quick (Acid-Test) Ratio is actually the current ratio figure without inventory in current assets.
The quick ratio of Pharma Zone looks satisfactory in 2008. But in other years it looks poor because it is below 1.
Hailey College of Commerce 35
Pharma Zone Pvt. Ltd. Internship Report
Activity Ratios:Activity Ratios:
Hailey College of Commerce 36
Pharma Zone Pvt. Ltd. Internship Report
Hailey College of Commerce 37
Pharma Zone Pvt. Ltd. Internship Report
Activity Ratios Analysis
InventoryInventory Turnover Turnover::
Inventory turnover was not good in 2007, but in 2008 it was 2.49 and got better.
Average Collection PeriodAverage Collection Period::
Average collection period is very good in 2007 and it was 30.31 days. It got hammered in 2008 because it was around 112 days.
Average Payment PeriodAverage Payment Period::
Average payment period becomes good from 74.37 days to 39.10 days from 2007 to 2008.
Total Asset TurnoverTotal Asset Turnover::
Total asset turnover got better from 2007 to 2008. Although it is getting better from year to year, but it is actually very low for the Pharma Zone. Just it is around 1.
Hailey College of Commerce 38
Pharma Zone Pvt. Ltd. Internship Report
Debt RatiosDebt Ratios
Hailey College of Commerce 39
Pharma Zone Pvt. Ltd. Internship Report
Debt ratios Analysis
Debt RatioDebt Ratio
The lower the debt ratio is preferred by the new investors.
Debt Ratio has been Okay in 2007 and 2008. It is around 0.9 in all the years
Other debt ratios cannot be prepared because Pharma Zone have not shown any interest and fixed charges in their financial statements.
Hailey College of Commerce 40
Pharma Zone Pvt. Ltd. Internship Report
Profitability RatiosProfitability Ratios
Hailey College of Commerce 41
Pharma Zone Pvt. Ltd. Internship Report
Profitability Ratios Analysis
All the profitability ratios are good in all the years and are expected to remain good in all the years. But the ratio is a little percentage of Sales.
Gross Profit MarginGross Profit Margin::
Gross Profit margin is good in all the years and is expected to be good in all the years.
Operating Profit MarginOperating Profit Margin::
Operating Profits Margin is around 0.10. It was good and remain almost constant in 2007-08 and is expected to show the same behavior in next overs.
Net Profit MarginNet Profit Margin::
Net Profit margin was good in 2008 but is expected to drop a bit from 0.16 to 0.08 from 2007 to 2008.
Return On Assets:Return On Assets:
Return on Assets became good from 0.50 to 0.10 from 2007 to 2008. So assets are not giving proper return.
Return On Equity:Return On Equity:
Return on equity of Pharma Zone is good in the year 2007 and 2008.
Hailey College of Commerce 42
Pharma Zone Pvt. Ltd. Internship Report
Summary of All Ratios
Following is given complete summary of all ratios from 2007-2008 of Pharma Zone Pvt. Limited in a tabular format.
Time Series Ratio Analysis Pharma Zone Pvt. Limited (2007-2008)
Actual EvaluationRatio 2007 2008 2007-11
Liquidity Ratios Current Ratio 1.77 2.40 OK Quick (Acid-Test) Ratio 0.50 1.40 Poor
Activity Ratios Inventory Turnover 0.98 2.49 Ok Average Collection Period 30.31 112.72 Very Bad Average Payment Period 74.37 39.10 Good Total Asset Turnover 0.58 0.85 Poor
Debt Ratios Debt Ratio 0.93 0.85 Ok
Profitability Ratios Gross Profit Margin 0.18 0.17 Ok Operating Profit Margin 0.09 0.10 Good Net Profit Margin 0.09 0.16 Ok Return On Assets 0.05 0.13 Poor Return On Equity 0.76 0.89 Good
Pharma Zone looks good in most of the ratios. But some ratios are not good rather these are poor like the Average collection period is much worse. Its profits are low but this happens in industry in which Pharma Zone lies.
Hailey College of Commerce 43
Pharma Zone Pvt. Ltd. Internship Report
Ratio Analysis Conclusion
Most of the Pharma Zone ratios are good. But Pharma Zone has much to look for the average collection period. Pharma Zone has really to look on it because it is the heart and soul of any business to survive in the marketplace.
Hailey College of Commerce 44
Pharma Zone Pvt. Ltd. Internship Report
Horizontal and vertical Analysis
Vertical AnalysisVertical Analysis::Vertical Analysis reports each amount on a financial statement as a percentage of
another item.xvii
Horizontal AnalysisHorizontal Analysis::
Horizontal analysis looks at amounts on the financial statements over the past years.xviii
Vertical Analysis
Common-size Income Statement:Common-size Income Statement:
An income statement in which each item is expressed as a percentage of sales is called Common-size Income Statement:xix
The Common Size income Statement of Pharma Zone is given over the five years.
Common-Size Income Statement
2007 2008 Sales 100.00% 100.00% Less: Cost of Sales 81.59% 83.50% Gross Profit/ (Loss) 18.41% 16.50% Administrative, Selling and General Expenses 9.38% 6.93%Financial Charges 0.07% Operating Profit 8.96% 9.57%
xvii September 7, 2007, article What is the difference between vertical and horizontal analysis? Available on site http://blog.accountingcoach.com/vertical-analysis-horizontal-analysis/
xviii September 7, 2007, article What is the difference between vertical and horizontal analysis? Available on site http://blog.accountingcoach.com/vertical-analysis-horizontal-analysis/
xix Page 61, Principals of Managerial Finance, 10th edition
Hailey College of Commerce 45
Pharma Zone Pvt. Ltd. Internship Report
Provision for taxation 0.50% Net Loss before Taxation 8.46% 9.57% Accmulated profit - Transffered to Balance Sheet 8.46% 9.57%
Supporting Calculation:Supporting Calculation:
Here is given the supporting calculation of above common-size Income Statement:
Sales
=
Sales x
100
=
7292261
x
100
=
100.00%
Sales729226
1
Cost of Sales
=
Cost of Sales x
100
=
5949751
x
100
=
81.59%
Sales729226
1
Gross Profit/ (Loss)
=
Gross Profits x
100
=
1342510
x
100
=
18.41%
Sales729226
1
Administrative, selling and general expenses
=
Administrative, Selling and general expenses
x
100
=
683869 x
100
=
9.38%
Sales729226
1
Financial Charges =
Financial charges x
100
=
5064 x
100
=0.07%
Sales729226
1
Operating Profits =
Operating Profits x
100
=
663705 x
100
=9.10%
Sales729226
1
Provision for taxation =
Provision for taxation x
100 =
36461 x
100 =
0.50%Sales 729226
Hailey College of Commerce 46
Pharma Zone Pvt. Ltd. Internship Report
1
Net Loss Before taxation
=
Net Loss before taxation x
100
=
627244 x
100
=8.60%
Sales729226
1
Hailey College of Commerce 47
Pharma Zone Pvt. Ltd. Internship Report
Graphical Representation of Common-size Income Statement
Hailey College of Commerce 48
Pharma Zone Pvt. Ltd. Internship Report
Common-Size Balance Sheet:Here the base year is taken to be 2007:
Common-Size Balance Sheet December 31st, 2008
Capital and Liabilities
Share Capital and reservesAuthorized Share Capital:25000/-ordinary Shares of 100/- each 20.43%Issued, Subscribed and Paid up Capital:2,000/- Ordinary Shares of 100/- each fully paid up in cash 1.63%
Accumulated Profit 13.29%
Share Deposit Money 56.38%
Current Liabilities 28.69%
Director's Loan 23.93%Creditors, accrued and other liabilities 4.76%
100.00%
Property and Assets
Operating Fixed Assets 29.16%
Deferred Cost 1.98%
Current Assets: 68.87%
Trade Debts 26.72%Stock in Trade 28.60%Advances, deposits, prepayments and other receivables 9.43%Cash and Bank Balances 4.11%
100.00%
In the Common-size Balance Sheet total assets are taken as 100% of that year and the percentage of each amount is calculated as compared to that percentage of total assets.
Hailey College of Commerce 49
Pharma Zone Pvt. Ltd. Internship Report
Pharma Zone Cash and Bank Balances position looks bad, it is just 4.11%. Pharma Zone liabilities are much more specially directors’ loan which is about 28% of total assets.
Supporting Calculation:Supporting Calculation:
Authorized Share Capital:
=
Authorized Share Capital: =
Rs 2,500,000 =
20.43%Total Assets Rs 12,238,356
Issued, Subscribed and Paid up Capital:
=
Issued, Subscribed and Paid up Capital:
=
Rs 200,000 =
1.63%Total Assets Rs 12,238,356
Accumulated Profit =
Accumulated Profit =
Rs 1,627,039 =
13.29%Total Assets Rs 12,238,356
Share Deposit Money
=
Share Deposit Money =
Rs 6,900,000 =
56.38%Total Assets Rs 12,238,356
Current Liabilities =
Current Liabilities =
Rs 504,581 =
4.12%Total Assets Rs 12,238,356
Director's Loan =
Director's Loan =
Rs 2,928,939 =
23.93%Total Assets Rs 12,238,356
Creditors, accrued and other liabilities
=
Creditors, accrued and other liabilities
=
Rs 582,378 =
4.76%Total Assets Rs 12,238,356
Hailey College of Commerce 50
Pharma Zone Pvt. Ltd. Internship Report
Operating Fixed Assets
=
Operating Fixed Assets =
Rs 3,568,529 =
29.16%Total Assets Rs 12,238,356
Deferred Cost =
Deferred Cost =
Rs 241,841 =
1.98%Total Assets Rs 12,238,356
Current Assets: =
Current Assets: =
Rs 8,427,986 =
68.87%Total Assets Rs 12,238,356
Trade Debts =
Trade Debts =
Rs 3,269,571 =
26.72%Total Assets Rs 12,238,356
Stock in Trade =
Stock in Trade =
Rs 3,500,535 =
28.60%Total Assets Rs 12,238,356
Advances, deposits, and other
receivables
=
Advances, deposits, and other receivables
=
Rs 1,154,642 =
9.43%Total Assets Rs 12,238,356
Cash and Bank Balances
=
Cash and Bank Balances =
Rs 503,238 =
4.11%Total Assets Rs 12,238,356
Hailey College of Commerce 51
Pharma Zone Pvt. Ltd. Internship Report
Horizontal Analysis
In this Horizontal Analysis the base year is considered as 2007. All the amounts of 2008 are divided by 2007 amounts and the percentage is given here
Horizontal Analysis of Balance Sheet
Horizontal Analysis of Balance sheet
Capital and Liabilities
Share Capital and reservesAuthorized Share Capital:25000/-ordinary Shares of 100/- each 0.00%Issued, Subscribed and Paid up Capital:2,000/- Ordinary Shares of 100/- each fully paid up in cash 0.00%
Accumulated Profit 159.39%
Share Deposit Money 0.00%
Current Liabilities 13.76%
Director's Loan -39.36%Creditors, accrued and other liabilities 25.90%
-2.49%
Property and Assets
Operating Fixed Assets -5.47%
Deffered Cost 0.00%
Current Assets: -1.24%
Trade Debts 432.60%Stock in Trade -42.61%Advances, deposits, prepayments and other receivables -28.10%Cash and Bank Balances 133.97%
-2.49%
Hailey College of Commerce 52
Pharma Zone Pvt. Ltd. Internship Report
As we can see that accumulated profits are approximately 259% of the year 2007. That’s discussed in the income statement below. Although total assets are decreased in the year 2008 but there is good change in liquidity of the Pharma Zone in the year 2008.
As we can see in the ratio analysis Average Collection period is very very large, this is the behavior depicted in the trade debts, just look at the percentage of trade debts, it is 532.60%.
Supporting Calculations:Supporting Calculations:
Authorized Share
Capital: =
Authorized Share Capital (2008) - Authorized Share Capital (2007)
x
100 = 2,500,00
0 - 2,500,00
0 = 0.00%Authorized Share Capital (2007) 2500000
Issued, Subscribed and Paid up
Capital:
=
Issued Capital (2008) - Issued Capital (2007)
x
100 =
200,000 -
200,000
= 0.00%
Issued Capital (2007) 200000
Accumulated Profit
=Accumulated Profits (2008) - Accumulated Profits (2007)
x
100 = 1,627,03
9 - 627,24
4 =159.39
%Accumulated Profits (2007) 627244
Share Deposit Money
=Share Deposit Money (2008) - Share
Deposit Money (2007) x
100 = 6,900,00
0 - 6,900,00
0 = 0.00%Share Deposit Money (2007) 6900000
Director's Loan
=Director's Loan (2008) - Director's Loan
(2007) x
100 = 2,928,93
9 - 2,574,72
2 = 13.76%Director's Loan (2007) 2574722
Creditors, accrued and
other liabilities
=
Creditors and other liabilities (2008) - Creditors and other liabilities (2007)
x
100 = 77,797 -
128,298
= -39.36%
Creditors and other liabilities (2007) 128298
Operating Fixed Assets
= Operating Fixed Assets (2008) - Operating Fixed Assets (2007)
x
100 = 3,568,529
- 3,775,000
= -5.47%
Hailey College of Commerce 53
Pharma Zone Pvt. Ltd. Internship Report
Operating Fixed Assets (2007) 3775000
Deffered Cost
=Deffered Cost (2008)- Deffered Cost
(2007) x
100 = 241,84
1 - 241,84
1 = 0.00%Deffered Cost (2007) 241841
Current Assets:
=Current Assets (2008) - Current Assets
(2007) x
100 = 8,427,98
6 - 8,534,06
6 = -1.24%Current Assets (2007) 8534066
Trade Debts = Trade debts (2008) -Trade debts (2007) x
100 = 3,269,57
1 - 613,88
7 =432.60
%Trade debts (2007) 613887
Stock in Trade
=Stock in Trade(2008) - Stock in
Trade(2007) x
100 = 3,500,53
5 - 6,099,22
9 = -42.61%Stock in Trade(2007) 6099229
Advances, deposits,
prepayments and other
receivables
=
Advance deposits and receivables (2008) - Advance deposits and
receivables (2007) x
100 = 1,154,64
2 - 1,605,86
1 = -28.10%Advance deposits and receivables
(2007) 1605861
Cash and Bank
Balances =
Cash and Bank Balance (2008) - Cash and Bank Balance (2007)
x
100 = 503,23
8 - 215,08
9 =133.97
%Cash and Bank Balance (2007) 215089
Total Assets =Total Assets (2008) - Total Assets
(2007) x
100 = 12,238,35
6 - 12,550,90
7 = -2.49%Total Assets (2007) 12550907
Horizontal Analysis of Income Statement
Hailey College of Commerce 54
Pharma Zone Pvt. Ltd. Internship Report
Horizontal Analysis of Income Statement
For the year ended december 2008
2008 Sales 43.19% Less: Cost of Sales 46.54% Gross Profit/ (Loss) 28.37% Administrative, Selling and General Expenses 5.81%Financial Charges -100.00% Operating Profit 50.64% Provision for taxation -100.00% Net Loss before Taxation 59.39% Accmulated profit - Transffered to Balance Sheet 59.39%
As we can see the Income statement looks very healthy as far as the base year 2007 is concerned. Sales are of 143.19% of 2007. This is a very healthy change for the Pharma Zone. It earned the net profit of 15.91% that’s very good for Pharma Zone pvt. Limited.
Supporting Calculation:Supporting Calculation:
Sales =Sales (2008) - Sales (2007)
x 100 =
10442040 - 7292261=
43.19%Sales (2007) 7292261
Cost of Sales =Cost of Sales (2008) - Cost of
Sales (2007) x
100 = 8718676 - 5949751 =46.54%Cost of Sales (2007) 5949751
Gross Profit/ (Loss) =Gross Profits(2008) - Gross
Profits (2007) x
100 = 1723364 - 1342510 =28.37%Sales 1342510
Administrative, selling and general
expenses =
Administrative expenses(2008) - Administrative expenses(2007)
x 100 = 723570 - 683869 =
5.81%Administrative expenses(2007) 683869
Hailey College of Commerce 55
Pharma Zone Pvt. Ltd. Internship Report
Financial Charges =Financial charges (2008) - Financial charges (2007)
x 100 = 0 - 5064 =
-100.00%Financial charges (2007) 5064
Operating Profits =Operating Profits (2008) - Operating Profits (2007)
x 100 = 999794 - 663705 =
50.64%Operating Profits (2007) 663705
Provision for taxation
=Provision for taxation (2008) - Provision for taxation (2007)
x 100 = 0 - 36461 =
-100.00%Provision for taxation (2007) 36461
Net Loss Before taxation
=Net Loss before taxation (2008) - Net Loss before taxation (2007)
x 100 = 999794 - 627244 =
59.39%Net Loss before taxation (2007) 627244
Accumulated Profits
=Accumulated Profits (2008) - Accumulated Profits (2007)
x 100 = 1627038 - 627244 =
159.39%Accumulated Profits (2007) 627244
Hailey College of Commerce 56
Pharma Zone Pvt. Ltd. Internship Report
Recommendations
Almost any small business can use advice on how to improve its collection cycle. The first line of defense against late payments is a complete invoice. Bills should be accurate, detailed and easy to understand. If difficult to understand, then client will need to call for additional information. This increases the time of company collection cycle.
Include on each invoice:
Company's contact information: name, address, tax id number, phone and contact person
The date the invoice was prepared
The customer's name and address
A description of the goods or services sold to the customer
The amount due, with sales tax amount broken out
Once prepared, send invoices promptly. The longer a company takes to bill a customer the less likely it is to receive payment for the goods and services provided.
If the steps are reduced in the cash conversion process Average Collection Period can be reduced.
If the Pharma Zone makes the agent to the third party it can reduce its average collection period. For example it may hire the services of the bank or any other professional party.
The average accounts receivable collection period is an important indicator for determining when customers business will pay for the goods and services it provides.xx
xx http://www.content4reprint.com/accounting/bookkeeping/small-business-advice-improve-your-accounts-receivable-collection-cycle-now.htm
Hailey College of Commerce 57
Pharma Zone Pvt. Ltd. Internship Report
Conclusion
Pharma Zone, the leading company in the printing of foil, is situated in PCSIR Colony, College Road Lahore.
Pharma zone currently manufactures following products:
Aluminum Foil Blister
Strip Foil
Poly Coated Paper
Blister Pouches
Alu Alu Foil Plain
Company keeps its quality at the peak of the business.
There are high levels of professionals in all departments of Pharma Zone and it is continuously keeping an eye over their growth.
Accounting system adopted by Pharma zone is single entry system. Pharma Zone adopted this system because it is an easy approach towards accounting.
There is a proper channel of communication between the departments of the Pharma Zone. There is a proper organizational chart issued by the organization.
Ratios of Pharma Zone are good except average collection period which is very poor for Pharma Zone.
Overall Pharma Zone is in the good business with low profitability now a day. It is worth mentioned here that in the recent arena where Pakistan is in severe situation such as load shutting, there are different companies which are trying to survive in this situation Pharma Zone has done well and installed well generators of electricity to work effectively in the time of crises.
Hailey College of Commerce 58
Pharma Zone Pvt. Ltd. Internship Report
Index
A
Accounts Payable, 31Accounts Receivable, 31Activity ratios, 23, 24AIMS, 18Alu Alu Foil, iii, 6, 7, 9, 58Arshad Mahmood, 1Average Collection Period, 24, 31, 38, 43, 57Average Payment Period, 24, 25, 31, 38, 43
B
Bank Payment voucher, 18Bank receipt voucher, 18, 19
C
CEO, 3, 13Common Stock Equity, 32Cost of Goods Sold, 31Current Assets, 31Current Liabilities, 31Current Ratio, 23, 31, 35, 43
D
Debt Ratio, 25, 31, 40, 43Debt ratios, 23, 40delivery Challan, 12
E
Earning per Share, 26, 27
F
Fixed Payment Coverage Ratio, 25
G
Gross Profit Margin, 26, 32, 42, 43Gross Profits, 32
H
Horizontal Analysis, 46, 52, 55
I
Inventory, 24, 31, 38, 43Inventory Turnover, 24, 31, 38, 43
J
Journal, 12, 17, 18Journal Vouchers, 12, 17
L
Liquidity ratios, 23
M
Market Ratios, 23, 27Market/Book (M/B) Ratio, 28Mission & Vision Statement, 10
N
Net Profit Margin, 26, 27, 32, 42, 43Net Profits, 32
O
Operating Profit Margin, 26, 32, 42, 43Operating Profits, 32, 42
P
Pharma Zone, ii, iii, 1, 3, 6, 7, 9, 10, 11, 12, 13, 14, 15, 17, 18, 19, 29, 31, 35, 38, 40, 43, 44, 45, 57, 58
Price/ earnings (P/E) Ratio, 28Printing job card, 12, 14, 15Profitability ratios, 23Purchase Order, 12, 13, 15
Q
Quick Ratio, 23
R
Return on Assets, 26, 27, 42Return on equity, 26, 27
Hailey College of Commerce 59
Pharma Zone Pvt. Ltd. Internship Report
S
Sales, 1, 3, 5, 12, 13, 14, 15, 16, 17, 20, 31, 32, 42Sales Order, 12, 13, 14, 15sales tax invoice, 1, 12, 15, 16Sheikhupura, 10single entry system, iii, 12, 17, 58Special Excise Duty, 20
T
Tax Return, 12, 18Times Interest Earned Ratio, 25Total Asset Turnover, 24, 25, 31, 38, 43
V
Vertical Analysis, 46
Hailey College of Commerce 60
Pharma Zone Pvt. Ltd. Internship Report
Hailey College of Commerce 61
Pharma Zone Pvt. Ltd. Internship Report
References
vi Page 56, Principals of Managerial Finance, 10th edition
vii Page 57, Principals of Managerial Finance, 10th edition
viii Page 57, Principals of Managerial Finance, 10th edition
ix Page 60, Principals of Managerial Finance, 10th edition
x Page 62, Principals of Managerial Finance, 10th edition
xi Page 63, Principals of Managerial Finance, 10th edition
xii Page 64, Principals of Managerial Finance, 10th edition
xiii Page 65, Principals of Managerial Finance, 10th edition
xiv Page 65, Principals of Managerial Finance, 10th edition
xv Page 66, Principals of Managerial Finance, 10th edition
xvi Page 66, Principals of Managerial Finance, 10th edition
Hailey College of Commerce 62