Anda di halaman 1dari 36

INTRODUCTION

Pak Electron was set up in 1956 as a Public Limited Company with the object of
initially producing transformers, switchgears and electric motors. The designing
and production of the equipment was carried out jointly by ABC experts and PEL
personnel. After the conclusion of Joint Venture Agreement with ABC the
majority of share holding was acquired by Saigol Group in October 1978.
Immediately on take over the new management chalked out both long term and
short term plans to put the company on the path of progress. As apart of long term
plan, Appliances Division was introduced and initially the production of window
type air conditioners was taken up and was well received in the market for its
quality. The company floated its shares to the general public and was listed on
Karachi and Lahore stock exchanges in 1989. Subsequently the production of
refrigerators and deep freezers was started and lately in 1993 the Company has
started the assembly of Compressors for refrigerators and deep freezers under
technical collaboration with Messrs NECCHI COMPRESSOR Italy. The
Company also established a subsidiary, PEL Appliances Limited for the
manufacture of these appliances in Gadoon Amazai Industrial Estate.

In the Power Division the products include transformers up to 33KV-5MVA


capacity, switchgears up to 33KV,shunt capacitor bank and auto recliners, relays
and control panels. The company has also started the production with the
technical collaboration of Hitachi Corporation, Japan for the production of
Vacuum Circuit Breakers for its switchgear. During the year 1994 the
commissioning of energy meter plant with the technical assistance of ABBUSA
has also been completed and the plant is in production at the moment.

The Company set up a subsidiary “PEL DAEWOO Electronics Limited” at


Hattar, District Haripur, NWFP, and a Joint Venture with Daewoo Electronics
Company, Korea for the manufacture of color television sets.

1
OBJECTIVE OF STUDYING THE ORGANIZATION

The objective of study the organization is to gain practical knowledge about


finance and to learn financial operations of an organization and increase financial
exposure, further following objectives are as under

• To Learn how financing circulates from purchase of raw material to sale of


end product.
• Computerized accounting system of finance department
• Procedure of payment and collection of fund
• To learn about inventory management system
• Loans and leasing operation
• Management for assets
• Debt and equity financing
• Accounting of subsidiary and parent companies
• Application of theoretical in a practical environment

2
OVERVIEW OF THE ORGANIZATION

History
The Company (PEL DAEWOO Electronics Limited), a Subsidiary of Pak
Electron Limited, was incorporated on 18th April 1994 as a Public Company and
commenced commercial production from 01 June 1995. The principal activity of
the Company is assembling and manufacturing of all sorts of television sets and
components thereof under a joint venture agreement dated 21 December 1993
between Pak Electron Limited - Pakistan and Daewoo Electronics Company
Limited - Republic of Korea.

The PEL Daewoo product was well received in the market and during the first full
year 1996 of its operation we have sold more than 16,000 units. In the year 1996,
imposition of Excise Duty @ 5%, regulatory duty @ 10%, and withdrawal of
Sales Tax exemption on components, and increase in customs duties on import of
components and increase in sales tax from 15% to 18% made the TV industry
unviable. In 1998, Color television manufacturing of PEL Daewoo Electronics
Limited was a victim of smuggling and adverse fiscal pronouncements. This year
the company approached by some multinational manufacturers of color television
sets that already have significant market share in our country.

Agreement for conversion of Sony Television at PEL Daewoo Electronics Ltd.


was finally concluded and production was started in the month of May 1999. The
Company had assembled televisions for Sony Pakistan (Pvt.) Limited (Sony)
under an agreement entered into between the Company and Sony during the
financial year ended 30th June 1999. As per terms of the agreement, Sony
supplied television kits to the Company and the Company delivered converted
televisions to Sony. Sony marketed these televisions through its own network.
The Company had charged U.S. $ denominated conversion price for the

3
televisions assembled by it. The agreement with Sony expired on 26th May 2002
and had not been renewed afterwards.

The Company entered into an agreement with Shahnawaz Traders, Importers


and Exporters, Industrial Area, Jamrud Road, Peshawar (SNT) on November 01,
2001. As per salient terms of this agreement, SNT was responsible for the
complete process of financing the import of Shahnawaz Brand CKD kits till the
delivery of imported CKD kits in assembled form. The job of complete
assembling and quality control of color television sets was the sole responsibility
of the Company. The Company, after assembling, is responsible to deliver the
finished goods within its factory to SNT; SNT then shift these television sets to its
marketing sites. SNT was responsible to pay sales tax and other levies as required
by law. On delivery and acceptance of each lot, the Company raised invoices.
SNT makes payment on invoice-to-invoice basis prior to lifting of finished goods.
The Company was entitled to charge fixed conversion charges for assembling of
color television sets.

The Company, during the financial year 2002-03, entered into an Assembly
Agreement with AVIA International, a registered partnership concern at Karachi
(AVIA). As per the salient terms of this agreement, AVIA is responsible to import
the Kits in its own name and to bear all import duties, Federal, Provincial and
Municipal taxes, other levies / charges and all sales taxes. In consideration for the
assembly of television sets, the Company is entitled to receive per television set
conversion charges. Sales tax, as per law, on the conversion charges charged are
claimed by the Company from AVIA and are reflected in invoices. AVIA may
claim this sales tax as Input Tax under the provisions of the Sales Tax Act, 1990.
The duration of agreement with AVIA is five years; however, the duration may be
extended or reduced by the prior written consent of the parties.

The Company, during the financial year 2003-04, entered into an Assembly
Agreement with Bless Electronics (Pvt.) Limited, a registered company at

4
Gujranwala (Bless). As per the salient terms of this agreement, Bless is
responsible to import the Kits in its own name and to bear all import duties,
Federal, Provincial and Municipal taxes, other levies / charges and all sales taxes.
In consideration for the assembly of television sets, the Company is entitled to
receive per television set conversion charges. Sales tax, as per law, on the
conversion charges charged are claimed by the Company from Bless and are
reflected in invoices. Bless may claim this sales tax as Input Tax under the
provisions of the Sales Tax Act, 1990. The duration of agreement with Bless is
five years; however, the duration may be extended or reduced by the prior written
consent of the parties.

Nature of the Organization


The company started operations during 1995 and manufactured its own brand
color television ‘PEL VISION’ from 1995 to 1999 in different screen sizes
ranging from 14” to 21”. From 1998, the company entered into agreements with
other companies for the assembly of color televisions in different screen sizes
from 14” to 29”: Now company is working as assembler for different brands
under different agreements.

Business Volume
The business volume of the said organization can be viewed as per the turnover of
the products of the company. In the start of the subsidiary the results from the
sales were so positive and no one was expecting such a down fall in the business
of this subsidiary. The business volume of the organization shown on the basis of
different indicators taken from the balance sheet and income statement of the
company is as under, Figures are shown in thousands.

Basis 2000 2001 2002 2003 2004


Issued, Subscribed &
70,000 70,000 70,000 70,000 70,000
paid up capital
Total Asset 70,934 64,408 78,645 54,035 48,996

5
Sales/Revenue-Net 32,435 41,508 30,714 14,197 1,038
Number of employees

There are following details of employees who are working in different


departments.

DEPARTMENTS NOS OF
EMPLOYEES

ENGINEERING 64

HR/ADMIN 22

MARKETING (EXPORT) 08

MARKETING (LOCAL) 28

FINANCE 12

MAIN STORE 14

PROCUREMENT 06

GENERAL SALE 19

QUALITY ASSURANCE 25

PRODUCTION 07
PLANNING & CONTROLLING
205
TOTAL

Product Line
• ‘SONY’ brand color televisions sets for M/S Sony Pakistan (Pvt.) Limited.
• ‘SHAHBAZ’ brand color television sets for M/S Shahnawaz Traders.
• ‘KONKA’ brand color television sets for M/S AVIA International.
• ‘BELVIN’ brand color television sets for M/S Bless Electronics (Pvt.) Limited

6
The main business of PEL DAEWOO ELECTRONICS is the production of above
mentioned range of color televisions for the local market as well as for export purposes
under certain agreements.
ORGANIZATIONAL STRUCTURE:

Main offices

Head Office 06 - Edgerton Road, Lahore

Works 81/1, Phase IV, Industrial Estate


Hattar, Haripur - N.W.F.P.
Phone: 0995-617401-05
Fax: 0995-617400
E-mail: peldaewoo@isb.paknet.com.pk

7
ORGANIZATIONAL CHART
(PEL DAEWOO Electronics Limited)

8
Comments on Organizational structure:

Policy guidelines and overall control is vested in the elected Board of Directors which

includes representatives of shareholders as well as of creditors, as provided for in the

Companies Ordinance 1984. Presently, PEL Board comprises 7 members, which are

mostly from the saigal family and it represents a family owned business. The family

members perform the key operations.

The Managing Director/Chief Executive has been delegated with such powers and

authorities as are necessary to effectively conduct the business of the organization. The

relationship between the management and the workers remained cordial and the company

was able to successfully meet the targets set. There is functional organizational structure

in operations and the decision is much slow due to this. There is a need to change this

structure because now the era is changing briskly and this structure is not supporting the

changes.

This organization is having a operational hierarchy and the decision making process is

too slow than the other organizations, because the major decisions are vested in the hands

of directors and the higher management working in the parent organization. The

operational management performs its duties in subsidiary and the top management makes

crucial decision from the head office, which cause delay in decisions and the deficiency

in management operations. Here in this office they have four main departments and every

department have its head in the operational area but they have certain boundaries. They

9
need to get permission from the project manager beyond the boundaries of their

decisions. Which is a drawback and a cause of inefficiency.

STRUCTURE OF FINANCE DEPARTMENT


Number of employees working in finance department

NOS OF
DESIGNATION
EMPLOYEES

FINACE MANAGER 01

CHIEF ACCOUNTANT 01

ACCOUNTANT 01

I/C STORES 01

I/C EDP 01

ASSISTANT ACCOUNTANT 01

CASHIER 01

COMMERCIAL ASISTANT 01

STORE ASSISTANT 01

DISPATCH CLERK 01

02

10
STORE HELPERS

PEL DAEWOO Electronics Limited


ORGANIZATION CHART – FINANCE & ACCOUNTS
DEPARTMENT

11
Finance and Accounts Operations:
In all mixed and capitalists societies the basic aim of business is to earn profit. Such is
also case with PEL DAEWOO Electronics Ltd. In order to calculate the order most of
the companies need to establish their separate accounts and finance departments but due
to a small setup they the same department working under the control of finance manager.
The major functions of finance and accounts department are to control and generate
finance whenever required.

All the accounting activities are routine and assigned to the staff so that the tasks are
performed in a simple systematic way, with as free from errors.
The accrual basis double entry system used. Assistant accountant and cashier with
supporting documents prepare vouchers. The vouchers are verified by the accountant and
then chief accountant approves the vouchers with amount up to Rs.50,000.00. The
approval of vouchers with amount more then Rs.50,000.00 are approved by the finance
manager.

When capital purchases are made, capital proposal form is submitted to the finance
manager by the respective department head. The purchases made after approval. The
cashier maintains the cash and bank record. He prepares the payment and receipt
vouchers. He makes disbursement after getting approval from the authorities. He
maintains physical cash Cheque Books are also in his custody. The finance department
has a separate EDP section for MIS Reporting and computerization accounting.
In the head office Finance department performs different operations related to purchase
and sale of products. To explain these functions it is better to divide operations into
different sections: these sections are as follows.

Cash Office

12
This department operates its function in coordination with bank. This section maintained
daily cash transactions and maintained cash flows accordingly. Cashbook is maintained
on daily basis. This department handles cash payment and cash receipt.

Payables

This section is responsible for timely payments of their payables. It performs its
operations in coordination with purchase department and have direct relations with the
suppliers of the raw material and other overhead suppliers. Payable section pays the bills
to the supplier after verifying the quantities and amount of the invoices with the purchase
orders, which are issued by purchase department to the supplier.

Receivables

This section is considered as the backbone of any organization. If it performs its


operation efficiently then no company will face working capital problems. In Pak
Elektron this section is very week and in efficient, so that it is facing such problems. It
operates in coordination with sale department and maintained the regular cash in flows
for the company operations. This section recovers outstanding receivables from debtors
against sales orders, which are issued by sale department.

Costing

This section operates its functions in coordination with store department and prepares the
monthly cost of production report accordingly, in which they integrate total costing of
production department vise gradually. Pak Elektron is using product base costing method,
as it is has vide product lines.

Store

Store department operates its function in coordination with finance department,


production department and purchase department. This department issue acceptance report
after physical inspection of material from quality control/production department. After
that they issue issuance reports of material, which is issued to production department

13
accordingly. This department also maintains maximum levels, minimum levels, economic
order quantities and safety stock levels. Store department issues stock requisitions to the
purchase department according to the requirement of production department.

Banking

Finance manager of the company handles all banking transactions. Pak Elektron Ltd has
its bank accounts with united bank and allied bank. Payable section and receivable
section is directly linked with finance manager regarding their operations.

Record

In this section all daily transactions are recorded in their accounts. Pak Elektron is using
single entry accounting system. All items are being recorded as per their natural balances,
and separate accounts are prepared. This section is also responsible for the timely
balancing of Trial Balances and provision of annual statements. After the completion of
the statements the finance manager and other higher officials make other financial
decisions.

MOBILIZATION OF FUNDS:

PEL DEAWOO is working as the subsidiary of PEL Electronics, so the major financial
decisions were taken by the holding company. Finance manager is authorized to take the
operational decision and the higher authorities in the parent company make all future
plans. Mobilization of funds is not so obvious in the statement of the PEL DEAWOO
limited.

GENERATION OF FUNDS:

Due to the heavy losses from the start of the business the company is unable to generate
the funds internally. There was no proper provision for reserves and taxations up to 2003
because tax exemption was available up to May 2003 as the project was set up in Hattar
Industrial Estate. The basic source of internal generation of funds was the provision for
depreciation.

14
SOURCES OF FUNDS:

Company is using both sources as equity source and debts financing. PEL DEAWOO has
not increased its issued capital since its beginning. From the history it is cleared that
company is operating at loss even more than its equity. In 2004 the accumulated loss is
five times of the equity. Presently company is at its liquidation stage.

In the debts sources of the company there is long term financing, lease financing and
deferred liabilities for gratuity, but in the last year company’s credit standing is weaker
than ever. So, the company is operating through current sources like, short term financing
creditors and provisions.

The sources of funds can easily be understands from equities and liabilities portion of
balance sheet.

ALLOCATION OF FUNDS:

As it is cleared from the asset side of balance sheet that PEL DAEWOO is allocating
most its funds on operating fixed assets. Investment on operating fixed asset is about 80%
of the total. Its current assets specially inventory and cash & bank is as low as the
company is facing operating capital problems. Another characteristic of the company
regarding its allocation is that company has high trade debts and advances and
prepayments, which cause the low efficiency of turnover.

USE OF ELECTRONIC DATA IN DECISION MAKING:

PEL DAEWOO is working as subsidiary of PEL Electronic Ltd and all the major
decision making is in the hands of parent company. No modern decision making
techniques are used in the subsidiary so the process of decision is very slow and it harms
the efficiency of the company.

15
CRITICAL ANALYSIS OF THEORATICAL AND PRACTICAL CONCEPTS

As for as critical analysis of theoretical concepts are concerned relating to practical

experience in this organization during my internship I have got much knowledge,

which is very useful in my practical life.

As for as the critical analysis is concerned, there is a huge difference between

theoretical concepts and practical working. For example, in accounting we record the

double aspects of any entry or a business transaction in the journal and then transfer

into the ledgers and other accounting books. But in-practical experience companies

record the transaction in prescribed books.

The theoretical concept of finance department is that the finance personnel use

different financial theories in their decision making and think scientifically, but

in the routine working of finance department there is pet format of each activity

which every one has to follow. Each and every employee of the finance department is

not engaged in financial activities rather in recording as accountant. It is obvious

from the finance department chart that the only difference between the finance and

the accounts is on the higher level.

16
FINANCIAL ANALYSIS

Vertical Analysis of Balance Sheet

17
Analysis

1. The Accumulated Loss of the company is continuously


increased, as company was unable to earn profit in any year from date of
its commencement.
2. Due to continuous increase in the Accumulated Loss, the
shareholders equity is continuously decreased. It also indicates that the
investment was made only at the time of commencement and no further
investment was made by the shareholders in form of equity.
3. Daewoo Electronics did not support the company financially
while the PEL, the main holding company is continuously financing the
company in for its operations. The amount financed by the holding
company – PEL is shown under the current liabilities.
4. Initially the company enjoyed a short term credit limit by the
banks (MCB and ACBL) for importing the raw materials for assembly of
its own brand colour television sets. As the operations of company were
reduced in the years 1997 to 1999, so the company was unable to pay off
the short term loans. The said banks scheduled the short term loan into
long term loan in the year 2000. The long term loans were repeatedly
rescheduled by the banks. The holding company is paying off the loan to
ACBL and negotiating with MCB to adjust the loan from the dividend to
be paid to the directors of the company from other associated companies
in any future year.
5. The plant & machinery installed in the company was
financed by three leasing companies (Atlas Leasing Co., Pacific Leasing
Co. & Lease Pak Ltd.). The leasing companies also repeatedly
rescheduled their loans. Installments were paid to the leasing companies
by the support of holding company. In the year 2002, the holding
company paid off all the pending balances of leasing companies.

18
6. The figures of Current portion of long term liabilities indicate
that the company did not paid the installments to the leasing companies
and the banks on regular basis.
7. The figures of Creditors, Accruals and other Liabilities are
continuously increasing. The major figure is the amount financed by the
holding company. As no payment is being made or expected to be made
to the holding company in the near future, so the balance in the holding
company account should be treated as long term liability.
8. The Project is set-up in Hattar Industrial Estate, District
Haripur, N.W.F.P and enjoyed tax holiday for a period of eight years from
the date of commencement of commercial production under clause 118C
of Second Schedule to the repealed Income Tax Ordinance, 1979 (the
Ordinance). Tax exemption was available upto May, 2003. As the
company did not earned any profit, so provision for taxation is not
required. Year-end tax provision represents minimum tax leviable under
section 113 of the Income Tax Ordinance, 2001.
9. The company produced its own brand colour televisions in
the years 1995 to 1998. From 1999 onward, the company is doing
business on OEM basis for various parties. So the stock in trade in the
early years represent the company’s stock and in the later years the
conversion cost assigned to the stock of third parties.
10. The company was unable to recover the amount from its
debtors of its own brand colour television sets. So the company has to
made provision for bad debts repeatedly and finally the provision for bad
debts is 8.647 million. Minor recoveries are being made. All the
conversion charges from the other parties (OEM Business) has been
recovered normally in time.

19
Vertical Analysis of Income Statement

20
Analysis

1. In the early years, the cost incurred for manufacturing of the


company’s product were higher than the gross revenues. In the year 2000,
when company started the business on OEM basis, the costs were reduced
as the company was earning conversion charges from different parties. In
the last years, the OEM operations were also low, so the costs could not be
covered resulting to the gross loss.

2. The administrative expenses are the fixed expenses, which the


company has to bear even in very low or nil operations. In the last years,
the figure seems too much high as compared to the revenues because of
low operations. The fixed administrative expenses are causing to increase
in the huge operating loss.

3. The financial charges are the markup on the short term finances, long
term finances and on the balance payable to the holding company. In the
last four years, the major amount is the markup on holding company
balances. The holding company is continuously financing the company
for its operations so it is charging heavy markup. The huge financial
charges are the major cause for heavy losses of the company.

21
Horizontal Analysis

Balance Sheet

22
Analysis

1. The Accumulated Loss of the company is continuously increased,


as company was unable to earn profit in any year from date of its
commencement.

2. Due to continuous increase in the Accumulated Loss, the


shareholders equity is continuously decreased. It also indicates that the
investment was made only at the time of commencement and no further
investment was made by the shareholders in form of equity.

3. Daewoo Electronics did not supported the company financially


while the PEL, the main holding company is continuously financing the
company in for its operations. The amount financed by the holding
company – PEL is shown under the current liabilities.

4. The long term loans were repeatedly rescheduled by the banks.


The holding company is paying off the loan to ACBL and negotiating with
MCB to adjust the loan from the dividend to be paid to the directors of the
company from other associated companies in any future year.

5. The plant & machinery installed in the company was financed by


three leasing companies (Atlas Leasing Co., Pacific Leasing Co. & Lease
Pak Ltd.). The leasing companies also repeatedly rescheduled their loans.
Installments were paid to the leasing companies by the support of holding
company. In the year 2002, the holding company paid off all the pending
balances of leasing companies.

6. The figures of Current portion of long term liabilities indicate that


the company did not paid the installments to the leasing companies and the
banks on regular basis.

23
7. The figures of Creditors, Accruals and other Liabilities are
continuously increasing. The major figure is the amount financed by the
holding company. As no payment is being made or expected to be made
to the holding company in the near future, so the balance in the holding
company account should be treated as long term liability.

8. The Project is set-up in Hattar Industrial Estate, District Haripur,


N.W.F.P and enjoyed tax holiday for a period of eight years from the date
of commencement of commercial production under clause 118C of
Second Schedule to the repealed Income Tax Ordinance, 1979 (the
Ordinance). Tax exemption was available upto May, 2003. As the
company did not earned any profit, so provision for taxation is not
required. Year-end tax provision represents minimum tax leviable under
section 113 of the Income Tax Ordinance, 2001.

9. The company produced its own brand colour televisions in the


years 1995 to 1998. From 1999 onward, the company is doing business
on OEM basis for various parties. So the stock in trade in the early years
represent the company’s stock and in the later years the conversion cost
assigned to the stock of third parties.

10. The company was unable to recover the amount from its debtors of
its own brand colour television sets. So the company has to made
provision for bad debts repeatedly and finally the provision for bad debts
is 8.647 million. Minor recoveries are being made. All the conversion
charges from the other parties (OEM Business) has been recovered
normally in time.

24
Income Statement
Horizontal Analysis

25
Analysis
1 In the early years, the cost incurred for manufacturing of the
company’s product were higher than the gross revenues. In the year
2000, when company started the business on OEM basis, the costs
were reduced as the company was earning conversion charges from
different parties. In the last years, the OEM operations were also low,
so the costs could not be covered resulting to the gross loss.

2 The administrative expenses are the fixed expenses which the


company have to bear even in very low or nil operations. In the last
years, the figure seems too much high as compared to the revenues
because of low operations. The fixed administrative expenses are
causing to increase in the huge operating loss.

3 The financial charges are the markup on the short term finances,
long term finances and on the balance payable to the holding company.
In the last four years, the major amount is the markup on holding
company balances. The holding company is continuously financing
the company for its operations so it is charging heavy markup. The
huge financial charges are the major cause for heavy losses of the
company.

26
Ratio Analysis

27
Liquidity Ratios
1. The current and acid test ratios of the company are getting lower
and lower, as the loss of company is increasing and the holding
company is financing the company for its running expenses.

2. At the end, the current and acid test ratios are almost the same as
the company is doing OEM business and it has no its own inventory.

Activity Ratios
1. In the initial years, the inventory turn over of the company was
high, as it had its own inventory but slow sales. The figures are
sluggish because the operations of the company are not continuous.

2. In the initial years, the company was unable to recover the amount
from debtors in time. The provision for bad debts was provided
number of times. When the company started OEM Business, the
debtors turn over was good. In the last year, high figure indicates the
OEM operation started in June 2004, but recoveries made in July
2004.

3. The assets turn over are low because of low operations of the
company.

Leverage Ratios
1. The debt ratio of the company is continuously increased, as the
Holding Company has to finance it for its running expenses because of
low operations of the company.

2. The accumulated loss of the company continuously increased, as


the company was unable to earn profit even in a single year, so the
debt equity ratio and total capitalization ratio are in negative.

28
Profitability Ratios:

Profitability Ratios of the PEL DAEWOO shows that company is not


in a position to operate further. It is better to close the operations rather
than bearing more losses.

1. According to the calculated ratios of last five years it is very clear


that in the start Gross Profit was in a reasonable position and the
company could perform better by curtailing the operating expenses.
But in the subsequent years the situation becomes odd for the company
and uncontrollable. The basic reason of such situation is the high cost
of production and the brisk downfall in the sales.

2. Operating expenses of the PEL DEAWOO were much high as


compare to its sales so the operating profit become negative and shows
the operating inefficiency, so the parent company PEL Electronics
takes the decision of liquidation of it subsidiary.

3. Another point of discussion is the return on Assets and the return


on Equity. From the last three years the company is facing high losses
so the return on asset shows the negative values that means the
company is not suing its assets properly and earning loss per rupee
amount invested on assets. But in the case of return on Equity the ratio
values are positive, this is not because of the profits earned by the
company. The real thing behind that is negative Equity of the
company. So the decision of liquidation is beneficial for the
shareholders or the real owners because further operations may cause
further losses and negative equity.

29
FUTURE PROSPECTS:

The future of the PEL DAEWOO is very certain and as obvious as a


common man can easily predict by seeing its financial statements of
last 3 years without performing any analysis. The PEL Electronics is
going to close operations of its subsidiary. In the near future PEL
DAEWOO will be no more.

SHORTFALLS
Following are the major short falls of PEL DAEWOO Limited.

1. PEL DAEWOO is continuously depending on the other investors


who import the television kits, get assemble from PEL DAEWOO and
sale the television sets in the market.

2. In this way, PEL DAEWOO is only earning the assembling


charges for which it has to expand more and earn too much less. The
kit suppliers are earning the actual profit, which it should earn.

3. From the last 3 years, PEL DAEWOO was in need of a capital


investment to get stability in its operations but the parent company was
not taking interest in its operations.
4. The level of current assets are not meeting the requirements of
current operations which shows insolvency position. Because of low
current assets the capacity of payment of the financial charges
becomes low and the company can not increase its funds through debts
sources.
5. As per inventory records and the ratios of the company it seems
that there is no concept of inventory management and the policies
regarding stock keeping which cause operating problems.

30
6. PEL DAEWOO is working as subsidiary of PEL Electronic Ltd
and all the major decision making is in the hands of parent company.
No modern decision making techniques are used in the subsidiary so
the process of decision is very slow and it harms the efficiency of the
company.

7. While depending on OEM business with kit suppliers, PEL


DAEWOO is also loosing its market share. PEL is well known brand
in the market of electronic and electrical appliances.

8. The Financial Charges are too much high because PEL DAEWOO
is unable to pay back the loans, and it has also pay markup on advance
from Holding Company, which is decreasing the worth of the
company badly.

9. PEL DAEWOO is not looking for expanding its sale base and not
going to contract with other distributors, so that its sales are going to
be low and low in subsequent years.

10. PEL DAEWOO is not manufacturing its television for its own
name, as it is not brand name so that the ultimate consumers don’t
have any image of PEL DAEWOO and the company is not caring
about its image in the eye of consumers.

31
RECOMMENDATIONS FOR IMPROVEMENTS:

1. It is strongly recommended that PEL, the Holding company should


take serious interest in PEL DAEWOO and support to revive the
company by providing finance for import of television kits.

2. PEL DAEWOO should manufacture television sets with its own


brand name and market its product through network of PEL. It should
import small quantities of television kits and gradually increase it.

3. The annexed comparison between the cost television sets imported


and manufactured locally by importing CKD kits indicates that it will
be in the best benefit of the Holding Company PEL to import the CKD
kits and manufacture the televisions at PEL DAEWOO instead of
importing finished television sets (CBUs).

4. PEL DAEWOO should try to capture its market share gradually.

5. The remaining shares allowed (30 (M)) should be issued to some


financer, which will also cause to solve the financial problems to
import the television kits for PEL DAEWOO.

6. The analysis indicates that the Holding Company PEL has to bear
the expenses of PEL DAEWOO without operations being performed
there, so it should finance PEL DAEWOO for import of CKD Kits and
assemble the televisions of its own brand and market it through PEL’s
marketing setup. In this way, the company itself will earn the running
expenses of PEL DAEWOO.

32
7. The projected Cash Flow for the year 2005 is annexed. It indicates
that even with the production of 14,400 sets per annum, PEL
DAEWOO can be revived easily.

8. The company was not using the computer software in its decision-
making in the initial days of the operations. Its will take time to build a
new set up for computerization in all of its departments. To cope up
the deficiencies in the operations and compete in the new emerging
environments it is necessary for the organization to have a
computerized setup in all of its departments.

33
CONCLUSION:

By the analysis and the statement of subsidiary of PEL, it is obvious


that the current financial position of the company is not so good and it
is the comment by the analysts of the market that PEL should closed
the operation of its subsidiary to get the accumulated profit.

The main causes I found during my tenure of internship is the delay in


decision making and the Government policies regarding taxes, imports
& exports of electronics items.

Except of all its financial position it can be set it is a good setup and a
cooperative staff which help me in making good practical concepts of
business environment.

34
REFERENCES & SOURCES USED

• Mr. Tahir Arshad (finance manager)


• Mr. Imran Naveed (accounts officer)
• peldaewo@isb.paknet.com.pk
• financial statements of last 5 years

35
Annexure

Condensed Balance Sheet (Last 5 years)


Condensed Income Statement (Last 5 years)

36

Anda mungkin juga menyukai