1 Introduction:

Premier Dairies was incorporated in 1999s an organization. The Head Office & Plant is situated at 2-km Defence road, Off Raiwind Road Lahore. Commercial production of dry milk powder was started in 2000. The powder was introduced in the market in bulk form and in consumer packing. In year 2004, company lunched UHT packed milk and Desi Ghee in Tins. In order to improve its processes and make the system more visible and to identify the shortcomings, Premier Dairies decided to implement the concept of TQM. As an initial step, the management opted to acquire ISO 9000 certification.

Premier Dairies is managed by a board of Directors who have vested the control of the company operations with the Chief Executive (CE). The CE is nominated as a person with overall responsibility for all matters relating to quality. CE is supported by a number functional heads of departments, including a full time Management representative, responsible for maintenance of the ISO 9001 quality management systems. Job descriptions define responsibilities, authorities and roils of all key staff members, who are encouraged to initiate action to prevent non-conformances. Staff members are authorized to identify problems related to products, the process, or quality management system,and to recommend solutions through their immediate managers or through the corrective action system. All such problems are recorded, and where necessary solutions are evolved, implemented and verified. Heads of Department are authorized to handle issues, which are within their own control. Where interdepartmental problems are concerned, ISO department is responsible for facilitating solutions using the Corrective and,preventive,Action,Procedure.

1.1 History:

Premier Dairies was incorporated in 1999s an organization. The Head Office & Plant is situated at 2-km Defence road, Off Raiwind Road Lahore. Commercial production of dry milk powder was started in 2000. The powder was introduced in the market in bulk form and in consumer packing. In year 2004, company lunched UHT packed milk and Desi Ghee in Tins. In order to improve its processes and make the system more visible and to identify the shortcomings, Premier Dairies decided to implement the concept of TQM. As an initial step, the management opted to acquire ISO 9000 certification. In 2000, it also started production of butter and ghee for its SHEREN MEHAL Outlets with brand name ANMOL. At start two types of powder were produced, SKIM Milk Powder & FULL CREAM Milk Powder. Later in 2001, Premier Dairies launched VEGETABLE FAT FILLED Milk Powder first time in Pakistan, which attracted many multinational companies. In 2004, Premier Dairies installed UHT & Tetra Pak and launched its product with brand name VANIA Milk pack size of 250ml. Premier Dairies has its distribution network in all major cities of Punjab, NWFP and Baluchistan. Since 2000 Premier Dairies is working on the aspect of life to provide pasteurized milk in a healthy way. We collect best milk from its reliable resources. After its careful and different checking processes 'PURE & FRESH' milk is extracted and produced in the form of "VANIA" milk. Premier Dairies has other many valuable products too, mentioned below. For details follow the appropriate link.

1.2 Objective Of Studying The Organization:

I was looking an organization for internship that has diversified activities so that I can get as much as I can. In this regard I found Premier Dairies (Pvt) Limited the most suitable organization for this purpose due to the following reasons: It is manufacturing as well as trading concern. It is mainly concerned with the production of Dry Milk, UHT packed Milk and Desi ghee in tins. It does business with different organization. Therefore I choose this organization in order to get rich working experience during my internship. 1.2.1 Our Mission: Build branded food business to improve quality of life by offering tasty, affordable and highly nutritional products to our consumers while maximizing stakeholders value. 1.2.2 Our Vision: Most innovative and fastest growing food company offering products enjoyed in every home every day. 1.2.3 Our Values: Enterprise Empowerment Accountability Trust Teamwork

1.3 Major Customers:

Major customers of Premier Dairies Powder Products are as follows: LU Biscuits English Biscuits Manufacturers Unilever Pakistan Walls Ice Cream Hico Ice Cream Silver Lake Foods Asian Foods (Mayfair) Pakistan Army and many Pharmaceutical companies.

1.4 Nature Of The Organization: The company is principally engaged in the manufacturing of Dry Milk UHT Packed Milk Desi Ghee

2 Main Product:
Our wide range of pure dairy products have a significant impact on the improvement of health of people. Dairy brands of Premier Dairies play a major role in the nutritional building of human body. These instant and full of taste products help you growing faster and healthier. The current main products of the company are as below: 2.1 Vania Tetra Pak Milk: Vania is UHT (Ultra Heat Tested) milk which is safely packed under six layers of solid tetra pack. You can make sure that now high level of bacterias are very far from you which can easily damage the health of young and old. Vania milk provides you the original, pure and fresh milk according to the international standards. 'Premier Dairies' arrange all these factors of pasteurizing milk being in the nature, rules and regulations, so that it is called as "Gift of Nature".

Vania milk no doubts creates a entirely different taste in drinking milk or a cup of tea. We provide quality and health depends on quality of diet. Balance diet formula is present in Vania milk. So we say it "Premier's Premier Milk Vania".

UHT stands for Ultra High Temperature pasteurization and packing. Applying this special process produces milk that will be fresh and natural for several months without refrigeration. UHT milk has extended shelf life (shelf stable) and is sometimes called long life or extended life milk also. No preservatives are added. Once the pack has been opened it must be refrigerated. UHT milk is a perfect choice for breakfast, school lunch, hiking, biking, camping, travel, food storage, emergency preparedness, and disaster response.

Tetra Pak supply an array of innovative long-life packaging and processing solutions that lock in the freshness and flavor of foods, naturally. Tetra Paks signature aseptic technology helps keep even the most sensitive foods like fresh milk safe, nutritious and naturally delicious for monthswithout the need for refrigeration or preservatives. To food producers, Tetra Pak means everything from product development support, to complete packaging and processing systems designed to work seamlessly together. And its all backed by 50 years of global expertise and service. 2.2 Pure Desi Ghee: A quality milk food supplement prepared by cooking butter ghee or cream. Pure Desi Ghee in tins is ideal for cooking and desserts making and has got a pure and natural taste.

2.3 Instant Skimmed Milk Powder (ISMP) INSTANT SKIMMED MILK Powder is real milk without fat and ideal product for health conscious people. 2.4 Milk Cream: Milk Cream prepared by Premier Dairies is extra rich and nourishing.

2.5 Other Products Of The Company: INSTANT FULL CREAM MILK POWDER (IFCMP) VEGE FAT FILLED POWDER (VFFP) BUTTER BUTTER OIL

2.6 Number Of Employees:

The number of employees of the company is 325 an average. Employees break up as per their position in Management is as follow: Sr # 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Designation Chairman Chief Executive Officer (CEO) Director Company Secretary General Manager Marketing General Manager Finance General Manager Human Resource Chief Marketing Officer Chief Finance Officer Procurement Manager Production Manager Finance Manager No of Position 1 1 2 1 1 1 1 1 1 1 1 1

See annexure A

2.7 Products Lines: Dry Milk UHT Packed Milk Desi Ghee

2.8 Organizational Structure:

Board of Directors Executive Directors Mr. Mian Amir Mr. Mian Asad Hameed Company Secretary Mr. Arshad Mahmood Chairman Chief Executive Director

2.9 Main Offices: 2.9.1 Registered Office/ Factory: The registered office and the factory of the company is situated 2 KM Defence Road off Raiwind Road Lahore.

2.9.2 Comments On The Organization Structure: The organization is well structured and planned. The jobs / task are divided, grouped and coordinated in well manner thats why the organization is achieving its goals and improving day by day. It works very systematically and has an experienced and professional team that monitors the organization activities and evaluates it with organization objectives, vision & mission in order to get it back on the track. They are following the team structure, they use of teams as the central device to coordinate work activities. It requires employees to be generalists as well as specialist. This kind of structure becomes extremely popular. Its advantages are as follow: It breaks down departmental barriers Decentralize decision making to the level of the work team Some time large organization structure activities around cross functional teams that will improve the productivity. Organization structure can have significant effects on its members. We can judge its effect by evaluating the employee performance and satisfaction. It is not necessary that everyone prefers the freedom and flexibility of organic structure. Some people are most productive and satisfied when tasks are standardized and ambiguity is minimized that is in mechanistic structure. We can judge the effectiveness of the organization structure by evaluating the performance and satisfaction of the employees. Personally I felt that everyone is satisfied and perform his / her duties very effectively and efficiently. 2.9.3 Structure of the Finance Department: Finance is the back bone of every organization therefore every tries his / her best to give them they try their level best to provide them ideal working environment in order to enhance their performance, that doesnt mean the finance department is performing poor, they believe in continuous improvement.

2.9.4 Number Of Employees Working in the Finance Department: They have ten employees in accounts and finance department. Their designation is as follow.

Sr # 1. 2. 3. 4. 5. 6. 7. 8. See annexure b

Designation General Manager Finance Chief Finance Officer Finance Manager Assistant Finance Manager Accountant Assistant Accountant Peon Driver

No of Post 1 1 1 1 1 5 2 2

2.9.5 Finance & Accounting Operations: Finance & Accounting department is headed by the General Manager Finance & Accounts and succeeding by the Chief Accountant (C.A) as per following:

Finance for the company is arranged by the General Manager Finance with the assistance of Chief Accountant and following sources are used to arrange above funds. Sale of Finished Goods Loans from bank

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2.9.6 Functions of the Finance Department:

2.9.6.1 Accounting System of the Organization: International Accounting Standards as applicable in Pakistan have been followed in preparation of financial statements.

The following functions are performed by the Accounts section. 2.9.6.2 Payroll: Electronic sheets are generated through software and salary paid to the workers and employees accordingly.

2.9.6.3 Procurement: 2.9.6.4 Requisition: Goods are procured on the bases of needs in this regard; a requisition is being processed that contains the following information: Description of the goods (Specification if any) Quantity required. Store officers signature if goods are not available in stock Last purchase date Last purchase rate

2.9.6.5 The requisition is duly signed by the authorized person. No quotation is required up to Rs. 5,000 purchase, any purchase that cross this limit will require three quotations. A comparative statement is prepared in order to evaluate the suitable firm for this purchase. Comparative statement is duly signed by the two officers, designated for this purpose. After that a purchase order will issue in favor of suitable firm. When supplier supply the goods, first of all it will enter in stock register and storekeeper signed on the back of invoice that item is entered in stock register page no Therefore the bill is processed for payment. 11

2.9.7 Inventory Management

Inventory has been updated by the Assistant and reports are generated according to the needs or according to the information required. 2.9.7.1 Recording of the transaction Day to day business transaction is entered in the software and different reports are generated. Accounts and bank accounts are reconciled electronically 2.9.7.2 Account Receivable Management Accounts receivable are maintained electronically. 2.9.7.3 Cash and cash equivalents For the purpose of cash flow statement, cash and cash equivalent consists of cash in hand, balances with banks and short term running finance facilities. 2.9.8 Financial Instruments. All the financial assets and financial liabilities are recognized at the time when the company becomes party to the contractual provisions of the instrument. Any gain or loss on de-recognition of the financial assets and financial liabilities is taken to profit and loss account currently. 2.9.8.1 Offsetting financial assets and financial liabilities A financial asset and a financial liabilities is offset and the net amount is reported in the balance sheet if the company has legally enforceable right to set off the recognized amount and intend either to settle on a net basis or to realize the asset and settle the liability simultaneously. 2.9.8.2 Dividends Dividend distribution to the shareholders is recognized as a liability in the period in which it is approved by the shareholders.

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2.9.9 Internal Control System: The system of internal control is sound in design and has been effectively implemented and is being monitored continuously. The review will continue in future for the improvement in controls.

Administrative controls focus on operations without any direct link to accounting records. Accounting controls concern with the integrity and accuracy of the accounting system and the financial reports being generated in that system. Following are the desired attributes of accounting system. Completeness Validity Authorization Accuracy

Any controls that directly influence these attributes are referred to as accounting/financial controls.

2.9.9.1 Finance System of the Organization Assets under finance lease are stated at lower of present value of minimum lease payments under the lease agreement and the fair value of assets at the inception of the lease. The aggregate amounts of obligation relating to these assets are accounted for at net present value of liabilities. Depreciation on these assets is charged in line with normal depreciation policy adopted for assets owned by the company.

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2.9.9.2 LIABILITY AGAINST ASSET SUBJECT TO FINANCE LEASE 2008 2009

Minimum Lease Payments Less: Unamortized finance charge

14153279 994017

24449204 2401048

Present value of minimum lease payments

13159262

22048156

Less: Current portion shown under current liability

11395334 1763928

11820756 10227400

Deferred Liabilities Deferred taxation 13,591,134 9,221,820

Interest And Mark Up Accured On Loans And Others Payables Short term finances 2,833,309 5,415,930

Liabilities against assets subject to finance lease

2,148,667

4,383,052

Total Short Term Finances And Advances Secured Cash Finance

4,981,976

9,798,982

12,778,685

14,817,719

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A cash finance facility has been availed from United Bank Limited (UBL) with a limit of Rupees 44 Million at 3 month KIBOR + 3% (2009: 44 Million at 3 month KIBOR + 3%) charged on quarterly basis. The purpose of such facility is to meet the working capital needs of the Company. The facility has been secured by first hypothecation charge on current assets of the company to the extent of Rupees 105 million. 2.9.9.3 Use of electronic data in decision making: Information technology plays very vital role in the development of business. Information technology provides the following advantages Support of business operation Support of managerial decision making Support of strategic competitive advantage Internet is the most imperative trend in information technology. We can receive or forward information in less time. Premier Dairies emphasis the best use of this technology in order to get the competitive benefit of this technology.

Calculation of salaries & wages Maintain accounts receivable ledger

Inventory Management. Maintenance of stock of raw materials, stores, spares and finished goods Maintenance of record of goods produced to check that how many goods produced and how much goods remaining to be produced (work in process) as per schedule of supply. Sales trend Sales forecast Net Sales Employee information Purchases information 15

 Mobilization of Funds Mobilization of funds is based on the requirement of funds; 2.9.9.4 A major portion of funds is utilized for the purchase of the raw material. Secondly the funds are utilized to meet the day to day needs of the business.

Sr # 1.

Description Purchase of raw material Tangible Assets

Amount 1288.87 9.484 1.24 .45

2. Civil Works 3. Intangible Assets 4. TOTAL 1299

Mobilization of Funds
Purchase of raw material Tangible Assets Civil Worksh Intangible Assets

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2.9.9.5 Generation of funds:

Funds generation is the difference between all the cash flows into the business and all the cash that flows out of the business in a given time period. Cash gives you the ability to stay in business. It is a companys oxygen supply. Lack of cash, decreasing cash, or consumption of cash spells trouble, even if the other elements of money makingsuch as profit margin and asset velocitylook good. Funds are generated in the following way: Sale of Finished Goods Loans from banks Mobilization advances from major customers.

All accounting operations are done by the Chief Accountant and he used computerized accounting software for decision making. Sr # Description Amount

Sales 1. Cash generated from operations 2. Sale proceeds from sale of fixed assets 3. Proceed from short term finances & advance 4. Proceeds from finance lease 5. TOTAL

1655

64.437 1.25 1.5 4.35

1726.537

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Generation of Funds

Sales

Cash generated from operations Sale proceeds from sale of fixed assets Proceed from short term finances & advance Proceeds from finance lease

2.9.9.6 Sources of funds: Sources of funds are as follow: Sale of Finished Goods Loans from banks Mobilization advances from major customers.

Sr # 1.

Description Sales Running finance under mark up arrangements

Amount 376.92 22.39 5.71 16.38 4.40 426 18

2. Finance against trust receipts 3. Advance Income tax 4. Letter of credit margin 5. TOTAL

Sales

Sources of fund
Cash finance under mark up arrangements Advance Income tax Contract securities Letter of credit margin

2.9.9.7 Allocation of funds: Funds are allocated as per requirement of the company as per following Procurement of raw material Purchase of operating fixed assets (if required for the operation) Day to day requirement of expenses

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Sr #

Description

Amount

Purchase of raw material 1. Purchase of fixed assets 2. Day to day expenses 3. TOTAL

1288.667

11.088

32.545

1332.3

Allocation of funds

Purchase of raw material Purchase of fixed assets Day to day expenses

As we know if funds are misallocated then the economy growth will be slowed. Therefore proper allocation of funds is required for growth of economy. So is the case for the development of organization if funds are misallocated then that organization will not survive in this competitive world. It is also important to ensure that individuals obtain satisfaction of their highest levels of personal wants. That is possible only if the finance manager efficiently acquiring, financing and managing assets that contribute not only for growth of organization but also for the growth of economy.

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3 Investment Decision

3.1 Investment Decision: It is most important decision that has to perform by the finance manager. It begins with the decision that how much total assets is required by the organization to hold. When we review the balance sheet of the organization then it is quiet possible for the finance manager to determine the size of organization as we know owners equity, short and long term liabilities is shown on left hand side of balance sheet that is known as liabilities and current assets and fixed assets are shown on the right hand side of balance sheet that is Assets. The size of the firm is determined by the total amount of assets side. When this total is known then too it has to be decided the composition of assets. For example how much cash is required for doing day to day needs of the organization, how much inventory is required? A finance manager does not ignore the disinvestment, the assets that are not required by the organization or that contributes nothing in the growth of organization need to be reduced, eliminated or replaced.

3.2 Financial Decision: The second major decision of the firm is the financing decision. Here the financial management is concerned with the makeup of the right hand side of the balance sheet that is liabilities. In other words resources are generated from the right hand side of the balance sheet either this finance comes from owners equity and from long or short term liabilities. Some firms have relatively large amount of debt while some firms have debt free. It is the duty of finance manager to analyze that which type of financing is good for the organization. Dividend policy is the internal matter of the organization and it affects firms financing decision. The dividend payout ratio determined the amount of earnings that can be retained in the firm. And out of that retaining the finance manager makes decision to where and how that amount invest that will prove more beneficial for the firm.

3.3 Asset Management Decision: The third important decision of the firms is the asset management decision. Once assets have been acquired and appropriate financing provided, these assets must still be managed efficiently. The financial manager is charged with varying degrees of operating 21

responsibility over existing assets. These responsibilities require that the financial manager be more concerned with the management of current assets than with that of fixed assets. A large share of the responsibility for the management of fixed assets would reside with the operating managers who employ these assets.

It is required by the efficient financial management that there is some objectives or goals that are compared to determine whether financial decision is efficient or financial decisions are made in the light of objectives and goals. It has been assumed that firms goal is to maximize the wealth of the firms present owner. As we know that the shareholders wealth is the market price of the firms common stock, that brings investment for the firms in return, financing and asset management decisions. We can judge the effectiveness of financial decisions impact by the effect of share price.

3.3.1 Profit Maximization: Maximizing a firms earnings after taxes (EAT), It is proper objective of the firm. However if the manager increase the earning of the firm and issue stock and using the remaining to invest in Treasury bills then definitely there is decrease in each owners share of profits. In other words earnings per share would fall. Earnings after taxes divided by the number of common shares outstanding is called earning per share. Maximizing earning per share is the improved version of profit maximization. But maximizing of earning per share is not appropriate goal because it does not specify the timing or duration of expected returns. Is the investment that will pay Rs. 100,000/- return five years from the date investment is valuable or Rs. 15,000/- per year is more valuable it depends on the time value of money to the firms and to investors. There is another shortcoming in this approach is risk is not considered. Some projects are more risky than others. So that if these projects are accepted then there is high level of risk involved in that particular investment. The company becomes risky; this can be judged by the ratio of debt and equity ratio. If debt is more than the equity it means owner invest less amount in the business and borrow more loan it means his level of interest is low and there is a chance that investment will become danger for the investor. If the equity is more than the debt it means owner is interested to enhance its business activities as he invests more than debt.

It is a process in which we efficiently manage working capital (current assets and their supporting financing). When we make a capital investment the attention is very clear to 22

have expected benefit in the future. These benefits are usually more than one year in the future. For example, investment in equipment, building and land, as well as introduction of new product, a new distribution system or a new program for research and development. We can say that firms future success and benefits depends on long term decisions currently made.

Investment proposal should be compared either it is capable of earning equal to or greater than the expected rate of return. Capital Budgeting means that The process of identifying, analyzing and selecting investment projects whose returns (cash flows) are expected to extend beyond one year. Capital budgeting involves:

Generating investments project proposals in relation to the firms strategic objectives. Estimating after tax incremental operating cash flows for the investment projects Evaluation project incremental cash flows Selecting those projects that are expected to pay maximum Re-evaluating implemented investment projects

3.3.2 Generating Investment Project Proposals: Projects may be classified into five categories that are as under: New products or expansion of existing products Replacement of equipment or buildings Research & Development Exploration

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4 Financial Analysis:
Financial rations are useful indicators of a firms performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios can be used to analyze trends and to compare the firms financials to those other firms. In some cases, ratio analysis can predict future bankruptcy.

Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

Liquidity ratios Asset turnover ratios Financial Leverage ratios Profitability ratios Dividend policy ratios

Liquidity Ratios: Liquidity ratios provide information about a firms ability to meet its short term financial obligations. They are of particular interest to those extending short term credit to the firm. Two frequently used liquidity ratios are the current ratio or working capital ratio and the quick ratio.

Current ratio:

Current Assets Current Liabilities

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2005 105,366,354 1.117:1 90,277,974

2006 = 148,483,421 1.28:1 116,373,678

2007 = 148,583,421 1.18:1 116,373,678

2008 = 468,404,520 1.39:1 335,664,735

2009 = 381,990,844= 1.54:1 247,501,035

Comments: it looks like that the liquidity position of the organization is good and if we examine the last five years liquidity ratio of the organization then it reveals that every year its liquidity ratio is improving gradually.

Acid Test (or Quick ) Ratio: Current Assets Inventories Current Liabilities

Current assets less inventories divided by current liabilities. It shows a firms ability to meet with current liabilities with its most liquid (quick) assets. 2005 103,371,609 1.15:1 90,277,974 2006 = 146,861,208 1.26:1 116,373,678 2007 = 146,161,208 1.16:1 116,373,678 2008 = 464,736,147= 1.38:1 335,664,735 2009 376,552,316= 1.52:1 247,501,035

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Comments: Acid Test or quick ratio indicates the sound position of the organization that represents its financial positions and performance. Over the years it is still increasing which indicates reliability of its financial as well as overall strategic planning.

Cash Ratio =

Cash + Marketable Securities Current Liabilities

2008 773,107+66,781,147 116,373,678

2009 621,172+42,905,432 90,277,974

67,554,254 116,373,678

= 0.58:1

43,526,604 90,277,974

= 0.48:1

Comments: Although it give the impression that this ratio is quite well to meet with the financial obligations of the organization. Asset Turnover ratio: Receivable turnover = Annual Credit Sales Accounts Receivable

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2008 376,919,915 41,489,308 = 9.08

2009 290,486,881 22,337,977 = 13.00

Comments: This ratio tells us the number of times accounts receivable have been turned over (turned into cash) during the year. The higher the turnover, the shorter the time between the typical sale and cash collection. This ratio specifies that during this year (2006) accounts receivable is not up to the mark that reflects poor performance. Average Collection Period = Accounts Receivable Credit sales / 365

2008 41,489,308 = 40.18 Days

2009 22,337,977 = 28.07 days

376,919,915 /365

290,486,881/365

Average collection period =

365 Receivable turnover

2008 365 9.08 = 40.18 Days

2009 365 13 = 28.07 days

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Inventory Period

Cost of goods sold

Average Inventory 2008 298,656,794 19,170,387 = 15.58 Days 2009 244,801,648 17,253,349 = 14.19 days

Comments: This ratio reflects how effectively the firm is managing inventory and also to gain an indication of the liquidity of inventory. As we know that high inventory turnover, the more efficient the inventory management of the firm and the fresher more liquid the inventory. I observe that its inventory turnover ratio is more liquid. They make it sure that enough stock is available to fill an order.

Inventory Period = 2008 19,170,387 298,656,794/365

Average Inventory Annual Cost of goods sold / 365 2009 17,253,349 244,801,648/365

19,170,387 818,238

= 23.4 Days

17,253,349 670,689 28

= 25.72 days

 Inventory period 2008 365 15.58 = 23.4 days 2009 365 14.18 = 25.72 days

Comments: Organization inventory system is working efficiently and they examine the system regularly in order to minimize the inventory problems.

Financial Leverage ratios: Debt ratio 2008 9,804,560 = 0.038 255,361,983 Total Debt Total Assets 2009 13,717,517 = 0.07 195,466,112

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Comments: To assess the extent to which the firm is using borrowed money, we may use several different debt ratios. The debt to equity ratio is computed by simply dividing the total debt of the firm (including current liabilities) by its share holders equity. This ratio tells us that creditors are providing 0.038 paisa of financing for each Rs. 1 being provided by shareholders. Creditors would generally like the ratio to be low.

Debt to equity ratio:

Total Debt Total Equity

The debt to equity is derived by dividing a firms total debt by its total assets. To assess the extent to which the firm is using borrowed money, we may use several different debt ratios. The debt to equity ratio is computed by simply dividing the total debt of the firm (including current liabilities) by its share holders equity. This ratio tells us that creditors are providing 0.54 paisa of financing for each Rs. 1 being provided by shareholders. Creditors would generally like the ratio to be low.

2008 9,804,560 = 0.14 71,630,000

2009 13,717,517 = 0.19 71,630,000

This ratio serves a similar purpose to the debt to equity ratio. It highlights the relative importance of debt financing to the firm by showing the percentage of the firms assts that are supported by debt financing. Thus 0.14 percent of the firms assets are financed with debt (various types), while the remaining 0.86 percent of the financing comes from shareholders equity.

Long term capitalization = Long term debt Total Capitalization (long term debt + equity)

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2008 9,804,560 = 0.20 81,434,560

2009 13,717,517 = 0.11 85,347,517

Comments: This ratio measures the relative importance of long term debt to the capital structure of the firm. Debt ratios tell us the relative proportions of capital contribution by creditors and by owners.

Profitability Ratios: Ratios that relate profits to sales and investment. There are two types of it. Profitability in relation to sales Profitability in relation to investment Profitability in relation to sales = Net sales cost of goods sold Net sales

2008 376,919,915-298,656,794 = 21% 376,919,915

2009 290,486,881-244,801,648 = 15.83% 290,486,881

Comments: This ratio tells us the profit of the firm relative to sales after we deduct the cost of producing the goods. It is a measure of the efficiency of the firms operations as well as an indication of how products are priced. There is relatively increase in gross profit ratio as compared to last year. This ratio indicates that firms operation is performing well day by day and products are priced well.

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Net profit after taxes Net Sales

2008 34,024,537 = 9.03% 376,919,915

2009 25,875,468 = 8.91% 290,486,881

Comments: The net profit margin is a measure of the firms profitability of sales after taking account of all expenses and income tax. It tells us a firms net income per rupees of sales. Therefore organization net profit margin is 9% of the net sales that is higher than the last year of the net profit margin. It indicates that net profit margin of the firm is improving gradually.

Profitability in relation to Investment: Net profit after taxes Total Assets

2008 34,024,537 = 13.32% 255,361,983

2009 25,875,468 = 13.24% 195,466,112

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Comments: Lower profitability per rupees of sales but a slightly higher return on investment confirms that Premier Dairies employs fewer assets to generate rupees of sales.

Return on equity = Net profit after taxes Shareholders equity

2008 34,024,537 = 48% 71,630,000

2009 25,875,468 = 36% 71,630,000

Comments: This ratio tells us the earning power on shareholders book value investment. A high return on equity often reflects the firms acceptance of strong investment opportunities and effective expense management as it is indicated in previous ratio.

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4.1 Trend Analysis:

DESCRIPTION Liquidity Ratios Current Ratio Acid Test Ratio Cash Ratio

2004

2005

2006

2007

2008

2009

0.87:1 0.85:1 0.25

0.79:1 0.94:1 0.3

0.68:1 1.01:1 0.33

1.04:1 1.04:1 0.31

1.117:1 1.15:1 0.48

1.28:1 1.26:1 0.58

Financial Leverage Debt Ratio Debt to Equity Ratio Long Term Capitalization 0.075 62.38 0.06 0.072 47.53 0.07 0.069 20.80 0.09 0.063 21.71 0.1 0.07 19.89 0.11 0.038 14.86 0.2

Assets Turnover ratio Receivable turnover ratio Average collection period Inventory Period Inventory period 6 60.83 days 1.11 days 43.56 days 7 52.14 days 5.93 days 39.08 days 13 28.08 days 6.54 days 33.04 days 8.01 45.57 days 10.68 days 30.35 days 13 28.08 days 14.19 days 25.72 days 9.08 40.18 days 15.58 days 23.4 days

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Profitability Ratios Gross Profit Ratio Net Profit Ratio Return on investment Return on equity 7% -232.069% -12.16% -12% 19% -51.96% 11.67% 8% 21.71% -26.58% 12.56% 19% 20% -6.94% 12.79% 26% 15.83% 8.91% 13.24% 36% 21% 9.03% 13.32% 48%

Comments: Trend analysis of the organization indicates the following: Current ratio of the organization is improving year after year that indicates the organization ability to meet with the organization financial obligations

Similarly, acid test ratio also reflects organization soundness in order to meet with its financial obligations.

This ratio (Cash ratio ) indicates that more than 50% of the firm obligation can be meet with cash marketable securities which is a clear indication of firm is ability to meet with its financial obligations.

Debt ratio of the organization shows that its total debt in relation to total assets is very few; it specifies that firm trust on self fund more.

This ratio indicates that organization relies on self generated fund more. This ratio again designates the same position as in the above ratio that firm relies on its equity than debt.

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This ratio shows (receivable turnover ratio) that particularly in 2006 the performance of this portion of the organization operation is not performed well they need to pay more attention on it in order to improve it.

Gross profit margin ratio increased than last year it is the sign that they are performing continuously well.

Net profit margin is not too good but it is at the highest position as compared to last five years. I think there is more room of improvement.

Return on investment is good but there are more opportunities of improvement. In coming years it would definitely be better. Return on investment is very good and in future it would be better.

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4.2 Horizontal Analysis: The process of dividing each expense item of a given year by the same expense item in the base year. It allows assessment of changes in the relative importance of expense item over time and the behavior of expense items as sales change. Description Cost of Sales Raw materials Salaries & wages Stores, spares and loose tools Power and fuel charges Repair and maintenance Other expenses Depreciation Opening work in process Closing work in process Opening Finished Goods Closing Finished Goods Cost of goods sold Distribution Cost Salaries Freight & Octroi Traveling & Conveyance Packing material Advertisement and sale promotion After sales service 27.90% 37.56% 34.94% 29.75% 198.79% 473.40% 308,580 20.61% 48.05% 8.40% 37.22% 101.48% 28.64% 29.75% 5.50% 72.22% 16.51% -30.07% 51.15% 22.00% Increase in Expenses Increase in Sales

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Description Depreciation Total Distribution Cost Administrative Expenses Salaries Electricity, gas and water charges Communication expenses Vehicle running expenses Legal & Professional Expenses Traveling & Conveyance Fee and subscription Insurance Rent, rates and taxes Printing & stationary Entertainment Office supplies Misc. Exp Depreciation Total Administrative Expenses

Increase in Expenses -0.42% 76.68%

Increase in Sales

78.45% 124.12% 63.34% -40.57% 194.53% 1139.41% 37.70% 51.97% 3.30% 9.84% 110.70% -11.19% 64.87% 4.45% 27.88% 29.75%

Other Operating Expenses Auditor's Remuneration 16.44% 29.75%

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Description Worker's profit participation fund Worker's Welfare fund Total Operating Expenses

Increase in Expenses 76.23% 12491.08% 113.13%

Increase in Sales

Comments: There is an increase of 29.75% in sales as compared with last year sales and there is increase of 20.61% in cost of material, 101.48% in repair & maintenance, 48.05% in salaries & wages which look likes more and seems that worker are less efficient over all cost of goods sold increased only 22% which increase4 the gross profit ratio.

Total distribution cost in the current year is 76.68% more than last year whereas increase in sales is 29.75% which looks more. Specifically advertising 473% and packing material 198.79% more than last year. These two component needs to be addressed and management should find out the reasons to defend these expenditures.

But actually we have to examine the vertical analysis in order to reach on final conclusion. No doubt it looks like that increase in different expenses are more than the increase in sales. There is need of the results of vertical analysis in order to reach on conclusion.

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4.3 Vertical Analysis: Dividing each expense item in the income statement of a given year by net sales to identify expense items that rise more quickly or more slowly than a change in sales.

Description Cost of Sales Raw materials Salaries & wages Stores, spares and loose tools Power and fuel charges Repair and maintenance Other expenses Depreciation Opening work in process Closing work in process Opening Finished Goods Closing Finished Goods Cost of goods sold Distribution Cost Salaries Freight & Octroi Traveling & Conveyance Packing material Advertisement and sale promotion 40

Vertical Analysis Vertical 2008 Analysis 2009

60.93% 6.42% 1.76% 3.98% 2.51% 0.44% 1.91% 2.72% 3.17% 2.48% 3.75% 79.24%

65.56% 5.63% 2.11% 3.77% 1.62% 0.44% 2.35% 2.05% 3.52% 4.60% 3.22% 84.27%

0.36% 0.62% 0.12% 0.18% 0.37%

0.37% 0.59% 0.12% 0.08% 0.08%

Description After sales service Depreciation Total Distribution Cost Administrative Expenses Salaries Electricity, gas and water charges Communication expenses Vehicle running expenses Legal & Professional Expenses Traveling & Conveyance Fee and subscription Insurance Rent, rates and taxes Printing & stationary Entertainment Office supplies Research Expenses Misc. Exp Depreciation Total Administrative Expenses Other Operating Expenses Auditor's Remuneration

Vertical Analysis Vertical 2008 Analysis 2009 0.08% 0.07% 1.81% 0.00% 0.09% 1.33%

1.62% 0.05% 0.26% 0.03% 0.07% 0.08% 0.09% 0.05% 0.10% 0.14% 0.06% 0.01% 0.00% 0.11% 0.23% 2.90%

1.18% 0.03% 0.21% 0.06% 0.03% 0.01% 0.08% 0.05% 0.13% 0.17% 0.04% 0.01% 0.59% 0.08% 0.28% 2.94%

0.08%

0.09%

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Description Worker's profit participation fund Worker's Welfare fund Total Operating Expenses

Vertical Analysis Vertical 2008 Analysis 2009 0.73% 0.22% 1.03% 0.54% 0.00% 0.63%

Comments: Raw material cost is 60.93% of total net sales which is 4.63% more than the last years whereas there is 29.75% increase in net sales.

Salaries & wages have 6.42% of net sales that there is only 0.79% more than last year. In horizontal analysis this component is 48% more than last year but actual position is that this expenditure has no significant impact on sales.

There is more that 100% increase in repairs & maintenance but again it has very low share i.e. 2.51%. It is 0.89% more than last year. The cost of good sold is 79.24% of net sales that is 5.03% less than the last year which is significant achievement.

Distribution cost is 1.81% of total net sales which is 0.48% more than last year. Total administrative cost is 2.9% of net sales and it is 0.04% less than the last year.

The total other operating cost is 1.03% of net sales and it is 0.40% more than the last year This statement has shown that the firm is growing day by day. In the beginning it has certain problem but now it is running smoothly. Every year earning per share is increasing it shows that organization is right on track now. Behavior of The Studied Organization In Allocation Of Various Funds To Different Assets Funds are allocated on the basis of needs, objectives of the company. 42

Keeping in view the urgency of the matter funds are allocated. First priority is given to the purchase of raw material Short Falls / Weaknesses Of The Finance Department I found following short falls / weaknesses pertaining to finance department. Staff is overburden. For example if a person is capable of doing different tasks or jobs, he is required to do these different tasks and on the other hand if a person is not able to do different tasks professionally, they are little bit relaxed and they are forced to learn as quickly as they can in order to contribute in a well manner. No incentives are offered for additional duties performed by the staff in order to motivate them to perform well therefore they quit the organization as soon as they have another opportunity. Tight working hours. Means if a person has performed 10 hours duty, he is required to do something more or assign a new task that might do next day, the attention is to make their stay at office as long as it possible. Annual increment due on the basis of working hours instead of quality of work Capital Budgeting is not done as it is required to make the decisions, certain assets are to be proved financially good for the organization or not. Present value of money or Future value of money concept is not apply for getting the right information about the assets so decisions are purely made on the base of personal judgment that prove sometime not in the favor of the organization. Management should have to allow finance department to contribute or perform their responsibilities which definitely proves more beneficial for the organization. In other words they should provide decision making space to the finance department so that they have better idea what to do and what not to do in order to achieve the organizational goals. Decisions are to be made on the basis of information not on the basis of personal judgment. There should be Hunan Resource Department for measuring the performance of the staff and provide them timely feedback about the performance therefore they can adjust themselves accordingly in order to work efficiently and effectively.

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 Each and every employee should have their job description so that they know very well what is required by the organization and what is not. I would like to add one thing more that they should do something in order to make the finance department more efficient in order to obtain better results from them (it doesnt mean they at this time not efficient, they are doing very well). I feel there is a huge gap between management and employees, this gap should be filled and they should convey a very clear message that management are with them and they have complete confidence over them.

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5 Internship Experience:
My internship duration was from Dec 05, 2010 to Jan 20, 2011. During my stay at Premier Dairies (private) Limited. I had worked for Sale Department, Accounts Department, Quality Assurance lab, Production hall, and Procurement Department of Premier Dairies (private) Limited. I was assigned different assignments and duties in these Departments. The detail of assignments and duties is given below:

Sales Department Account Department Quality Assurance Lab Production Hall Procurement Department

5.1 Sales Department: The sales department would aim to improve the interaction between the customer and ... involves the need for alignment and integration between corporate sales and marketing functions. In this section, I gain the practical knowledge about the sale department. I spend one week in the sales department and I got lot of experience how to make a sale and how to retain the customers etc 5.2 Accounts Department: During the internship of six weeks at Premier Dairies ( private) limited I was rotaded in the Accounts Department where we make the salaries of the employees, The Accounting Department works closely with the Training Department and the Information Systems Department to deliver cutting-edge and up to date training to the entire company. As several managers and account executives need to manage financial resources within their respective projects, the Accounting Department provides a financial knowledge-base to help them maximize their financial resources.

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5.3 Quality Assurance Lab: I spend about one week in the quality assurance lab where we check out the quality of the products after passing the quality we send in the market. Quality assurance lab specially focus on the maintaining the quality of their products and improve it. The performance of standard methods depends on the quality of reagents, equipment, commercial and in-house test procedures. Laboratories should ensure that these have been validated and shown to be fit for purpose. Internal and external quality assurance procedures should also be in place. 5.4 Production Hall:

The right production hall layout is one of the major factors that determine whether a production line can function effectively. This is true not just for large industrial operations but also for the assembly hall in a dairies company. In fact, in this case if is often vital to accommodate as much as possible in a small space. I spend some time in the production hall where I maintain the inventory. 5.5 Procurement Department: A procurement department is responsible for managing the purchasing activity for the organization. There are two types of purchasing or procurement departments: centralized and decentralized. In a centralized model, all requests for materials or goods are center to this department. In a decentralized model, individual departments can process their own purchases.I also spend some days in procurement department where I handle the raw material, check inventory system and give the report to my supervisor.

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6 SWOT Analysis:
6.1 Strengths: Highly sophisticated plant and equipment Qualified work force Focus on research and development First and the only dairy company in Pakistan to get ISO 9002 Certification

6.2 Weaknesses: Low promotional activities Comparatively weak distribution system

6.3 Opportunities: Premier Dairies (Private) Limited can export food items especially Juices to Middle East CDL Foods limited has been changed to Premier Dairies (private) Limited, so this change in name can help them to attract foreign customers Premier Dairies (Private) Limited can go for related diversification by producing pure juices and flavored yoghurt Premier Dairies (Private) Limited can go for joint venture with other companies to attract the market share.

6.4 Threats: Strong competitors i.e. Milk Pak etc. Price sensitive people Milk men (Gawalas) providing non branded milk in homes

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7 Conclusion & Recommendations:

7.1 Conclusion: Money making in business has three basic parts: cash generation, return on assets (a combination of margin and velocity), and growth. True businesspeople understand them individually as well as the relationships between them. Everyone in a company must be aware that his actions use or generate cash. It is necessary to find out the tangible assets (the things you have invested in that you can see and touch). A person with great business acumen will wonder how much money you are able to make with those assets. What kind of money is being returned to you through their use? In short, what is your return on assets? Are you making enough of a return on those assets, they must concentrate to evaluate the returns on assets in order to bring appropriate changes in their policy.

7.2 Recommendations: They should bring change in management style in order to improve the working conditions of the organization. They should empower the employee in order to bring the feeling of ownership so that their will become more loyal and it definitely effect the productivity of the organization. They should be more concerned in order to bring change in the attitude of the employees and they should pay more attention to raise the level of comfort and satisfaction that have surely a positive impact on organizations productivity. There should be a Human Resource Department who can access the performance of the staff by exercising the performance appraisal process so that the organization can know the level of efforts, exerts by the employee towards achieving the organization goals as well as staff could know the gap in their performances and set the objectives for the forthcoming year. Organization is in a position to offer or arrange training when and where it is required to improve the professional skills of their employees so that they can contribute in a better way. Define the job description of each employee so that their performance can be accessed on the basis of their job description. 48

 Annual increment should be based on their performance so that they work with more dedication and motivation. Strategies and planning are to be made by involving as much employees as it possible in order to obtain the better ideas and the same may be incorporated in planning.

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References:
www.google.com www.premierdairies.com.pk www.wikipedia.com

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Chairman

(CEO)/Director

Director

G.M Marketing

G.M Finance

G.M Project

G.M Human Resource

Chief Marketing Officer

Chief Sales Officer

Chief Finance Officer

Procurement Manager

Production Manager

Manager Contract & Hiring

Manager Admin

Marketing Manager

Sales Manager

Finance Manager

Purchasers

Supervisor

Assit Manager

Assist. Manager Admin

Asst. Marketing Manager

Assistant Sales Manager

Assist Finance manager

Manager Stores

Assit. Supervisor

Sales Officer

Accountant

Sore Keeper

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Other Sales Staff Accounts Assistant (17)