Telephone Indutries Of Pakistan

1. Internship Report on Telephone Industries of Pakistan
Submitted by: Toheed Ahmad
Registration # SP09-MBA-099
Supervised by: Mr. Assd Raffaq
Department of Management Sciences
COMSATS Institute of Information Technology
Abbottabad
January 2011

2. Internship Report on Telephone Industries of Pakistan
Submitted by: Toheed Ahmed
Registration # SP09-MBA-099
Supervised by: Assd Raffaq
This internship report is submitted in partial fulfillment of the requirements
for the degree of Master of Business Administration awarded by the
COMSATS Institute of Information Technology,
Abbottabad.
Department of Management Sciences
COMSATS Institute of Information Technology
Abbottabad
January 2011
ii

3. Department of Management Sciences
COMSATS Institute of Information Technology
Abbottabad
Approval Sheet
.
Approval Committee
1. External Examiner
Mr. _____________________________________________ Signature_______________
2. Supervisor
Mr. ____________________________________________ Signature_______________
3. Head of Department
Mr. ___________________________________________ Signature ________________
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4. Certificate
iv

5. v

6. DEDICATION
DEDICATED
TO MY PARENTS
WHO ALWAYS
LOVED ME
To my Teachers who have been my source of inspiration,
My siblings and finally my Friends who have always
Supported and encouraged me in my Endeavour’s!
&all those who have soft corner for me in their hearts.
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7. Abstract
First of all I am very thankful to ALLMIGHTY ALLAH who gives me strength to fulfill the
last requirement of the MBA COURSE. Keeping pace with the time is the key to success.
Left behind means lost. Learning the emerging skill is one of the means to keep up with time.
The internship required for MBA degree is much more than a formality, it is an opportunity
to experience practical environment, real pressure and to develop an understanding of what
student have been studying in their courses. In real sense it is a challenge to match our
creativity and vision with demand of challenging business environment, an endeavor to fire
our imagination, challenge our thinking and give us a chance to look at what the future holds.
Selection of TELEPHONE INDUSTRIES OF PAKISTAN for the internship in the year 2010
was based on a desire to work in the challenging manufacturing industry and being able to
put all efforts to understand, and absorb the corporate culture existing in the organization.
This report presents extracts of initiator learning, and observation of TIP. The report attempts
to give a few but concrete facts figure, which would not challenge TIP limitation. The report
can be very helpful for those interested in getting information about this great asset of our
country and especially for the students studying the management system and processes of
TIP. The management of TIP can find the ways to improve the performance of the
organization by studying the findings and the recommendations of TIP. Due to the shortage
of time and space some areas are discussed very briefly and can be explained to the interested
readers.
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8. Table of Contents
DEDICATION.........................................................................................................................iii
Abstract ...................................................................................................................................vii
ACKNOWLEDGEMENTS ................................................................................................... x
LIST OF ABBREVIATIONS ................................................................................................ xi
EXECUTIVE SUMMARY ...................................................................................................xii
CHAPTER 1 ............................................................................................................................. 1
Introduction .............................................................................................................................. 1
1.1 Background of study: ....................................................................................................... 1
1.2 Objective of the report: .................................................................................................... 1
1.3 Purpose of study:.............................................................................................................. 2
1.4 Scope of study: ................................................................................................................. 2
1.5 Methodology: ................................................................................................................... 3
1.5.1 Secondary Source: ........................................................................................................ 3
1.6 Scheme of the Report ....................................................................................................... 3
CHAPTER 2 ............................................................................................................................. 4
Introduction of Telephone Industry of Pakistan................................................................... 4
2.1 History of TIP: ................................................................................................................. 4
2.2 TIP Mission Is: ................................................................................................................. 5
2.3 Some Important Objectives Of TIP Are: ......................................................................... 5
2.4 Organizational structure of TIP: ...................................................................................... 6
2.4.1 General Product Division:......................................................................................... 7
2.4.2 Digital Switching Division: ...................................................................................... 7
2.4.3 Finance & Personal Division: ................................................................................... 8
CHAPTER 3 ............................................................................................................................. 9
Product and Departments of TIP ........................................................................................... 9
3.1 Product: ............................................................................................................................ 9
3.2 Personal &Administration Department: ........................................................................ 10
3.2.1 Recruitment & Selection: ........................................................................................ 10
3.2.2 Training & Development: ....................................................................................... 10
3.2.3 Compensation & Benefit: ....................................................................................... 11
3.2.4 Promotion:............................................................................................................... 12
3.2.5 Retirement of Employee: ........................................................................................ 12
3.2.6 Disciplinary Policy: ................................................................................................ 12
3.2.7 Social Security & Welfare Fund: ............................................................................ 13
3.3 Finance Department: ...................................................................................................... 13
3.4 Accounts Department: ................................................................................................... 14
3.4.1 Costing Section: ...................................................................................................... 14
3.4.2 Stores Section: ........................................................................................................ 15
3.4.3 Book Keeping Section: ........................................................................................... 16
3.4.4 Books of Account: .................................................................................................. 16
3.4.5 Payroll Section: ....................................................................................................... 17
3.4.6 Payroll Work Procedure:......................................................................................... 17
3.5 Production & Purchase Department: ............................................................................. 19
3.5.1 Production Department: .......................................................................................... 19
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9. 3.5.2 Purchase Department: ............................................................................................. 20
3.5.2.1 BY CALLING TENDER ..................................................................................... 20
3.5.2.2 BY CALLING QUOTATION ............................................................................. 21
3.5.3 Permanent Purchase Committees:........................................................................... 22
3.6 Commercial Department (Sales) .................................................................................... 22
3.6.1 Sales Procedure of TIP: .......................................................................................... 22
3.6.2 Sales to PTCL: ........................................................................................................ 24
3.6.3 Purchase Order against Development Work: .......................................................... 24
3.6.4 Purchase Order of the Store Suspense Order: ......................................................... 24
3.6.5 Installation Order: ................................................................................................... 24
CHAPTER 4 ........................................................................................................................... 25
4.1 FINANCIAL STATEMENTS ANALYSIS OF TIP ..................................................... 25
4.2 Common size analysis.................................................................................................... 25
4.2.1 Horizontal analysis...................................................................................................... 26
Common size (horizontal) analysis of balance sheet ....................................................... 26
4.2.2 Trend Analysis of Income Statement ...................................................................... 27
Trend analysis of income statement ................................................................................. 27
4.2.3 Vertical analysis ...................................................................................................... 28
4.3 Financial ratio analysis .................................................................................................... 30
4.3.1 Profitability Ratios .................................................................................................. 30
4.3.2 Overall profitability ratio ........................................................................................ 32
4.3.3 LIQUIDITY RATIO ............................................................................................... 34
CHAPTER 5 ........................................................................................................................... 35
Main Findings and Recommendation: ................................................................................. 35
5.1 General Findings and Recommendation: ....................................................................... 35
5.1.1 Findings: ................................................................................................................. 35
5.1.2 Recommendation: ................................................................................................... 36
Downsizing .......................................................................................................................... 37
Organizational culture .......................................................................................................... 37
Marketing ............................................................................................................................. 37
Research and Development.................................................................................................. 37
Apprentice training .............................................................................................................. 37
5.2 Conclusion: .................................................................................................................... 39
References:.............................................................................................................................. 40
Books ................................................................................................................................... 40
Reports ................................................................................................................................. 40
Internet ................................................................................................................................. 40
ANNEXURES ......................................................................................................................... 41
(A) Telephone industries of Pakistan Profit & Loss Account ........................................ 41
(B) Telephone industries of Pakistan Balance Sheet ........................................................... 41
(C) Telephone industries of Pakistan Profit & Loss Account.............................................. 42
(D) Telephone industries of Pakistan Balance Sheet ........................................................... 44
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10. ACKNOWLEDGEMENTS
In the name of Allah, the most gracious, the most merciful who created the whole universe
and who taught me what they I not know. I am extremely thankful to Allah Almighty who
has enabled me to complete the course of MBA and the internship report thereafter, the last
step towards the fulfillment of the requirements of MBA course.
First of all I am very thankful to all of my teachers who taught us whole the MBA course. I
learnt lot of things from them. I am thankful to Sir Assad Rafaq who helped me in the
completion of report.
My thanks are due to all the staff at TIP with whom I have been working during my
internship. I am thankful to all the concerned staff of P&A Department and other divisions
for their full co-operation and guidance during my stay in the organization and tried their best
to guide me about the systems and processes at TIP. I have found all these people very
devoted to their work and cooperative to me. My thanks are also due to my senior supervisor,
Sir Assad Rafaq Jan who helped me at all steps from the selection of topic to the preparation
of the final report.
Finally, I would be failing in my duty if I do not acknowledge the debt I owe to my parents,
family members, teachers and friends who have played an important role in shaping my
personality.
May Allah bless and reward them all. Amen.
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11. LIST OF ABBREVIATIONS
1. TIP Telephone Industries of Pakistan
2. PTCL Pakistan Telecommunication Company Limited.
3. F&P Finance and Personnel
4. GP General Products
5. DS Digital Switching
6. PCB Printed Circuit Board
7. P&I Planning and Installation
8. CGS Cost of Goods Sold
9. R&D Research and Development
10. QAD Quality Assurance Department
11. HRD Human Resources Department
12. VSS Voluntary Separation Scheme
13. CDS Computer Data System
14. NRTC National Radio and Telecommunication Corporation
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12. EXECUTIVE SUMMARY
Telephone Industries of Pakistan Haripur is the result of the efforts done to promote and
spread telecommunication in the country and to minimize the dependence on foreign
countries. The industry was established in 1953 in collaboration with SIEMENS Germany at
Haripur (Hazara), N.W.F.P. and since its establishments it has contributed a lot to the
development of telecommunication in the country.
This report on the Telephone Industries of Pakistan (TIP), Haripur is written to fulfill the
requirements of MBA course. The reports cover all the departments of the TIP.
The findings of the study are as follows:
Telephone industries of Pakistan have machinery for the production of many different
products but most of this machinery is technologically old and needs extra time and efforts
for production. Due to this reason its cost of goods sold is increasing which has resulted in
the decrease in its profit. Telephone industries of Pakistan has huge production capacity but it
has never produced at its full capacity due to which it's per unit cost is high.
TIP has been involved in research and development but the organization has never been able
to capture so much capable resources (human & physical) to introduce the best quality
products at cheaper rates.
Personnel department of the telephone industries of Pakistan has got some very devoted and
skilled employees and workers but they are not sufficient enough to meet the demands of
such a large organization. It is, therefore, very difficult for the organization to employ its
limited staff on new development projects.
The managers at the top and middle level are not controlling the employees efficiently and
have developed a culture in which there is no motivation and role modeling of the superiors
and no share of the subordinates in the Decision Making process.
Following recommendations are given to improve the performance of TIP:
There is need for Telephone Industries to install new machinery and overhaul old machinery
to work properly. It should also give training to its unskilled workers to become profitable for
the organization. This is necessary for the long-term survival of the organization and for
decreasing long term marginal cost.
Telephone Industries of Pakistan is unable to take all the orders from Pakistan
Telecommunication Company Limited. Now, PTCL purchases its products by calling tenders
or quotations in which TIP participates as a member. Many a time TIP is unable to receive
the orders because the other companies offer their products at lesser rates. There is need for
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13. TIP to minimize its cost of goods sold so that it may be able to take all the order from its
sister concern PTCL.
In the downsizing operation a lot of loyal and skilled workers and engineers left the
organization. TIP should try to retain the remaining skilled and devoted employees and
workers because the workers are the most power full assets of any organization and at
difficult times the organization needs the people who are more committed and loyal to the
organization.
There is no motivation, no job rotation and employees' development should be changed for a
better culture in which there should be good and effective communication, motivation and
feedback for the employees. It is necessary for the betterment of the organization, for the
achievement of the organizational goals, for the reduction of cost and expenses and for
increasing the efficiency of the workers and profit as well.
Telephone Industries of Pakistan totally depended upon only one buyer i.e. PTCL and sold all
of its products to it. This is not good policy and TIP has suffered a lot because of it. TIP
should expand its business beyond PTCL and should try to find out new markets for its
products.
For expanding the market it is necessary for Telephone Industries of Pakistan to evolve
effective marketing campaign.
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14. CHAPTER 1
Introduction
1.1 Background of study:
At the time of independence, Pakistan had almost no
industries and infrastructure. The economy was mainly dependent on agriculture but this
sector was also underdeveloped and was using the old techniques which were time
consuming and less productive. Due to these and many other reasons, the development of
industrial sector has remained the top priority of all the governments.
The story of the industrialization of the country is unique and interesting one where the
primary motives behind the establishment of the new industries were not the general well-
being of the country and the masses but safeguarding of the political interest, nepotism and
money making of the governments. In this process of industrialization during the last 55
years, many medium and large-scale industries have been established. Most of these
industries failed in the long run when they had to face competition from the private investors.
Some major reason behind the failure of these industries were the managerial inefficiency,
lack of a check and balance system and corruption.
One such industry, established in 1952 as a private limited company in the public sector, is
the Telephone Industries of Pakistan (TIP). The industry is situated at Haripur Hazara, in the
province of Khyber Pakhtoonkhwa. This was one of the largest factories of Pakistan with
diverse production facilities but the management of TIP could never be efficient enough to
utilize the resources up to their full extent. So, the industry which emerged as a great asset of
Khyber Pakhtoonkhwa could not contribute its due share to the economy and general well-
being of the province and the country.
The present report is about this factory the TIP. It is based mainly on a six weeks Internship
in TIP.
1.2 Objective of the report:
The main objective of this is to apply the theoretical
knowledge of management into practice and it is the requirement of MBA degree to have 8-
weeks internship in any bank. Due to this I have selected the Telephone Industries of Pakistan
(TIP). The industry which emerged as a great asset of Khyber Pakhtoonkhwa could not
contribute its due share to the economy and general well-being of the province and the
1

15. country. The present report is about this factory the TIP. It is based mainly on a six weeks
Internship in TIP.
1.3 Purpose of study:
This study attempts to:
Provide an overview of the TIP;
Analyze TIP management structure/system;
Analyze TIP financial statements;
Appraise the organizations performance;
Recommend policies/measures for making the organization more viable.
1.4 Scope of study:
This work is an effort to introduce the Telephone Industries of Pakistan in terms of its recent
and past performance. This can be very useful for those interested in knowing bout the
organization in terms of its history and performance.
The performance has further been analyzed by using different techniques. This analysis gives
a true picture of the organization and shows its strengths and weaknesses. The people
interested in this organization can make a true image of the organization in their mind by
reading it. It can also be helpful for the management of TIP who can easily know bout their
strengths and weaknesses.
The opportunities for the organization and the threats it faces have also been discussed and
these have been used to make the recommendations for the improvement of the performance.
These recommendations can be very helpful for the top managers of the organization to
remove the defects and to improve the performance.
2

16. 1.5 Methodology:
The report is based on my six weeks internship program in TIP of Pakistan. The methodology
reported for collection of data is secondary data. The main source of information is my
personal observation during work with staff and having discussion with them.
1.5.1 Secondary Source:
Secondary data is the one collected from other source and already processed through
mathematical and statistical techniques. Secondary data is comprised of annual report of TIP,
manuals relevant materials, relevant books and newspapers etc
Following secondary sources for data collection have been used for this report:
 Brochures.
 Company’s orientation manual.
 Factory's Articles and Memorandum of Association
 Internship Reports and assignments written on TIP in the past
 Internet
1.6 Scheme of the Report
The scheme of the report is in such a way that:
Chapter one gives brief introduction of report, purpose, scope, methodology and
scheme.
Chapter two gives an overview of the organizational structure of TIP.
Chapter three is about Products and departments of TIP.
Chapter four is Financial statement analysis of TIP.
Chapter five gives feasible and constructive recommendations for different
departments of TIP.
During the period of internship, I studied the history and the background of the Telephone
Industries of Pakistan in detail, side by side with the information, which I gathered during the
daily routine work by personal observation. In this work, I came across on problems, which
were not defined in the previous works. So in order to clear my doubts; I visited the
concerned persons in all the departments. I took the help of interviews with different people
at TIP to get the necessary information about the management structure and functions and
present and past performance of TIP.
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17. CHAPTER 2
Introduction of Telephone Industry of Pakistan
2.1 History of TIP:
Telephone Industries of Pakistan was established in 1952 with joint venture of Pakistan
Telecommunication Corporation and German vendor Siemens. Main objective of the
organization was to manufacture switching equipment for facilitation of country’s
telecommunication needs. This was the first objective and then TIP started the manual
plugging of cables into cards and lastly the computerized switching, and now even soft
switches. After seventeen years the telephone industries of Pakistan had expanded its
manufacturing capacity from 7,000 exchange lines up to 40,000 subscriber lines.
In 1987, another agreement took place between Siemens and TIP and the investment pointers
hit the 1000 million mark. This brought, and thus, floated state-of-the-art digital switches and
latest models of telephones in to the market. (zambeel.03/02/2010.TIP)
Digital switching system is the latest development and has features such as:
Complete supply of Telecommunication services from a single source. Advanced
Subscriber Services (AD-SS). Integrated Services Digital Network (ISDN). Internet
Supplementary Services.
Telephone Industries of Pakistan, an ISO certified company, the only local manufacturing
company in telecommunication sector in the real sense. As a contributory to PTCL; it is
engaged in providing state-of-the-art manufacturing and installation services for last 50 years.
Its contribution towards the growth of telecommunication in the country is most significant.
Even today when more multinational companies have entered into telecom sector its
contribution is 50% to the total installed network of PTCL. It is equipped with state of the art
technologies and unmatchable product quality.
TIP Located at Haripur Hazara (Khyber Pakhtoonkhwa), 80 kilometers north-west of
Islamabad, Telephone Industries of Pakistan (Private) Limited (TIP) was incorporated as a
private limited company in 1953. The company is currently engaged in manufacturing and
sale of Telephone Sets, Telephone Exchanges and associated equipment, Energy Meters and
providing services for setting up and commissioning of exchanges.
4

18. The Authorized Capital of the company as on 2003 is Rs 1,000 million, whereas, the issued,
subscribed and paid up capital is Rs 759.753 million. There are two shareholders of the
telephone industries of Pakistan, Pakistan Telecommunication Company Limited (PTCL) and
Siemens A.G of Germany with 70% and 30% shareholdings respectively.
The board of directors comprises of eight members. Chairmen and managing director are
appointed by the PTCL and two members of the director are appointed by the Siemens.
TIP started its production in 1954 with an annual capacity of 7,000 Telephone sets and 7,000
line units of F-1 type stronger system of exchanges. It continued with changes of technology
to build Electromechanical types of Exchanges (EMD). The production capacity was
increased in different phases according to the requirements of the country.
(Financial report, 2003, published by TIP)
2.2 TIP Mission Is:
 A bright communication future of Pakistan.
 TIP commitment is a commitment to the pursuit of meaning life. It is meaning to
Put quality and meaning to its work and its products.
 Commitment is what character is made of, and commitment is what quality is all
about. This commitment to quality permits to all aspect of TIP'S product, its R&D, its
service and people and is expressed in daily action.
2.3 Some Important Objectives Of TIP Are:
 To provide quality products at low price to country.
 To fulfill the needs of the county for communication equipment.
 To provide products.
 To provide after sale service to its customers.
 A sound communication system in all organizations of Pakistan.
 To make research for modern telephone equipment and produce them at low cost.
 To enter international market and compete international firms. To provide skilled
labor in this field.
 Increase the revenue of Government.
 Building new skilled workers.
All the activities of TIP are directed to achieve these objectives
5

19. 2.4 Organizational structure of TIP:
The administrative responsibility of TIP lies under the federal ministry of science and
technology. After the reformation of the recent past, TIP has been divided into three major
subdivisions i.e. General products (GP) division, Digital Switching (DS) division, Finance
and Personnel (F&P) division.
BOARD OF
DIRECTORS
MANAGING DIRECTOR
DGM Management
Internal Audit Representative
ISO 9001
General General General
Manager Manager Manager
Digital switching Finance and personnel General products
division division division
6

20. 2.4.1 General Product Division:
This is the division which has its own GM under whose supervision all the departments work.
The General Manager reports directly to the Managing Director and the Board of Directors
and controls General Product Division. The division works in such a manner that it fulfills all
its financial needs through its own Finance Department.
Other departments in this division include sales and services, planning, procurement and
stores, production, purchase, admin and personnel and the Quality Assurance. The sales of
this department mainly depend on the production and sale of telephone sets, energy meters
and drop wires etc.
The sales and services department of General Product division receives orders for different
material and parts of general products from production department against which purchases
are made. This department also makes arrangements for the sale of the goods produced by the
production department. The quality of the products produced by the production department is
checked and controlled by Quality Assurance Department.
The Finance department of this division provides funds for the purchase expenses. Salaries
wages and other allowances are also paid to workers and employees by this department.
Personnel section keeps track of the activities of the staff in the department and handles
different administrative matters related to the department. This department also controls
annual reports of employee's welfare activities and the records related to medical facilities.
2.4.2 Digital Switching Division:
The most important department of TIP produces permanent and the containerized exchanges.
Digital switching division performs functions under the G.M who is responsible and report to
the managing director. There are different department such as: sales department deals all the
matters related to the sales and services. Production department handle the matters related to
the production of exchanges and the quality assurance department assures that the production
meets the standard.
The personnel department handles the matters related to employees and the finance
department deals with the financial problems.
7

21. 2.4.3 Finance & Personal Division:
Finances or the monetary resources and personnel or the human resources are the most
important assets and resources of any business without which the existence of an organization
is impossible. In the Telephone Industries of Pakistan, therefore, there is a separate division
for handling the financial and human problems. The basic aim of this division is to monitor
and control the actions and to make certain the smooth operations of the other two divisions
(i.e. the G.P and D.S divisions).The finance department deals with the purchases and sales,
receipts and payments and the income and expenditures etc. The personnel department deals
with the employees and workers recruitment to retirement policy which includes the selection
and placement, guidance and development, salaries and wages and the welfare policies
among the many others.
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22. CHAPTER 3
Product and Departments of TIP
3.1 Product:
Telephone industries of Pakistan started production in 1954 with an annual capacity of 7,000
Telephone sets and 7,000 line units of F-1 type system of exchanges. It continued with
changes of technology to build Electromechanical types of Exchanges (EMD). The
production capacity was increased in different phases according to the requirements of the
country (TIP official website, accessed 01/01/2011).
Sr. No Product Description Year
1 AUTOMATIC PUBLIC EXCHANGES (SYSTEM) & TELEPHONE SETS 1954
2 SUBSCRIBER TRUNK DIALING EQUIPMENT 1962
3 PRIVATE MANUAL BRANCH EXCHANGES 1968
4 PRIVATE AUTOMATIC BRANCH EXCHANGES 1968
5 TYPE WRITER (Multi-lingual Portable / Slandered size ) 1974
6 MASTER SET TELEPHONE M-113 1981
7 ELECTRONIC TYPEWRITER / TELEPRINTER 1985
8 DIGITAL PUBLIC EXCHANGES EWSD 1987
9 TELEPHONE SET-210 1991
10 DIGITAL MOBILE EXCHANGES 1992
11 D. P. BOXES 1993
12 TELEPHONE SET-240 1994
13 ENERGY METERS 1994
14 CONTAINER SHELL 1994
15 DIVISION CABINETS 1995
16 TELEPHONE EURO SET-802 1996
17 DTMF STENO PHONE 1996
18 PILLAR TYPE D.P. BOXES 1997
19 CLI TELEPHONE SET 1999
20 DROP WIRE 1999
21 DIGITAL PUBLIC EXCHANGES EWSD (16 Line Card) 2001
22 CROSS CONNECTION CABINETS 2001
23 D.P BOX WITH IDC MODULES 2001
9

23. 3.2 Personal &Administration Department:
At the time of establishment of any organization and starting work it accordance to the plans
it necessary to have the skilled and unskilled employees to achieve the organization goals and
objectives. Personnel and administration department is therefore most important department
to take care of the matters related with human resource of an organization. This department
was existed in the old organization and called health and happiness department now days it is
called human resource department which ensures the well being of employees of organization
and provide the better environment for work. The responsibilities of this department are
recruitment, selection, training, placement, development, compensation, salaries, benefits and
the retirement of the employees of organization.
The personnel section of TIP is deals with the management of human resources i.e. the
recruitment and selection, training and development, compensation, salaries and benefits and
the maintenance of human resources, to accomplish organizational as well as individual
objectives. The personnel section deals primarily with the policies and procedural work. The
administration section on the other hand deals with the day to day implementation of
personnel policies.
Different functions performed by the personnel and administration department are:
3.2.1 Recruitment & Selection:
TIP is a manufacturing industry therefore it needs the services of engineers and the skilled
labor force. The process for the selection of labor force and the clerical staff is very simple it
is usually based on the reference or recommendation of existing employees. TIP also has its
own training department from which student can be selected for the appropriate jobs. The
basic education is needed for these candidate mostly S.S.C or intermediate. the candidate
after the interview and the demo work selected. Grade 15 or the above employees are selected
inside the concerned departments and dealt by the central P&A division.
3.2.2 Training & Development:
Usually workers and clerical staff don’t know their job description and capable of doing
assigned task because of new environment and the work place therefore new employees need
training.
10

24. TIP after selection of employees and worker, under grade 16 provide training them through
attaching them with the experienced workers of concerned department there is no specific
time period for training and development. Usually the first three to four months are
considered as the training and development period. The period can be shorten and extend
keeping in view the time and capacity of employee.
Following training programs are offered in TIP;
1. Apprenticeship programs
2. Computer training
3.2.3 Compensation & Benefit:
The compensation program of TIP consists of two type of compensations, i.e.
1. Direct Compensation
2. Indirect Compensation
Direct compensation includes salary and wages of the employees and the workers.
The payroll section of finance and personnel department deals with direct compensation. The
salaries and wages are awarded on the basis of the Basic Pay Scale- 2001.
Indirect compensation comprise of a number of schemes usually called the 'benefits'. The
payroll section of personnel and administration section is directly involved in indirect
compensation.
TIP offers following indirect compensations/benefits to its employees:
a. MEDICAL FACILITIES
b. EDUCATION
c. RECREATION FACILITIES
d. HOUSING FACILITY
11

25. e. GROUP INSURANCE
f. WORKMEN COMPENSATION
g. SPECIAL ALLOWANCES
3.2.4 Promotion:
The personnel and administration section also handle the promotional policies and systems.
The promotion will be on the basis of
i Seniority cum fitness
ii. Length of service prescribed
iii. Shouldering capability of high responsibility
iv Availability of a higher post.
If there is no superior post available but an employee is qualified for the promotion, then, the
"Move-over" is granted to him, meaning that the grade not the post is improved and all the
facilities of that superior grade are given to that employee.
3.2.5 Retirement of Employee:
P & A department maintain the record of the employees service, which contain the date of
birth, joining and the retirement dates of the workers and employees. As a worker reaches the
age of 60, the department sends a notice to the GM that employees are near the retirement
age. GM then issues the retirement letter.
In case of casualty of any worker, TIP sends a letter of sympathy to his relatives and also the
insurance as soon as possible.
3.2.6 Disciplinary Policy:
Personnel department not only makes policies for selections but it also defines disciplinary
rules for TIP’s employees. When a man's character is not according to the codes of conduct
then TIP takes the disciplinary actions against him or his Property.
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26. 3.2.7 Social Security & Welfare Fund:
A: SOCIAL SECURITY
According to the provision of Social Security regulation all
employees whose wages are up to Rs.6000/- pm (inclusive of all allowances) is covered,
irrespective of their designation, position or nature of work. TIP also contributes in the social
security fund to provide facility to the eligible workers for their well being. The contract
employees of telephone industries of Pakistan use the medical facility and other benefits that
may apply.
B: WELFARE FUND
The welfare fund is reserved in the welfare fund budget for allowing economic help to the
small paid employees/workers. There is a board to distribute this endowment. The fund
allowed to an individual who remains on leave without disburse due to illness or due to
family problems. The welfare fund is also permissible in purchase of medicines, which are
not sheltered under the medical policy and are deducted from the statement of
employees/workers. The board consists of Chief Engineer (production), Executive Personnel
and Executive Administration.
3.3 Finance Department:
After the initial development work of the organization is complete and the human resources
necessary to execute these plans. Available to perform their tasks, the next most significant
factor for the organization is the capital or the financial resources.
Financial resources are very essential for the realization of the organizational plans. With the
availability of finances the human resources will quit the organization as the organization
won't have anything to pay them as compensation or a reward of their work. The accessibility
of raw material and other required inputs of the production can also be guaranteed only with
the availability of financial resources. At TIP, each division has its own separate department
to arrangement of the financial matters of its departments.
13

27. 3.4 Accounts Department:
To keep record of the financial transactions the accounts department plays a vital role in any
organization. It performs the check and balance system and also keeps record of transactions.
Telephone industries of Pakistan have its accounts department working under Finance
department accounts department has further sub sections as following;
3.4.1 Costing Section:
Costing section is the most important section because the act of this Office may affect the
profit/loss of the business. A small inaccuracy in cost computation may upset the result and
demonstrate adverse picture of economic position of the organization. A vast arrangement of
attention on the branch of Cost Accounting is required for calculating the cost of products,
because the removal of any cost factor may lead to failure of organization.
There are two segments of costing office:
1. Internal Accounting Value Section.
2. Cost Calculation Section
I.A.V. (Internal Accounting Value) Section
The major function of this Section is to keep the records of the raw material purchased locally
or from abroad. T.I.P is purchasing different types of parts in bulk from different vendors.
For such massive purchases it is not probable to workout price of each article by taking into
account all additional expenses incurred on each item until they arrive at the T.I.P. Stores.
Cost Calculation Section
For the purpose of cost calculation this section organizes I.A.V. report, as stated below:
Stores department submits demand slip to I.A.V. Section for the supply of price of fresh
purchases. On the receipt of Demand Sheet from Store I.A.V. Section works out the price,
enters it in same sheet and sends back to the Stores Department. Store clerk notes the price in
the Ledger Card. At the end of month Store Department put in orders consumption Book
14

28. Note for the material issued to the Production Department throughout the month on the basic
prices projected by this section.
At the end of each financial year, Costing Office carry outs twelve-monthly Stock-taking of
self manufactured parts in the stores or in the production departments in different
manufacturing points, purchased parts and raw materials in the relevant stores. The Stores
Department write down the balance quantity of each item on the Store Ledger Card and
prepares list of parts and raw materials in the stores on the day of stock calculating from
Ledger Cards sent to Costing office (CO.).
Costing section checks the balance with the financial store ledgers balance. If there is
difference in Stock taking balance of Store ledger then costing section verify the receipts and
issue of every item and generates discrepancy-booking reminder because the Stocktaking
result must be in accordance with the financial ledger. At the end of each year this section
matches stores balances with the financial ledgers and arranges financial lists of accounts that
get it checked by External Auditors.
3.4.2 Stores Section:
Telephone industries of Pakistan is a manufacturing concern so to production department’s
required different type of parts and raw material. TIP purchases raw material and parts in
bulk quantity so that production function can run smoothly. Because of huge raw material
inventory TIP set up store section that keeps record of the inventory.
Purchase of raw material and parts is the responsibility of purchase department. TIP
manufactures those components that can be produce in the factory. Purchase of parts is also
made because of economic benefits instead of producing these parts. Some parts require
specialized equipment that is costly and are not available in the factory. TIP therefore prefers
to buy these parts from the markets where these parts are available at low cost.
All these production materials are needed on the daily basis as the manufacturing goes on and
their requirement is not periodic i.e. just once in a year or in a period. These materials are
a1so not easy to acquire through just-in-time supply system. So, there is a need to keep an
inventory of those materials, which is used on regularly basis. For this reason stores have
been established under a Stores Department at TIP. The Store department has the following
sub-stores:
15

29. 1. Raw Material Store
2. Part Store
3. Oil Store
4. Overhead Store.
3.4.3 Book Keeping Section:
Book keeping is the record-keeping part of accounting system. It means to record and sum up
the business activities having financial effects in a set of books called books of accounts.
3.4.4 Books of Account:
The accounting books that are being used are as follows:
 Cash book
 Purchase book
 Sales book
 Bank book
 General ledger
 Subsidiary ledger
In these books the original entries are posted by the book keepers. entries in thses books
made through the bank voucher cash payment and received vouchers. the sales book is
maintain with the help of invoices. General ledger is also prepare and properly maintain in
this section.
16

30. Record keeping in TIP is based on the double entry system where every transaction have dual
effects one is called debit and second is credit which is the best system considered in the
accounting system.
3.4.5 Payroll Section:
Payroll section deals with the salaries and wages of the employees and performs different
function such as:
 Preparation and Payment of monthly salaries.
 Calculation and Payment of monthly allowances of workers
 Payment of T.A D.A advances
 Compensation of medical advances.
 Payment of all indirect reimbursements.
 Payment of overtime of workers.
 Payment of vehicle advance.
Payroll office keeps personal files of every one employee and worker. All documents relating
to employees and workers are kept in this record. Whole record of each employee since his
joining till retirement is available in his personal file.
3.4.6 Payroll Work Procedure:
Main purpose of the payroll division is to prepare the salaries, wages and other various
payments i.e.
 Allowances to workers & bonuses
 Medical bills
 TA/DA bills
 Advances
 Welfare payments
 Education grants
 Workers participation fund etc.
17

31. Making revitalization of advances, income tax, electricity bills and other found etc. from
the salaries, wages and allowances is also the job of pay roll section.
Payroll office conducts this work in the following manner:
a. Salary
The employees appointed on monthly payment basis are paid salaries as per their
appointment letters. On joining their job, salaries are prepared at the end of month and sent to
banks for crediting to their personal accounts as per their requests.
b. Wages
Wages are paid to workers after 15 days.
There are two categories of workers:
1. Fix rate workers
2. Piece rate workers
1. Fix Rates Workers
Fix rate workers means that their hourly or daily wage is fixed at certain amount. They are
mainly the workers of overhead shops such as maintenance shop drivers and labors of
different shops. As mentioned above that their wage rate is fixed at hourly or daily basis the
supervisors and timekeepers keep record of their presence at the work place and prepare the
individual record after 15 days they send this report to the payroll office where the wages
prepared according to the timekeepers record and made the voucher and payment is made
through cash department.
11. Piece Rates Workers
Piece rate workers are those workers that are paid by the wages on the basis of their
efficiency rate its mean that no of pieces determine the wage of worker (which is determined
through the number of units they produce in a certain time multiply by rate per piece). The
planning department already computed the maximum and the minimum time for pieces
making through Time & Motion Study.
c. Allowances
18

32. Another duty of Pay roll office is to make payment of monthly allowances. The following
allowances are allowed to the employees and workers at the present time:
 Special machine Allowances
 Cold cream
 House rent
 Milk Allowance
 Soap allowance
 Conveyance Allowance.
 Service Awards are granted:
 On completion of 20 years of service
 On completion of 25 years of service
 On completion of 30 years of service
 Service allowances paid on yearly basis.
3.5 Production & Purchase Department:
3.5.1 Production Department:
After the collection of humane source, financial resource and the planning of the company's
mission and objectives, the stage come for the production of the products (in a
manufacturing concern). For a manufacturing firm the production department is a very
significant because through this department firm can achieve and accomplish the company's
mission and objectives in a true sense. The production department helps the firm to make the
policies and successful implementation of the production plans.
Telephone Industries of Pakistan (TIP) is a manufacturing concern industry, all of its
efficiency is based upon the efficient performance of this department.
The production department of TIP is working efficiently and performing hard to meet the
necessities of the market, keeping in view the resources of the telephone industries of
Pakistan. It has get in touch with the Sales Department to make the standard products
available at time. TIP’s workshops are fully operational and are equipped with the latest and
state of the art machines. Workshops can perform the task in efficient manner. There is also a
system for on the job training of technical personnel, so that they are able to work with the
new technology using the complicated machinery.
19

33. 3.5.2 Purchase Department:
For a production oriented industry, the department of purchase has a great importance. The
reason is that no firm can get all the raw material and the equipment used in production
process by itself and without taking the help of any external supplier or manufacturer. The
raw material and the equipment not extracted and produced internally is purchased from the
external suppliers and the producers. In order to ensure the in time availability of the
materials used and the smooth working of the purchase process, a purchase department is
necessary.
TIP is a production-oriented company and it has a well-organized purchase department to
support its production.
TIP makes purchases of the raw material and components mostly from within the country but
as all the materials and components are not available within the country, some are imported
from outside. These materials are usually imported from the sharing partner Germany along
with the U.S.A, Italy, France and Turkey etc.
The aim of purchase is to get technically most suitable, easily available materials, parts and
components on cheaper rates without compromising on qualities by quickest means, under
very rigid Govt. policies within restrictive resources.
Keeping in views the above aims and goals, the purchase department of TIP comprising of
engineers and Associate engineers, makes it possible to buy a right type of material at the
right price from the right source of delivery at the right place.
Purchases are made at TIP by the following three ways:
i. by calling tender
ii. by calling quotation
iii. by cash.
3.5.2.1 BY CALLING TENDER
In this purchase method, an order is drafted by the order section mentioning the requirements
20

34. of the company on the basis of the reports of the production and the stores departments. This
draft order is then presented before a committee comprising the following members:
a) Deputy General Manager (DGM) /Assistant General Manager (AGM), the head of
ordering department.
b) Deputy General manager (Planning, Procurement, and stores)
c) Deputy General Manager (Finance and Personal).
3.5.2.2 BY CALLING QUOTATION
If the amount of material required is less than Rs.50, 000, the quotations are invited from the
registered firms. The quotation committee consists of the following officers.
1. Assistant General Manager (Plam1ing, Procurement and Stores).
11. Executive (Budgets, Accounts, Payroll)
lll. Executive (Quality Assurance Department).
3.5.2.3 BY CASH
Cash -purchases are generally made for small quantity and for urgently required material by
the stores. After approval from the concerned committee, the following committees will make
cash purchases.
1). For the Purchase Cases above Rs. 50,000
i. Assistant General Manager (AGM) of the concerned division.
ii. Executive (Budget/Accounts/Tax).
iii. Assistant General Manager (Quality Assurance Department)
21

35. 2). For the Purchase Cases below Rs. 50,000
i. Assistant General Manager (Planning, Procurement and Stores)
ii. Executive (Budget/Accounts/Tax).
iii. Quality Assurance Department (QAD).
3.5.3 Permanent Purchase Committees:
There are the purchase committees established on permanent basis. These committees consist
of the members from top management. These committees meet regularly on the pre-decided
dated and the cases have to be decided in these meetings. The proper planning, correct
execution of the orders, full dedication and teamwork guarantees the successful achievement
of the objectives.
3.6 Commercial Department (Sales)
The basic aim of all the (profit) organizations is the earning and the increase of profits. The
only means of earning profits for the organizations is to sell the goods or services. produced.
This profit is used to run the operations of the organization and to expand the business. For
this purpose the sales or marketing department is one of the most important departments in
any organization.
The purpose of the sales or marketing department is to meet the existing and the prospective
customers who can be interested in the company's products and hence the products can be
sold to them. The scope of sales department is narrow and it only performs the functions of
making and facilitating the sales. Marketing department on the other hand has a wide scope
and it covers all aspects of sales from the product's idea generation to its pricing, promotion
and the distribution.
3.6.1 Sales Procedure of TIP:
Telephone Industries of Pakistan depends on the sale of its products produced for the purpose
of earning profits. In order to facilitate sales, a separate department is established with the
22

36. name Commercial Department (sales). There is no marketing department at TIP.
Commercial Department (sales) is the most important department of TIP. : Regular! New
customers place office orders with telephone industries of Pakistan. It is a, statement of
requirements and is made to TIP through letter fax or telephone call. All inquires and orders
received from prospective customers are viewed keeping in mind the company's capacity to
meet the customer requirements. If the customer specifications Il1atch with the capacity of
the company, further actions are taken to complete the sale as under:
Sales Department forwards the copy of order to the Production Department asking it to start
the production according to the target fixed in purchase order. Production Department
produces the equipment and delivers the same to the Sales store on the delivery slip and also
informs the sales department. Now sales department: prepares six copies of advice/note for
the dispatch of material produced to consignee. The following colmlli1s are provided in the
advice/note
1. Consignee Address
11. Advice/note No. & Date
111. Mode of Dispatch
IV. Quantity
v. Drawing Designation of the Equipment.
Sales Department (Liaison) sends six copies to Sales store for the issuance of material. Sales
store maintains Ledger Card of equipment either produced or Purchased from outside. On
receipt of Advice/note sales store makes entry in the respective Ledger Card and sends the
equipment along with five (05) copies of advice/note ( a/note) to the forwarding officer for
onward dispatch to the Consignee and retains the one (01) copy of Advice/note (a/note) for
the booking purpose and officer record. Forwarding Office arranges the delivery of
equipment to consignees either by road or by train.
The Consignee after having received the goods signs on the Advice/note (a/note) as a token
of the receipt and sends back to the factory.
23

37. 3.6.2 Sales to PTCL:
T.I.P. is a subsidiary of PTCL and supplies equipment to PTCL on no profit no loss basis.
Assistant Manager (A.M.) Sales Department (liaison) and Commercial Officer CD (Sales)
only sign the Quotation. It is the responsibility of Sales Department (Liaison) to get the Firm
order released from PTCL. On receipt of the firm order from PTCL manufacturing of the
equipment are started. PTCL place three types of orders on TIP. Their detail is as follows:
3.6.3 Purchase Order against Development Work:
PTCL prepares Annual Development Programs. On the basis of Annual Development
Programs of PTCL, the Director General of PTCL calls for tender for 1he supply of
equipment and Installation charges thereof. TIP prepares Quotation and participates in
Tender. PTCL places order on the firm, which quotes the lowest price.
3.6.4 Purchase Order of the Store Suspense Order:
Controller of Telegraph Store places order for spare parts required for the 111faintenance of
existing exchanges.
3.6.5 Installation Order:
PTCL also places separate orders for the Installation of Exchanges. On the basis of estimated
hours, TIP works out total Installation Charges at the end. At the end of each year this section
also prepares a list of turnover showing quantity and value of each part sold during the year
which is required by Costing Office for the valuation of work in process.
24

38. CHAPTER 4
4.1 FINANCIAL STATEMENTS ANALYSIS OF TIP
Financial statements are organized mainly for the use of investors, creditors and for
managerial decision making. They provide support to the managerial decision but the
information provided in the financial statement is not complete and not show the certain
result. However, the information provided in the financial statements can be use in making
decision after calculation the ratios and constructing results. Ratios can be calculated by
establishing a reasonable relationship between balance sheet items and profit and loss
accounts. It also helps us for measuring the end result from the operation of that firm. This
analysis also helps us in determining the strengths and weakness of a firm. Or in other words
we can say that financial analyses are done for the purpose of identifying the financial
strength and weaknesses of an organization.
“The ratios simply mean one number expressed in terms of another. A ratio is a statistical
yardstick by means of which relationship between two or various figures can be compared or
measured” (Advanced Accounts by M.A Ghani)
4.2 Common size analysis
The use of common size analysis makes comparisons of firms for different sizes mush more
meaningful. Common size analysis means that in this analysis result to be show in percentage
all the items from the assets side of balance sheet will be divided by the total assets for
example if the cash is Rs 20,000 and the total assets are Rs. 100,000 then the cash will be
shown in common analysis as 20% of assets. A small change in amount can results in a very
substantial percentage change. This is the analysis where total assets are divided by all
balance sheet items, and all income statement items are divided by net sales or revenue is
called common size analysis. Common size analysis gives analyst a view of firm’s financial
trend and to see the changes in the financial conditions. As common size analysis gives us
relative percentage of an item with respect to total, so the growth or decline in various items
of balance sheet and income statement can not be detected from common size percentages. It
has the following two types:
25

39. 4.2.1 Horizontal analysis
Horizontal analysis compares each amount for a selected base year or we take each item of
base year as 100% and compare with other items.
Common size (horizontal) analysis of balance sheet
FIXED ASSETS 2005 2006 2007 2008
Plant, property and equipment 100% (23%) (45%) (62%)
Long term advances 100% (42%) (51%) (52%)
CURRENT ASSETS
Stores and spare parts 100% (43%) (38%) (62%)
Trade debts 100% (2.7%) (15%) (36%)
Stock in trade 100% (20%) (28%) (65%)
Tax refund due from government 100% (71%) (45%) (75%)
Bank balances 100% 31% (89%) (79%)
Share capital and accumulated loss
Issued subscribed and paid up 100% 0 0 0
Share allotment deposit 100% 0 0 0
Accumulated loss 100% 9.9% 53% 164%
Liabilities
Pension and other staff benefits schemes 100% 10% 23% 32
CURRENT LIABILITIES
Short term loans 100% 0 (8%) 1%
Deposits 100% (94%) 7% 1%
Creditors 100% (86%) (95%) (93%)
Accrued liabilities 100% (79%) (85%) 12%
Advance payments 100% (78%) (81%) (81%)
Provision for taxation 100% (15%) (24%) (30%)
26

40. 4.2.2 Trend Analysis of Income Statement
The trend analysis of the income statement shows the performance of an organization and
capability to meet the expenses. it also shows the future trend of organization. When we see
the trend analysis of Telephone industries of Pakistan it comes into our knowledge that TIP
continuously suffering from loss. Why TIP going into loss it can be seen in the following
table:
Trend analysis of income statement
Head of income statement 2005 2006 2007 2008
Sales 100% (26%) (86%) (87%)
Cost of goods sold 100% (33%) (78%) (69%)
Gross (Loss)/profit 100% 8% (8%) (18%)
Other income 100% (96%) (95%) (95%)
Administrative expenses 100% 8% (36%) 83%
Other operating expenses 100% (98%) (99%) (100%)
Finance cost 100% 96% 1.02 times 1.22 times
(Loss)/profit before taxation 100% (1.21) times (2.04) times (3.65) times
Provision for taxation 100% (94%) (98%) (99%)
(Loss)/profit for the year 100% (1.36) times (2.60) times (5.059) times
Above trend analysis shows that the sales in 2007 decline 86$% but it should be noted that
the cost of goods sold in 2006 decline more then the sales that’s why in 2006 gross profit is
8% after 2006 cost of goods sold incurred approximately in the same ratio. The amazing
trend is the administrative expenses with increase of 83% which shows the TIP is not
controlling the administrative expenses.
Telephone industries of Pakistan also incurring cost in respect of finance its cost is also
increasing continuously which must be noticed by the management of organization and take
the measure to reduce theses non-productive cost .the cost of goods sold and the sales
relationship also demand attention. Administrative cost and finance cost increasing trend is
cautious and demands serious attention from the management policies and it will be in the
best interest of the organization.
27

41. 4.2.3 Vertical analysis
Vertical analysis compares each amount with a base amount selected from the same year.
Simply, we compare the items of balance sheet or income statement vertically by taking one
item as 100%.
Common size (vertical) analysis of balance sheet (Assets side)
ASSETS 2005 2006 2007 2008
Cash and bank balances 7.20% 11.4% 1.09% 2.88%
Stores and spare parts 0.59% 0.41% 0.52% 0.44%
Loose tools 0.18% 0.22% 0.23% 0.23%
Stock in trade 18.2% 17.4% 18.7% 12.6%
Trade debts 43.0% 32.0% 29.4% 15.44%
Loans and advances 2.58% 1.20% 1.11% 1.53%
Trade deposits and short-term prepayments 2.00% 5.36% 4.14% 0.72%
Other receivables 0.19% 0.51% 2.08% 0.13%
Plant, property and equipment 3.10% 2.82% 2.37% 2.27%
Tax refund due to Government 1.40% 0.47% 0.478% 0.71%
Long term investments 20.25 28.3% 39.6% 63.0%
Long term advances 0.18% 0.12% 0.12% 0.99%
Interest accrued 0 0.007% 0.08% 0.003%
TOTAL ASSETS 100% 100% 100% 100%
GRAPHICALLY PRESENTATION of ASSETS
Cash
Stores
Loose tools
Stock in trade
Trade debts
Loans
Trade deposits
Other receivables
Plant
Tax refund
Advances
Interest accrued
Investments
28

42. Common size (vertical) analysis of balance sheet (Liability side)
LIABILITTIES 2005 2006 2007 2008
Issued, subscribed and paid up 28% 37% 40% 56%
Share allotment deposit 0.40% 0.49% 0 0
Accumulated loss (25%) (34%) (56%) (1.34) times
Pension and gratuity 32% 42% 56% 84%
Short term loans 33% 40% 44% 68%
Deposits 0.08% 0.09% 0.13% 0.17%
Creditors 14% 2.3% 0.8% 1.9%
Accrued liabilities 2.3% 0.57% 0.48% 5.1%
Advance payments 2.7% 0.7% 0.76% 1.06%
Other liabilities 2.5% 2.7% 3.19% 4.58%
Provision for taxation 10.3% 10.4% 11.0% 14.4%
TOTAL LIABILITIES 100% 100% 100% 100%
GRAPHICALLY PRESENTATION of LIABILITIES
Issued, subscribed and paid up
Share allotment deposit
Accumulated loss
Pension and gratuity
Short term loans
Deposits
Creditors
Accrued liabilities
Advance payments
Other liabilities
Provision for taxation
29

43. 4.3 Financial ratio analysis
A financial ratio is an index that relates two accounting numbers and is obtain by dividing
one number by other. One may consider that why there is a need to mingle with these ratios
and not take the actual figures straightforwardly. Among various reasons one strong reason
can be put forward that ratios help in comparison. When analysis is two compare the internal
performance of the organization in relation to time, only ratios analysis is the viable option
for them. Along with it, comparison with the other competitors in the same industry can only
be carried out with the help of financial ratios.
The number of financial ratios can be calculated to analyze the financial position of the firm.
4.3.1 Profitability Ratios
(i) Gross profit ratio
Gross profit ratio is the ratio of gross profit to net sales expressed as a percentage. It
expresses the relationship between gross profit and net sales.
Formula:
Gross profit ratio = Gross Profit / Net Sales x 100
Gross profit ratio 2005 = 329,938,790 / 1896279378 x 100
= 17.34 %
Gross profit ratio 2006 = 355,823,114 / 1,394,220,093 x 100
= 25.52 %
Gross profit ratio 2007 = (66,838,891) / 269,287,786 x 100
= (24.8%)
Gross profit ratio 2008 = (237,454,080) / 244,619,694 x 100
= (97%)
30

44. (ii) Net profit ratio
Net profit ratio is the ratio of net profit to net sales expressed as a percentage. It
expresses the relationship between net profit and net sales.
Formula:
Net profit ratio = Net Profit / Net Sales x 100
Net profit ratio 2005 = 223,581,137 / 1896279378 x 100
= 11.79 %
Net profit ratio 2006 = (81,175,922) / 1,394,220,093 x 100
= (5.82%)
Net profit ratio 2007 = (359,643,447) / 269,287,786 x 100
= (133%)
Net profit ratio 2008 = (907,627,898) / 244,619,694 x 100
= (371%)
(iii) Operating ratio
This is the ratio of cost of goods sold plus operating expenses to net sales. It is
generally expressed in percentage. It measures the cost of operations per rupee of
sales. This is closely related to the ratio of operating profit ratio to net sales.
Formula:
Operating ratio = CGS + Operating expenses / Net Sales x 100
Operating ratio 2005 = 1,566,340,588 + 336,907,108 / 1896279378 x 100
= 100%
Operating ratio 2006 = 1,038,396,979 + 332,260,375 / 1,394,220,093 x 100
= (98.3%)
31

45. Operating ratio 2007 = 336126677 + 196,031,775 / 269,287,786 x 100
= (198%)
Operating ratio 2008 = 482,073,774 + 560,393,075 / 244,619,694 x 100
= (426%)
200
100
0
-100 2005 2006 2007 2008
-200
-300
-400
-500
-600
-700
Gross profit ratio Net profit ratio Operating ratio
4.3.2 Overall profitability ratio
(i) Return on shareholder’s investment or net worth
It is the ratio of net profit to shareholder’s investment. It is the relationship between
net profit (after interest and tax) and shareholder’s funds. This ratio establishes the
profitability from the shareholder’s point of view. This ratio generally calculated in
percentage.
Formula:
Return on shareholder’s investment = Net Profit (after interest & tax) / shareholder’s
funds x 100
For 2005 = 223,581,137 / 896,193,000 x 100
= 25 %
2006 = (81,175,922) / 896,193,000 x 100
= (9.05%)
2007 = (359,643,447) / 896,193,000 x 100
= (40.01%)
32

46. 2008 = (907,627,898) / 896,193,000 x 100
= (101.2%)
(ii) Earnings per share (E.P.S)
Earning per share is a small variation of return on equity capital and is calculated by dividing
the net profit after taxes and preference dividend by the total number of equity shares.
Formula:
Earnings per share = Net Profit (after interest & tax) / No of equity shares
Earnings per share 2005 = 223,581,137 / 896,193
= Rs. 249
Earnings per share 2006 = (81,175,922) / 896,193
= Rs. (90.5)
Earnings per share 2007 = (359,643,447) / 896,193
= Rs. (401.30)
Earnings per share 2008 = (907,627,898) / 896,193
= Rs. (1012.76)
Earning per share
400
200
0
-200 2005 2006 2007 2008
-400
-600
-800
-1000
-1200
Earning per share
33

47. 4.3.3 LIQUIDITY RATIO
This analysis is also called analysis for short term solvency or short term financial position.
(i)Current ratio
Current ratio may be defined as the relationship between current assets and current liabilities.
This ratio is also known as working capital ratio.
Formula:
Current ratio = Current assets / Current liabilities
Current ratio for 2005 = 2,458,397,660 / 2,095,666,199
= 1.17 : 1
Current ratio for 2006 =1,829,311,852 / 1,523,772,094
= 1.20 : 1
Current ratio for 2007 = 1,305,186,678 / 1,360,964,642
= 0.95 :1
Current ratio for 2008 = 557,781,167 / 1,524,429,471
= 0.37 : 1
Current Assets to Current Liabilities
1.5
1
Current Assets to
Current Liabilities
0.5
0
2005 2006 2007 2008
34

48. CHAPTER 5
Main Findings and Recommendation:
The study of the organizational structure, systems and the performance of an organization and
then the analysis of its different departments reveal some important facts about the company.
These are the facts revealing the true picture of the organization including all the positive and
negative points on the basis of which the position of the organization is determined and the
management can decide about the future of the organization e.g. about the change in the
management structure, systems and processes etc.
This report is also organized on the same patters where the beginning sections discuss the
historical background; departmental review and Pakistan while the current section deals with
the Findings and Recommendations. Findings are given on the basis of my personal
observations during my time spent in the Telephone Industries and the written material
reflecting the performance of TIP, which I have collected in this period While
Recommendations are based on the analysis and findings about the organizational
performance and are solid points given to overcome the problems and weaknesses of the
organization (TIP).
The analysis of TIP tells that there are some basic problems with the organizational design,
human resource, R&D and some other departments, which should be removed immediately
for the successful working of the organization. The details are given as under:
5.1 General Findings and Recommendation:
5.1.1 Findings:
By analyzing the different departments of Telephone Industries of Pakistan for their functions
and processes, I come across certain facts which are given below: TIP has nothing to deal
with the fraud cases. TIP a big organization, but has not its marketing department which is
the need of an organization.
Telephone industries of Pakistan have machinery for the production of many different
products but most of this machinery is technologically old and needs extra time and efforts
for production. Due to this reason its cost of goods sold is increasing which has resulted in
the decrease in its profit.
Telephone industries of Pakistan has huge production capacity but it has never produced at its
full capacity due to which it's per unit cost is high. TIP has been involved in research and
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49. development but the organization has never been able to capture so much capable resources
(human & physical) to introduce the best quality products at cheaper rates.
Personnel department of the telephone industries of Pakistan has got some very devoted and
skilled employees and workers but they are not sufficient enough to meet the demands of
such a large organization. It is, therefore, very difficult for the organization to employ its
limited staff on new development projects.
The managers at the top m1d middle level are not controlling the employees efficiently and
have developed a culture in which there is no motivation and role modeling of the superiors
and no share of the subordinates in the Decision Making process.
Telephone industries of Pakistan depend mostly upon only one buyer that is Pakistan
Telecommunication Company Limited and has not sold its products in open market. Tip has
never been involved in any type of marketing activity.
The Quality Assurance Department of TIP has remained active in the past when the R&D
was efficiently working but now it has also become inactive and the rate of defects in the
products or their performance have increased.
5.1.2 Recommendation:
TIP should have a proper system to deal with the fraud corruption by the upper management
so that these types of events can never be happen again. As soon as possible TIP should start
its on full fledged marketing department as it is age of marketing and competition.
Telephone industries of Pakistan we found that telephone industry of Pakistan have old,
machinery and insufficient workers. With the passage of time new technologies are brought
in the market and the organizations which adopt new and better technologies have cost of
production much lower than the other firms having old technologies. There is need for
Telephone Industries to install new machinery and overhaul old machinery to work properly.
It should also give training to its unskilled workers to become profitable for the organization.
This is very necessary for the long term survival of the organization.
Telephone industries of Pakistan are unable to take all the orders from Pakistan
Telecommunication Company Limited. Now, PTCL purchases its products by calling tenders
or quotations in which TIP participates as a member. Many times TIP remains unable to
receive the orders because the other companies offer their products at lesser rates. There is
need for TIP to minimize its cost of goods sold so that it may be able to take all the order
from its sister concern PTCL.
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50. Downsizing
In the downsizing operation a lot of loyal and skilled workers and engineers left the
organization. TIP should try to retain the remaining skilled and devoted employees and
workers because the workers are the most power full asset of any organization and at difficult
times the organization needs the people who are more committed and loyal to the
organization.
Organizational culture
TIP should also change its organizational culture. The existing culture in which there is no
motivation, no job rotation and employees' development should be changed for a better
culture in which there should be good and effective communication, motivation and feedback
for the employees. It is necessary for the betterment of the organization, for the achievement
of the organizational goals, for the reduction of cost and expenses and for increasing the
efficiency of the workers and profit as well.
Marketing
Telephone Industries of Pakistan totally depended upon only one buyer i.e. PTCL and sold all
of its products on it. This is not a good policy and TIP has suffered a lot because of it. TIP
should expand its business beyond PTCL and should try to find out new markets for its
products.
For expanding the market it is necessary for Telephone Industries of Pakistan to involve in
the effective marketing campaign. The website developed by TIP is not meeting to the needs
of global world they should try to provide more information and make it interactive from the
customer point of view. Tip was established as a production unit of PTC but after
privatization of PTCL, TIP facing order problem due to lack of effective marketing
campaign.
Research and Development
TIP aims at self-sufficiency and has therefore set-up its own Research and Development
wing. This wing has already done considerable work in the development of new circuits and
equipment and in exploring possibilities of applying new scientific knowledge. Various other
activities are striving for the provision of more environmental procedures to manufacture
equipment suitable for the local condition and requirements.
Apprentice training
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51. TIP created facilities for apprentice training in its premises at a very early stage. This was
necessary because the rural area of HAZARA didn't offer sufficient number of technically
experiences workers. Practically the entire stat of the factory has been trained in the factory
itself, thus contributing towards the industrial and technical development of this particular
region, TIP has adopted the training scheme used in Siemens-Factories and adjusted in
according to the condition, prevailing here. For skilled technicians, the normal period of
apprenticeship is 3 year with the possibility to shorten and pass the half yearly examinations
with good result.
Lastly, we can say that;
TIP has contributed toward the Industrial Development the country the fields of precision
manufacturing.
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52. 5.2 Conclusion:
The products have reliability of service due to the standard of quality. The establishment of a
good Research & Development is helping in the introduction of the advanced technology and
changes modifications in the running products.
TIP manufacturing all parts according to the merit system. For maintenance of standards of
precision TIP Measuring Laboratory. The production process is started after proper pre-planning
by the Production Planning Branch and is finalized by a strict quality Control. The production
process itself is carried out by using means of modern techniques.
The workers are mostly paid according to the piece-rate system, which enables them to earn their
wages in accordance with their efficiency and skill.
TIP has qualified staff, huge production facilities and vast areas and opportunities to grow and
expand. There is need to adopt the suggestions given in this report, if TIP wants to regain its lost
strength. With the proper implementation of these suggestions, effective control and efficient
management there will be the existence of fair organizational culture, the commitment of
workers with the organization will increase, resources will be used efficiently, product line will
expand, market share will increase and all the resources will prove to be much more profitable
than ever before.
If all this can be made possible and these precious human and non human resources are used
with vigilance and proper planning TIP can certainly reach a point where it will be next to no
other company in the country and Pakistan will be among the world leaders in the field of
telecommunication.
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53. References:
Books
1: M.A. Ghani. Fourth Revised and Enlarged edition, My-Word Composing Center, Lahour
2003
Reports
1) Idrees, Shahid. 2003. An Internship Report on TIP. Islamabad, Quaid-e-Azam University,
Department of Administrative Sciences.
2) Rashid, Tayyiba. 2002. Internship Report on TIP. Peshawar, University of Peshawar,
Institute of Management Studies.
3) Financial repot, Telephone Industries of Pakistan, 2006,2008
Internet
1. http://www.ptcl.com.pk
2. http://www.pakistaneconomist.com/
3. http://www.zumbeel.net/beta/news/details.php?rev_param=6808
4. http://www.tip.org.pk
5. www.alibaba.com/member/ajtip.htm
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54. ANNEXURES
(A) Telephone industries of Pakistan Profit & Loss Account
For the year ended June 30, 2005, 2006
(B) Telephone industries of Pakistan Balance Sheet
For the year ended June 30, 2005, 2006
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55. (C) Telephone industries of Pakistan Profit & Loss Account
For the year ended June 30, 2007, 2008
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56. 43

57. (D) Telephone industries of Pakistan Balance Sheet
For the year ended June 30, 2007, 2008
44