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ALLAMA IQBAL OPEN UNIVERSITY
(Department of Business Administration)
Assignment # 2
Financial Management (5535)
TOPIC:CRITICALLY ANALYZE THE FINANCIAL
MANAGEMENT FUNCTIONS
Submitted to:Sir Waqar Akbar
Submitted by:Ishtiaq Ahmed (0333-6824303)
AH-526270
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ACKNOWLEDGEMENT
All praises to Almighty Allah, the most Gracious, the most
Beneficent and the most Merciful, who enabled me to complete this
assignment.
I feel great pleasure in expressing my since gratitude to my teacher,
for his guidance and support for providing me an opportunity to
complete my Project.
My special thanks and acknowledgments to Mr. Zeeshan for
providing me all relative information, guidance and support to
compile the project.
I will keep my hopes alive for the success of given task to submit
this report to my honorable teacher Sir Waqar Akbar, whose
guidance; support and encouragement enable me to complete this
assignment.
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EXECUTIVE SUMMARY
The todays world moves at neck breaking speed & it calls for a
decisive action
Quantum Leap thinking
The financial management is generally concerned with
procurement, allocation and control of financial resources with a one
main goal of increase in shareholder wealth.
PTCL has a Profit oriented management and one of the most
profitable organization in the public sector. PTCL ha a big market
share and big service provider in Pakistan. But PTCL can generate
more profit by adding more products in product line and by
expanding its network in more areas. PTCL has to give special
attention on employees training and Motivation because there exist
a Resistance in the organization from the employees. PTCL must
have to control on debts because its harmful for the organization.
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Table of Contents
Table of Contents PageNo
Title page
Acknowledgement 02
Abstract 03
Table of contents 04
Introduction to the issue 05
Practical study of organization 08
Practical study of organization with respect to the
issue
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SWOT analysis 17
Recommendations 18
Conclusion 19
References 20
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Introduction to Topic
Meaning of Financial Management:Financial Management means planning, organizing, directing and
controlling the financial activities such as procurement and
utilization of funds of the enterprise. It means applying general
management principles to financial resources of the enterprise.
Scope/Elements:
1. Investment decisions: includes investment in fixed assets(called as capital budgeting). Investment in current assets is
also a part of investment decisions called as working capital
decisions.
2. Financial decisions: They relate to the raising of finance from
various resources which will depend upon decision on type of
source, period of financing, cost of financing and the returns
thereby.
3. Dividend decision: The finance manager has to take decision
with regards to the net profit distribution. Net profits are
generally divided into two:a. Dividend for shareholders- Dividend and the rate of it has
to be decided.
b. Retained profits- Amount of retained profits has to be
finalized which will depend upon expansion and
diversification plans of the enterprise.
Objectives of Financial Management:
The financial management is generally concerned with
procurement, allocation and control of financial resources of a
concern. The objectives can be:
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1. To ensure regular and adequate supply of funds to the concern.
2. To ensure adequate returns to the shareholders which will
depend upon the earning capacity, market price of the share,
expectations of the shareholders?
3. To ensure optimum funds utilization. Once the funds areprocured, they should be utilized in maximum possible way at
least cost.
4. To ensure safety on investment, i.e., funds should be invested
in safe ventures so that adequate rate of return can be
achieved.
5. To plan a sound capital structure-There should be sound and
fair composition of capital so that a balance is maintained
between debt and equity capital.
Functions of Financial Management:
1. Estimation of capital requirements: A finance manager has
to make estimation with regards to capital requirements of the
company. This will depend upon expected costs and profits and
future programmes and policies of a concern. Estimations have
to be made in an adequate manner which increases earningcapacity of enterprise.
2. Determination of capital composition: Once the estimation
has been made, the capital structure have to be decided. This
involves short- term and long- term debt equity analysis. This
will depend upon the proportion of equity capital a company is
possessing and additional funds which have to be raised from
outside parties.
3. Choice of sources of funds: For additional funds to be
procured, a company has many choices like-
a. Issue of shares and debentures
b. Loans to be taken from banks and financial institutions
c. Public deposits to be drawn like in form of bonds.
Choice of factor will depend on relative merits and demerits of
each source and period of financing.
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4. Investment of funds: The finance manager has to decide to
allocate funds into profitable ventures so that there is safety on
investment and regular returns is possible.
5. Disposal of surplus: The net profits decision has to be made
by the finance manager. This can be done in two ways:a. Dividend declaration - It includes identifying the rate of
dividends and other benefits like bonus.
b. Retained profits - The volume has to be decided which will
depend upon expansional, innovational, diversification
plans of the company.
6. Management of cash: Finance manager has to make
decisions with regards to cash management. Cash is required
for many purposes like payment of wages and salaries,payment of electricity and water bills, payment to creditors,
meeting current liabilities, maintenance of enough stock,
purchase of raw materials, etc.
7. Financial controls: The finance manager has not only to plan,
procure and utilize the funds but he also has to exercise control
over finances. This can be done through many techniques like
ratio analysis, financial forecasting, cost and profit control, etc.
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Practical Study of theOrganization
Pakistan Telecommunication Company Ltd
Pakistan Telecommunication Company Limited (PTCL) is the largest
telecommunication company in Pakistan. The company providestelephony services nation-wide and is the backbone for country's
telecommunication infrastructure despite arrival of a dozen other
telecommunication companies, including giants like Telenor and
China Mobile. The company operates around 2000 telephone
exchanges across the country, providing the largest fixed line
network. Data and backbone services such as GSM, CDMA,
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Broadband Internet, and IPTV, wholesale are an increasing part of its
business. Originally fully owned by the Government of Pakistan, this
holding has since 2006 been reduced to 62%, when 26% of shares
and control was sold to Etisalat - and the remaining 12% to the
general public.
Company Profile
PTCL is all set to redefine the established boundaries of the
telecommunication market and is shifting the productivity frontier to
new heights. Today, for millions of people, we demand instant
access to new products and ideas. More importantly we want them
for their better living standards with increased values in this ever-shrinking globe of ours. We are setting free the spirit of innovation.
PTCL is going to be your first choice in the future as well, just as it
has been over the past six decades.
Business & Corporate Users:
For clear communication the first choice of business circles is PTCL
telephone for local, nationwide and international calling. Today
businesses can have 10-100 lines with modern day services to meettheir needs. Now you get options like Caller-ID, call-forwarding, call-
waiting, Call Barring, to name a few.
Other business specific services include:
0800-Toll free number, 0900-Preminum rate services, VPN-Virtual
Private Network, Audio Conference Service, Digital Cross Connect
(DXX), ISDN (Policy), Teleplus (ISDN/BRI), Digital Phone Facilities/
Modification Charges, UAN, UIN.
Nationwide Infrastructure:
We have the largest Copper infrastructure spread over every city,
town and village of Pakistan with over million installed lines. The
network has over 6 million PSTN lines installed across Pakistan with
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more than 3 million working. Furthermore installed capacity of
broadband is more than 0.6 million ports spread across 318 cities
and town of the country.
EVO Wireless Broadband:
PTCL EVO 3G Wireless Broadband is Pakistans fastest wireless
internet which offers its customers superior 3G internet
experience. EVO Wireless Broadband is enabling the wireless
broadband revolution in Pakistan with flexibility to roam freely like
never before. PTCL EVO has revolutionized the way people connect
to the internet by offering true mobility. PTCL EVO is currently
offering its services in more than 18 cities on EV-DO technology
offering speeds up to 3.1 Mbps. PTCL EVO gives its customers the
advantage of nationwide roaming with seamless internet
connectivity across Pakistan. The coverage of EVO is not limited to
100 cities as EVO customers can enjoy CDMA-1X data rates of up to
153.6 Kbps at more than 1000 destinations across Pakistan.
The portable, small & stylish EVO USB device is a multipurposedevice which not only delivers fastest wireless internet but can also
be used for Voice Calls by inserting a Vfone SIM and for data storage
by inserting a standard Micro SD Card
Broadband Pakistan:
PTCL Broadband is the largest and the fastest growing Broadband
service in Pakistan. In less than three years of it launch, PTCL has
acquired approximately 668,376 Broadband customers in over 605
cities and towns across Pakistan, leading the proliferation and
awareness of Broadband services across Pakistan.
With its entry in this market segment, PTCL opened up a broadband
culture in Pakistan, where till a couple of years back there was very
little awareness in the country about broadband & high speed
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internet services. PTCL made the broadband technology affordable
by lowering the barriers to entry, by geographically bringing the
service within the reach of a common user across Pakistan and by
continuous improvements in customer care for the service.
Unique offers that makes PTCLs Broadband unmatchable are
special packages for the student segment, FREE modem and
installation, Availability of Wi-Fi Modems, FREE dial up service for its
Broadband customers and FREE access to movies, music, classical
Pakistani dramas, cricket matches, online gaming, educational and
religious content on PTCLs entertainment portal BUZZ, (the access
to PTCL Buzz & Gaming lounge is exclusive to PTCL Broadband
subscribers). PTCL also offers multiple FREE personalized e-mailaccounts exclusively to its broadband users. In addition, PTCL
recently doubled its broadband speed for all its existing and new
customers at the same price, making 1 MB as its minimum offered
speed. For a connection you simply dial 0800 8 0800 or visit
www.ptcl.com.pk
History:
From the beginnings of Posts & Telegraph Department in 1947 and
establishment of Pakistan Telephone & Telegraph Department in
1962, PTCL has been a major player in telecommunication in
Pakistan. Despite having established a network of enormous size,
PTCL workings and policies have attracted regular criticism from
other smaller operators and the civil society of Pakistan.
Pakistan Telecommunication Corporation (PTC) took over operations
and functions from Pakistan Telephone and Telegraph Departmentunder Pakistan Telecommunication Corporation Act 1991. This
coincided with the Government's competitive policy, encouraging
private sector participation and resulting in award of licenses for
cellular, card-operated pay-phones, paging and, lately, data
communication services.
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Pursuing a progressive policy, the Government in 1991, announced
its plans to privatize PTCL, and in 1994 issued six million vouchers
exchangeable into 600 million shares of the would-be PTCL in two
separate placements. Each had a par value of Rs. 10 per share.
These vouchers were converted into PTCL shares in mid-1996.
In 1995, Pakistan Telecommunication (Reorganization) Ordinance
formed the basis for PTCL monopoly over basic telephony in the
country. The provisions of the Ordinance were lent permanence in
October 1996 through Pakistan Telecommunication (Reorganization)
Act. The same year, Pakistan Telecommunication Company Limited
was formed and listed on all stock exchanges of Pakistan
PTCL launched its mobile and data services subsidiaries in 2001 by
the name of Ufone and PakNet respectively. None of the brands
made it to the top slots in the respective competitions. Lately,
however, Ufone had increased its market share in the cellular
sector. The PakNet brand has effectively dissolved over the period of
time. Recent DSL services launched by PTCL reflect this by the
introduction of a new brand name and operation of the service being
directly supervised by PTCL.
As telecommunication monopolies head towards an imminent end,
services and infrastructure providers are set to face even bigger
challenges. The post-monopoly era came with Pakistans
Liberalization in Telecommunication in January 2003. On the
Government level, a comprehensive liberalization policy for
telecoms sector is in the offering.
In 2005 Government of Pakistan decided to sell 26 percent of thiscompany to some private corporation. There were three participants
in the bet for privatization of PTCL. Etisalat, an Abu Dhabi based
company was able to get the shares with a large margin in the bet.
Government's plan of privatizing the corporation was not welcomed
in all circles; countrywide protests and strikes were held by PTCL
workers. They disrupted phone lines of institutions like Punjab
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University Lahore along with public sector institutions were also
blocked. Military had to take over the management of all the
exchanges in the country. They arrested many workers and put
them behind bars. The contention between Government and
employees ended with a 30% increase in the salaries of workers.
Practical Study of the Organizationwith respect to the Issue
Financial Management Functions of PTCL:
Estimation of capital requirements
Determination of capital composition
Choice of sources of funds
Investment of funds
Disposal of surplus
Management of cash
Financial controls
Analysis of Financial Management Functionsof PTCL:1. Analysis of Financial Statements
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Balance Sheet
As on June 30, 2011Particulars 2011 2010
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Cash
Marketable Securities
Accounts Receivable (net)
QUICK ASSETS
Inventory
Prepaid Assets
Other Current Assets
TOTAL CURRENT
ASSETS
Property, Plant &
Equipment
Intangible AssetsInvestment in Shares
Other Long-Term Assets
TOTAL ASSETS
Trade Payables
Other Current Liabilities
Long-Term Debt
Defferd tax
TOTAL LIABILITIES
Preferred Stock
Common Equity
Retained Earnings
TOTAL EQUITY
TOTAL LIABILITIES &
EQUITY
6,422,144,000
13,493,865,000
10,171,530,000
_______________
30,087,539,000
4,075,863,000
0
11,286,834,000
_______________
45,450,236,000
88,219,285,000
3,079,031,000
6,681,965,000
7,337,210,000_______________
150,767,727,00
0
_______________
24,922,197,000
5,270,581,000
17,866,468,000
2,949,770,000
_______________
51,009,016,000
0
83,613,704,000
16,145,007,000
_______________
99,758,711,000
_______________
150,767,727,00
0
_______________
11,906,448,000
21,017,790,000
10,760,974,000
_______________
43,685,212,000
5,201,991,000
0
5,333,038,000
_______________
54,220,241,000
87,567,351,000
3,320,670,000
5,607,439,000
3,332,378,000________________
154,048,079,000
________________
26,114,171,000
9,972,151,000
16,193,198,000
2,379,000,000
_______________
54,658,520,000
0
83,183,074,000
16,206,485,000
__________________
99,389,559,000
_______________
154,048,079,000
_______________
Pakistan Telecommunication LimitedIncome StatementAs on 30 June 2011
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Particulars Current Year Prior year
Net RevenueCost of Goods Sold
GROSS PROFIT
AdministrationSelling and MarketingOther OperatingExpensesDepreciationAmortizationOPERATING INCOMEInterest
INCOME BEFORETAXES
TaxesNET INCOME
62,309,173,000(38,258,711,000)
63,506,173,000(37,732,282,000)
24,050,462,000
(7,223,780,000)(2,142,324,000)
00
25,773,891,000
(8,935,261,000)(1,817,071,000)
(92,118,000)0
14,684,358,000(403,240,000)
14,929,441,000(908,524,000)
14,281,118,000(4,986,966,000)
14,020,917,000(4,869,732,000)
9,294,152,000 9,151,185,000
2. Analysis of Cash flow statements:
PTCLCash flow statement
For the year ended June 30, 2011Particulars Current period
Prior period
Opening cash
Operating
activities
Investing activities
Financing activities
Closing cash
31,702,352,000
(13,029,562,000)
(11,627,447,000)
(13,188,458,000)
19,916,009,000.0
0
14,889,524,0
00
(28,904,490,00
0)
(12,088,920,00
0)
(2,742,000.00)
31,702,352,0
00.00
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3. Ratio Analysis:
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SWOT Analysis
Strength: Profit Oriented Management
One of the Profitable Organization in the Public Sector
Big internet provider
Huge cable network in 360 cities
Weakness: Employees Resistance
Less creative
Lack of Corporate Social Responsibility
Opportunities: Can generate more profit by Service expansion in further areas
Employees Motivation
Can expand Business by Expansion in Wife Services 3G Technology
Threats: Negative Leverage Ratio
Naya Tell and other competitors
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Recommendation
Following are some recommendations for PTCL:
Should have to control on Debts.
Should have to train and motivate the employees
Should have to expand the Network.
Add more Products in the Product Line.
Should inject new Blood.
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Conclusion
I have conclude that,
The financial management is generally concerned with
procurement, allocation and control of financial resources with
a one main goal of increase in shareholder wealth.
PTCL has a Profit oriented management and one of the most
profitable organization in the public sector.
PTCL ha a big market share and big service provider in
Pakistan. But PTCL can generate more profit by adding more
products in product line and by expanding its network in more
areas.
PTCL has to give special attention on employees training and
Motivation because there exist a Resistance in the organization
from the employees.
PTCL must have to control on debts because its harmful for
the organization.
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Reference
Project report Critically Analyze the Financial Management
Functions
www.ptcl.com.pk
www.slideshare.com
http://www.google.com
http://www.wikkipedia.com
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