PROJECT OF “FINANCIAL DECISION MAKING”

TOPIC: FINANCIAL STATEMENT ANALYSIS Submitted To: SIR.AHMED HASSAN Submitted By: KHURAM JAVAID CIIT/SP10-MBA1/LHR

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY LAHORE

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Networks of PIA (Domestic Network)

International Network

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 Participating in global alliances.  Ensuring cost effective measures in procurement and operations  Achieving adequate returns for all stake holders. MISSION STATEMENT 16 .  Providing competitive compensation and a congenial work environment. Mission Statement  Offering quality customer services and innovative products.  Using state of the art technologies.  Being an equal opportunity employer.Vision  PIA to be a world class profitable air line exceeding customer expectations through dedicated employees committed to excellence.

Modernization of the communication system and the fleet replacement & and up-gradation is of massive importance in this regard.  Key success factors Modernization: In airline industry modernization is the key success factor.  Key success factors  Organizational value  Organization philosophy  Target market Mission of PIAC As a symbol of National pride.Mission statement is an overriding statement inline with business and aspirations of stakeholder’s expectations. The airline should be responsive to the changes that are taking place in the environment. It should be a choice employer deploying modern technology in all spheres of its activities. capable of competing with the best in its entire International and Domestic markets consistently exceeding customer expectations. From communication side PIA has recently upgraded its previous communication system REPAK by the new and state of the art SABRE system which is directly connected to 16 . As far as PIA is concerned modernization has been the hallmark of it. Pakistan International must strive to be an airline of choice operating profitably on modern commercial concepts. Generally a mission statement covers following four areas.

 Organization philosophy PIA believes in competition. PIA has been upgrading its fleet periodically keeping in view the changing customer needs.  Target market: PIA has always kept its market broad. Initiation of telephonic reservation is also worth mentioning in this regard. which fall in the category of wide body aircraft and will fulfill the requirements of class one passengers Organizational value Customer responsiveness: PIA is very responsive towards its valued customers and customer responsiveness is embedded in the organization culture. If we compare its domestic and international route map over the period of time will come across that it has expanded its operations drastically to meet the needs of its customers. It believes on the slogan that “Customers are the king”. It has continuously been offering special incentives and schemes for its customers like AWARD PLUS and many others. Values 16 . PIA also maintains very close interaction with its agents and provides them with the latest information including fare lists etc.Singapore. nothing can hinder its growth and success. It believes that if an organization is capable of competing with the best in the industry. Recently it has signed a contract with Boeing company to purchase eight Boeing 777 aircrafts. Moreover the customers place suggestion boxes at its domestic and international counters to obtain helpful comments and constructive criticism.

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All the departments in the organization give their reports to the finance department and it makes and presents the final report for the decision making purpose.FINANCE DEPARTMENT The major function of the finance department is the reporting of all the financial events of all departments. AUTOMATION The Finance section is totally computerized and linked with Head Office. The finance department gets all the documents and then compiles them in the form of a report. 16 . The COSSAP is using through out the department. • • • • • Collections from PIA’s counters Collections from Agents Collections from Cargo counter Collections from cargo agents Collections from excess baggage DISBURSEMENT • • • • • Refunds of tickets Salaries Utilities bills Works Others……………………. Collections are of different types.

R1R2R3R4R5R6R7R8R9Passenger sales report on counter & Agents (SAR & ASR) Cargo sales report Cargo receipt on the behalf of the other station Miscellaneous collection except credit Credit receipt reports Refund to passengers Except cargo other collections on the behalf of other stations Invoicing All sorts of collections/passenger/cargo/others R10.REPORTING SYSTEM There 11 types of reports maintained by the Finance Department and in evening the whole closing must be done in order to avoid errors.Cargo sales receivables from agents CREDIT ALLOWANCE The credit sales either for the tickets or for the cargo is also recorded into computer system and relevant reports are generated and the whole record of these sales is also maintained. IT department in PIA RWP Station is not only responsible for maintaining network 16 . Introduction Of Communication & It Department IT department is one of those departments that is considered to be the backbone o the whole organization.Sales reports from agents/receivable generation R11.

Network. Telephone Exchange. 16 .among different stations but it deals with different operations like Telephone Billing. • • • Data Communication.managing Inventory and the whole Communication structure. E-ticketing . Following are the Subsections that work under IT department.

366 2.950 2.214.799.855 149.075 290.804.421 51.933 1.614.144.335 323.087 2.239 4.064 768.524.060.640 157.738 46.280.790.104 51.878.170.712 SHARE CAPITAL AND RESERVES Share capital Reserves Unrealized(loss)/gain on remeasurement investment-net Foreign Exchange Reserve Accumulated Loss NON CURRENT LIABILITIES Long Term Finance under mark-up arrangements Term Finance Certificate Liabilities against assets subjects to finance lease Long Term Murabaha finance Long Term Deposits Deferred Liabilities 16 .980.940 21.003.403 3.395.820 2067.771 310.724.180 16.170 5.449 363.298 4.537.242.222.024 -------------321.866 28.446.669.723.690 41.257.914 112.298 1.644 2.236 2.937 188.233.263. 2009 NON CURRENT ASSETS Fixed Assets Property-plant and equipment Intangibles Long Term Investment Long term advances and other receivables Long term deposits and prepayments CURRENT ASSETS Stores and spares Trade Debts Advances Trade deposits and prepayments Accrued interest Other receivables Short term investment Taxation-advance tax net of provision Cash and bank balance 2009 2008 Rupees in Thousand 132.621.745 549.900 1.470.765 161.755.BALANCE SHEET AS AT DECEMBER 31ST.705 6.376.117 134.280.980 32.866 182.140.441 -36.175 39.534 513.099 14.659 4.286.708 481.116.635.789 1.074 4.966 10.756.691 12.137 5.703 140.897.934 10.917 581.712 of 97.706.107 -11.553 72.994.140 -15.465 1.029.824.503 17.234.977 60.043 20.419.679 14.

232 4.897.884 19.372 978.075 1.237.970 2.921 607.388 5.CURRENT LIABILITIES Trade and other payables Accrued Interest/mark-up Short Term Borrowing Taxes Current portion of : Long Term Finance under mark-up arrangement Term Finance Certificate Liabilities against assets subject to finance lease Long term Murabaha finance Total Current Liabilities CONTIGENCIES AND COMMITMENTS Total Equity & Total Liabilities 21.523.900 21.349 2.037 157.845.724.317 18.769 362.652.503 16 .067.983.363 837.043 14.849.101 72.144.621.495 -------------53.103 756.105.

194.571.513.759.554.293.489.509.364 -20.576 -6.655 -26.112 7.221 614.586 4.634 1.893 5.211 7.918.897 Gross Profit Other Operating Income Marketing and distribution costs Administrative expenses Other Income (Loss)/Profit from operations Finance cost Other provisions and adjustments.159 42.657 78.047.462.940.169 -4.753 -12.Profit and Loss Account Statement Profit and Loss Account For the year ended December 31.net (Loss)/Profit before tax Taxation (Loss)/Profit for the Year 6.346 -13.487.605 -2.411.133.115 -58.241.893.325.669 -3.809.236 101.753.738 72.315.787.470 16 .215.483 2008 64.448.076 ------------1.442 -2.654 11.938.721 -32.265 726.836 5.478.044.674 1.794 -4.399 33.579 -4.230.523 -4.2009 2009 Turnover-Net Cost of service Aircraft Fuel Others 30.

It shows a firm’s ability to cover its current liabilities with its current assets.RATIO ANALYSIS CURRENT RATIO Current Ratio is obtained by dividing current assets by current liabilities. = Current Assets Current Liabilities Year Calculations Current Ratio 16 .

60 ANALYSIS Result of this ratio is that during the year the ratio is declining rapidly.30 2008 0. PIA could face problem if the current ratio will decline.243 2008 0.46 16 . = Current Assets – Inventory Current Liabilities Year 2009 Calculations =16419640000-3286170000 53849037000 =1275655000-279013000 21237101000 ANALYSIS Acid-Test Ratio 0.2009 =1641964000 53849037000 =12756553000 21237101000 0. It shows a firm’s ability to meet its current liabilities with its most liquid (quick) assets. QUICK RATIO Current assets less inventory divided by current liabilities.

Here. = Total Liabilities Total Assets Year 2009 Calculations = 215083177000 157144043000 = 62451265000 72897563000 ANALYSIS Debt ratio in the year 2006 was not so much efficient but it is going to efficient in the coming years. Ratio is decreasing continuously.060.86 Total Debt Ratio = Total Liabilities Total Equity Year 2009 Calculations = 215083177 2. Debt Ratio 1.8660 = 62451265 Debt Ratio 10. the same case with acid test ratio. Result shows that more proportion if asset as inventory in current asset with comparison to other assets.4 2008 5.37 2008 0. Debt Ratio Dividing the firm’s total liabilities by its total assets derives the Debt Ratio.97 16 .

88 NET PROFIT MARGIN A more specific measure of the sales profitability is the net profit margin: =Net Profit(loss) after Taxes Net Sales Year 2009 2008 Calculations =(1321565000) 78554483000 =(4411657000) 64074470000 ANALYSIS PIA profit margin is decreasing in negative so PIA is going in so much losses Net Profit Margin (16.047.10.043 = 64.503 Debt Ratio 0.8%) (6.446.298 Total Asset Turnover = ____Sale Total Asset Year 2009 Calculations =78.483 157.470 72.897.554.144.88%) 16 .49 2008 0.

it’s completely in losses.503 -0.53.21.237.553 .11 Return on Earning Asset =Net profit after tax assets 16 .RETURN ON EQUITY (ROE) ROE compares net profit after taxes (minus preferred stock dividends.12%) (42.419.037 157.8 -0.897.849. Return On Equity (64.23%) Net Working Capital Turnover =Current Asset – Current liabilities Total assets Year 2009 2008 Calculations =16.043 = 12.101 72.640 .144.756. if any) to the equity that shareholders have invested in the firm: =Net Profit After Taxes Shareholder’s Equity Year 2009 2008 Calculations =(13215655000) 2060866000 =(4411657000) 10446298000 ANALYSIS PIA return on equity is also in negative.

08 -0.215.503 Return On Equity -0.897.06 16 .144.411.Year 2009 2008 Calculations = -13.655 157.043 = -4.657 72.

CONCLUSION Pakistan International Airlines Corporation (PIAC) is a giant organization and enjoys complete monopoly at national level. technologically advanced operational system and a well established centre to train its workforce. PIA’s management style is centralized and the direction of strategy development can be viewed as market development. Being a semi government organization. 16 . as it provides top quality services but at comparatively higher prices. huge infrastructure. PIA’s generic competitive strategy can be categorized as differentiation. Any a few linkages can be created like between technology development-operations and human resources-operations. So PIA has no literal threat of any potential competitor. e. PIA is highly affected by any change in political or economic frontier.g. As far as core competences of PIAC are concerned. Its financial position has also been improved over the year due to sound management policies (cost controlling measures are the important ones). Airline industry due to heavy capital requirement poses great barrier to entry. even its single activities are not less than its competences.

Apart from this. Every SBU should have a defined business strategy and a manager with sales and profit responsibility. so it would ultimately lead to more satisfied employees that would result in enhanced productivity of the organization. Since employees issues regarding their behavior would lessen. easy access to information and resolution of the conflicts (as they would be resolved by the immediate manger time span would then reduced). increased motivation. Strategic Business Unit PIA should make its different departments into Strategic Business Unit. so it must be convert into SBUs. Different factors should be determined for the success of SBUs which as follows:    The degree of autonomy given to each SBU manager The degree to which an SBU shares functional programs and facilities with other SBU's The manner in which the corporation evaluates and rewards the performance of its SBU managers Employee Empowerment PIA should make efforts towards empowering the employees that is going to lead to more employee participation in the decision making process and also result in more employee satisfaction and enhanced motivation. As PIA is a large organization. employees would feel more independent 16 .SUGGESTION & RECOMMENDATIONS FOR PAKISTAN INTERNATIONAL AIRLINES Decentralization PIA should decentralize its structure that would lead to the easy management.

the employees would feel motivated and valued as they would be included in decision-making. there should also be a “controlled check’’ on them to ensue the correct usage of power delegated to every employees within their circumscribed limits. Therefore. with empowerment comes accountability. However.to discuss the issues explicitly without hesitation. Overhead Costs PIA should also reduce its overhead costs that are it should mange its resources: labor more effectively. Hiring the services of expertise can improve the efficiency of their services. So by analyzing the various segments of the organization and making the right corrections. Two-Way Communication The suggestions of the employees can prove to be very effective in improving the operations as they are the ones who manage them. they can utilize that money for the expertise services. a top-down approach should be replaced with two-way communications. The employees will work with more commitment and dedication and every employee would work to his/her fullest due to increased motivation. 16 . so by saving the overhead costs. more out put can be achieved and the saved resources can be utilized in other areas such as introducing more training courses for the employees so that the quality of the workforce could be increased. so it is suggested that while they empower their employees. This would also enhance team work process at PIA as quality team and cross-functional teams. so that with less input. it can substantially improve the standards of Organizational behavior. In this way.

16 .Total Quality Management Total quality management should be catered to within the work groups and implementation of various skill enhancement programs for quality and productivity improvements such as Six Sigma should be provided to its executive employees.

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