Final Project

Proposal Development

Muhammad Usama baig

Submitted To: Dr. Qazi Subhan

Department of Business Studies

Bahria University, Islamabad

Impact of Budgetary Control on the Organizational Performance: A Case of

Manufacturing Sector of Pakistan
Section 1

Abstract:

The fertilizer industry in Pakistan, with US$3.74 billion per year in sales, now stands at a crossroads where,
after an initial substantial contribution in boosting crop productivity, its future potential is being
challenged. Fertilizer-responsive crop varieties, supplementary irrigation water, and a favorable policy
environment in Pakistan have induced fast growth in fertilizer demand. On the supply side, the availability
of gas at low prices along with a favorable investment environment resulted in the buildup of excessive
manufacturing capacity. But recently, a shortage of gas and monopolistic behavior has led to
underutilization and greater imports. Restrictive laws put fertilizer processing and marketing in a few
hands, which has also affected its efficiency. Moreover, the yield response of fertilizer has tapered off and
per hectare use is fast reaching its optimal level. The existing policy environment leads to higher costs,
inefficient use, and a heavy burden on the government as it charges one-fourth of the market price for
feedstock gas used in fertilizer manufacturing. In addition, the government imports urea and absorbs the
difference in international and domestic prices.

The main purpose of this paper is to examine the relationship between budgetary
control and financial performance of fertilizer companies’ performance of Pakistan while
presenting the real scenario of the organization. Therefore, to test the practice of
budgetary control and financial performance, a descriptive survey design, as a sample
of the study, was used to gather data through structured questionnaire distributed to 60
respondents from Account, Finance, Administration, Engineering and Project
Department. The findings of this study emphasize that a practice of budgetary control
leads to increased profitability but for that management commitment is indispensable.
The study concludes that budgetary control process shows a significant positive bearing
on the financial performance of FERTILIZER companies through the influences on
financial objectives, allocation of funds as well as investment ventures. The study
recommends a sensitization of management and employees of fertilizer companies’
performance along the lines of the importance of budgetary controls in enhancing
financial performance, avoidance of unnecessary interference in the budgetary process
and use of budgets as tools for management efficiency. Keywords: Budgetary control,
Practice, Performance, Management, FERTILIZER companies’ performance.
Introduction:

Budgetary control is a process of planning, monitoring, and controlling financial

resources to achieve organizational objectives. Firm performance, on the other hand, refers to
the ability of a company to achieve its goals and objectives efficiently and
effectively.

The relationship between budgetary control and firm performance is generally positive. Effective
budgetary control helps organizations to achieve their financial goals and objectives, and
ultimately leads to improved performance. By setting clear financial
targets and monitoring progress towards them, organizations can identify areas where resources
are being used inefficiently and take corrective action. This can result in increased profitability,
improved cash flow, and better overall financial health.

However, the relationship between budgetary control and firm performance is not always
straightforward. Poor budgeting practices, such as setting unrealistic targets or failing to monitor
progress effectively, can lead to negative outcomes such as
decreased employee morale, reduced customer satisfaction, and ultimately, lower
performance. It is therefore essential that budgetary control is implemented in a way
that aligns with the overall strategic goals and objectives of the organization, and that it is
continuously reviewed and adjusted as necessary.
Budgetary control is the process of developing a spending plan and periodically
comparing actual expenditures against that plan to determine if it or the spending
patterns need adjustment to stay on track. This process is necessary to control
spending and meet various financial goals. Organizations rely heavily on budgetary
control to manage their spending activities, and this technique is also used by the public
and private sectors Budgetary control is system which uses budgets as a means of
planning and controlling all aspects of producing and selling commodities or services.
This is true as we tend to prepare revenue and expenditure variance analysis to be able
to deduce area of divergences for which management needs to watch to avoid
embarrassment as any adverse variance will translate in to inability to meet the
corporate objective which will eventually lead to disagreement with stakeholders (Batty,
1982).Although many people complain about budget and its process, budgets are
indispensable in a large modern organization as the benefit that occurs from budgets
and its control is much greater than the cost involved. In view of this, the fact that
resources are scare, coupled with high competition that permeate most business,
budgets when rightly applied, would be an effective tool for planning and control,
especially large organization as fertilizer companies’ performance of Pakistan
Organization’s Performance (OP) is partly dependent on its technology, processes,
systems and employees. It is concerned with efficiency and effectiveness of operation.
It is an indicator which measures how well an enterprise achieved their objectives
(2023). Puts forward major areas in which performance can be examined. These
include: liquidity, profitability, efficiency and debt repayment capability. Empirical studies
(2019) show a positive link between budgetary control and financial performance and
have a good motivational impact by involving managers in the budgeting process and
by providing incentives to managers to help achieve the business's goals and
objectives. It can be said that budgetary control is one of the key tool which leads to the
realization of benefits in the financial performance in the organization. Budgetary control
involves the preparation of a budget, recording of actual achievements, ascertaining
and investigating the differences between actual and budgeted performance and taking
42 suitable remedial action so that the budgeted performance may be achieved
effectively (2015). By implementing proper budgetary control planning, the firm is able to
reduce costs and improve on quality of its services based on its budgetary allocations.
This helps to reduce on costs and achievement of goals is enhanced thus
organizational effectiveness. By budgeting, managers coordinate their efforts so that
objectives of the organization harmonize with the objectives of its parts. Control insures
that objectives as laid down in the budgets are achieved (Churchill, 2001). The use of
budgetary control in profit planning to improve the financial performance of the
organization is tremendous. It can be used in matching expenditure and income in order
to make some profits. And to the extent that budgetary control is frequently applied in
profit planning, its contribution to the realization of profits and improve financial
performance cannot be doubted. In recent years, budgetary control has been frequently
examined to find out its relationship with financial performance of the organizations. The
existence of many organizations at
present can only be justified in terms of their financial performance. Therefore, to such
organizations, anything, which improves their financial performance, is worthwhile. The
literatures mentioned above clearly depicts that budgeting is a useful tool that guides
firms to evaluate whether their goals and objectives are achieved. Many research and
studies has been conducted internationally and indicated that a positive significant
relationship exists between budgetary control and financial performance of state
corporations.
In many profitable companies, budget is actually a key to their success (2022).
Budgeting is critical to financial success. Studies of differences between successful and
unsuccessful new businesses consistently find that businesses that carefully develop
and follow budgets increase their chances of survival and success. Budgeting is the
process of compiling budgets and subsequently adhering to them as closely as possible
(Batty, 1970). The terminology used to describe budgets varies among companies.
Some companies refer to budgeting as targeting and many companies refer to the
budget as a profit plan (2022).
Effective budgeting depends on a sound organizational structure. In such a structure,
authority and responsibility for all phases of operations are clearly defined. Budgets
based on research and analysis should result in realistic goals that will contribute to the
growth and profitability of a company. In addition, the effectiveness of a budget
program is directly related to its acceptance by all levels of management (2020).
Budgeting is most useful when it is integrated with a company’s strategy. After
organizational goals, strategies and long-range plans have been developed, companies
prepare budgets. In developing the budget, each level of management should be invited
to participate. Budgets are probably the most widely used control devices. The benefit
of budgetary control as profit maximization; a budgetary control aims at profit
maximization of an organization through proper planning and coordination of different
functions, proper control over various capital and revenue expenditures and putting
resources in to best use. Coordination; achieved through working of different
department and sectors (2010).
The decision as to how to distribute limited financial and non-financial resources, in an
effective and efficient manner, is an important challenge in all organizations. In most
large and complex organizations, this task would be nearly impossible without
budgeting. Without effective budget analysis and feedback about budgetary problems,
many organizations would become bankrupt. Some of the problems arise from
inadequate data to formulate and implement a proper budget; and non-existence of
well-defined structure, which leads to overlapping of duties. Therefore, these
deficiencies can be addressed through the use of budgeting technique. Based on the
above-mentioned research findings, it can be noticed that the proper plan and its
effective utilization should be accordance to the need and requirement of the
organization. Therefore, the need of understanding about budgetary control practice
and financial performance has become very much essential for every type of
organizations who wants to sustain and make profit in this globalized business world
and fertilizer companies’ performance of pakistan Thus, this study is motivated to find
out the solution of followings issues:
1. What is the practice of budgetary control in the fertilizer companies’
performance of pakistan.

2. Whether there is any relationship exist between budgetary control and financial
performance of the fertilizer companies’ performance of pakistan.

Background of the Study:

Companies implement budgetary control to regulate their income and expenses. To

determine if corrective action is necessary or not, actual income or expenditure is
compared to projected income or expenditure. Aerospace, furniture, farming, oil and
gas, water treatment, industrial equipment, steel products, paper products, pump
manufacturers, and many other businesses are present in Pakistan's manufacturing
industry. Pakistan's Ministry of Finance unveiled a medium-term performance-based
budget for the following three years in June 2021. The stakeholders may profit from this
since it will enable the government to allocate funds in accordance with earlier policies
in order to meet important commitments.

In Pakistan, there is a culture where choices are made only by higher-ups without taking
the opinions of middle- and lower-level management into account. As a result, bad
decisions are made that have a negative impact on the business. The majority of
businesses are more interested in short-term profits and suffer catastrophic failures in
the future. Other than this inescapable risk in Pakistan, which is seldom taken into
account when making a budgeting decision, businesses begin to lose revenue following
a calamity like heavy rains or floods and transition to becoming high leverage
businesses.
The company which our study will focus on is Fauji Fertilizer Bin Pakistan Limited
(FFBL). FFBL is the only manufacturer of DAP and Granular Urea in Pakistan. we have
chosen this company because of convenience and easy accessibility.

History of Fertilizer Industry in Pakistan:

The use of fertilizers in Pakistan began in 1957 with the operation of WPIDCs (West Pakistan
Industrial Development Corporation) plant for single super –phosphate at Lyallpur (Currently
Faislabad) and Ammonium sulphate at Daudkhel. Later on WPIDC established another factory in
multan for the production of Ammonium Nitrate and Urea which went into production in 1962. The
first plant in the private sector was established by Esso( Currently Engro) at Daharki, which went
into production in late 1968, and another by Dawood Hercules at Chicho-ki-Mallian was
commissioned in late 1971 before the separation of east and west Pakistan. Undoubtedly, the
separation of East Pakistan was a gigantic disaster for the whole country but fortunately not for the
fertilizer industry, although it was not that flourishing at that particular time but it had its big setup
in West Pakistan. But Fertilizer industry in Pakistan had faced problems regarding the financial
crunch because almost 80% of the wealth was in East Pakistan. This was one of the reasons that
this industry could not flourish up to that extent. Another reason was low demand because the
fertilizer which was being used mainly to fulfill needs was “Organic Fertilizer.” At that time, there
was only three foremost companies in this industry exist namely, Dawood Hercules (formed in
1968), National Gas & Fertilizer (1962) and Esson (currently named as Engro, formed in 1965).

At present there are eleven plants running for the manufacture of fertilizers, 2 at Bin Qasim, 1 at
Sheikhupura, 2 at Sadiqabad, Rahim Yar Khan, 1at Multan, 2 at Haripur, 1 at Faisalabad, 1at
Mirpur Mathelo, Dist Gotki and 1 present at Daudkhel. the production capacity of fertilizers are
shown in appendix. However, the fulfillment of fertilizer demands mainly depends upon the
performance of fertilizer sector. 1.5. Key Players of the Fertilizer Industry in Pakistan The seven
key players of the fertilizer sector that are listed on Karachi Stock Exchange are:
1. Engro fertilizers Limited
2. Fatima Fertilizer Limited
3. Fauji Fertilizer Limited
4. Fauji Bin Qasim Limited
5. Dawood Hercules Fertilizers Limited
6. Pak Arab Fertilizers Limited
7. Agritech Fertilizers Limited
Gap Identification:

(Ali, 2022) have proposed to investigate the impact of budgeting process on

organizational performance. In the present study we will find that proposed area of
explanation i.e., how budgetary control helps in improving the organizational
performance. It will also provide organizations with useful information which may help
them in tackling their daily financial challenges.
Problem Statement:

“The corporations in Pakistan are having trouble controlling their budgets. Budgetary
management is crucial because it allows businesses to focus on cash flow, cost-cutting,
increased earnings, and high returns on investments. The majority of the organizations
in Pakistan lack comprehensive and efficient budget and budgetary control systems
because this is a time-consuming operation. Even some businesses struggle long-term
because they are unaware of the significance of budgetary control. This proposal will
outline how organizational performance will be impacted by budgetary control in
Pakistan's fertilizer market”.
Research Questions:

This proposal will answer following questions:

1. What is the impact of budgetary control on organizational performance?
2. What are the main determinants of budgetary control that will influence the
organizational performance?
3. What are the problems company will face that are associated with budgetary
control?
4. What is the impact of budgetary control on organizational performance in
Fertilizer company of Pakistan?

Research Objectives:

This proposal will address following objectives:

1. To identify the impact of budgetary control on organizational performance.
2. To identify the main determinants of budgetary control that will influence
the organizational performance.
3. To explain the problems, company is facing which are associated with
budgetary control.
 4. To identify the impact of budgetary control on organizational performance
in Fertilizer company of Pakistan.

Budget and Budgeting

To plan and control, management need budgets not just as an instrument, but
more than that. According to Isaac et al., (2015), public management and firm
management use budgeting as a key policy instrument. It is common as it is
practiced in private life as well as in corporations, government and voluntary
organizations. Government circle uses budgeting ahead before the enterprises or
in the business sector. Before the World War, a few large corporations, especially
in the United States and the United Kingdom with a stable economic climate,
used budgets for a number of purposes. The budgets then generated their own
problems, some businesses reported having negative effects on performance and
competitiveness, but innovative companies described budgeting as a key
management method. “Business worries and troubles” is a negative effect
created by the world depression of the 1920s and its attendant made the use of
budgeting imperative in order to plan the overall growth of an economy and the
enterprise (Isaac, Lawal, & Okoli, 2015).

Benefit of Budgets

According to Penning (2016), business and the managers also others staff are
benefited by using budgets, the benefits are described below:
1. Planning assisted by budgets by formalizing the goals through budget, a firm
may ensure that the strategies are feasible. It will be able to determine what is needed
to maximize the production of goods and services and to ensure that it is available at
the right time.
2. The budget communicates and coordinates Once the budget is decided upon in
the organization, all related managers and employees must work towards the same
end. Once the budget is set, any planned issues will be addressed and any areas of
possible ambiguity are clarified. All departments will be in a position to play their part in
achieving the overall objectives.
3. The budget support the decision-making By planning ahead the budgets, a
business can make decisions about how much production–in the form of goods or
services–can be accomplished. At the same time, the cost of production can be
calculated and, where necessary, adjustments can be made.
4. The budget can be used for monitoring and control purposes A significant
justification for creating a budget is that management may use budgetary control to
track and compare the actual performance.
This is in such a way that steps can be taken to adjust the activity of the company as
time passes, or likely to alter the budget if it is necessary.
5. The budget can be used to empower people The budget may be part of strategies
to encourage managers and other workers to achieve the goals of the company. The
degree to which this occurs will depend on whether the budget is negotiated and set
and whether it is considered to be realistic and feasible. The budget can also be related
to rewards, such as bonus, when goals are achieved or surpassed. The final result of
the budgeting system is also the development of a master budget in the form of the
forecasted financial statements–the forecasted income statement–and the forecasted
balance sheet. The master budget is the master plan that shows how all of the other
budgets fit together (Penning, 2016).

Limitations of Budgets

Despite the numerous benefits of budgets to organizations, Cox and Fardon (2012)
offered the following limitations of budget:
1. The advantage of the budget must be more than the cost Budgeting is a fairly
complex process and some businesses - especially smaller ones - may find that the
undertaking is a lot of a weight in terms of time and other resources, with just limited
advantages. In any case, numerous lenders - for example, banks - often require the
production of budgets as part of the business plan. The general rule is that, the benefit
of creating the budget must surpass its cost.
2. Budget information may not be precise It is fundamental that the information
going into budgets ought to be as exact as could reasonably be expected. Everyone
may create a budget, but the more misguided it is, the more useless it becomes for
business as a planning and control mechanism. Extraordinary caution should be taken
with an estimation of revenue, which is also the starting point of the budgeting
process, as well as costs. Budgetary control is used to equate the budget with what
has really happened - the budget will be adjusted if it appears to be inevitable.
3. The budget can de-motivate Employees who have no part in concurring and
setting a budget that is imposed upon them would feel like they do not own it. The
employees can therefore be demotivated. Another drawback is that employees can
see budgets as either a' carrot' or a' stick;' as a means of motivation to achieve the
goals set or as a form of retribution if targets are missed.
4. Budgets could lead to dysfunctional management The disadvantage that can
happen is employees in one department of the company can over-execute their budget
and create problems elsewhere. Case in point, the production department can make
additional returns that the sales department considers difficult to sell. To stay away
from such a dysfunctional management, budgets should be set at a realistic level and
linked and organized through all departments within the industry.
5. Budgets may be set at too low a level If the budget is too easy to
implement, it will be of no benefit to the company and will, in effect, contribute to
lower production rates and higher costs than before the budget has been
created. Budgets should be set at appropriate levels to allow the best use of the
resources available.

Significance of the Study:

The most effective strategy for maximizing profitability is budgetary discipline. It

increases fiscal awareness and offers defined goals. Additionally, it aids in both
short-term and long-term cost reduction. The budgetary control method will give
the
organization insight into how the company can react in the future when they face any
kind of financial problems in the long run, which will help in preventing the organization
from suffering any losses in the long run. About 22.98% of Pakistan's GDP comes from
agriculture. 18.7% of which come from Pakistan's manufacturing industry, and the rest
from its service industry. The wheat crisis, Pakistan is currently experiencing can be
prevented by having a strong agricultural sector. It is essential to understand budgetary
control and how it affects organizational effectiveness on the Pakistani fertilizer market.
The first section of this proposal includes Background of the study, Gap Identification,
Problem Statement, Research Questions, Research Objectives and Significance of the
study. Second section includes Literature Review. The third section includes the
Theoretical Framework and the fourth section consist of Data and Methodology.
Section 2
Literature Review

The fertilizer industry is one of the petrochemical industries with a significant development amidst
the
challenging business competition. The increasing competitiveness in the national
petrochemical industry is influenced by the availability of raw material and energy
supply, integration between the petrochemical industry with the downstream oil and gas
sector, as well as improvement in the transportation and port logistics system. Human
resources competency along with the utilization of research and technology also have a
role in this development. study investigated a relationship between budgeting and
performance remittance. This paper focuses on to identify the link between budgetary
control and firms’ performance. The variables which were studies in this research were
Budgeting Process (Independent Variable) and Organization Performance (Dependent
Variable). Seven remittance companies were chosen from which questionnaires were
carried out and data was collected. 23 operating companies in Somalia were selected
as the target population but only 15 were selected for data collection. The sample size
consisted of 60 respondents, 4 respondents from each of the 15 firms. Sampling
technique which was used was non probability sampling specifically judgmental
sampling. Data was analyzed using descriptive studies.
The author has further concluded that there is a slight positive link between independent
and dependent variable. The findings found out that if there is a clarity in the goal of the
budget than it will powerfully influence the performance of SME`s. There is no
connection between the participation of making budget and performance of the
companies because the budget is solely made by the top authority. The study also
showed a slight association between budgetary control and payment companies’
performance because payment companies evaluate the business on the basis of
budget. The study recommended for the future researchers that payment organizations
promote a participative budgeting and provide compensations to those individuals who
will fulfil the budget objectives. Payment organizations also take full advantage of
budgetary control process competence and efficacy in order to maintain their
competitive advantage.
(Subriyah, Brasit, & Darmawati, 2021) research have used the cost standards in order
to analyze and explain how budget planning was affecting the organizational
performance at the General Bureau of the Regional Secretariat of West Sulawesi
Province. There variables were budget planning, an Independent Variable while
Organizational Performance as Dependent Variable. The study is using a primary data
technique and used questionnaires in order to collect data. This paper used a
quantitative research method because the research is based upon numbers and it also
used statistics and hypothesis testing in order to study the relationship between
variables. It used Path Analysis using the AMOS program and sample size consisted of
72 participants.
The author has further concluded that budgetary planning and organizational
performance were positively linked with each other. Similarly, it disclosed that
analysis of budget evaluation and organizational performance were also positively
linked. Cost standards also plays a positive part in between the association of
budgetary planning and organizational performance.
This study focused on how the budgetary control is affecting the financial performance
of SMEs in Germany. Quantitative method was used in the study and the data is
collected from three cities of Germany which were, Munich, Berlin and Stuttgart
because these three cities have high number of SMEs. The variables were budgetary
control as Independent Variable and financial performance of SMEs as Dependent
Variable. Surveys were conducted not only on personal level but also were sent to the
business owners. The research was conducted using questionnaires and interview
guide.
The results found out that strategic planning in organization and cost control processes
are combined together with the use of budgetary control. Conclusion showed a positive
link between budgetary control and financial performance of SMEs in Germany as it
contributes in both employment and economic growth. The results also showed that
financial control is important in fiscal and monetary performance of the SMEs in
Germany. The study recommended that SMEs should pay very close attention to the
budget control process and it is better to use a sound budgeting control process
because it provides a vital effect upon the financial performance of the SMEs.
The study discussed how budgeting and budgetary control is impacting the private
banking sector of Ethiopia and what are the practices carried out for budgeting and
budgetary control. The study also identifying problems which are related to the
budgeting and budgetary control and provide alternate solutions. The variable which
was used in the study were Budget and Budgetary Control system as Independent
Variable while Organizational Performance as Dependent Variable. 128 respondents
were targeted and questionnaires were carried out through which Primary data was
collected and those respondents were selected on the basis of simple random sampling
and the target working units were chosen through purposive or judgmental sampling
technique. Descriptive study was taken to carry out Research design and analysis of
data was done with the help of STATA 14 plus which is a type of descriptive statistics.
The results showed that there is already established system of budgeting and budgetary
control in the banks of Ethiopia. Despite of having a budget or a budgetary control
system, the results showed that the banks have a lack of forecasting system due to
which they cannot make an effective budget. Also, the managers do not have proper
information in order to make a fruitful budget. There is no full participation by the
stakeholders in order to make a budget, no support available by the top management,
budgets are not flexible and there is no sound budget administration available due to
which the budgets cannot be prepared effectively. Another result showed that costing
and monetary control is very vital because with the help of this one organization can
achieve its financial and other goals. The results also explained problems and
challenges in implementation of the budget. In future the researchers can pay more
emphasize in making financial arrangements and monetary control system for
organizational performance. There should be an effective budgetary control process in
the banks in order to improve their overall organizational performance and staff should
be provided with proper trainings regarding the budgeting and budgetary control
process in order to improve and enhance the overall performance of the organization.
Another study focused on assessing how budgetary control is affecting the financial
performance as well as how this technique is effective in the Oman Telecommunication
Company. This study main focus was to allow the managers to understand how the
budgetary control technique work and how much these techniques will impact, thus
providing a greater understanding among managers which will choose the best
technique in order to improve the proficiency of financial and organizational
performance. Budgetary control and organizational performance were used as
Independent and Dependent Variable respectively. Survey method was used which
included questionnaires and interviews. Data was analyzed using correlation and
regression analysis. Microsoft Excel was used to analyze the data while for interviews
descriptive and explanatory methods were used in order to analyze them.
The findings indicated a favorable association between budgetary control and an
organization's financial performance. They also highlight the significance of top
management support and their participation in budgetary control strategies. The
company's adjustments of funds technique should be understood and used in future
study due to its significance in boosting and increasing the company's financial
performance.
(Keng`ara & Makina, 2020) determined the impact of implementation and evaluation of
budgetary control on organizational performance and evaluated the impact of budgetary
control on organizational performance. The study consists of two variables:
organizational performance, which is a dependent variable, and budgetary control,
which is an independent variable. Budget Cycle Theory, Agency Theory, Institutional
Theory, and Stewardship Theory were the four theories considered in the study. The
study's research methodology was descriptive. The CEOs and the heads of the
financial, procurement, audit, and monitoring and evaluation departments in the marine
sector were the target population. There were 70 respondents in the sample, and
questionnaires were utilized to gather information from them. There were two types of
data collecting used: primary and secondary. Validity of content was also used.
Regression analysis was used to determine the relationship between the variables and
the data.
According to the study's findings, there is a link between budgetary control and
organizational performance, and budgetary management is crucial to an organization's
performance. In order to achieve greater performance, the study advised that
organizations create financial control processes free from political party intervention.
Another researcher (2020) centered on establishing a link between financial
management and the efficiency of county administrations. Budgetary management
and county government effectiveness are independent and dependent variables. The
theories of the budgetary process and the contingency method were applied in the
study. A target population of 72 workers was chosen and a descriptive research
design was adopted. A quantitative approach was utilized, using descriptive statistical
techniques like pie charts and measurements of central tendency like mean, mode,
and standard deviation. The data was analyzed using multiple regression models and
ANOVA.
The findings demonstrated the significance of budgeting participation in building
organizational trust, perception of control, and ego-involvement. The findings also
indicated that there are additional factors that influence organizational effectiveness,
and top management should investigate these factors as well. The study also showed
that an organization's managerial effectiveness will be significantly impacted by its level
of budgeting participation. The study also outlined how financial procedures and
organizational performance are positively correlated. According to the study, in order to
build a successful budget, stakeholders and employees should participate actively.
This study also made the suggestion that organizations create guidelines for citizen
involvement in budgeting because doing so will increase ownership while also
benefiting the organizations to the fullest extent possible.
Another study by (Jamiu Agbolade, Adewumi Zaid, Lukman Olalekan, & Muritala
Makinde, 2020) addressed the connection between local government performance,
budgetary management, and the state of Osun in Nigeria. Budget and budgetary
control
were the study's independent variables, and organizational performance was its
dependent variable. The study employed stratified and straightforward random sample
methods when conducting questionnaires. In-depth information was gathered via
questionnaires. Statistical approaches for inference and description were used to
analyze the data. While inferential technique involves hypothesis testing, descriptive
technique used simple frequencies to examine the data.
The results of the investigation demonstrated a favorable correlation between the
independent and dependent variables. The findings demonstrated that budget and
budgetary control are a wonderful way to increase revenue in addition to increasing
transparency. Additionally, it aids in efficient fund allocation. The report advised firms
to effectively implement the budget because doing so will prevent wasteful spending
and bad financial management.
The study by (Mazikana & Anthony, 2019) explored the link between organizational
effectiveness and the impact of financial control. The study looked into the budgeting
process used by ZDF. This essay looked at how well a control system worked in
connection to how well an organization performed. Budgetary control (Independent
Variable) and organizational performance were the variables investigated in this article
(Dependent Variable). There were 65 questionnaires utilized to collect the data. In this
study, both qualitative and quantitative methods were applied. Simple random
sampling techniques were utilized for the qualitative data, while purposeful methods
were used for the quantitative data. While the reduction approach was utilized to
examine the qualitative data, SPSS 21.0 was used to assess the quantitative data.
The findings demonstrated a correlation between competent budgetary control and
organizational performance, which will be advantageous for ZDF. In order to improve
organizational performance, the study advised ZDF to adopt a strategic budgeting
strategy as well as monthly budgeting. The study recommended that future researchers
look into how ZDF managers' attitudes affect the implementation of budgeting controls,
how budgeting programs contribute to the wellbeing of the ZDF in Zimbabwe, and how
formalizing budgeting in the ZDF affects its effectiveness to learn more about ZDF
budgeting control.
(Mbuthia & Veronicah, 2019) The primary goal of the study was to determine how
budgetary control affected the organizational performance of a few Kenyan commercial
banks. This essay sought to determine the impact of budgeting planning, execution,
control, and management on the organizational effectiveness of the chosen commercial
banks. The primary factors were organizational performance and financial control
(Independent Variable) (Dependent Variable). The target population was chosen from
three chosen commercial banks and the study's cross-sectional descriptive research
design was applied. Employees in the credit, accounting, and operations divisions of the
three selected banks make up the respondents. Both primary and secondary data were
collected for the investigation. Trend analysis, multiple regression analysis, and
descriptive analysis were all used to analyze the data.
The findings demonstrated a favorable association between the independent and
dependent variables. The report's conclusion is that the organization will perform
financially better as a result of efficient budgetary preparation. The study suggested
that the company's budgeting strategy be improved by analyzing the present
performance targets, identifying threats and opportunities, and then focusing on
successes and failures. Successful training and awareness initiatives can improve the
company's budget planning. To better understand the relationship between variables, it
will be crucial for future scholars to look at other Kenyan banks. Future academics
ought to investigate more elements that may impact an organization's performance.
The study by (M. Etale & Idumesaro, 2019) explained the connection between financial
oversight and performance, focusing on Nigeria's Bayelsa State. Actual spending, which
reflects performance, served as the dependent variable in the study, while the capital
expenditure budget and the recurrent expenditure budget served as the independent
variables. For this study, time series data were gathered from the Ministry of Budget's
Budget Department. The information was gathered between the years of 2007 and
2016. In this study, an ex-post facto research design was employed. Using the
computer program E-view version 10, descriptive statistics and multiple regression
analysis were used to examine the data that had been obtained.
According to the study's findings, in Bayelsa State, there is no meaningful correlation
between budgetary control and organizational success. The report suggested that
the
government create precise budget projections. The primary tasks involved in budget
planning should be handled by highly qualified personnel. The budget's execution must
be rigorously followed.
(Hasan, Syam BZ, & Indriani, 2018) used characteristics of the budgetary aim and
understanding of cost management as moderating variables in the study of the impact
of budgetary control on managerial performance of Indonesian fertilizer firms. 144
respondents, including middle to top level managers, completed survey questionnaires
to gather the primary data. Moderating Regression Analysis was used to analyze the
data (MRA).
The findings indicated that there is a positive association between budgetary control
and managerial performance, and that the influence of budgetary control on
organizational performance is moderated by budgetary control's attributes and cost
management knowledge. In order to generalize the findings, the author advised that
future researchers examine the effect of budgetary control on organizational
performance in the manufacturing sector and use the moderating variables as mediating
variables.
Another study by (Kumar Chaudhary & Kumar Chaudhary, 2018) studied the
connection between Nepal Oil Corporation's financial performance and budgetary
control (NOC).
Financial performance and budgetary control were the independent and dependent
variables, respectively. The research design used in the study was descriptive. Data
from 60 respondents, including those from the accounts, finance, administration,
engineering, and project departments, was gathered using a structured questionnaire.
Correlational analysis was employed to study the data.
The findings indicated a favorable correlation between financial performance and
budgetary control. The NOC personnel found it challenging to develop and implement
the budget because of their lack of training and expertise. The findings indicated that
budgetary control improves organizational profitability and aids in achieving a
corporation's profit plan. A good budgetary control procedure will lower costs while
increasing the company's revenue. More work should be done, according to the study's
recommendations, to better grasp the significance of budgetary control's impact on an
organization. It is important to look into additional variables that might impact an
organization's performance. Given that human aspects are crucial in boosting a
company's financial success, employees should receive the appropriate training so they
can understand how to carry out budgetary control processes more effectively.
There is an article by (Nwanyanwu & Agatha Nkiru, 2018) This sought to determine the
connection between financial performance of Small and Medium Sized Enterprises in
Rivers State and budgetary control. Financial performance is a dependent variable,
whereas budgetary control is an independent variable. 74 members of the Port Harcourt
Chambers of Commerce make up the target population. 63 people made up the sample,
which was chosen using the Taro Yemen formula. Methods for collecting primary and
secondary data were also used. The major method of gathering data used hypothesis
testing, while the secondary approach was only utilized as a supplemental technique.
The two facets of budgetary control and marginal cost were used to study management
accounting principles, while net profit and return on equity were used to gauge financial
performance. In this essay, technology's function as a moderating factor was also
examined. For the analysis of the data, both parametric and non-parametric techniques
were employed.
The findings demonstrated a favorable correlation between the independent and
dependent variables. Additionally, it demonstrated that businesses would likely perform
better financially if the majority of resources were put into hiring and developing talented
human resources. The findings also indicated that there is a prospect for significant
growth and sustainability for a company if budgetary control procedures are applied
correctly. The study advocated offering internships to recent graduates in order to help
them better grasp how to carry out an efficient budgetary control procedure.
Another researcher (Tanjeh Mukah, 2018) provided a study in which he looked at the
relationship between budgetary control and local council performance in the Mezam and
Momo Divisions of Cameroon's North West Region. He also explored the difficulties
these divisions encountered when trying to control their budgets. The performance of
local governments was considered the dependent variable, while budgetary control was
considered the independent variable. A survey was employed to gather the data, and
the Ordinary Least Square (OLS) method was used to regress the association between
council performance and the budgetary control variable.
The findings demonstrated that budgetary management enhances local government
performance because it serves as a guide for financial planning activities. The study
also outlined some of the difficulties budgetary control faces even when there is a
favorable link. It will be very challenging to establish an efficient budgetary control
process when there is unqualified staff, a lack of funding, and a lack of commitment
from the council members. The report advised that the council members receive training
and that resources be used wisely while creating the budget. Good investment policies
should be put in place, and seminars should be held to help people understand the
impact that financial control has on organizational performance.
Another study by (Murwisi, 2017) outlined the effects of budgeting and budgetary
control on the financial performance of Zimbabwe's statutory Upper Manyame Sub
Catchment Council (UMSCC). The primary goal of the study was to examine the
budgeting and budgetary management strategies employed by UMSCC and how they
affected its revenue and overall cost. Budgeting and budgetary control were the
independent factors, and financial performance was the dependent variable. Data
collection was done using a descriptive approach. Interviews and questionnaires were
used to gather the data, which included both primary and secondary sources. The target
population consisted of six UMSCC departments, and the sample size was determined
using a stratified sampling technique.
The findings demonstrated that the dependent variable and independent variables have
a negative connection. It made operations more rigid and unbending. Zimbabwe's
environmental conditions are rapidly changing, and this has a detrimental impact on
UMSCC's financial performance. The report suggested that UMSCC create a flexible
mechanism for budgetary control. The UMSCC should have enhanced monitoring and
evaluation procedures and should communicate its policies clearly so that they may be
used to create a budgetary control procedure that works.
A study by (kuria Kamau, Rotich, & Anyango, 2017) aimed primarily on state enterprises
in Kenya with the goal of establishing a link between budgetary control and performance
in the public sector. Budgetary participation, sophistication, feedback, and control were
the variables used. Budget agreement, value for money, and objective achievement
were used to evaluate budgetary performance in Kenya. The study employed a
descriptive research approach, and 450 staff who participated in budget creation at
Kenyatta National Hospital were the focus of the study. A sample size of 72
employees was chosen using a formula. The data was acquired using questionnaires,
and the reliability and validity of the data were assessed using test-pre-test procedures
and expert judgements, respectively. Techniques for both qualitative and quantitative
data were employed. While content analysis was used to study qualitative data,
descriptive statistics were used to assess quantitative data. Correlation and regression
analysis were used to examine the relationship between the variables.
The findings demonstrated that budgetary performance of State Corporations in Kenya
is positively impacted by participation in budgeting. The guideline states that it is crucial
for staff to be included in the budget participation measurement process. Financial
models ought to be created as budgets get more complex. Effective communication
channels and well-defined budget goals are also necessary. Additionally, it was
advised that Kenyatta National Hospital implement financial control, as this establishes
the key elements of budgetary control in state corporations.
A study by (Mui Yee, Sek Khin, & Ismail, 2016) elaborated a conceptual view about
how budgetary goals will affect the organizational performance. The study will give a
better understanding about how organization`s decision making process and
operational performance are linked directly and indirectly. Budgetary goals were the
independent variable while organizational performance was the dependent variable.
The data was collected using 3 perspective approaches which were; monetary goal,
monetary participation and monetary evaluation.
The study concluded that, participation in budget includes a factor known as task
uncertainty. The budget is set by the Subordinates’ which influences the budget
goals and motivations which enhances the job performance. In case of goal
acceptance, it means that participation is increasing the performance. Companies
having maximum efficiency and effectiveness in budgetary control will maintain
competitive advantage among rival companies.
A study by (Choge, 2016) analyzed the influence of organizational budgetary control
system on performance management and decision making. The independent variable
was Budgetary control and dependent variable were performance management and
decision making. Target population was Top management and middle level
management of SDV Tsunami. 46 departmental heads were part of the sample size.
Methodology based on the was taken and both primary and secondary information was
gathered. Secondary data was used as a supporting tool with the primary data in order
to gather more information related to the topic. The information was gathered from
secondary sources such as magazines, financial reports, prior researches, etc. For
descriptive statistics, the researcher used SPSS to generate results. They took help
from correlation and regression analysis in order to check the relationship between
independent variable and dependent variable.
The study concluded that budgetary control affects positively the decision making and
performance management. The suggestions in the study were that organizations should
use budgetary control and lower management should actively take part in preparing the
budget. For future researchers, the study conducted research on only one organization
so, in future more organizations should be studied. Future researchers should also work
hard in collecting data from those respondents which will positively coordinate with
them.

Section 3

T
heoretical Framework:
Conceptual Framework:
Interrelationship between variables:

Depending on how much it is employed inside the company, budgetary control's impact
on organizational performance differs from firm to firm. According to the literature
review, budgetary control and organizational effectiveness are positively correlated
(Kumar Chaudhary & Kumar Chaudhary, 2018). It was found in a different study by
(Subriyah, Brasit, and Darmawati, 2021) that there is a strong correlation between
financial control and organizational success. The majority conclusion from the literature
review was that budgetary control has a positive impact on organizational performance.

Conceptual Definition:

Budgetary Control:
Budgetary control, according to Ngugi (2013), is the method used to manage
expenditures inside an organization. It is determined whether the actual performance
matches the budgeted performance by comparing the actual and budgeted
performance. There are three objectives of budgetary control, according to him, which
are as follows:
1. Planning
2. Coordination
3. Control.

In order to maximize profits, the budgetary control process manages expenditures

through the creation of budgets, departmental collaboration, and responsibility-
setting.

Organizational Performance:

(Ali & Mohamed, 2022) describe organizational performance as the firm's position in the
market and the extent to which it is serving the needs of its shareholders. It can also be
described as the ways in which the organization's activities satisfy both client demands
and performance goals. Additionally, he discussed how organizational performance
ought to improve the efficacy and efficiency of management within the organization.
Concept of Performance:

(Ngugi, 2013) explained in his study that performance is related to efficiency and
effectiveness. Efficiency is related to the shareholders satisfaction while effectiveness
is related to the degree to which shareholders needs are being met.
According to him, performance is of 2 types:
1. Organizational Performance
2. Job Performance

Performance of an organization depends upon, how the employees are performing

within the organization. It also depends upon the macroeconomic factors as well.
Operational Definition:

Budgetary Control Organizational

Performance
Hypothesis:

H1: Budgetary Control have positive impact on the Organizational Performance.

H2: Projected Income have positive impact on the Organizational Performance.

H3: Allocation of Funds have a positive impact on the Organizational Performance.

H4: Budget Process have a positive impact on the Organizational Performance.

Section 4

Data and Methodology:

Budgetary control is used by businesses to manage their revenue and expenses
because it enables firms to concentrate on cash flow, cost-cutting, higher revenue,
and
good returns on investments, budgetary management is essential. The effect of
budgetary control on organizational performance will be explored in this proposal.
Choice of Variables:
Budgetary Control as an Independent Variable and Organizational Performance as a
Dependent Variable are the variables that will be discussed in our proposal.

Determination:

Used Projected Income, Allocation of Funds and Budget Process as dimensions to

measure Budgetary Control and Spending as per appropriation, working Capital Ratio
and Development Ratio as dimensions to measure Organizational Performance. Our
proposal will also use these dimensions to measure both independent variable and
dependent variable.

Data Collection:

Primary data will be collected using questionnaires conducted from the head of
departments of FFBL and secondary data will be collected from organizational financial
reports.
Sources of Data:

Used questionnaires to collect primary data and used organizational budget

reports in order to collect secondary data.
Methodology:

Model Specification:

Regression:

The proposal consists of four independent variables and one dependent variable only
and multiple Regression model will be used to measure the variables.
y=αₒ + α₁x₁ + α₂x₂ + α₃x₃ + α₄x₄ + µ
where:
y = Dependent
Variable αₒ = Constant
α₁, α₂, α₃, α₄ = Coefficients
x₁, x₂, x₃, x₄ = Independent
Variables µ = Error Term

Current Ratio
Current ratio is calculated to measure the firm’s promise to meet its short-term liabilities. It is an
indicator of the firm’s financial strength as it calculates the degree to which the Current Assets are
excess of Current Liabilities. Calculation with exceptionally high ratio means that current asset is
lying idle which is not a good sign because it shows that the funds are not used efficiently,
inventory turnover is less and account receivables are also high. It also means excessive
dependence on long-term sources of fund, which costs higher than Current Liabilities and can
results in lowering down the profitability of the concern. However, a very low ratio can mean that
the management is not maintaining adequate cash balances that can result in Bad Credit Image
and loss of Creditors confidence
Analysis:
By analyzing the four years data of fertilizer sector, it is to be shown in Table 1.1 that Engro has
improved its current ratio in 2023 from 0.55 in 2022 to 1.34 in 2023, while the rest of the
companies have deteriorated their current ratios. By analyzing Fatima Fertilizers Limited, company
has a current ratio of 5.19 and 6.19 in 2023 and 2022 respectively which is quite high than the
ideal ratio of 1:1. It doesn’t show a satisfactory sign for the company as one can interpret that the
company is efficiently utilizing its funds and ideal funds doesn’t yield any return. Fauji fertilizers
and Fauji Bin Qasim Fertilizers Limited both have almost same ratios and maintained the good
ratios as they are close to the ideal one. Pak Arab Fertilizers and Agritech Fertilizers have
maintained a low current ratio which is also not a good sign for the company, it gives bad image to
the creditors that company is not having adequate funds. Dawood Hercules Fertilizers Limited has
maintained a relatively good amount of current ratio in 2022 and in 2020 which shows the sound
financial position of the company but maintaining very high ratio in 2021 is again not a good sign.
If compare the companies according to current ratios, the Fauji Group of Companies can be
considered the best one among all companies in the sector. They have maintained ideal ratios
throughout the time period of three years but had slightly reduced in 2023. Overall, the ratios are
good.

CURRENT RATIO: CURRENT ASSETS /CURRENT LIABILITIES

Current Ratios
Companies 2023 2022 2021 2020
Engro Fertilizers Limited 1.34 0.55 0.81 0.83
Fatima Fertilizers Limited 5.19 6.19 0.76 0.64
Fauji Bin Qasim Fertilizers 0.77 0.19 1.17 0.86
Limited
Pak Arab Fertilizers Limited 0.73 1.14 0.89 0.46
Agri tech Fertilizers Limited 0.41 0.55 0.57
Dawood Hercules Fertilizers 0.29 2.16 0.36 2.46
Limited

Quick Ratio:
This ratio is also termed as ‘Acid Test Ratio’ or ‘Liquidity ratio’. This ratio is ascertained by
comparing the Liquid Asset to Current Liabilities. A current asset is considered to be liquid if it is
convertible into cash without loss of time and value. So, the Quick Ratio looks for the availability or
convertibility into cash. Prepaid Expenses and Inventories are not taken as Liquid Asset and are
singled out of total current assets. The ideal ratio for the fertilizer company is 1:1. Quick Ratio is
considered to be better test of a firm’s liquidity than the Current Ratio.
Analysis
Discloses that over the course of four financial periods of the study of 7 key players of Fertilizer
Sector, Quick Ratio of Engro Fertilizers Limited has improved as compared to the rest of three
years which shows the sound liquidity position of the company. In Fatima Fertilizers Limited the
Quick Ratio is very high which is not a satisfactory sign for the company as it shows too much of
liquid assets hold with the company and too much of assets lying ideal with the company is not
giving any return to the company. Therefore, it’s not satisfactorily. As far as Fauji Companies are
concerned, they maintained relatively good amount of ratio as they are quite close to the ideal one
in most of their years. Pak Arab Fertilizers, Agritech Fertilizers and Dawood Fertilizers Limited
have not maintained a satisfactory ratio as in 2022 DHFL has maintained a ratio of 0.07 which is
very low. It means company is not able to meet its short-term obligations and hence a poor
liquidity position of the company. If compare the companies according to quick ratios, the Fauji
Group of Companies can be considered the best one among all companies in the fertilizer sector.
They have maintained ideal ratios throughout the time period of three years but had slightly
reduced in 2023. Overall, the ratios are also good.

QUICK RATIO: LIQUID or QUICK ASSET / TOTAL CURRENT LIABILITIES

companies 2023 2022 2021 2020

Engro Fertilizers Limited 1.28 0.48 0.12 0.44
Fatima Fertilizers Limited 5.67 5.11 1.02 2.11
Fauji Bin Qasim Fertilizers 0.76 0.63 0.89 0.71
Limited
Pak Arab Fertilizers Limited 0.66 0.48 0.45 0.51
Agri tech Fertilizers Limited 0.37 0.24 0.31 0.42
Dawood Hercules Fertilizers 0.41 0.81 0.57 0.78
Limited

Inventory Turnover Ratio:

The inventory turnover ratio is an efficiency ratio or it is one of the activity ratios that shows the
effectiveness of a company in managing its inventory by comparing two items of financial
statement, cost of goods sold with average inventory for a period or we can say that the ratio
calculates the number of time average inventory is "turned" or sold during a period. In other words,
it computes how many times a company sold its total average inventory amount during the year.
The importance of the ratio is that it focuses on two fundamental items of performance. First one is
the purchase of inventory and if larger amounts of inventory are purchased during the year, the
company will have to sell greater amounts of inventory to improve its turnover. If sales are not
there, both holding and storage costs will be high. Second one is Sales. In order to be effective in
turning over the inventory, sales have to be matched with inventory purchases. By comparing this
ratio against industry averages, a low inventory turnover ratio is a sign of incompetence, poor
sales or excess inventory. It shows the low solvency may be inventory stock is too much high or
may be its not up to date but it also reflects a planned inventory buildup in case of shortage of
material or in anticipation of rapidly rising prices. A high inventory turnover ratio implies either
strong sales or effective strategy adopted by the company. It indicates better liquidity, but it can
also indicate a shortage or inadequate inventory levels, which may lead to a loss in business. High
inventory levels are usually seemed to be unhealthy because the company can up to trouble if the
prices begin to fall.

Analysis depicts that FFL and PAFL have very low inventory turnover ratio which is not a good
sign for the company but the reason behind this low inventory turnover is just the start of Fatima
Group of Companies as their commencement of production date is July, 2021 that is why FFL has
zero turnover ratio in 2020. EFL and DHFL has maintained slightly low turnover ratio whereas
Fauji Group of Companies have maintained a good ratio which is neither that high nor low.
INVENTORY TURNOVER RATIO: COST OF GOOD SOLD/AVG. INVENTORY

Companies 2023 2022 2021 2020

Engro Fertilizers Limited 20 12 8 11

Fatima Fertilizers Limited 51 75 42 29
Fauji Bin Qasim Fertilizers 132 87 33 120
Limited
Pak Arab Fertilizers Limited 106 71 124 176
Agri tech Fertilizers Limited 37 49 43 72
Dawood Hercules Fertilizers 65 38 22 35
Limited

Fixed Asset Turnover Ratio:

Fixed asset turnover ratio shows the efficiency and effectiveness or it is also called as the activity
ratio that calculates company's ability to generate sales from its fixed assets. In other words, this
ratio shows how efficiently and effectively a company can use its fixed assets to convert them into
sales. The fixed asset turnover ratio measures net sales as a percentage of assets to show how
many sales are generated from each rupee of company assets. As this ratio measures firm’s
effectively utilization of assets to generate sales, so a high ratio is always more encouraging.
Higher turnover ratios mean the company is using its assets more efficiently and effectively. Low
ratio means that the company isn't utilizing its fixed assets effectively and efficiently or maybe
there is a lackness of management or there may exist production problems.

Analysis
Table depicts that Fauji Group of Companies have maintained a good ratio as compared to the
rest of the companies in the fertilizer sector which shows they are highly efficient in terms of
utilizing their fixed assets to generate sales. Also, Dawood Hercules Fertilizers Limited has
maintained a very good ratio which shows a good sign for the company and they are utilizing their
fixed assets efficiently.

FIXED ASSET TURNOVER: FIXED ASSET/NET SALES

Companies 2023 2022 2021 2020
Engro Fertilizers Limited 0.63 0.37 0.36 0.74
Fatima Fertilizers Limited 0.49 0.44 0.22 0.55
Fauji Bin Qasim Fertilizers 1.29 2.50 1.94 1.07
Limited
Pak Arab Fertilizers Limited 2.37 1.85 2.07 2.25
Agri tech Fertilizers Limited 0.36 0.76 0.54 0.69
Dawood Hercules Fertilizers 2.41 1.92 0.95 1.42
Limited

Return on Asset Ratio:

In Profitability ratios, the return on total assets is an important ratio as it calculates the return or the
net income generated by the total assets. In other words, this ratio measures the efficiency or the
effectiveness of the company to manage its assets in order to produce profits. As firm’s assets
solitarily is to generate revenues and produce profits, this ratio helps both management and
investors see how effectively and efficiently the company is converting its investments in assets
into profits. The higher the ratio is the more preferable it is for the investors. A positive ROA ratio
usually indicates an upward profit trend and its beneficial for the firm as well. It is usually
expressed as a percentage.

Analysis
By analyzing the fertilizer sector, it is shown from the table 1.6 that EFL and DHFL have somehow
fluctuating ratios whereas FFL’s ratio is increasing which shows a step forward towards an
effective management of the company. Undoubtedly, Fauji Group of Companies have maintained
a good ratios trough out the period of 2020 – 2023 which shows that the management is efficiently
utilizing its assets to generate profit for the company, a good sign for the management. As shown
in the table, PFL and AFL both have their ratios in negative, a bad sign for the company.

RETURN ON ASSET: TOTAL ASSET/NET INCOME

Companies 2023 2022 2021 2020

Engro Fertilizers Limited 5% -3% 3.5% 4.7%
Fatima Fertilizers Limited 10% 8% 5% 2.1%

Fauji Bin Qasim Fertilizers 29% 34% 40% 25%

 Limited
Pak Arab Fertilizers Limited15% 10% 26% 18%
Agri tech Fertilizers Limited
- -0.44% 6.32% 3.14%
2.69%
Dawood Hercules Fertilizers 15% 5% 14% 18%
Limited

Return on Equity Ratio

The return on equity ratio or ROE is a profitability ratio that calculates the effectiveness of the firm
to produce profits from its shareholder’s capital in the company. In other words, the return on
equity ratio shows how much profit each rupee of common stockholders' equity is generating. It
also shows the effectiveness of the management in utilizing the equity financing to fund operations
and run the company. This is an important measurement for potential investors because they want
to see how efficiently company will use their money to generate net income or the profits.
Analysis
By analyzing the fertilizer sector, it is to be shown in a table 1.7 that likewise ROA, FFL is
improving its ratio on yearly basis. Fauji Group of Companies has maintained a positive ratio,
good sign for the company. But PFL and AFL both have their ratios in negative, which again is a
bad sign for the company showing that like their assets they are not able to generate profits from
their shareholders equity even.

Companies 2023 2022 2021 2020

Engro Fertilizers Limited 26% 17% 28% 27%
Fatima Fertilizers Limited 24% 21% 14% 11%
Fauji Bin Qasim Fertilizers 80% 62% 71% 77%
Limited
Pak Arab Fertilizers Limited 40% 34% 41% 51%
Agri tech Fertilizers Limited 12% 3% 11% 14%
Dawood Hercules Fertilizers 29% 12% 9% 21%
Limited

Proposed Data Estimation:

Reliability Analysis:
In order to reduce errors, the data gathering tool will be evaluated for relevance and
consistency of results. Internal consistency will also be used to test responses to ensure
that they are uniform across the board and that the questionnaire is administered and
scored carefully.
Normality Analysis:
Along with the use of descriptive statistics, quantitative data analysis techniques will be
used in this study. Data will be examined using linear regression analysis using IBM
Statistical Package for Social Sciences (SPSS) software, and items will be rated on a
Likert scale.
Regression Analysis:

Additionally, a linear regression analysis of the data is performed to determine

the degree to which budgetary control will impact the performance of an
organization.
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