FFBL Internship Report

INTERNSHIP REPORT
On Fauji Fertilizers Bin Qasim Ltd

By
Jahanzeb Abbas

A report submitted to
Finance Division of Fauji Fertilizers Bin Qasim Ltd

July 2014

INTERNRSHIP REPORT

2 FAUJI FERTILIZERS BIN QASIM LTD
PREFACE

This report is based on the training in Finance Division of FAUJI FERTILIZERS BIN
QASIM LTD providing basic knowledge for carrying out various operations in different sections
of Finance Division.
The aim to write this report is to share a meaningful material and concepts about the
working of Finance Division in FFBL.
I am thankful to my parents specially my late father, who helped me whenever I needed
him. I am also grateful to my departments management, my supervisor Mr. Irfan and staff
members for deepful consideration towards me during my internship.

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Summary
I was given a chance to work with Finance Division of FAUJI FERTILIZERS BIN QASIM LTD
by the Department of Management Sciences of National University of Modern Languages. It is
compulsory to write a report about what have you learned in the organization. My internship remained
with the Finance Division of FAUJI FERTILIZERS BIN QASIM LTD. I joined FAUJI FERTILIZERS
BIN QASIM LTD on June 02, 2014. During my internship I worked in following sections of Finance
Division,
I worked in Payroll and Taxation section for 4 days, where I learned about monthly salary
disbursement, final settlement of account and various types of loans and advances that are available to
employees. I also studied various types of taxes that are charged by Government of Pakistan in the form
of corporate tax, sales tax, capital gain tax, custom duty, etc.
I also spend 4 days in Local Payment section, where I taught about the procedure of payment to
local vendors of FFBL, and re-imbursement of different bills to employees.
I also worked in the section of Financial Reporting and Employee Funds, which are responsible
for the preparation of Financial Statements and maintaining Provident and Gratuity Funds respectively. In
Financial Reporting section preparation of Financial Statements and their timely provision to concerned
parties, and coordination with the external auditor are the main operations. In Employees Fund,
maintenance of Provident and Gratuity Funds, their utilization, recognition and disbursement to
employees are the main responsibilities.
I spend 4 days in Planning & Budgeting section, where I had chance to analyze the procedure of
Budget preparation, Project Planning and Management Reporting. Planning & Budgeting section prepares
and monitors Budget of FFBL, it also analyzes and evaluate projects of FFBL and finally prepares
Management Reports for onward submission to General Manager Finance / Managing Director.

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Purpose and Scope of Internship
The purpose of internship is to develop skills through learning various aspects of organization. The study
enables to get command on bookish knowledge through practical approach and to understand the
difference in both approaches. This thing increases the knowledge and brings betterment in working.
Working in FFBL was unique experience, since I had exposure to study various rules and regulations
FFBL is bound to follow.
Difficulties and Limitations
The students have maximum time to do internship of 4 weeks which is very less to understand functions
of Finance Division thus the time was limited to understand all aspects but I have tried my best to learn
everything which I had exposure. Secondly company has confidential information which cannot be
exposed to internees that also hinders the learning process.

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1) INTRODUCTION
1.1) FAUJI FERTILIZERS BIN QASIM
The Company started out in 1993 as Fauji Jordan Fertilizer Company (FJFC), a joint venture of
Fauji Foundation, Fauji Fertilizer and Jordan Phosphate Mines Company (JPMC), with FFC
(30%), FF (10%) and JPMC (10%) of sponsorship. In 1996 it listed in stock exchange with
authorized and paid up capital of Rs. 11,000 million and Rs. 9,341 million, respectively. FFBL
started its production at commercial level from January 2000. In 2003, after JPMC sold its
shares, it was renamed as Fauji Fertilizer Bin Qasim Limited (FFBL). In 2005 FFBL made a
joint venture with Office Cherifien Des Phosphates (OCP) Morocco to incorporate Pakistan
Maroc Phosphore S.A (PMP) with equity participation of 25%.
FFBL plant site is a modern Granular Urea and Di-Ammonia Phosphate (DAP) fertilizer
manufacturing complex, built at a cost of US$ 468 million and located on 350 acres in the
Eastern Zone of Bin Qasim, Karachi. The Head office of FFBL is situated at 73 Harley Street
Rawalpindi.
The current share holding of the FFCL is about 50.88% where as the holding of Fauji Foundation
is just about 17.29% in FFBL.
The latest achievement of FFBL is incorporation of Fauji Meat Limited and Fauji Foods
limited in 2013. FFBL also holds investment in Askari Bank Limited and Fauji Cement
Company Limited.

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FFCL
51%
FF
17%
OTHERS
32%
FFBL Share Holding Structure
ASKARI
BANK LTD
FAUJI
CEMENT
COMPANY
LTD
FAUJI
MEAT LTD
FAUJI
FOODS LTD
SUBSIDIARIES &
ASSOCIATE COMPANIES
OF FFBL

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1.2) FFBL PRODUCT LINE
Being the sole producer of DAP and Granular Urea, it is making a significant contribution
towards agricultural growth in the country, by meeting around 45% of the demand of DAP and
about 13% of Urea in the domestic market.
SONA DAP
SONA UREA
1.2.1) SONA DAP
FFBL is the pioneer of premium quality DAP fertilizer manufacturing in Pakistan. FFBL DAP
plant is the only facility of its kind in the country.

1.2.2) SONA UREA
With its state of art fertilizer plant, FFBL is the only Granular Urea manufacturer in Pakistan.

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1.3) COMPETITIVE ADVANTAGE (DISTINCTION)
FFBL is the only fertilizer complex in Pakistan producing DAP fertilizer and Granular Urea thus
making significant contribution towards agricultural growth of the country by meeting 45% of
the demand of DAP and 13% of Urea in domestic market. The raw material for DAP production is
being imported from morocco to ensure that this supply of raw material is continues to be available for
plant which is located in Karachi.
2) COMPANY OVERVIEW
2.1) VISION
To be a premier organization focused on quality and growth, leading to enhanced stakeholders
value.
2.2) MISSION
FFBL is committed to remain amongst the best companies by maintaining the spirit of excellence
through sustained growth rate in all activities, competitive price, quality fertilizer and providing
safe and conducive working environment for the employees.
2.3) CORE VALUES
Professional Integrity
Winning Working Environment
Accountable for Actions
Innovation and Creativity
Corporate Social Responsibility
Focus on Results

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SWOT Analysis

STRENHTH

The only granular Urea plant in Pakistan
The only DAP manufacturer in Pakistan
Offshore joint venture to secure the supply of raw material

WEAKNESSES

Dependency on single source of gas supply
Dependency on costly logistics in the absence of railway network

OPPORTUNITIES

Growing fertilizer demand in the country
Diversification of investment
Opportunity to export fertilizer
Brand goodwill

THREATS

Increasing trend of gas price and curtailment
Fluctuation in International prices of DAP and phosphoric acid
Law and order situation
General inflation and environmental threats (floods, earthquake,
drought etc)

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2.4) FFBL BOARD OF DIRECTORS
DESIGNATION NAME
CHAIRMAN Lt Gen Muhammad Mustafa Khan, HI(M), (Retired)
CE & MD Lt Gen Muhammad Haroon Aslam, HI(M), SBt, (Retired)
DIRECTOR Lt Gen Naeem Khalid Lodhi, HI(M), (Retired)
DIRECTOR Mr Qaiser Javed
DIRECTOR Dr Nadeem Inayat
DIRECTOR Maj Gen Ghulam Haider, HI(M), (Retired)
DIRECTOR Brig Parvez Sarwar Khan, SI(M), (Retired)
DIRECTOR Brig Dr Gulfam Alam, SI(M), (Retired)
DIRECTOR Brig Muhammad Saeed Khan, (Retired)
DIRECTOR Mr Naved A. Khan
DIRECTOR Mr Nasier A. Sheikh
DIRECTOR Dr Rashid Bajwa

2.5) FFBL SENIOR MANAGEMENT TEAM
DESIGNATION NAME
Chief Executive & Managing
Director
Lt Gen Muhammad Haroon Aslam, HI(M), S.Bt, (Retired)
Company Secretary Brig Shaukat Yaqub Malik SI (M), (Retd)
Chief Financial Officer Syed Aamir Ahsan

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General Manager Plant Mr. Anwar Mehmood Shahid
General Manager Technology Mr. Iftikhar Ahmed
General Manager Supply Chain
Management
Brig. Imtiaz Ahmed, SI (M), (Retd)
Head Project Brig Nasrullah Khan, SI(M), (Retd)
Head Business Excellence Brig Tasadduq Hussain Zahid, SI(M), (Retd)
Head Human Capital Management Brig Pervez Khalid, SI (M), (Retd)
Head Internal Audit Mr. Wasim Ejaz

2.6) COMPANY INFORMATION
2.6.1) FFBL HEAD OFFICE
Fauji fertilizer Bin Qasim Limited
Location: Head office Rawalpindi 73 Harley Street
Tel: 051-9272196-97
Fax: 051-9272198-99
Email:[email protected]
Website: hppt:/www.ffbl.com.pk
2.6.2) FFBL PLANT SITE
Fauji Fertilizer Bin Qasim Limited
Location: Plot No EZ/I/P-1 Edtern zone, port Qasim, Karachi 75020
Tel: 021-34724500-29, 34750706-10
Fax: 021-34750704, 34724530
Email:[email protected]

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2.7) FFBL AUDITOR
KPMG Taseer Hadi & Co.
6
th
floor, state life building Jinnah avenue Islamabad
3) FFBL DEPARTMENTS
Various Divisions at FFBL include Finance, Human Capital Management (HCM), Administration,
Business Excellence, Supply Chain Management (SCM) and Technology Department. Regardless of
these types, Finance Division is playing most crucial at FFBL. There are six sections working under
Finance Division.

FINANCE
DIVISION
PAYROLL &
TAXATION
EMPLOYEES
FUNDS
LOCAL
PAYMENTS
FINANCIAL
REPORTING
PLANNING
&
BUDGETING
TREASURY

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4) SECTIONS OF FINANCE DIVISION
4.1) PAYROLL & TAXATION
4.1.1) PAYROLL
Payroll section performs three major functions which are;
Disbursement of monthly salary
Final settlement of Accounts
o Retired Employees
o Terminated Employees
o Resignation Cases
Employee loans
In FFBL employees are divided into certain categories, their salary, allowances and benefits vary
according to their category,
Management Employees
Non-management/ Staff Employees
Management Apprentice (Management Associates)
Non-management/ Staff Apprentice
Daily Wagers
Internees
SALARY
The break-up salary in FFBL is as follow,

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BASIC SALARY
(+) ALLOWANCES
House Rent Allowance
Utility Allowance
Location Allowance (only to plant workers)
Cost of Living Allowance (only to management employees)
Conveyance Allowance
Shift Allowance
Adhoc Allowance, etc
(+) BONUS (if given)
(-) DEDUCTIONS
Mess charges (if mess facility is availed)
Transportation charges (if transport facility is availed)
Income tax
Loan installment (if loan is taken)
EOBI
Provident fund (10% of basic salary), etc
FINAL SETTLEMENT OF ACCOUNT
After the employee is retired or resigned or being terminated, his/ her final account is prepared by Human
Capital Management Division, it includes the lump sum amount which is payable by FFBL to the
employee. Finance Division reviews and makes arrangements for disbursement.
EMPLOYEE LOANS
FFBL provides following loan and advances facility to its employees,
Intrest Free Loan
House Rent Advance
Vehicle Loan
Advance Salary

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Intrest Free Loan
FFBL provides interest free loan to their regular employees whose designation is supervisor or above. The
employees have to repay this amount within 4 years. No interest is charged on these loans.
House Rent Advance
House Rent Advance facility is provided by FFBL to their employees so that they can meet their
accommodation needs. The time limit to repay such amount is 1 year.
Vehicle/ Car Loan
FFBL also provides the car loan facility to its regular employees whos designation is supervisor or
above. The amount under this head is to be returned within 4 years by the employee.
Advance Salary
1 month advance salary can be taken by the employees in FFBL. This advance salary is then deducted
from next salary of that employee.
4.1.2) TAXATION
The Taxation section at FFBL is responsible to deal with different taxes. By the 15
th
of each month the
section has to file the tax returns to Tax Authority and make refund claims if any.
Taxation section deals with the following taxes.
Sales tax
Employees tax
Custom duty
Capital Gain tax
Income tax

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Sale Tax
Standard rate of sale tax is 17% (goods) and for services its rate is different in different provinces. All
Sales Tax registered payers are required to file the returns. To meet this requirement monthly Sales Tax is
submitted and payment is processed accordingly.
Input Tax: Input tax will be paid by FFBL for the purchases of goods or raw material etc. There are two
types of Input taxes i.e. admissible (operational) and inadmissible tax (non-operational).
Output Tax: Output tax is charged by the FFBL on behalf of Tax authority on their finished product and
need to be paid by 15
th
of next month.
Net Sales Tax liability= (Output Tax Input Tax) + Withholding Tax
Employee Tax
FBR also authorized FFBL to deduct the tax from the employees salary and supplier (vendors) according
to applicable tax rate in each month end and deposit in Government Treasury.
Custom duty
Tax levied on imports and sometimes on exports by the Custom Authorities of a country to raise state
revenue, and/or to protect domestic industries from more efficient or predatory competitors from abroad.
Custom duty is mainly charged on the basis of the value of goods or upon the weight, dimensions, or
some other criteria of the particular items such as size of item etc. Every company should retain the
import documents as proof of payment of items subject to custom duty.
Capital Gain Tax
Any gain arising on the disposal of capital assets or securities by FFBL in a tax year is chargeable to tax.
Capital gain tax on Immovable property
Where the holding period of immovable property is up to one year, 10% of the gain is chargeable
to tax.

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Where the holding period of immovable property in more than one year but not more than two
years, 5% of the gain is chargeable to tax.
Capital gain tax on disposal of securities
Where the holding period of securities is less than six months, 10% of the gain is chargeable to
tax.
Where the holding period of security is more than six months but less than twelve months, 8% of
the gain is chargeable to tax.
Income Tax
Income tax (corporate tax) is charged on the annual income of the FFBL, according to the income tax
rules. Current rate of corporate tax is 33% (budget 2014-15) that is charged on the annual income of the
FFBL. Monthly tax returns are filled with FBR.
4.2) EMPLOYEE FUNDS (Retirement Benefits)
FFBL gives following retirement benefits to their employees,
PROVIDENT FUND
GRATUITY FUND

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PROVIDENT FUND
FFBL maintained a Provident Fund for its permanent employees. The fund is regulated through Board of
Trustees (BOT). Monthly contributions are made to the fund both by the company and employees at the
rate of 10% of basic pay. The Companys contribution is charged to income for the year. There are two
way contributions in Provident Fund i.e. Employee and Company. On behalf of employee FFBL deducts
some amount (@ rate of 10%) from their salary and FFBL also contributes the same amount into the
fund. The employee will be entitled to provident fund either he/she terminate the job during the service or
at the end of his/her service (retirement/ death).
Purpose
The purpose behind maintaining the Provident Fund is to give monetary security to employee for long
term and to retain the employee as well.
Retirement
Benefits
EMPLOYEE FUNDS
RETIREMENT FUNDS
GRATUITY PROVIDENT
PROFIT
PARTICIPATION FUND
Profit earned by the
comany must be
distributed to non-
management
employees @5%

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Utilization of Provident Fund
Provident Fund has a separate entity from FFBL. Provident Fund is maintained in a separate account apart
from FFBL. Separate audit is held for Provident Fund. Provident Funds are recognized from
Commissioner Income tax and are also exempt from tax.

Provident fund loans are returned in installments multiple of 12, i.e 12, 24, 36, 48 installments.
ROI on Provident Fund Investment
At the end of the year profit earned on Provident Fund investment is distributed among the employees
according to their contribution ratio.
After this, audit of Provident Fund is held by an external auditor. After audit Board of Trustees meeting is
held that approves the profit earned on Provident Fund investment, accounts and transaction of Provident
Fund. Finally Provident Fund statement is issued.
Provident Fund
Invetment
50% held at Bank
30% in Stock exchange
20% in Mutual funds
50% held at Bank
50% in Mutual funds
PF Loans
To employees @ 80% of
their contribution

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GRATUITY FUND
FFBL also maintains gratuity fund for its all regular employees. The fund is regulated by Board of
Trustees (BOT).
Contribution to Gratuity fund
There are two methods of contribution to gratuity fund.
Actuary valuation
Tax rule
Actuary Valuation
Contribution to the fund is made on the basis of actuarial valuation. Amount determined by the actuary as
charged for the year is included in profit and loss account for the year.
Tax Rule
A company can only contribute one month salary (maximum) to gratuity fund of its employees on annual
basis.
Employee salary*1/12= annual contribution to GF by company
Or
Employee salary*8.33% = annual contribution to GF by company
Utilization of Gratuity Fund
Alike provident fund, gratuity fund also has a separate entity from FFBL. Gratuity fund is maintained in a
separate account apart from FFBL. Separate audit is held for gratuity fund. Gratuity funds are recognized
from Commissioner Income tax and are also exempt from tax.

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Gratuity Payment
Gratuity fund is given at the end of the service to the employee through following formula,
Gratuity fund=Basic salary*number of served years.
4.3) LOCAL PAYMENTS
Local payment section makes payments to its local vendors. Local payment section involves three major
payment categories which are payments to local vendors (bags, liner and chemicals), payments to service
providers (direct invoices i.e telecommunication services, travelling services, utility bills, fuel charges
etc) and re-imbursements to FFBL employees.
Local payment operations

GF Investemnt
50% held in Bank
20% in Mutual funds
30% in Stock exchange

100% held in Bank
50% held in Bank
50% in Mutual funds
Parking
Tax sheet &
Certificates
Posting
Cheque
Issuance
Payment
Voucher
Entering

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Local Payment Terminologies (at FFBL)
MIGO
When the material ordered by FFBL is being delivered and accepted it is called as MIGO, at this stage a
general entry is being passed in the FFBL database system.
MIRO
When the general liability is booked against the specific liability in the database it is called as MIRO.
Invoice booking also takes place at this stage.
Payment Process
The major function of Local Payment section is to make payments to the vendors. In Local Payment
section, I learned about how payments were made against the invoices, cheques are prepared and journal
voucher are finalized with copies of purchase requisition, purchase order, invoice and payees cheque
attached to it.
For Goods
When material amount is more than Rs. 10,000 payments will be made through Purchase Order
When material amount is less than Rs. 10,000 payments will be made through Payment Order.
For Services
If the amount of services rendered is more than Rs. 20,000 payments will be made through
Purchase Order.
If the amount of services rendered is less than Rs. 20,000 payments will be made through
Payment Order.
There are two categories in Local Payment section, these are
Payments to Direct Invoices ( Petrol bills, Medical bills, Travelling charges, Telephone bills, etc)

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Payments to the vendors of Bags, Chemicals and Liner
Payment to Direct Invoices
Local payment section receives verified bills of expenses from different departments in the company or
outside the company such as hotel bills, travel agencies, medical store along with approved PO from
authorized personals.
Direct Invoices such as utility bills, Stationary Medicine, TCS charges and employees reimbursement etc
will be always paid through payment order.
In the case of re-imbursement to employees, if the amount is less than Rs.10, 000 then payment is made
through Petty Cash. There is no tax deduction in the case of re-imbursement as the tax has already been
deducted.
Withholding Tax
Government has given authority to Large Tax Payer Units (LTU) to withhold or deduct the tax from the
payments to its vendors on behalf of FBR and pay the tax to Government. But a Large Tax Payer Unit
(LTU) cannot withhold or deduct the tax of another LTU.
The withholding tax rates are as below,
Withholding tax Income tax Sales tax
Goods In the case of company,
Withhold 3.5%

In the case of individual
or AOP, withhold 4%
In the case of Whole
seller, Withhold 10% of
GST

Other than Whole seller,
withhold 20% of GST
Services In case of company,
Withhold 6%

In case of Individual or
AOP, withhold 7%
In Punjab, Withhold
100% of GST

In Sindh, Withhold 1%
of GST

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Withholding Tax Certificates
FFBL issues a certificate to its vendors mentioning Computerized Payment Receipt (CPR #) and
amount withheld by FFBL on the behalf of FBR, only those vendors are exempt from this deduction who
possess an exemption certificate.
4.4) FINANCIAL REPORTING
Financial reporting section is mainly concerned with the preparation of financial statement and distributes
the presented information to the end user such as, FFBL management, planning and budgeting section,
share holders and other stake holders. The financial statements include,
Balance sheet
Income statement
Statement of comprehensive income
Cash flow statement
Statement of change in equity
Notes to the accounts
Reporting Hierarchy

General Manager
Finance
Finance Manager
Deputy Manager
SUPERVISOR

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Major Responsibilities
Preparation of Financial statements
Coordination with external auditor
o Annual audit
o Half yearly review
Timely provision of financial reports to the concerning parties
Accounting Cycle

Charts of Account
The chart of accounts defines the cost centre & General ledger Codes such as Finance department
(3401010) and Admin (320100) etc. Cost centre is allocated on the basis of departments which are
denoted by their cost centre codes. These codes represent a particular G/L account and Items such as
furniture, asset or Expenses a/c etc.
Asset are represented by 1000000
Capital & equity 2000000
Liabilities 3000000
Revenues 4000000
Expenses 5000000
Entries
through
invoices
"GL"
Extraction
of Trail
balance
Financial
statement
preparetion

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Financial statements & Items
Balance Sheet
as at December 31,2013
(Rupees, 000)
SHARE CAPITAL & RESERVES
Share capital
Capital reserve
NON CURRENT LIABILITIES
Long term loans
Deferred liabilities
CURRENT LIABILTIES
Trade & other Payables
Loans
Provision for income tax
TOTAL LIABILITIES
NON CURRENT ASSETS
Property, plant & equipments
Intangible asset
CURRENT ASSETS
Stock
Cash & bank balances
Advances
TOTAL ASSETS

Profit & Loss Account

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for the year ended December 31, 2013
(Rupees, 000)
Sales-net
Cost of sales
Gross Profit
Selling & distribution cost
Administrative expenses
Operating expense
Finance cost
Other expenses
Profit before tax
Taxation
Profit after tax

Statement of Comprehensive Income
for the year ended December 31,2013

(Rupees000)
Profit after tax
Other comprehensive Incomes
Total comprehensive income

Cash Flow Statement

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CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations
Finance cost paid
Taxes paid
Payment to Gratuity Fund
Compensated absences paid
Payment to Workers (Profit) Participation Fund
Net cash generated from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed capital expenditure
Long term investments
Proceeds from sale of property, plant and equipment
Long term deposits
Short term investments
Profit received on bank balances and term deposits
Net cash (used in) / generated from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Long term loan - repayments
Short term borrowings - net
Dividend paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts:
- Cash and bank balances
- Short term highly liquid investments
- Short term running finance
Total

Statement of Changes in Equity

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Balance as at January 01, 2013 - as previously reported
Changes in accounting policy for recognition of actuarial gains and losses
Balance as at January 01, 2013 restated
Profit for the year after taxation
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners, recorded directly in equity distributions to owners
Final dividend (previous year)
Interim dividend (current year)
Total transactions with owners
Balance as at December 31, 2012 restated

Balance as at January 01, 2013 restated
Profit for the year after taxation
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners, recorded directly in equity distributions to owners
Final dividend (previous year)
1st interim dividend (current year)
2nd interim dividend (current year)
Total transactions with owners
Balance as at December 31, 2013
Audit of Financial Statements
KPMG (Taseer Hadi) is currently engaged with FFBL to verify the financial statements. The FFBL
financial statements are disclosed to share holders and public after the completion of annual audit. It is
also the responsibility of reporting section to deal with external auditor. During the annual audit or half

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yearly review of financial statements & notes to accounts, the external auditor may need some
information through which they can verify the desired items. The main audit procedures they carrying out
are as follows,
Inspection items, enquiries, third party conformation, observations etc. The external auditors review the
financial statement and pass their opinion whether the presented information is free from material
misstatement.
After the completion of final audit, FFBL does disclose the audited financial statements to share holders
and other stake holders.
4.5) PLANNING & BUDGETING
In Planning and Budgeting section, I was entertained by Mr. Wali Muhammad, Mr. Azmat and Mr. Shaik.
Planning and Budgeting is the most important part as it provides you the estimated future expenses or
costs of the company. It reviews and analyzes Operational Expenditures (OPEX) and Capital
Expenditures (CAPEX) and constantly monitors it.
In Planning and Budgeting section, I was told about its functions and significance. The major functions of
Planning and Budgeting section are given below,
Budget
Project Planning
Management Reporting
4.5.1) Budget
In FFBL, financial year is from January 1
st
to December 31
st
. Budget section starts its activities from July
to develop the budget and finalizes it by the end of October.

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Budget Composition
Budget comprises of two categories Operational Expenditure (OPEX) and Capital Expenditure
(CAPEX).
Operational Expenditure (OPEX)
Expenditures required for the day-to-day functioning of the business are called as Operational
Expenditures (OPEX).
Operation Expenditure includes,
Sales Plan
Production Plan
Dispatch Plan
Raw Material Budget
Main Power Budget
Overhead Budget
Selling & Distribution Budget
Finance Cost
Capital Expenditure (CAPEX)
CAPEX (Capital Expenditure) are business expenses incurred to create future benefits i.e. acquisition of
assets that will have a useful life beyond the tax year. Capital expenditure includes those items which
have more than one year life.
Computer
Vehicles
Equipments
Plant & Machinery, etc

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Budget preparation
Following steps are taken by the Budget section for preparation,
Budget is made on annual basis by Planning and Budgeting section in such a way that every Department
sends its Budget Inputs for the next financial year with comprehensive description. These Budget Inputs
are then reviewed on various levels from Section Head to Department Manager then to General Manager
Plant and to General Manager Finance and Managing Director with meetings on each level. Then the
Budget is further sent to the Board of Directors for final approval.

Budget Monitoring
Budget section continuously monitors the budget on daily and monthly basis. Budget section compares
the Actual Expenses with Business Plan and requires the justification, if the actual expenses overrun the
Business Plan.
Budget Inputs
General Manager Plant/
General Manager Finance
Managing Director
Board of Directors

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4.5.2) PROJECT PLANNING
Project planning deals with new and existing projects at FFBL. Project planning includes following steps
in project evaluation and its commencement.
Financial Analysis
Financial analysis is done under the supervision of finance department (Project Planning section). Finance
department can do in-house study or outsource the consultant for financial analysis. In this analysis
Financial Feasibility/Model is developed by the consultants and then reviewed by Planning &
Budgeting Section.
Financial Model
Financial model represents the real world financial situation. It is the mathematical model designed to
represent the performance of the project.
Project Evaluation Techniques
After the analysis the project is evaluated, through various evaluation techniques to confirm the worth of
the project. These techniques includes,
New projects Existing Projects
NPV Relevant Cost method
IRR
Pay Back Period method
New Projects Evaluation Techniques
Net Present Value (NPV)
The difference between the present value of cash inflows and the present value of cash outflows. NPV is
used in capital budgeting to analyze the profitability of an investment or project.

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Internal Rate of Return (IRR)
The discount rate that makes the net present value of all cash flows from a particular project equal to zero
is called as Internal Rate of Return (IRR). Generally, the higher a project's Internal Rate of Return, the
more desirable it is to undertake the project. As such, IRR can be used to rank several prospective projects
a firm is considering. Assuming all other factors are equal among the various projects, the project with the
highest IRR would probably be considered the best and undertaken first.
Pay Back Period Method
The length of time required to recover the cost of an investment. The payback period of a given
investment or project is an important determinant of whether to undertake the position or project, as
longer payback periods are typically not desirable for investment positions.
Payback Period = Cost of Project / Annual Cash Inflows
Existing Projects Evaluation Techniques
Relevant Cost Method
In this project evaluation technique, cost and benefits are analyzed i.e before project what benefits are
being obtained and after project what benefits can be attained.
After evaluation of projects, they are presented to the Board of Directors. Sensitivity analysis is run to
foresee the various outcomes of the project in different situations (ranging from best condition to the
worst). Finally the project is approved or rejected by the Board of Directors.
4.5.3) Management Reporting
Monthly management reports are prepared for onward submission to GMF/ MD. These reports comprise
the following major details.
Quantitative Analysis
Variance Calculations

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Reasons for Variance
Variance Calculation
Variance Calculation is done on monthly, quarterly and annual basis. Variances are calculated on the
basis of Actual versus Business Plan and Current year actual versus Last year actual.
Industrial Comparison
Industrial comparison is done half and annual basis. In these comparison financial statements of FFBL is
compared with the leading fertilizer firms to check their performance in the prevailing market situation.
Cost Audit
Cost statements (product wise) as per cost audit guide lines are prepared. Cost audit of cost statements is
held on monthly basis. After audit cost statements are approved.
Actualization Process/ Outlook
Actualization process is done on monthly basis to outlook the future profit. In actualization process actual
profit of previous months are analyzed to foresee the future profits.
4.6) TREASURY
The goal of Treasury section is to optimize their companys liquidity and make sound financial
investments for the future or enter into hedges against its financial risks.
Treasury Section also ensures that the placement of the funds is safe with a minimum risk. Whenever the
company needs funds, the section has responsibility to arrange funds from best possible source. The main
source of cash inflow is selling the DAP and Urea and the outflow of cash is Payments to raw material,
salary and loan etc.
Main Function
Investment

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Reconciliation
Investment
Treasury Section invests the surplus funds in either Banks or in Mutual Funds.
Bank Deposits
Treasury section can Deposit the funds into bank either in PLS account or in Term Deposit Receipt
(TDR). Both of these accounts have different advantages and drawbacks. The section need to ensure that
which account is more beneficial for the FFBL.
P/L Account
The treasury section has an option to draw the amount at any time they need the cash. There is no
restriction but the interest rate will be low as compare to TDR.
Term Deposit Receipt (TDR)
The company will be bound and cannot draw the amount until the fixed time period has been elapsed but
the return on the amount will be higher than the P/L investment.
Mutual Funds
Mutual fund is professionally managed by experts. They attract different investors to make investment
into mutual funds in return for some management fee. The mutual funds can be Open end & close end.
Open end Funds
Mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high
enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds
also buy back shares when investors wish to sell.

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Close end Funds
A closed-end fund functions much more like an exchange traded fund than a mutual fund. They are
launched through an IPO in order to raise money and then trade in the open market just like a stock.
Activities
Daily Basis Activities includes
Funds transfer, fund status monitoring & exchange rates update
Monthly Basis Activities Includes
Bank Reconciliation, recording of Income & Expenses.
Funds Transfer
Treasury section has also the responsibility to deposit the funds in the most appropriate way. The funds
can be transferred through the fallowing ways e.g. Through a Cheque, Letter or Real Time Gross
Settlement (RTGS).
Funds Status Monitoring
Treasury section continuously monitors the Funds status and update the Funds on a regular basis/routinely
e.g. draw the Funds from a particular bank to another bank that offered and/or committed to pay more
competitive interest and have minimum risk.
Bank Reconciliation
At the end of each month the Treasury Section receives the Bank statement from the all banks and
reconciles the bank balance with the GL accounts which are maintained by the Section through SAP.
CONCLUSION
This internship was very enlightening experience for me. With the exposure in the field I
learnt many new things. At FFBL, the environment is professional; all employees can be seen

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working in much trained way. Internees have suitable environment of learning, employees are
keen to train Internees.
All departments are working in the most professional way in their work field. The internship
was also inspiring experiences that attract me to consider this as my future field for my career.
I observed FFBL a financially sound company. Its profits are increasing year by year. Its staff
is very good and sincere with the company. FFBL views specialization and product excellence
as the corner stone of its strategy. The people at FFBL realize that innovation; creativity,
reliability are the key ingredients for their future growth.
After analyzing I observed that FFBL is in better position in all respects. Despite hard
competition within the Fertilizer Industry in Pakistan, FFBL has made tremendous and
remarkable progress practically in every sphere of its activities. FFBL is maintaining its position
as one of the leading fertilizer company in the country both in terms of capital base and good
governance. FFBL has been able to continue its overall progress. This success has been made
possible due to dynamic leadership of its management as well as devotion and sincerity of all
categories of staff and executives.

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On Fauji Fertilizers Bin Qasim Ltd

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