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If you will face any confusion then you can contact with us via email at [email protected] Project Proposal Activity Ratio Analysis of Fauji Fertilizer Co. Limited, Engro Corporation Limited and Dawood Hercules Limited in Fertilizer Sector for FY 2008-2010

A PROJECT PROPOSAL SUBMITTED TO THE DEPARTMENT OF MANAGEMENT SCIENCES, VIRTUAL UNIVERSITY OF PAKISTAN IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER IN BUSINESS ADMINISTRATION

Submitted By mc090403897 Wasif Pervaiz Dar Virtual University of Pakistan

Date of Submission: 15th April, 2011

Table of contents

1 - Chapter 1 Introduction ------------------------------------------- 2 1.1 Introduction of the Project -------------------------------- 2 1.1.1 Introduction --------------------------------------2 1.1.2 Description of the Project Title --------------- 7 1.2 Background ------------------------------------------------- 8

1.3 Objectives --------------------------------------------------- 8 1.4 Significance ------------------------------------------------- 9 2 Chapter 2 Project Proceedings ---------------------------------10 3 Chapter 3 Methodology ------------------------------------------11 3.1 Data Collection Sources --------------------------------- 11 3.1.1 Primary Sources ------------------------------- 11 3.1.2 Secondary Sources -----------------------------11 3.5 Data Processing & Analysis -----------------------------11 4 Chapter 4 - Bibliography ------------------------------------------12

CHAPTER 1 INTRODUCTION 1.1 Introduction of the Project: 1.1.1 Introduction: Pakistans economy is an agricultural based and its importance is well established in the country. It plays an important and vital role in the growth of the economy, its activity, generating revenues/foreign exchange and in the development of the industrial sector of the country. It provides raw material to the industrial sector of the country like sugar, cotton, textile, foods, jute, tobacco and other industries and regarded as a backbone of the Pakistans economic activity. It is contributed almost 21% of the Pakistans GDP and employs about 41% of the total labor force.

Fertilizers have played an important role in the growth and development of the agricultural sector especially to meet the growing demand of the food and to achieve the self sufficiency level. Keeping the importance of fertilizer sector in my mind, I have choose fertilizer sector from which top 3 listed companies have been selected for my project of Activity Ratio Analysis and these companies are Fauji Fertilizer Co. Ltd. Engro Corporation Limited Dawood Hercules Chemical Limited Now, I would like to briefly introduce the selected companies and their business activities

FAUJI FERTILIZER CO. LTD.

Fauji Fertilizer Company Limited (FFC) is Pakistan's leading urea manufacturing company with over 60% market share. It is principally engaged in the production, purchasing, and marketing of fertilizers and chemicals. It offers ammonia/urea under the brand name Sona, as well as nitrogen, phosphate, and potash based fertilizers with a vision to acquire self - sufficiency in fertilizer production in the country, FFC was incorporated in 1978 as a private limited company. This was a joint venture between Fauji Foundation (a leading charitable trust in Pakistan) and Haldor Topsoe A/S of Denmark. The initial share capital of the company was 813.9 Million Rupees. The present share capital of the company stands above Rs. 8.48 Billion. Additionally, FFC has more than Rs. 8.3 Billion as long term investments which include stakes in the subsidiaries FFBL, FFCEL and associate FCCL. Required brief introduction

Unnecessary details have been deleted

VISION STATEMENT
FFC's vision for the 21st Century remains focused on harmonizing the Company with fresh challenges and encompasses diversification and embarking on ventures within and beyond the territorial limits of the Country in collaboration with leading business partners.

MISSION STATEMENT
FFC is committed to play its leading role in industrial and agricultural advancement in Pakistan by providing quality fertilizers and allied services to its customers and given the passion to excel, take on fresh challenges, set new goals and take initiatives for development of profitable business ventures.

LOCATION OF OFFICE
Rawalpindi

REGIONAL OFFICES
Multan Lahore Sukkar Mirpur Khas Nawabshah

PLANT LOCATION
FFC having 3 plants in Pakistan Plants in Goth Machhi 1 Plant in Mirpur Mathelo

PRODUCT OFFERED
Sona Urea 5

 Sona DAP

ENGRO CORPORATION LIMITED

Engro Chemical Pakistan Limited (Engro) is a Pakistan based fertilizer company. The company's principal activities include manufacturing and marketing of fertilizers such as Urea, NPK fertilizers, MAP fertilizer and micronutrients Zinc Sulphate. The company is the second producer largest of

Urea fertilizer in Pakistan. Engro is also engaged in storage, chemical and PVC terminal

resin manufacturing and marketing, chemicals and explosive products handling and storage, control and automation processes, dairy products and energy businesses.

Required brief introduction Unnecessary details have been deleted

VISION & MISSION STATEMENT

To be the premier Pakistani enterprise with a global reach, passionately pursuing value creation for all stakeholders.

HEAD OFFICE LOCATION

Clifton, Karachi

REGIONAL OFFICES
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Hyderabad Quetta Nawabshah Rahim Yar Khan DG Khan Multan Lahore Gujranwala DI Khan

FACTORIES LOCATION
Dharki, Sindh Bin Qasim, Karachi

PRODUCTS OFFERED
Engro urea Engro Zorawar Engro Phosphate Engro NP Zingro Engro DAP Engro Zarkhez

DAWOOD HERCULES CHEMICALS LIMITED

Dawood incorporated

Hercules as a

Chemicals Limited was public limited company on 17th April 1968, as a joint venture between Dawood Group of

Industries and Hercules Inc. USA. It was the first private sector venture in Pakistan to receive a loan from the World Bank and was the largest ammonia/urea plant in country at that time. Initially the plant's capacity was 345,000 metric tons of urea per annum. The plant was revamped in 1989 / 1991 to enhance the capacity to 445,500 metric tons of urea per annum. Also, it made the manufacturing facilities more energy efficient and environment friendly. In recent years, Dawood Hercules has made a colossal investment to incorporate the latest technology; the most significant are the construction of new Prilling tower in a record time; the tallest industrial structure in Pakistan, replacement of Primary Waste Heat Exchanger, Primary Reformer Harps Assemblies and conventional instrumentation (with Distributed Control System).

VISION STATEMENT
To excel in the fertilizer and allied business at national and international level by maintaining highest standards of product quality thereby playing our role in the development of the country's economy and adding value to the shareholders' investment.

MISSION STATEMENT
To offer consistent dividends to the shareholders. To chalk out a plan to improve production techniques and quality standards. To provide career grooming opportunities to the talented professionals. To become a good corporate citizen. To develop long-term relationship with the employees. To create high performing Organizational Environment in which ideas are generated and nurtured. To inculcate honest and ethical behavior. To create safe, healthy environment and friendly atmosphere for the employees. To improve quality of life for the employees. To make the farmer community prosper.

HEAD OFFICE LOCATION

8

 Empress Road, Lahore

FACTORY LOCATION
Chichoki Mallia, Shkhupura

PRODUCT OFFERED
Bubber Sher Dawood Hercules manufactures urea and markets urea under the brand Bubber Sher has consistently delivered quality and value for more than 35 years and today it has become a household name for the farmers. 1.1.2 Description of the Project: The project is all about to perform activity ratio analysis to the selected companies i.e. Fauji Fertilizer Co. Ltd., Engro Corporation Ltd. & Dawood Hercules Chemicals Ltd. These are the leading companies in Pakistans Fertilizer sector and playing very significant role not only in the fertilizer sector but also continue to support our agricultural sector. The project will guide and facilitate to the managers, owners, investors, bankers, creditors and debtors to assess the most efficient company out of the top three selected companies in the fertilizer sector that which one manages their resources and assets such as inventory, receivables, fixed assets and current liability more effectively and efficiently as compared to the others two by applying activity ratio analysis to their recent financial statements. Actually activity ratios measure the firms ability to convert non-cash assets into cash assets within the date of balance sheet. Companies try to convert their production into the sales or cash as fast as they can so that they could achieve higher level of revenues in future.

1.2 Background

The background behind thereason for selection of fertilizer sector and selected companies for my project is that I have already done some work in the stock market as a local trader and the sector that I have chosen for the project is my favorite sector for trading purpose. As I am little bit familiar about these companies and that become the main reason and forces me to select fertilizer sector and I suppose it will be easy for me to conduct the activity ratio analysis on these companies and can better analyze the companies efficiency and the interpretation of the results for the stakeholders. I further believe that a quality work will be evolved from the study and research of my project. 1.3 Objectives

Following objectives are OK but also you are required to view the project template of this topic available on VULSM under tab of Downloads in which sample of objectives is given on this topic.
Ratio analysis is an integral part of the financial statement analysis and it is most widely and powerful tool used to analyze the companies financial statements. The main objective of ratio analysis is to deeply analyze the information provided in the financial statements and present meaningful results in terms of liquidity, solvency, activity and profitability of the company in a relative form. Here in this project, I will just remain focus and limit my research to the extent of the Activity ratio which is used to asses, how quickly a company turnover their assets into sales or cash. Companies are invested their capital in various assets to generate revenues and earn incomes and those managed their assets smartly usually achieve larger amount of sales and profits as well. Hence, the main objective of the project is to facilitate all the stakeholders especially the investors and bankers to evaluate the three listed companies ability to how effectively and efficiently manage their operations and resources/assets. Project will enable the investors and the other stakeholders to make a decision that which one is

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better to invest and safe and having great potential to improve their sales volume as compared to the rest of the two companies in a similar sector.

1.4 Significance The project will provide very significant, rich and valuable information for all the stakeholders, financial analysts and the students as well. Study of the project will become enable to identify the companies past and current performance with respect to the management of their resources and further will lead them to paint the future growth of the selected companies on the bases of the facts, figures and analysis provided in the project within the limit of activity ratio. The project will give them solid analysis in a graphical and tabular form with an interpretation and conclusion drawn on bases of facts and figures and allow them to take decision that which company is better to invest and less riskier as compared to the other two selected companies in a fertilizer sector.

CHAPTER 2 PROJECT PROCEEDINGS Since the project is about to conduct Activity ratio analysis of the selected companies in a same sector and for this reason I will calculate the following ratios of the selected companies in a tabular and graphical form having some introduction of each ratio supported with necessary working, formulas, calculation and interpretation individually. Accounts Receivable Turnover

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 Average Collection Period Accounts Payable Turnover Average Payment Period Inventory Turnover Average Age of Inventory Operating Cycle Total Assets Turnover Fixed Assets Turnover Ratios will be plotted on the graph to perform the trend analysis that will help to see whether the ratios are increasing, decreasing or remain constant. After accomplishing ratio analysis, conclusion will be drawn on the bases of the work done throughout the project and then suggested accordingly.

CHAPTER 3 METHODOLOGY

3.1 Data Collection Sources 3.1.1 Primary Sources

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Companies annual accounts report and their official sites will be used as a primary source to collect the basic and necessary information like financial statements, company profile, introduction, their business activity, vision and mission statement. 3.1.2 Secondary Sources Articles, books, stock exchange, brokers and different sites will be consulted as secondary sources available on the internet or in a physical form to collect the raw data and information as much as possible on the topic selected in order to get a nice and comprehensive shape of the project. I will keep one thing in my mind to give reference of the source in APA format where it will be necessary. 3.5 Data Processing & Analysis Following tools and softwares will be used to process the raw data and then analyze it properly in a given format. MS Word MS Excel Calculators

CHAPTER 4 BIBLIOGRAPHY William L. Megginson, Scott B. Smart.(2008). Introduction to Corporate Finance: Activity Ratio, Website: http://books.google.com.pk/books? id=OTcIDFiNiVIC&pg=PA50&lpg=PA50&dq=introduction+of+activity+rat io&source=bl&ots=Xc1QP4-UmX&sig=dY-cmuMb_s1Ap-

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97TwentopyGJA&hl=en&ei=ZwieTbPFFsysrAfGsdTEBA&sa=X&oi=book_r esult&ct=result&resnum=10&ved=0CFIQ6AEwCQ#v=onepage&q=introduc tion%20of%20activity%20ratio&f=false Activity Ratio, Website: http://www.investopedia.com/terms/a/activityratio.asp http://financial-education.com/2007/01/31/activity-ratios/ http://www.accountingformanagement.com/accounting_ratios.htm http://www.scribd.com/doc/51790153/14/OBJECTIVE-OF-RATIO-ANALYSIS http://www.nfdc.gov.pk/update.htm Agriculture in Pakistan, Website: http://en.wikipedia.org/wiki/Agriculture_in_Pakistan Fauji Fertilizer Co. Ltd. Introduction, Website: http://www.ffc.com.pk/aboutffc.aspx, http://www.infogrok.com/index.php/vmchk/2169-swot/fauji-fertilizer-companylimited-fauf-swot-profile/flypage.pbv.tpl.html http://www.scribd.com/doc/29506620/Analysis-of-Fertilizer-Industry-ofPakistan Fauji Fertilizer Co. Ltd. Mission Statement, Website: http://www.ffc.com.pk/missionstat.aspx Fauji Fertilizer Co. Ltd. Vision Statement, Website: http://www.ffc.com.pk/visionstat.aspx Engro Corporation Limited., Introduction, Website: http://www.scribd.com/doc/29506620/Analysis-of-Fertilizer-Industry-ofPakistan http://www.infogrok.com/index.php/vmchk/2169-swot/engro-chemicalpakistan-limited-egch-swot-profile/flypage.pbv.tpl.html Dawood Hercules Limited, Introduction, Website: http://www.scribd.com/doc/29506620/Analysis-of-Fertilizer-Industry-ofPakistan http://www.dawoodhercules.com/

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