Pharma Zone Pvt. Ltd.
Internship Report
DEDICATED
TO
My Parents
AND
All My Teachers
Who taught me the first word to speak
The first alphabet to write and
The first step to take
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Preface
The business world today is considerably different and more complex than it was just
some years ago. Today, we experience private-equity firms acquiring hundreds of
companies. Both the challenges and opportunities facing organizations of all sizes today
are greater than ever.
This internship report prepared on one of the company in printing of aluminum foils,
gives you a complete over view of that company what is its accounting cycle, what is its
opportunities and etc.
I have given the ratio analysis of Pharma Zone Pvt. Limited. Ratios are made for
2007, 2008. These ratios are depicted graphically through line chart. Analysis of ratio
shows that the ratios of Pharma Zone are satisfactory except average collection period.
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Pharma Zone Pvt. Ltd.
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Executive summary
Pharma Zone, the leading company in the printing of foil, is situated in PCSIR
Colony, College Road Lahore. It was a sole proprietorship named as Pharma Link but in
2002 it was converted into private Limited Corporation. Mr. Arshad Mehmood and his
wife are the director of Pharma Zone.
Pharma Zone has acquired a plot in Shaikhupura to start the work in the year 2010. It
has also acquired new machineries to improve its functions. Currently Pharma Zone has
50 gravure (printing) machines.
Pharma zone currently manufactures following products:

Aluminum Foil Blister

Strip Foil

Poly Coated Paper

Blister Pouches

Alu Alu Foil Plain
Company keeps its quality at the peak of the business.
There are high levels of professionals in all departments of Pharma Zone and it is
continuously keeping an eye over their growth.
There is a proper channel of communication between the departments of the Pharma
Zone. There is a proper organizational chart issued by the organization.
Accounting system adopted by Pharma zone is single entry system. Pharma Zone
adopted this system because it is an easy approach towards accounting.
Ratios of Pharma Zone are good except average collection period which is very poor
for Pharma Zone.
Ali Mehdi
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Pharma Zone Pvt. Ltd.
Internship Report
Acknowledgement
I was home when I heard the news from my cousin that you can do your training in
his friend’s company, the Pharma Zone Pvt. Limited. After one week
I got into my career first opportunity and went to the company with my cousin.
Initially there was little bit work to do in the Pharma Zone but Manger Accounts and
Finance very kind to me gave me some work of posting and other checking. I want to
thanks Mr. Imran Shafi, Manager Accounts and Finance of Pharma Zone for his
cooperativeness to me in the prepration of this internship report.
Mr. Quasim, the accountant, also assisted me in understanding the management and
hierarchy of the organization and the relationship between departments.
Mr. Adeel Dawar gave me the Financial Statements of Pharma Zone Pvt. Limited
very next day of my internsip to get the ratios and have a work on it.
Finally I want to thanks Mr. Arshad Mehmood, the CEO of Pharma Zone who also
talked to me on much occasions do discuss any problems faced by me.
Ali Mehdi
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Pharma Zone Pvt. Ltd.
Internship Report
Table of Contents
PREFACE
II
EXECUTIVE SUMMARY
III
ACKNOWLEDGEMENT
IV
HISTORY OF ORGANIZATION
1
ORIGIN:
WHY CHANGE TO PRIVATE LIMITED COMPANY?
1
1
ORGANIZATIONAL CHART
2
MANAGEMENT OF ORGANIZATION
3
BOARD OF DIRECTORS:
MANAGEMENT:
3
3
FIELD OF ACTIVITIES
6
CUSTOMERS AND SUPPLIERS OF PHARMA ZONE
7
LIST OF QUALITY MAJOR CUSTOMERS:
LIST OF MAJOR SUPPLIERS:
7
8
PRODUCT INFORMATION
9
PRODUCT MATRIX
PRODUCT RANGE:
9
9
FUTURE PLANS AND PROJECTIONS
10
MISSION & VISION STATEMENT
10
OFFICES AND FACTORY OF PHARMA ZONE
11
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MAJOR FUNCTIONS PERFORMED BY ACCOUNTING DEPARTMENT
12
SALES CYCLE
12
STEP I: COLLECTION OF PURCHASE ORDER:
STEP II: PREPARATION OF SALES ORDER:
STEP III: PREPARATION OF PRINTING JOB CARD:
STEP IV: PREPARATION OF DELIVERY CHALLAN:
STEP V: PREPARATION OF SALES TAX INVOICE:
STEP VI: PREPARATION OF JOURNAL VOUCHERS (JV):
STEP VII: POSTING TO LEDGERS:
STEP VIII: PREPARATION OF JOURNAL:
STEP IX: TAX RETURN FILING:
13
13
14
15
16
17
17
18
18
WHEN A CUSTOMER MAKES PAYMENT
18
WHEN PAYMENT IS MADE TO THE SUPPLIER
18
MY LEARNING
19
CHEQUE ONLINE TRANSFER AND RECEIPT OF CHEQUES:
POSTING INTO DEBTORS’ LEDGER:
CHECKING THE ENTRIES POSTED INTO LEDGER:
CHECKING OF JOURNAL VOUCHERS:
MISCELLANEOUS:
19
19
20
20
20
PHARMA ZONE FINANCIAL STATEMENTS:
21
BALANCE SHEET:
INCOME STATEMENT:
21
22
RATIO ANALYSIS
23
CATEGORIES OF FINANCIAL RATIOS:
LIQUIDITY RATIOS:
DEBT RATIO:
23
23
23
24
24
24
24
25
25
25
25
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CURRENT RATIO:
QUICK (ACID-TEST) RATIO:
ACTIVITY RATIOS:
INVENTORY TURNOVER:
AVERAGE COLLECTION PERIOD:
AVERAGE PAYMENT PERIOD:
TOTAL ASSET TURNOVER:
DEBT RATIOS:
Pharma Zone Pvt. Ltd.
TIMES INTEREST EARNED RATIO:
Internship Report
ADVANTAGES OF RATIO ANALYSIS:
25
26
26
26
27
27
27
27
27
28
28
28
RATIOS OF PHARMA ZONE PVT. LIMITED 2007-08
29
RATIOS PHARMA ZONE PVT. LIMITED (2007)
29
RATIOS PHARMA ZONE PVT. LIMITED (2008)
31
IMPORTANT NOTES & ASSUMPTION
33
LIMITATIONS:
33
RATIO ANALYSIS 2007-2008
34
LIQUIDITY RATIOS:
34
LIQUIDITY RATIOS ANALYSIS
35
CURRENT RATIO:
QUICK (ACID-TEST) RATIO:
ACTIVITY RATIOS:
35
35
36
ACTIVITY RATIOS ANALYSIS
38
INVENTORY TURNOVER:
AVERAGE COLLECTION PERIOD:
AVERAGE PAYMENT PERIOD:
TOTAL ASSET TURNOVER:
DEBT RATIOS
38
38
38
38
39
DEBT RATIOS ANALYSIS
40
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PROFITABILITY RATIOS:
GROSS PROFIT MARGIN:
OPERATING PROFIT MARGIN:
NET PROFIT MARGIN:
EARNING PER SHARE:
RETURN ON ASSETS:
RETURN ON EQUITY:
MARKET RATIOS:
PRICE/ EARNINGS (P/E) RATIO:
MARKET/BOOK (M/B) RATIO:
Pharma Zone Pvt. Ltd.
Internship Report
DEBT RATIO
PROFITABILITY RATIOS
40
41
PROFITABILITY RATIOS ANALYSIS
42
GROSS PROFIT MARGIN:
OPERATING PROFIT MARGIN:
NET PROFIT MARGIN:
RETURN ON ASSETS:
RETURN ON EQUITY:
42
42
42
42
42
SUMMARY OF ALL RATIOS
43
RATIO ANALYSIS CONCLUSION
45
HORIZONTAL AND VERTICAL ANALYSIS
46
VERTICAL ANALYSIS:
HORIZONTAL ANALYSIS:
46
46
VERTICAL ANALYSIS
46
COMMON-SIZE INCOME STATEMENT:
SUPPORTING CALCULATION:
46
47
GRAPHICAL REPRESENTATION OF COMMON-SIZE INCOME
STATEMENT
48
COMMON-SIZE BALANCE SHEET:
49
SUPPORTING CALCULATION:
50
HORIZONTAL ANALYSIS
52
HORIZONTAL ANALYSIS OF BALANCE SHEET
52
SUPPORTING CALCULATIONS:
53
HORIZONTAL ANALYSIS OF INCOME STATEMENT
55
SUPPORTING CALCULATION:
55
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RECOMMENDATIONS
57
CONCLUSION
58
INDEX
59
REFERENCES
61
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History of organization
Origin:
Pharma Zone was established in 2002 with name of Pharma Link for manufacturing
of Printed Aluminum Foil, Strip & Poly Coated Paper for Pharmaceutical Industries by:

Mr. Arshad Mahmood – Executive director since its inception a position holding
bachelor of engineering from UET Lahore who served Material Manager Himont
Pharmaceutical (Pvt.) Ltd, and National Sales Manager in Himont Chemicals
Lahore for 10 years.

Mr. Arshad Mahmood – being a successful purchaser and Marketer has
sufficient understanding of quality and commitments which are integral parts of a
successful business by any supplier or vendor. This is the reason that in a short
span of time Pharma Link has captured a big share of Printing Market for
pharmaceutical industries.

We have established a private Limited company in the name of Pharma Zone
(Pvt.) Limited to further improve the existing business in a corporate and
systematic manner.
Why Change to Private Limited Company?
Pharma Link was the sole proprietorship. Many of the customers of the Pharma Link
were the Sales Tax Payer. They wanted to have the transactions secure. So for this reason
Pharma Zone was formed. Now with the private limited company customers can be given
sales tax invoice and tax can be deducted at source.
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Pharma Zone Pvt. Ltd.
Internship Report
Organizational Chart
CEO
Assistant CEO/
Director
Operations
Manager
Operations
Production
Manager
Assistant
Operations
Manger
Designer
Marketing
Manager
Marketing
Executive
Sales Order
Maker
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Marketing
Officer
Accounts and
Finance
Manager
Assistant
Finance
Manger
Sales Officer
Dispatch
Manger
Assistant
Dispatch
Manger
Accountant
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Pharma Zone Pvt. Ltd.
Internship Report
Management of Organization
Following is the experienced management of Pharma Zone Pvt. Ltd.:
Board of Directors:
In private Limited company minimum directors should be 2. Mr. Arshad Mehmood and
his wife are the two directors of Pharma Zone.
Management:
1. Arshad Mehmood, CEO:
Arshad Mehmood is executive director/Chief executive Officer (CEO) since its
inception. He has got position holding bachelor of engineering from UET Lahore who
served Material Manager Himont Pharmaceutical (Pvt.) Ltd, and National Sales
Manager in Himont Chemicals Lahore for 10 years.
2. Fahad Khalid, Assistant CEO/Director Operations:
3. Sarfraz A. Malik, Manager Operations:
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4. Faraz Ali, Assistant Operations Manager:
5. Shehzad Ahmed, Designer:
6. Badar Munir, Production Manager:
7. Rana Azhar Jamshed, Marketing Manager:
8. Huma Qureshi, Marketing Executive:
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9. Waseem Ahmed Jam , Sales Officer:
10. Liaqat Ali, Marketing Officer:
11. Muhammad Imran Shafi, Manager Finance & Accounts:
12. Muhammad Qasim, Accountant:
13. Adeel Dawar, Assistant Finance Manger
14. Muhammad Kashif, Dispatch Manager
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Field of activities

Recently, Pharma Zone (Pvt.) Limited is formally leading source of Printed and
Plain Aluminum foil for blister, Strip, Poly Coated Paper & Alu Alu Foil.
Alu Alu Foil
Plain Aluminum
Exhibit 1

It Prints Aluminum foil for more than 150 pharmaceutical Companies all over
Pakistan and it always use best quality imported material for printing.
o It employees over 40 qualified manpower
o It prides itself on maintaining internal standards and quality

Pharma Zone secures product leadership by:
o Product differentiation
o Operational Competencies, and
o Customer intimacy
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Printed Alu Alu Foil
Exhibit 2
Customers and Suppliers of Pharma Zone
List of quality Major Customers:

Servier Research and Pharmaceuticals (Pvt.) Ltd, Lahore

The Schazoo laboratories (Pvt.) Ltd, Lahore

Highnoon Laboratories (Pvt.) Ltd, Lahore

Wilshire Laboratories (Pvt.) Ltd, Lahore

Ferozsons Laboratories (Pvt.) Ltd, Noshera

Stand Pharm Pakistan (Pvt.) Ltd, Lahore

Pacific Pharmaceuticals (Pvt.) Ltd, Lahore

Askari Pharmaceuticals (Pvt.) Ltd, Lahore
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Pharma Zone Pvt. Ltd.

Siza International (Pvt.) Ltd, Lahore

Raazee Therapeutics (Pvt.) Ltd, Lahore

Hansel Pharmaceuticals (Pvt.) Ltd, Lahore

Dyson Laboratories (Pvt.) Ltd, Lahore

Bryon Pharmaceuticals (Pvt.) Ltd, Peshawar

Paramount Pharmaceutical (Pvt.) Ltd, Islamabad

Polyfine Chem Pharmaceuticals (Pvt.) Ltd, Peshawar

Hammaz Pharmaceuticals (Pvt.) Ltd, Multan

Batala Pharmaceuticals (Pvt.) Ltd, Gujranwala

Qintat Pharmaceuticals (Pvt.) Ltd, Sargodha

Fynk Pharmaceuticals (Pvt.) Ltd, Lahore

NovaMed Pharmaceuticals (Pvt.) Ltd, Lahore
Internship Report
List of major suppliers:
Local:

Chemiaa Enterprises Ltd. (Packages Ltd.)

Aluminum Processing Industries, Karachi

Abbasi Chemicals (Pvt.) Ltd,

Bharay Bha Chemicals

Al-Pak Rubber Engineering

Descon Corporation (Pvt.) Ltd,

Khan Traders

Modern Packages

Asia Packages

Print n Pack
Imports:

Zibo Hengzbou Aluminum Plastic Packing Material Co Ltd. China

Jiangsu Zhongin Medical Packing Co. Ltd. China
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Product Information
Product Matrix

Aluminum Foil Blister
o Use in Blistering of Tablets, Capsules and Injections by Pharmaceuticals
Industry

Strip Foil
o Use in making strips for tablets or capsules by different machine
technology

Poly Coated Paper
o Use in making paper strips and powder sachets by pharmaceuticals and
food industry.

Blister Pouches
o Use to protect blisters from heat, light and moisture

Alu Alu Foil Plain
o Use in Blister Making in Place of PVC. This is the most protection
material used by pharmaceuticals
Product Range:
According to Pharma Zone Sources the share of the company in the market is as
follows:
Types of Products
Share of Business in Market (%age)
Aluminum foil
60
Strip Foil
15
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Poly Coated Paper
20
Pouches for Blister
5
Alu Alu Plain Foil
80/100
The aluminum foil is the most selling product of Pharma Zone with a market share of
60%. And the Alu Alu Plain foil is the least selling product of Pharma Zone with a
market share of 0.8%.
Future Plans and Projections
Currently, Pharma Zone has 50 gravure printing machines with the printing capacity
of 25000 kg/month. Pharma Zone has planned to import one fully computerized gravure
machine in this year. Due to addition of new machine its printing capacity will be
increased upto 36000 kg/month.
Pharma Zone has purchased a plot at Sheikhupura for installation of new unit for
business and to relocate the current facility in larger premises to meet future demands.
Construction of building has been started and hopes to complete this building and the
work will start there by the end of year 2010.
The current number of customers of Pharma Zone is over 150 and management is
confident to add 50 more companies every year.
Mission & Vision Statement
Mission & Vision Statement of Pharma Zone is the same and is given as below:
To be the leading private company of printing foils in Pakistan
Delivering quality printing foils
Through innovative technology
In a modern and progressive organization
High ethical and professional standards,
With providing enhance value to all our staff and workers,
And contributing to society
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Offices and Factory of Pharma Zone
Currently there is one head office and one factory of Pharma Zone, but it is in future
plans that one factory should be in Shaikhupura. Currently the address of the office and
factory is:
Pharma Zone (Pvt.) Ltd.
102-D, PCSIR Staff Colony
College Road,
Lahore
Phone: 0423-5110647
E-mail: thepharmazone@gmail.com
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Major Functions performed by accounting
department
Pharma Zone currently maintains its books of accounts according to single entry
system. The accounting department has number of functions to do in the whole year but
here are major functions of accounting department.
The following are given three cycles and processes. Each and every document is
explained. It is also explained that which document goes into what department? In which
department is prepared? How many copies are prepared?
First Cycle gives the details of Sales Cycle. Second describes when the customers of
the Pharma Zone make payment what documents are prepared. Third one describes how
payment is made to the Supplier and other party via different sources e.g. through
cheques, or cash.
In the boxes these documents are explained little bit.
Sales Cycle
Here are some steps which tells exactly what’s the sale procedure of Pharma Zone
Pvt. Ltd.
Sales Cycle consists of following steps:

Step I: Collection of Purchase Order

Step II: Preparation of Sales Order

Step III: Preparation of Printing job card

Step IV: Preparation of delivery Challan

Step V: Preparation of sales tax invoice

Step VI: Preparation of Journal Vouchers (JV)

Step VII: Posting to Ledgers

Step VIII: Preparation of Journal

Step IX: Tax Return Filing
Here is the detail of each step.
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Step I: Collection of Purchase Order:
Sales cycle of any company starts with the collection of the purchase order from its
customer. In the Pharma Zone purchase order is collected by head of the operations
department. The original copy of purchase order is received by Pharma Zone. Mostly the
head of the operations receives the purchase order. At times the chief executive officer
(CEO) receives the purchase order from the company.
Purchase Order:
Purchase order or PO is the first communication of the customer to purchase
a specified amount of goods at specified prices. There are different formats of
purchase orders. One of the samples of purchase order is given in Appendix I.
Following is the brief description of purchase order:

It mentions the company name, address, phone and fax of the customer.

It mentions the company name, address, phone and fax of the vendor.

It describes the shipping location where the goods are to be ultimately
brought.

It specifies the item/items which are to be purchased by the customer.

Their quantity, preferably in the case of Pharma Industry, their weight, is
mentioned.

The price of the items is mentioned.

The total purchase amount is calculated.

If there is any sales tax or other duty such as in Pakistan there is 1%
special excise duty is mentioned and the final total is calculated.

And finally there is signature of the manager operations of the customer and
preferably stamp of the company.
Box 1
Step II: Preparation of Sales Order:
After receiving the purchase order, Sales order is created in the operations
department. Sales order is prepared from purchase order but the prices may change and
fluctuate from what the customer has sent in the purchase order. Box 2 gives a brief
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description of Sales order. At the end of this report, the Sample of Sales order of Pharma
Zone is also given.
Sales Order
Following are given brief contents of sales order:

It specifies the purchase order number from which it is made.

It has its own number which is Sales order number.

It tells the job name, order quantity, material, size and other specifications
of the order.

It includes date of the sales order

Required date of the order is mentioned.

In the Pharma zone all aluminum foils are sent to the customer wrapping
around a cylinder. So in the Pharma Zone Sales order Cylinder information
is also given.

Blank spaces of different signatures are included.
Box 2
There are made three copies of Sales order one is kept in the files for future
evidence. One is given to the production department for the manufacturing. And one is
sent to the Accounting department.
Step III: Preparation of Printing job card:
Printing job card is firstly prepared in the manufacturing department and it is moved
in different departments. Job card is prepared actually to do that particular job. When job
is done it is finished. Box 3 explains Printing Job Card.
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Printing Job Card
Printing job card includes the following descriptions.
1. It includes machine name onto which the job is to be done.
2. It specifies the operator name
3. It includes, Sales Order Number, Purchase Order Number, Job card
number and Date at which the sales order is received by the production
department
For the Pharma Zone Pvt. Limited the job card has four sections and it travels
into 4 different departments.
 Production department portion includes
o Customer Name
o Type of material
o Number of Colors, order quantity, etc.
 Raw Material Store department portion includes
o Gross weight issued
o Source of Material etc.
 Quality Control Department portion includes
o Quality check during production
o Quality check after final production
 Store Department includes
o Weight received
o Wastage of material
Box 3
Step IV: Preparation of delivery Challan:
Job card is moved in different department and when the total foils are printed and the
job is done goods are sent to the dispatch department. Along with job card a copy of
purchase order and a sample of foil are received by the dispatch department. The dispatch
manager prepares the delivery challan (DC) from the following documents. Actually
delivery challan is a document issued on the delivery of these goods to the customer. The
original copy of DC is sent to the customer with the sales tax invoice. Another copy is
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sent to the accounting department with the purchase order and a specimen of the goods.
In box 4 delivery challan specifications are given.
Delivery Challan (DC)
Delivery Challan includes

Purchaser name, address, sales tax registration number, purchase
order number invoice number etc.

Its delivery challan number

It contains the description of the goods, their quantity, size etc.

The purchase price is not included in the delivery challan.
Box 4
Step V: Preparation of sales tax invoice:
When one copy of DC, PO and a specimen of goods is received by the accounting
department, it prepares sales tax invoice from these documents. There are made three
copies of sales tax invoice in the accounting department. The original copy of sales tax
invoice is sent to the customer via courier. One copy is kept in files. One copy is used for
the preparation of journal vouchers and attached with it.
In box 5 Sales Tax invoice specifications are given. And in the annexed documents
to the report Sales tax invoice of Pharma zone is given.
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Sales tax invoice:
Sales tax invoice includes:

Invoice number

Date of invoice created

Sales tax registration number

National Tax Number

Purchase order Number

DC Number

Purchaser name, address and the sales tax registration number

The quantity of goods their prices their total prices

Sales tax of the goods

Any type of other duties
Box 5
Step VI: Preparation of Journal Vouchers (JV):
From the Sales tax invoice the vouchers are prepared. Because these sales are credit
sales vouchers prepared are journal vouchers. Journal voucher of pharma zone is attached
at the end of the internship report.
Step VII: Posting to Ledgers:
The entries into journal vouchers are posted into debtors’ ledger. Pharma Zone
adopts single entry system of book-keeping. In the single entry system
Single-entry bookkeeping system also known as Single-entry accounting system
is a method of bookkeeping relying on a one sided accounting entry to maintain financial
information.1
In this system, for example, in the posting of vouchers in ledger only debtors’
account is debited. Hence it considers only one aspect not the other aspect which is sales.
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Step VIII: Preparation of Journal:
From the ledger, Pharma Zone accounts & finance department enters those amounts
in computerized Accounting software named “AIMS”. Journal is prepared automatically
in the Pharma Zone by this software.
Step IX: Tax Return Filing:
Every 15 of a month all the sales tax payable in the vouchers are filed to the FBR.
When a customer makes payment
After sales the customer makes payment by cheques. Cheque comes into accounting
department and its Bank receipt voucher (BRV) is prepared.
BRV is posted into the ledger of that customer and that account is credited
recognizing that his liability has been reduced.
From those debtors’ ledgers the input is given into AIMS and journal is obtained.
When Payment is made to the supplier
When any payment is made to the supplier via cheque, the cheque is issued in the
name of the company. It comes into accounting department.
Then the Bank Payment voucher (BPV) is prepared. BPV is posted into ledger of
that supplier and then ledger is entered into computerized accounting system to get
journal and other financial statements.
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My Learning
I have a good opportunity to having the internship of 2 months from the Pharma
Zone pvt. Limited. All these 2 months were full of events. At start I have little bit work to
do but when I got stuck with my job I gained much experience in my these two months.
Cheque online transfer and receipt of cheques:
At my very first day at the internship I went with marketing Officer, Mr. Liaqat, to
deposit some money and transfer online the cheques. Initially I have little bit problem
over understanding of the online transfer but Marketing Officer gave me good support to
understand this. We went to the Bank al-Habib Peco Road Branch Lahore. There we got
slip of cheque online transfer to the payee account. We entered its information such as
account number, name of account holder, name of online transferor etc. Then we got the
token from the token counter. I still remember the token number I received was 232, I
waited for my turn. When my token number was announced I went to the counter number
3, transferred the amount. I waited for at-least 20 minutes for the confirmation of online
transfer. So after this we went to HBL Peco Road Branch and did almost the same thing.
Posting into debtors’ ledger:
I have been given the task by Mr. Qasim the accountant to post the entries from
journal vouchers to Debtors’ ledger. He gave a little bit help initially.
If there was debit in journal voucher I debited the amount of that customer account in
ledger. If there was the credit in the journal vouchers I credited the amount of that
customer account in the ledger book. I did some wrong in posting initially. There were
mistakes in adding or subtracting initially. But these errors were rectified by the passing
of time.
I have also posted Bank receipt voucher into the debtors’ ledger. Customer account
is credited while posting into the ledger.
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Pharma Zone Pvt. Ltd.
Internship Report
Checking the entries posted into ledger:
I also checked the entries posted into ledger by tallying it from the vouchers (e.g.
bank receipt voucher). This was easy task I had to check the amount entered, into specific
customer account.
If these were correct I have to sign on the voucher below which ledger entries are
referenced.
Checking of journal vouchers:
I also checked journal vouchers. Actually journal vouchers are attached to the copy
of invoice, Purchase order and Delivery Challan. I had to check from all these documents
that all the amounts entered into journal vouchers are correct and there is no mistake.
Typical journal voucher entry for the sales was:
Debtor’s Account
To Sales
To Sales Tax Payable
To Special Excise Duty
Sales, Sales Tax Payable, Special Excise Duty Accounts are tallied from Sales Tax
invoice. These 3 accounts are totaled to get that particular debtor’s account.
After the checking of journal voucher I signed at the bottom of document.
Miscellaneous:
If there was no work to do sometimes I was called to do other than routine work.
That’s sometimes I was said that “Get the USB net device from the operations
department”.
Sometimes I have to copy the documents from the photocopy machines given by my
superiors.
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Pharma Zone Pvt. Ltd.
Internship Report
Pharma Zone Financial Statements:
Here are given two financial statements of Pharma Zone Pvt. Limited. One is balance
sheet and other is income statement.
Balance Sheet:
PHARMA ZONE (PVT.) LIMITED
Balance Sheet
AS AT JUNE 30, 2008
2008
2007
2,500,000
2,500,000
200,000
200,000
1,627,039
627,244
1,827,039
827,244
6,900,000
6,900,000
2,928,939
2,574,722
504,581
2,120,643
Capital and Liabilities
Share Capital and reserves
Authorized Share Capital:
25000/-ordinary Shares of 100/- each
Issued, Subscribed and Paid up Capital:
2,000/- Ordinary Shares of 100/- each fully paid up in cash
Accumulated Profit
Share Deposit Money
Current Liabilities
Director's Loan
Creditors
Accrued and other Liabilities
77,797
12,238,356
128,298
12,550,907
Property and Assets
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Pharma Zone Pvt. Ltd.
Internship Report
3,568,529
3,775,000
241,841
241,841
Trade Debts
3,269,571
613,887
Stock in Trade
3,500,535
6,099,229
Advances, deposits, prepayments and other receivables
1,154,642
1,605,861
503,238
215,089
8,427,986
8,534,066
12,238,356
12,550,907
Operating Fixed Assets
Deferred Cost
Current Assets:
Cash and Bank Balances
Income Statement:
The Pharma Zone Income statement is given below:
PHARMA ZONE (PVT.) LIMITED
Income Statement
FOR THE YEAR ENDED JUNE 30, 2008
2008
Amount
(Rupees)
2007
Amount
(Rupees)
Sales
10442040
7292261
Less: Cost of Sales
8718676
5949751
Gross Profit/ (Loss)
1723364
1342510
Administrative, Selling and General Expenses
Financial Charges
723570
683869
5064
Operating Profit
999794
663705
--
36461
Net Loss before Taxation
999794
627244
Accumulated profit - Transferred to Balance
Sheet
1627038
627244
Provision for taxation
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Ratio analysis
Categories of Financial Ratios:
Financial ratios are divided into five basic categories:
1. Liquidity Ratios
2. Activity Ratios
3. Debt Ratios
4. Profitability Ratios
5. Market Ratios
Liquidity Ratios:
A firm’s ability to satisfy its short-term obligations as they come due is called
liquidity. Liquidity ratios measure the power of the firm to satisfy its short-term
obligations.
The two basic sources of liquidity are:
1. Current Ratio
2. Quick Ratio
Current Ratio:
The current ratio is a measure of liquidity calculated by dividing the firm’s current
assets by its current liabilities.2
It is calculated by:
Current Ratio 
Current Assets
Current Liabilitie s
Although the current ratio depends on what type of industry the firm exists, but
normally high current ratio is preferred.
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Pharma Zone Pvt. Ltd.
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Quick (Acid-Test) Ratio:
It is similar to current ratio except that inventory is excluded from current assets. The
higher the ratio is preferred.
It is calculated by
Quick ( Acid  Test ) Ratio 
Current Assets  Inventories
Current Liabilitie s
Activity Ratios:
Following are the activity ratios:
1. Inventory Turnover
2. Average Collection Period
3. Average Payment Period
4. Total Asset Turnover
Activity ratios measure the speed with which various accounts are converted into
sales or cash – inflows or outflows.3
Inventory Turnover:
Inventory turnover measures the activity, or liquidity, of a firm’s inventory. 4
Inventory Turnover 
Cost of Goods Sold
Inventory
Average Collection Period:
The average collection period, or average age of accounts receivable, is useful in
evaluating credit and collection policies.5
Average Collection Period 
Hailey College of Commerce
Accounts Re ceivable
Average Sales per Day
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Pharma Zone Pvt. Ltd.
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Average Payment Period:
The average payment period, or average age of accounts payable, is the average
amount of time needed to pay accounts payable.6
Average Payment Period 
Accounts Payable
Average Purchases per Day
Total Asset Turnover:
It indicates the efficiency with which the firm uses its assets to generate sales.7
Total Asset Turnover 
Sales
Total Assets
Debt Ratios:
Following are three debt ratios:
1. Debt Ratio
2. Times Interest Earned Ratio
3. Fixed Payment Coverage Ratio
Debt Ratio:
It measures the proportion of total assets financed by the firm’s creditors.8
Debt Ratio 
Total Liabilitie s
Total Assets
Times Interest Earned Ratio:
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Times interest earned ratio or interest coverage ratio measures the firm’s ability to
make contractual interest payments.9
Times Interest earned Ratio 
Earnings before int erest and Taxes
Interest
Profitability Ratios:
Following are the profitability ratios:
1. Gross Profit Margin
2. Operating Profit Margin
3. Net Profit Margin
4. Earning per Share
5. Return on Assets
6. Return on equity
Gross Profit Margin:
It measures the percentage of each sales dollar remaining after the firm has paid for
its goods.10
Gross Pr ofits M arg in 
Gross Pr ofits
Sales
Operating Profit Margin:
It measures the percentage of each sales dollar remaining after all costs and expenses
other than interest, taxes, and preferred stock dividends are deducted: the “pure profits”
earned on each sales dollar.11
Operating Pr ofits M arg in 
Operating Pr ofits
Sales
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Pharma Zone Pvt. Ltd.
Internship Report
Net Profit Margin:
It measures the percentage of each sales dollar remaining after all costs and
expenses, including interest, taxes and preferred stock dividends, have been deducted.12
Net Pr ofits M arg in 
Earnings Available to Common Stockholders
Sales
Earning per Share:
The firm’s earnings per share (EPS) is generally of interest to present or prospective
stockholders and management.13
Earnings per share 
Earnings Available to Common Stockholders
Number of Shares
Return on Assets:
It measures the overall effectiveness of management is generating profits with its
available assets, also called the return on investment (ROI).
Re turn on Assets 
Earnings Available to Common Stockholders
Total Assets
Return on equity:
It measures the return earned on the common stockholders’ investment in the firm.14
Re turn on Equity 
Earnings Available to Common Stockholders
Common Stock Equity
Market Ratios:
Following are the two market ratios:
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Pharma Zone Pvt. Ltd.
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1. Price/ earnings (P/E) Ratio:
2. Market/Book (M/B) Ratio:
Price/ earnings (P/E) Ratio:
It measures the amount that investors are willing to pay for each dollar of a firm’s
earnings; the higher the P/E ratio, the greater is investor confidence.15
Pr ice / earnings ( P / E ) ratio 
Market price per share of common stock
Earnings per share
Market/Book (M/B) Ratio:
It provides an assessment of how investors view the firm’s performance. Firms
expected to earn higher returns relative to their risk typically sell at higher M/B
multiples.16
Market / book ( M / B) ratio 
Market price per share ofcommon stock
Book value per share of Common Stock
Advantages of Ratio Analysis:

Helpful in analysis of Financial Statements.

Helpful in comparative study.

Helpful in locating the weak spots of the business.

Helpful in forecasting.

Estimate about the trend of the business.
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Pharma Zone Pvt. Ltd.
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Ratios of Pharma Zone Pvt. Limited 200708
I have given the ratio analysis for the Pharma Zone for two years. These financial
statements are audited by the Arman & Company.
Ratios Pharma Zone Pvt. Limited (2007)
Liquidity Ratios
Ratio
Current Ratio
Quick (Acid-Test) Ratio
Formula
Calculation
Value
=
Current Assets
Current Liabilities
=
Rs
Rs
8,534,066
4,823,663
=
1.77
=
Current Assets - Inventory
Current Liabilities
=
Rs
Rs
2,434,767
4,823,663
=
0.50
Activity Ratios
Inventory Turnover
Average Collection Period
Average Payment Period
Total Asset Turnover
Hailey College of Commerce
=
Cost of Goods Sold
Inventory
=
Rs
Rs
5,949,751
6,099,229
=
0.98
=
Accounts Receivable
Average Sales Per Day
=
Rs
Rs
613,887
20,256
=
30.31
=
Accounts Payable
Average Purchases Per Day
=
Rs
Rs
2,120,643
28,515
=
74.37
=
Sales
Total Assets
=
Rs 7,292,261
Rs 12,550,907
=
0.58
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Pharma Zone Pvt. Ltd.
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Debt Ratios
Debt Ratio
=
Total Liabilities
Total Assets
=
Rs
Rs
11,723,663
12,550,907
=
0.93
Profitability Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return On Assets
Return On Equity
Hailey College of Commerce
=
Gross Profits
Sales
=
Rs
Rs
1,342,510
7,292,261
=
0.18
=
Operating Profits
Sales
=
Rs
Rs
663,705
7,292,261
=
0.09
=
Net Profits
Sales
=
Rs
Rs
627,244
7,292,261
=
0.09
=
Net Profits
Total Assets
=
Rs
627,244
Rs 12,550,907
=
0.05
=
Net Profits
Common Stock Equity
=
Rs
Rs
=
0.76
627,244
827,244
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Ratios Pharma Zone Pvt. Limited (2008)
Liquidity Ratios
Ratio
Formula
Current Ratio
Current Assets
Current Liabilities
Quick (Acid-Test) Ratio
=
Current Assets Inventory
Current Liabilities
=
Calculation
Value
=
Rs
Rs
8,427,986
3,511,317
=
2.40
=
Rs
Rs
4,927,451
3,511,317
=
1.40
Activity Ratios
Inventory Turnover
Average Collection Period
Average Payment Period
Total Asset Turnover
=
Cost of Goods Sold
Inventory
=
Rs
Rs
8,718,676
3,500,535
=
2.49
=
Accounts Receivable
Average Sales Per Day
=
Rs
Rs
3,269,571
29,006
=
112.72
Rs
504,581
=
Accounts Payable
Average Purchases Per
Day
=
Rs
12,905
=
39.10
=
Sales
Total Assets
=
Rs
Rs
10,442,040
12,238,356
=
0.85
=
Rs
Rs
10,411,317
12,238,356
=
0.85
Debt Ratios
Debt Ratio
=
Hailey College of Commerce
Total Liabilities
Total Assets
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Profitability Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return On Assets
Return On Equity
=
Gross Profits
Sales
=
Rs
Rs
1,723,364
10,442,040
=
0.17
=
Operating Profits
Sales
=
Rs
999,795
Rs 10,442,040
=
0.10
=
Net Profits
Sales
=
Rs
Rs
1,627,039
10,442,040
=
0.16
=
Net Profits
Total Assets
=
Rs
Rs
1,627,039
12,238,356
=
0.13
=
Net Profits
Common Stock Equity
=
Rs
Rs
1,627,039
1,827,039
=
0.89
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Important Notes & Assumption
1. One year is considered to be comprised of 360 days.
2. Trade debts are accounts receivables.
3. Share deposit money is considered to be long term liability.
4. Creditors/ Accounts payables are excluded from notes to the financial
statements.
Limitations:
1. Inflation can affect Ratios.
2. Only one ratio is not enough to give the company whole image.
3. Times interest earned ratio is not given because there is no interest.
4. Market ratios are unavailable.
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Ratio analysis 2007-2008
Liquidity Ratios:
Ratios
Liquidity Ratio Graphical Analysis
3
2.5
2
1.5
1
0.5
0
Current Ratio
Quick (Acid-Test)
Ratio
2007 2008
Years
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Liquidity Ratios Analysis
Current Ratio:
Normally the higher the current ratio is preferred. According to some observations if
it is above two for a company, it is well enough depending on its nature of the business.
Current ratio of Pharma Zone was good in 2007, it increased in 2008. So totally it
looks satisfactory for Pharma Zone to have the current ratio around that value.
Quick (Acid-Test) Ratio:
As we know that quick (Acid-Test) Ratio is actually the current ratio figure without
inventory in current assets.
The quick ratio of Pharma Zone looks satisfactory in 2008. But in other years it
looks poor because it is below 1.
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Activity Ratios:
Ratios
Activity Ratios Graphical Analysis
(ACP & APP)
120
100
80
60
40
20
0
Average
Collection
Period
Average
Payment
Period
2007 2008
Years
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Pharma Zone Pvt. Ltd.
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Activity Ratios Graphical Analysis
(Inventory Turnover & Total Asset
Turnover)
3
Inventory
Turnover
Total Asset
Turnover
2
Ratios
1
0
2007 2008
Years
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Pharma Zone Pvt. Ltd.
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Activity Ratios Analysis
Inventory Turnover:
Inventory turnover was not good in 2007, but in 2008 it was 2.49 and got better.
Average Collection Period:
Average collection period is very good in 2007 and it was 30.31 days. It got
hammered in 2008 because it was around 112 days.
Average Payment Period:
Average payment period becomes good from 74.37 days to 39.10 days from 2007 to
2008.
Total Asset Turnover:
Total asset turnover got better from 2007 to 2008. Although it is getting better from
year to year, but it is actually very low for the Pharma Zone. Just it is around 1.
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Debt Ratios
Ratio
Debt Ratio Graphical Analysis
0.94
0.92
0.9
0.88
0.86
0.84
0.82
0.8
Debt Ratio
2007 2008
Years
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Debt ratios Analysis
Debt Ratio
The lower the debt ratio is preferred by the new investors.
Debt Ratio has been Okay in 2007 and 2008. It is around 0.9 in all the years
Other debt ratios cannot be prepared because Pharma Zone have not shown any
interest and fixed charges in their financial statements.
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Profitability Ratios
Profitability Ratios Graphical Analysis
1
Gross Profit
Margin
Operating Profit
Margin
Net Profit Margin
Ratios
0.8
0.6
0.4
0.2
0
2007 2008
Years
Hailey College of Commerce
Return On
Assets
Return On
Equity
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Pharma Zone Pvt. Ltd.
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Profitability Ratios Analysis
All the profitability ratios are good in all the years and are expected to remain good
in all the years. But the ratio is a little percentage of Sales.
Gross Profit Margin:
Gross Profit margin is good in all the years and is expected to be good in all the
years.
Operating Profit Margin:
Operating Profits Margin is around 0.10. It was good and remain almost constant in
2007-08 and is expected to show the same behavior in next overs.
Net Profit Margin:
Net Profit margin was good in 2008 but is expected to drop a bit from 0.16 to 0.08
from 2007 to 2008.
Return On Assets:
Return on Assets became good from 0.50 to 0.10 from 2007 to 2008. So assets are
not giving proper return.
Return On Equity:
Return on equity of Pharma Zone is good in the year 2007 and 2008.
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
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Summary of All Ratios
Following is given complete summary of all ratios from 2007-2008 of Pharma Zone
Pvt. Limited in a tabular format.
Time Series Ratio Analysis Pharma Zone Pvt. Limited
(2007-2008)
Ratio
2007
Actual
2008
Evaluation
2007-11
Liquidity Ratios
Current Ratio
Quick (Acid-Test) Ratio
1.77
0.50
2.40
1.40
OK
Poor
0.98
30.31
74.37
0.58
2.49
112.72
39.10
0.85
Ok
Very Bad
Good
Poor
0.93
0.85
Ok
0.18
0.09
0.09
0.05
0.76
0.17
0.10
0.16
0.13
0.89
Ok
Good
Ok
Poor
Good
Activity Ratios
Inventory Turnover
Average Collection Period
Average Payment Period
Total Asset Turnover
Debt Ratios
Debt Ratio
Profitability Ratios
Gross Profit Margin
Operating Profit Margin
Net Profit Margin
Return On Assets
Return On Equity
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Pharma Zone looks good in most of the ratios. But some ratios are not good rather
these are poor like the Average collection period is much worse. Its profits are low but
this happens in industry in which Pharma Zone lies.
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Pharma Zone Pvt. Ltd.
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Ratio Analysis Conclusion
Most of the Pharma Zone ratios are good. But Pharma Zone has much to look for the
average collection period. Pharma Zone has really to look on it because it is the heart and
soul of any business to survive in the marketplace.
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Pharma Zone Pvt. Ltd.
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Horizontal and vertical Analysis
Vertical Analysis:
Vertical Analysis reports each amount on a financial statement as a percentage of
another item.17
Horizontal Analysis:
Horizontal analysis looks at amounts on the financial statements over the past
years.18
Vertical Analysis
Common-size Income Statement:
An income statement in which each item is expressed as a percentage of sales is
called Common-size Income Statement:19
The Common Size income Statement of Pharma Zone is given over the five years.
Common-Size Income Statement
2007
2008
100.00%
100.00%
Less: Cost of Sales
81.59%
83.50%
Gross Profit/ (Loss)
18.41%
16.50%
Administrative, Selling and General Expenses
Financial Charges
9.38%
0.07%
6.93%
Operating Profit
8.96%
9.57%
Provision for taxation
0.50%
Net Loss before Taxation
8.46%
9.57%
Accmulated profit - Transffered to Balance Sheet
8.46%
9.57%
Sales
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Supporting Calculation:
Here is given the supporting calculation of above common-size Income Statement:
Sales
Cost of Sales
Gross Profit/ (Loss)
Administrative, selling
and general expenses
Financial Charges
Operating Profits
Provision for taxation
Net Loss Before taxation
=
Sales
Sales
x
=
Cost of Sales
Sales
x
=
Gross Profits
Sales
x
=
Administrative, Selling and
general expenses
Sales
=
Financial charges
Sales
x
=
Operating Profits
Sales
x
=
Provision for taxation
Sales
x
=
Net Loss before taxation
Sales
x
Hailey College of Commerce
x
100
100
100
=
7292261
7292261
x
=
5949751
7292261
x
=
1342510
7292261
x
=
683869
7292261
=
5064
7292261
x
=
663705
7292261
x
=
36461
7292261
x
=
627244
7292261
x
100
100
100
100
100
x
100
100
100
100.00%
=
81.59%
=
18.41%
=
100
9.38%
=
100
100
100
100
0.07%
=
9.10%
=
0.50%
=
8.60%
=
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Graphical Representation of Common-size Income Statement
Comparison b/w GP Margin, OP Margin
and NP Margin
20.00%
Gross Profit/
(Loss)
Operating Profit
15.00%
10.00%
Net Loss before
Taxation
5.00%
0.00%
2007 2008
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Common-Size Balance Sheet:
Here the base year is taken to be 2007:
Common-Size Balance Sheet
December 31st, 2008
Capital and Liabilities
Share Capital and reserves
Authorized Share Capital:
25000/-ordinary Shares of 100/- each
20.43%
Issued, Subscribed and Paid up Capital:
2,000/- Ordinary Shares of 100/- each fully paid up in
cash
1.63%
Accumulated Profit
13.29%
Share Deposit Money
56.38%
Current Liabilities
28.69%
Director's Loan
Creditors, accrued and other liabilities
23.93%
4.76%
100.00%
Property and Assets
Operating Fixed Assets
29.16%
Deferred Cost
1.98%
Current Assets:
68.87%
Trade Debts
Stock in Trade
Advances, deposits, prepayments and other receivables
Cash and Bank Balances
26.72%
28.60%
9.43%
4.11%
100.00%
In the Common-size Balance Sheet total assets are taken as 100% of that year and
the percentage of each amount is calculated as compared to that percentage of total
assets.
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Pharma Zone Cash and Bank Balances position looks bad, it is just 4.11%. Pharma
Zone liabilities are much more specially directors’ loan which is about 28% of total
assets.
Supporting Calculation:
Authorized Share
Capital:
Issued, Subscribed
and Paid up Capital:
Accumulated Profit
Share Deposit Money
Current Liabilities
Director's Loan
Creditors, accrued
and other liabilities
=
=
Authorized Share Capital:
Total Assets
Issued, Subscribed and Paid up
Capital:
Total Assets
=
Rs 2,500,000
Rs 12,238,356
=
=
Rs
200,000
Rs 12,238,356
=
=
Accumulated Profit
Total Assets
=
Rs 1,627,039
Rs 12,238,356
=
=
Share Deposit Money
Total Assets
=
Rs 6,900,000
Rs 12,238,356
=
=
Current Liabilities
Total Assets
=
Rs
504,581
Rs 12,238,356
=
=
Director's Loan
Total Assets
=
Rs 2,928,939
Rs 12,238,356
=
=
Rs
582,378
Rs 12,238,356
=
=
Hailey College of Commerce
Creditors, accrued and other
liabilities
Total Assets
50
20.43%
1.63%
13.29%
56.38%
4.12%
23.93%
4.76%
Pharma Zone Pvt. Ltd.
Operating Fixed
Assets
Deferred Cost
Current Assets:
Trade Debts
Stock in Trade
Internship Report
=
Operating Fixed Assets
Total Assets
=
Rs 3,568,529
Rs 12,238,356
=
=
Deferred Cost
Total Assets
=
Rs
241,841
Rs 12,238,356
=
=
Current Assets:
Total Assets
=
Rs 8,427,986
Rs 12,238,356
=
=
Trade Debts
Total Assets
=
Rs 3,269,571
Rs 12,238,356
=
=
Stock in Trade
Total Assets
=
Rs 3,500,535
Rs 12,238,356
=
=
Rs 1,154,642
Rs 12,238,356
=
=
Rs
503,238
Rs 12,238,356
=
Advances, deposits,
and other receivables
=
Cash and Bank
Balances
=
Hailey College of Commerce
Advances, deposits, and other
receivables
Total Assets
Cash and Bank Balances
Total Assets
51
29.16%
1.98%
68.87%
26.72%
28.60%
9.43%
4.11%
Pharma Zone Pvt. Ltd.
Internship Report
Horizontal Analysis
In this Horizontal Analysis the base year is considered as 2007. All the amounts of
2008 are divided by 2007 amounts and the percentage is given here
Horizontal Analysis of Balance Sheet
Horizontal Analysis of Balance sheet
Capital and Liabilities
Share Capital and reserves
Authorized Share Capital:
25000/-ordinary Shares of 100/- each
0.00%
Issued, Subscribed and Paid up Capital:
2,000/- Ordinary Shares of 100/- each fully paid up in cash
0.00%
Accumulated Profit
Share Deposit Money
Current Liabilities
Director's Loan
Creditors, accrued and other liabilities
159.39%
0.00%
13.76%
-39.36%
25.90%
-2.49%
Property and Assets
Operating Fixed Assets
Deffered Cost
Current Assets:
Trade Debts
Stock in Trade
Advances, deposits, prepayments and other receivables
Cash and Bank Balances
-5.47%
0.00%
-1.24%
432.60%
-42.61%
-28.10%
133.97%
-2.49%
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
As we can see that accumulated profits are approximately 259% of the year 2007.
That’s discussed in the income statement below. Although total assets are decreased in
the year 2008 but there is good change in liquidity of the Pharma Zone in the year 2008.
As we can see in the ratio analysis Average Collection period is very very large, this
is the behavior depicted in the trade debts, just look at the percentage of trade debts, it is
532.60%.
Supporting Calculations:
Authorized
=
Share Capital:
Issued,
Subscribed
=
and Paid up
Capital:
Accumulated
=
Profit
Share
Deposit
Money
=
Director's
Loan
=
Creditors,
accrued and
=
other
liabilities
Authorized Share Capital (2008) Authorized Share Capital (2007)
Authorized Share Capital (2007)
x
Issued Capital (2008) - Issued Capital
(2007)
x
100
=
100
=
Issued Capital (2007)
Accumulated Profits (2008) Accumulated Profits (2007)
Accumulated Profits (2007)
2,500,000 - 2,500,000 = 0.00%
2500000
200,000
-
200,000
= 0.00%
200000
100
=
1,627,039 - 627,244
627244
100
=
6,900,000 - 6,900,000 = 0.00%
6900000
Director's Loan (2008) - Director's Loan
(2007)
100
x
Director's Loan (2007)
=
2,928,939 - 2,574,722 = 13.76%
2574722
Share Deposit Money (2008) - Share
Deposit Money (2007)
Share Deposit Money (2007)
x
x
Creditors and other liabilities (2008) Creditors and other liabilities (2007)
x
Creditors and other liabilities (2007)
Hailey College of Commerce
100
=
77,797 -
128,298
128298
53
= 159.39%
= -39.36%
Pharma Zone Pvt. Ltd.
Operating
=
Fixed Assets
Operating Fixed Assets (2008) Operating Fixed Assets (2007)
Operating Fixed Assets (2007)
Deffered Cost =
Deffered Cost (2008)- Deffered Cost
(2007)
Deffered Cost (2007)
Internship Report
3,568,529 - 3,775,000 = -5.47%
3775000
100
=
100
=
Current Assets (2008) - Current Assets
(2007)
100
x
Current Assets (2007)
=
8,427,986 - 8,534,066 = -1.24%
8534066
=
3,269,571 - 613,887
613887
100
=
3,500,535 - 6,099,229 = -42.61%
6099229
Advances,
Advance deposits and receivables (2008)
deposits,
- Advance deposits and receivables
prepayments =
(2007)
100
x
and other
receivables
Advance deposits and receivables (2007)
=
1,154,642 - 1,605,861 = -28.10%
Cash and Bank Balance (2008) - Cash
and Bank Balance (2007)
100
x
Cash and Bank Balance (2007)
=
Current
Assets:
=
x
x
Trade Debts = Trade debts (2008) -Trade debts (2007)
100
x
Trade debts (2007)
Stock in
Trade
Cash and
Bank
Balances
=
=
Stock in Trade(2008) - Stock in
Trade(2007)
Stock in Trade(2007)
x
Total Assets = Total Assets (2008) - Total Assets (2007) 100
x
Total Assets (2007)
Hailey College of Commerce
241,841 - 241,841
241841
= 0.00%
= 432.60%
1605861
503,238 - 215,089
215089
= 133.97%
= 12,238,356 - 12,550,907 = -2.49%
12550907
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Pharma Zone Pvt. Ltd.
Internship Report
Horizontal Analysis of Income Statement
Horizontal Analysis of Income Statement
For the year ended december 2008
2008
Sales
43.19%
Less: Cost of Sales
46.54%
Gross Profit/ (Loss)
28.37%
Administrative, Selling and General Expenses
Financial Charges
5.81%
-100.00%
Operating Profit
50.64%
Provision for taxation
-100.00%
Net Loss before Taxation
59.39%
Accmulated profit - Transffered to Balance Sheet
59.39%
As we can see the Income statement looks very healthy as far as the base year 2007
is concerned. Sales are of 143.19% of 2007. This is a very healthy change for the Pharma
Zone. It earned the net profit of 15.91% that’s very good for Pharma Zone pvt. Limited.
Supporting Calculation:
Sales
=
Sales (2008) - Sales (2007)
Sales (2007)
Cost of Sales
=
Cost of Sales (2008) - Cost of
Sales (2007)
Cost of Sales (2007)
Gross Profit/ (Loss) =
Gross Profits(2008) - Gross
Profits (2007)
Sales
Hailey College of Commerce
x
x
x
100 =
10442040 - 7292261
=
7292261
43.19%
100 =
8718676 - 5949751 =
5949751
46.54%
100 =
1723364 - 1342510 =
1342510
28.37%
55
Pharma Zone Pvt. Ltd.
Internship Report
Administrative expenses(2008) Administrative,
selling and general = Administrative expenses(2007)
100 =
x
expenses
Administrative expenses(2007)
Financial Charges =
Operating Profits =
Provision for
taxation
Net Loss Before
taxation
Accumulated
Profits
=
Financial charges (2008) Financial charges (2007)
Financial charges (2007)
Operating Profits (2008) Operating Profits (2007)
Operating Profits (2007)
Provision for taxation (2008) Provision for taxation (2007)
Provision for taxation (2007)
x
x
x
100 =
100 =
100 =
Net Loss before taxation (2008) = Net Loss before taxation (2007)
100 =
x
Net Loss before taxation (2007)
=
Accumulated Profits (2008) Accumulated Profits (2007)
Accumulated Profits (2007)
Hailey College of Commerce
x
100 =
723570 - 683869 =
683869
5.81%
0
5064
5064
=
-100.00%
999794 - 663705 =
663705
50.64%
0
- 36461 =
36461
-100.00%
999794 - 627244 =
627244
59.39%
1627038 - 627244 =
627244
159.39%
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Pharma Zone Pvt. Ltd.
Internship Report
Recommendations
Almost any small business can use advice on how to improve its collection cycle.
The first line of defense against late payments is a complete invoice. Bills should be
accurate, detailed and easy to understand. If difficult to understand, then client will need
to call for additional information. This increases the time of company collection cycle.
Include on each invoice:

Company's contact information: name, address, tax id number, phone and
contact person

The date the invoice was prepared

The customer's name and address

A description of the goods or services sold to the customer

The
amount
due,
with
sales
tax
amount
broken
out
Once prepared, send invoices promptly. The longer a company takes to bill a
customer the less likely it is to receive payment for the goods and services provided.
If the steps are reduced in the cash conversion process Average Collection Period
can be reduced.
If the Pharma Zone makes the agent to the third party it can reduce its average
collection period. For example it may hire the services of the bank or any other
professional party.
The average accounts receivable collection period is an important indicator for
determining when customers business will pay for the goods and services it provides.20
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Conclusion
Pharma Zone, the leading company in the printing of foil, is situated in PCSIR
Colony, College Road Lahore.
Pharma zone currently manufactures following products:

Aluminum Foil Blister

Strip Foil

Poly Coated Paper

Blister Pouches

Alu Alu Foil Plain
Company keeps its quality at the peak of the business.
There are high levels of professionals in all departments of Pharma Zone and it is
continuously keeping an eye over their growth.
Accounting system adopted by Pharma zone is single entry system. Pharma Zone
adopted this system because it is an easy approach towards accounting.
There is a proper channel of communication between the departments of the Pharma
Zone. There is a proper organizational chart issued by the organization.
Ratios of Pharma Zone are good except average collection period which is very poor
for Pharma Zone.
Overall Pharma Zone is in the good business with low profitability now a day. It is
worth mentioned here that in the recent arena where Pakistan is in severe situation such
as load shutting, there are different companies which are trying to survive in this situation
Pharma Zone has done well and installed well generators of electricity to work
effectively in the time of crises.
Hailey College of Commerce
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Pharma Zone Pvt. Ltd.
Internship Report
Index
A
Accounts Payable, 31
Accounts Receivable, 31
Activity ratios, 23, 24
AIMS, 18
Alu Alu Foil, iii, 6, 7, 9, 58
Arshad Mahmood, 1
Average Collection Period, 24, 31, 38, 43, 57
Average Payment Period, 24, 25, 31, 38, 43
I
Inventory, 24, 31, 38, 43
Inventory Turnover, 24, 31, 38, 43
J
Journal, 12, 17, 18
Journal Vouchers, 12, 17
L
B
Bank Payment voucher, 18
Bank receipt voucher, 18, 19
Liquidity ratios, 23
M
C
CEO, 3, 13
Common Stock Equity, 32
Cost of Goods Sold, 31
Current Assets, 31
Current Liabilities, 31
Current Ratio, 23, 31, 35, 43
Market Ratios, 23, 27
Market/Book (M/B) Ratio, 28
Mission & Vision Statement, 10
N
Net Profit Margin, 26, 27, 32, 42, 43
Net Profits, 32
D
Debt Ratio, 25, 31, 40, 43
Debt ratios, 23, 40
delivery Challan, 12
O
Operating Profit Margin, 26, 32, 42, 43
Operating Profits, 32, 42
E
Earning per Share, 26, 27
F
Fixed Payment Coverage Ratio, 25
P
Pharma Zone, ii, iii, 1, 3, 6, 7, 9, 10, 11, 12, 13, 14, 15,
17, 18, 19, 29, 31, 35, 38, 40, 43, 44, 45, 57, 58
Price/ earnings (P/E) Ratio, 28
Printing job card, 12, 14, 15
Profitability ratios, 23
Purchase Order, 12, 13, 15
G
Gross Profit Margin, 26, 32, 42, 43
Gross Profits, 32
H
Horizontal Analysis, 46, 52, 55
Hailey College of Commerce
Q
Quick Ratio, 23
R
Return on Assets, 26, 27, 42
Return on equity, 26, 27
59
Pharma Zone Pvt. Ltd.
Internship Report
S
Sales, 1, 3, 5, 12, 13, 14, 15, 16, 17, 20, 31, 32, 42
Sales Order, 12, 13, 14, 15
sales tax invoice, 1, 12, 15, 16
Sheikhupura, 10
single entry system, iii, 12, 17, 58
Special Excise Duty, 20
T
Tax Return, 12, 18
Times Interest Earned Ratio, 25
Total Asset Turnover, 24, 25, 31, 38, 43
V
Vertical Analysis, 46
Hailey College of Commerce
60
Pharma Zone Pvt. Ltd.
Internship Report
References
1
http://en.wikipedia.org/wiki/Single-entry_bookkeeping_system
2
Page 54, Principals of Managerial Finance, 10th edition
3
Page 55, Principals of Managerial Finance, 10th edition
4
Page 55, Principals of Managerial Finance, 10th edition
5
Page 56, Principals of Managerial Finance, 10th edition
6
Page 56, Principals of Managerial Finance, 10th edition
7
Page 57, Principals of Managerial Finance, 10th edition
8
Page 57, Principals of Managerial Finance, 10th edition
9
Page 60, Principals of Managerial Finance, 10th edition
10
Page 62, Principals of Managerial Finance, 10th edition
11
Page 63, Principals of Managerial Finance, 10th edition
12
Page 64, Principals of Managerial Finance, 10th edition
13
Page 65, Principals of Managerial Finance, 10th edition
14
Page 65, Principals of Managerial Finance, 10th edition
15
Page 66, Principals of Managerial Finance, 10th edition
16
Page 66, Principals of Managerial Finance, 10th edition
17
September 7, 2007, article What is the difference between vertical and horizontal analysis? Available on
site http://blog.accountingcoach.com/vertical-analysis-horizontal-analysis/
18
September 7, 2007, article What is the difference between vertical and horizontal analysis? Available on
site http://blog.accountingcoach.com/vertical-analysis-horizontal-analysis/
19
Page 61, Principals of Managerial Finance, 10th edition
20
http://www.content4reprint.com/accounting/bookkeeping/small-business-advice-improve-your-accountsreceivable-collection-cycle-now.htm
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