Selecting ACCA certification has been one of the most important decisions by me as it helped me leverage my position in the job market along with extensive understanding of accounting concepts. Other than that, I selected it as it provided me an opportunity to get the BSc. Honors degree of Oxford Brookes University. While studying as an accounting student in United Kingdom, I really needed a locally recognized degree on my resume to enhance my exposure in the competitive market of UK. The topic I chose for my research is “Financial and business analysis of an organization over a period of 3 years” The organization I chose for my RAP is Al Ghazi Tractors Limited, Pakistan.
Project objectives and overall research approach:Reasons for choosing this topic: Financial and accounting sector has been facing tough time post the slowdown in world’s economy. This has lead to more competition in major financial centers of the world like London in terms of jobs. Though I have had some experience of accounting by working at different place, I have not been able to work on financial analysis on any company during my job. This was the major reason why I decided to chose this topic because it will not only allow me to do something important that I have never done, but also provide me advantage of being flexible about any prospective job arising in the market. Moreover, I believe this topic will increase my understanding of the accounting and business practices used by companies in my home land.
It will help me understand how different accounting practices impact the financial position and performance of a company.Why I choose this Organization: Since I have Pakistani origin and I keep visiting my country, I always remained interested in the companies in my country. Agriculture is the most important sector in Pakistan due to its high contribution and highest employment in the country. Due to this I decided to select a company related to agricultural sector. Since there is no corporate farming company in Pakistan, I decided to choose the tractor company whose sales are directly related to the increase in agricultural activity of Pakistan.Thus I decided to choose Al Ghazi tractors which is known for its low price tractors in Pakistan.
Moreover, it’s affiliation with the FIAT international group, which is one of the largest agricultural products providers, also made me inquisitive about the value addition of the company. Moreover, I have been hearing about the tractor schemes provided by the government to the Pakistani farmers. This also made me interesting about the financial and business performance of the company.Al ghazi tractors was incorporating in Pakistan in June 1983 as a government owned organization.
However, it got privatized in December 1991 and was purchased by Al-Futtain Group of Dubai. Main business of the company is to manufacture agricultural tractors. Head office of the company is in Karachi and the factory of the company is located in Dera Ghazi Khan, 700 kilometers (Profile, 2010, cited on Al ghazi Tractors website www.alghazitractors.
com : About Us, 2010) away from Karachi. The company manufacturers its New Holland (FIAT) tractors in technical collaboration with CNH – Case New Holland, the number one manufacturer of agricultural tractors in the world. The CNH group employs approximately 31,500 people around the world in 170 countries.CNH is the majority-owned subsidiary of Fiat S.p.
A, the parent company of Fiat Group, a public limited company with stock listed on the Milan Stock Exchange. CNH has 43.17 percent holding in Al Ghazi Tractors. Moreover, 50% of shares of Al Ghazi are owned by Al Futtain Group which operates through 65 countries and has investments in automotive, electronics, engineering, retail, financial services, general services, and real estate around the world. Al Ghazi tractor started its production in 1984 with auxiliary plant which expanded to a main plant in 1985 (Showcase, 2010, cited on Al ghazi Tractors website www.
alghazitractors.com : About Us, 2010).The company then installed a sheet Metal Plant in July 2006 to improve the cost. The production capacity of the company is 30,000 tractors per annum in single shift. It employs 396 employees and has a total covered area of 90 Acres. The marketing centers of the company are in Lahore, Multan, Islamabad and Sukkar.
Aims and objectives of my report:My research will be focused on analyzing the financial and business performance of Al Ghazi Tractors over last three years (January 2007 – December 2009). In the start I will analyze the trends in net sales (both volumetric sales and revenues) over the three year period. I will try to find the reasons behind the trends in sales. After conducting a proper analysis, I will conclude the reasons behind the trend.
After that I will use profitability measures to find the factors that affect the profits of the company in the profit and loss statement. After that, I will assess the liquidity position of the company by using liquidity ratios. To find the asset efficiency of the company, I will employ asset utilization ratios. Leverage ratios will provide me an insight into the financing structure of the company and its implications on the performance of the company.Then I will use stock performance ratios to learn about the performance of Al Ghazi’s stock in the local stock market of Pakistan, which will tell me how investors perceive the stock of Al Ghazi tractors. To form an unbiased opinion, I will compare and analyze the performance of Al Ghazi with competitor Millat Tractors which will provide more understanding of how the company has performed against the competitor.
I will also use the SWOT and PEST analysis to comment on the business performance of the company. In the end, I will draw conclusion about the performance of the company during last 3 years both financially and business performance.Information gathering:Information gathering is an important activity of every research undertaken. This could be tricky for me since I was working in United Kingdom while I am conducting my RAP on a company that is Pakistan based. Initially, I used internet during my stay in UK. Internet is a very important source of information but I tried to be careful and only relied on the information presented through authentic sources.
I visited the websites of both tractor manufacturers on the internet.The Press releases section in the website was informative as it included information about the company. Though the website had information about the products of the company, I was not able to find information on the prices of their products which were needed for the effective analysis. I was able to find information about the overall agriculture sector but there was limited information about tractors industry so decided to conduct later part of my research in when I visit my family in Pakistan for a month. In Pakistan, I started my research with the annual reports of the company which will provide me the Financial Statements of Al Ghazi Tractors. Since the financial statements of the company were not available on its website, I had to arrange them after visiting the head office of the company.
Annual reports is a very important source to understand the financial and business performance of the company.The Chairman’s report portion of the report provided me the information about general business environment in which the company has to operate. For comparison, I also required the financial statements of Millat tractors. I searched through internet and found its financial statements on its websites. Then I went through financial statements of Millat Tractors which increased my understanding about the competition in the sector. After going through all the reports, I decided to conduct the ratio analysis and for that I read my ACCA books to revise the information about ratios and other models like SWOT and PEST analysis.
Though these tools, like ratios and business analysis models were also available on internet, I preferred to use syllabus book as they are more comprehensive. Then I listed down all the points I needed to search on my visit to Pakistan. Then I went to Pakistan to visit my family for one month. I had one month with me so I carefully planned my stay to make sure that I get all the information I needed. I decided to visit the marketing centre of Al Ghazi Tractors.
Visiting the marketing centre was helpful as this provided me information about the factors that impact the sales of the company. My visit to the marketing centre proved really informative as I got to understand the market importance of the company. I was able to understand which company has lower product prices. Moreover, it also provided me information about the quality provided by the company. In order to check that the information provided by marketing centre I matched it with the product specifications on the website.
After that, I tried to find any trade journal which can give me information on tractor manufacturing industry of Pakistan.Though I could not find any specific journal, I was able to find news related to the sector on newspaper archives of “Business recorder”. Then I prepared a questionnaire which included questions about all the things I did not know. Questionnaire is best sources of getting the information from anyone since a) questions are effectively communicated, b) evidence of information collection is there, c) there is no chance of missing any important point, and d) managers are more comfortable using such information.
After preparing the questionnaire, I called the CEO of the company Mr Parvez Ali. He invited me to his office but it could not go to the head office because I was staying in Punjab.To avoid any ethical issue, he suggested me to email the chairman of the company and ask him the permission. He gave me the filled questionnaire after one week. After that, I talked with him on the phone.
We discussed different factors that help the industry and we focused on the financial health of the company. Ethical issues that arose during the information gathering period:To avoid any ethical issues, I read the data protection act 1998 so that I unknowingly do not violate any code. I sent the consent form with the questionnaire to take the written consent from the CEO of the company. I made it sure that the CEO understands the nature of my RAP so that he can provide me all the relevant information.
I gave the CEO around one week to fill the questionnaire so that he is able to answer the questions in a better way. Research tools used and their limitationsFinancial ratios are the most important tools that I could use for my RAP. But financial ratios are only effective if the period under review is the same. Therefore, summed up the quarterly accounts of Millat tractors in to calendar year so that it is comparable to Al Ghazi Tractors.
Moreover, the financial ratios are only helpful when they are used to interpret the information. Therefore, I gathered enough non financial information so that I am able to find the change in values. I also used the SWOT analysis to analyze the business analysis of the company. SWOT analysis has to be done extensively because it can make me miss some points that do not fall in any one head.
PEST analysis was really helpful for this company as it highlighted many external pressures which impact the performance of the company.
