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P8. Analyze budgets and make appropriate decisions.

Budget: - A budget is a plan expressed in monetary terms. This plan includes the income, expenditures and capital investment of the company for a specific period of time. It is a plan for:

Providing an estimate of revenues and expenditures Enabling the actual financial operation of the business to be measured against the forecast.

(b). Information given by the budget On the basis of information given by the budget, the organization can be easily able to know about the deficit or surplus. A deficit is the amount by which a sum of money falls short of the required amount for the company. If there is a deficit it means that the company is not in a good position the company is going toward loss, this stage is very alarming for the company. The reasons for budget deficit are

A Budget Deficit is due to spends more money then its revenues by the company. Company should control their expenses to overcome the budget deficits. Budget deficit is due to the investment in fixed assets i.e capital expenditures and to overcome these deficits company need to borrow loan from some finance institute.

P9. Calculate unit costs and make pricing decisions using relevant information. Unit price: - Unit price is the price for a single unit of measure of a product sold in a small or in more than the single unit. Price = Cost spend on the single item + Profit Margin Unit cost: - The unit cost of a product is the cost per standard unit. Cost of production concerns the investment of the seller which includes direct cost and indirect cost in the product. Cost = Direct cost + Indirect cost

Calculate the unit price of the product of your chosen organization after the assessment of all the relevant information
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The per unit cost of the Toyota product includes the direct cost and the indirect cost. Direct cost includes the traceable cost and indirect cost includes the untraceable cost.

Price of Toyota Corolla 1.3L GLi Rs. 1,462,000

The cost spends on each Toyota Corolla 1.3L GLi car with tax are 1186400 the remaining 275600 is the profit without giving dividend to the shareholders. P10. Assess the viability of a project using investment appraisal techniques. Investment appraisal is also known as capital budgeting. It is a planning process used to determine companys long term and short term investments. Here are some methods of investment appraisal which are

Payback Period: - Payback period in capital budgeting refers to the period of time required for the return on an investment or how long does the project take to pay back the original investment to the company. PP = The Costs of Project / Investment ---------------------------------------Annual Cash Inflows

Net Present Value (NPV):- The net present value (NPV) of a time series of cash flows is

defined as the sum of the present values (PVs) of the cash flows, by deducting the initial

investment from the discounted returns. NPV

Accounting Rate of Return (ARR): - It is a financial ratio used in capital budgeting. It calculates the return generated from net income of the proposed capital investment.

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Internal rate of return (IRR):- The internal rate of return is the rate of return earned on

a business proposal. That is, the discount rate equating the present value of cash inflows to the initial investment.

P11. Explain the purpose of the main financial statements Financial statement: - Financial statements play an important role in the progress of the company. It is a written statement about the companys financial positions. It also presents the position of the company either it is in profit or loss. Financial statements include the balance sheet, cash flow of the company, income statement, and statement of Owner's Equity.

Cash flow statement: - This report shows the cash inflow and cash outflow in the business of the company and shows all sources and uses of a company's capital during the accounting period. These include revenues, long-term financing, sales of non-current assets, and an increase in any current liability account or a decrease in any current asset account. It includes operating, investing and financing activities. Time of preparation of cash flow statement is yearly or a quarterly or a monthly basis.

Balance sheet: - Balance sheet is the review of the financial position of the company which describes the assets of the company, liabilities, owners and stockholders equity. It is based on this equation: assets = liabilities + owners' equity. It lists everything company owns (assets), everything company owes to creditors (liabilities) and the value of ownership stake in company (owners' equity, or capital). Time of preparation of balance sheet is yearly or quarterly or monthly basis.

Income statement: - Income statement is a company's financial statement that shows how much money is received from the sales (before expenses are taken out) and to transform into the net income (after expenses have been deducted). It also displays the revenues recognized for a specific period, and the cost and expenses charged against these revenues. The purpose of the income statement is to show whether the company gets profit or loss during the period being reported yearly, quarterly or monthly.

Statement of Owners Capital: - The statement of capital shows changes in owners' capital accounts. Capital account represents how much owner invested in the company. At the closing of the accounting period. Whether reinvest it in the business, Statements of capital typically are prepared after the income statement. It needs to know whether a
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company has a net income or net loss. This report is being reported yearly, quarterly or monthly. (b). Discuss the type of information that is extracted from financial statements by decision makers and stakeholders. It provides information about the financial position, performance and changes in financial position of a company that is useful in making decisions. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. Financial statements may be used by users for different purposes:

Owners and managers require financial statements to make decisions. These statements are also used as part of management's annual report to the stockholders. Prospective investors make use of financial statements to judge the possibility of investing in a business. Financial analyses are often used by investors and are prepared by professionals. They provide them information to make investment decisions.

P13. Analyze financial statements using appropriate ratios and comparisons, both internal and external.

Financial ratio of Toyota Pakistan

Introduction: - Toyota Pakistan is a joint venture between the House of Habib , Toyota Motor Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. LIQUIDITY ANALYSIS RATIOS
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NET WORKING CAPITAL RATIO

Ratio Net Working Capital Ratio

Formula Working Capital / Total Assets

Calculation 2008 5,885,153 / 13,748,109 0.428

Calculation 2007 6,125,156/ 15,665,050 0.391

There is an increase in the net working capital in 2008 as compared to 2007. The company can easily utilize the amount for other profit related activities after paying off its debts. Also we can see that it is due to decrease in total assets in 2008, thus meaning that company is effectively utilizing its inventories. WORKING CAPITAL Ratio Working Capital Formula Current Assets - Current Liabilities Calculation 2008 9,664,784 5885153 - 3,779,631 Calculation 2007 13,536,082 6125156 - 7,410,926

There is a decrease in the working capital in 2008 as compared to 2007. The companys current assets have decreased in 2008 as well as its current liabilities. Although company still has enough working capital after paying off its debts in 2008, it also means that company is effectively utilizing its inventory. CURRENT RATIO Ratio Current Ratio Formula Current Assets / Current Liabilities Calculation 2008 9,664,784 2.557 / 3,779,631 Calculation 2007 13,536,082 1.826 / 7,410,926

There is an increase in the current ratio in 2008 as compared to 2007. The company can easily pay off its debts. Moreover companys current liabilities have also decreased from 2007. QUICK RATIO Ratio Acid Test/ Quick Ratio Formula Quick Assets / Current Liabilities Calculation 2008 8,406,562 / 2.224 3,779,631 Calculation 2007 12,304,238 1.660 / 7,410,926

There is an increase in the quick ratio/ acid test in 2008 as compared to 2007. The company can easily meet its current liabilities with its most liquid current assets. QUICK ASSETS
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Ratio Quick Assets Formula Current Assets Inventories

Managing Financial Resources

Calculation 9,664,784 - 1,258,222 2008 8406562 Calculation 2007 13,536,082 1230423 - 1,231,844 8

There is a decrease in the quick assets in 2008 as compared to 2007. This is due to decrease in the current assets from 2007 to 2008.

ACTIVITY ANALYSIS / TURNOVER RATIOS INVENTORY TURNOVER RATIO Ratio Inventory Turnover Formula Cost of Goods Sold / Average Inventories Calculation 37,575,356 / 1,245,033 2008 30.18 Calculation 34,620,632 / 1,849,648 2007 18.717

There is an increase in the inventory turnover ratio in 2008 as compared to in 2007. It means that company changed inventory 30.18 times during the year (which is a very good sign for the company) and sold more cars as compared to in 2007. ASSET TURNOVER RATIO Ratio Asset Turnover Formula Sales / Average Total Assets Calculation 2008 Calculation 39,061,226/ 15,743,759 2007 2.481

41,423,843/ 2.816 14,706,580

There is an increase in the asset turnover ratio in 2008 as compared to 2007. The company has increased sales as compared to 2007 thus it has sold more services to customer.

PROFITIABILITY RATIOS RETURN ON EQUITY Ratio Return on Equity Formula Calculation 2008 0.262 Calculation 2,745,701 / 7,150,927 2007 0.383

Net Income / 2,290,845 / Average 8,740,158 Stockholder's Equity

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There is a decrease in the return on equity in 2008 as compared to 2007. The company average total equity has increased from 2007. EARNINGS PER SHARE Ratio Earnings Per Share Formula Net Income / No of Shares Outstanding (in Rs) Calculation 2,290,845 / 78,600 2008 2.914 Calculation 2,745,701 / 78,600 2007 3.493

There is a decrease in the earnings per share in 2008 as compared to 2007. The company earning per share is Rs 2.914 as compared to Rs 3.493 and is due to decrease in net income. PROFIT MARGIN Ratio Profit Margin Formula Net Income / Sales Calculation 2,290,845 / 41,423,843 2008 0.055 Calculation 2,745,701 / 39,061,226 2007 0.070

There is a decrease in the profit margin in 2008 as compared to 2007. This is due to increase in net income and sales of the company in 2008 and giving fewer margins for profit.

CAPITAL STRUCTURE ANLYSIS RATIO

DEBT TO EQUITY RATIO Ratio Debt to Equity Ratio Formula Total Liabilities / Total Stockholder's Equity Calculation 4,311,769 / 9,436,340 2008 0.456 Calculation 7,621,075 / 8,043,975 2007 0.947

There is a decrease in the debt to equity ratio in 2008 as compared to in 2007. This is due to considerable decrease in the total liabilities of the company in 2008.

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DEBT RATIO Ratio Debt Ratio Formula Long Term Debts / (Long Term Debt + Stockholder's Equity) Calculation 532,138 / (532,138 + 9,436,340)

Managing Financial Resources

2008 0.053

Calculation 210,149 / (210,149 + 8,043,975)

2007 0.025

There is an increase in the debt ratio in 2008 as compared to in 2007. The company long term debts have increased from 2007.

Comparing the 2008 financial ratio with industrial ratio RATIOS Current Ratio Quick Ratio Assets Turnover Ratio Inventory turnover ratio TOYOTA 2.55 2.224 2.816 30.18
INDUSTRY

2.34 2 1.02 39.1

M2. Prepare the feasibility report of a project of the chosen organization and assess its level of success or failure.

Pakistan Construction Company Pakistan Construction Company is a construction company working nationally in the country and having a very good performance over few past years. This company having take part in the

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building houses, towers, bridges and road construction. And this company is growing rapidly because of the good and quality service.
(a) Roadway Construction Project by PCC

The project is to construct roadway project from Peshawar to Torkham (Pakistan and Afghanistan boarder). The motorway project will provide an easily and efficiently transportation system. This project is will provide the public with a safe and efficient countywide transportation system and will help in the trade purpose. The system increases access and mobility, improves the quality of life. This project has a length of about 45 km long between Peshawar and Torkham. Working on this project will initially start in the year 2011 by a Pakistan Construction Company but it left the work incomplete in 2016. The speed limit on this road will be 120 km/ph and it is completed at a cost of $ 9,000.00. Expected cash inflows will be $ 5,000.00 for the next 4 years. Year 4 = Year 5 = $3000 * (1 + .1)4 = $2049 $4000 * (1 + .1)5 = $2484 NPV = $2316
Years

Pay Back Period

Year 1 Year 2 Year 3 Year 4 Year 5

Cash Flows

5000*(1.1)-1=$4545

1000*(1.1)-2=$826

2000*(1.1)-3=$1503

3000*(1.1)4=$2049

4000*(1.1)5=$2484

Left To Repay

($4,545)

($3,719)

($2,216)

($167)

$2,317

Return on Investment = (Discounted Benefits Discounted Costs) / Discounted Costs = ($9747-$7427) / $7427 = =or 31%
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(c). Results to approve or disapprove the project

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Financial decision making and capital budgeting are a very important part of business and there are many financial considerations that need to be taken into account before making an effective decision between projects. In order to do so, there are 3 primary methods for determining the financial value of a project which include, net Present Value, Return on Investment and Payback Analysis Conclusion In conclusion there are a number of considerations that should be taken into account when deciding where to place their capital investiture. And to have the best chance of deciding correctly all three primary methods including Net Present Value, Return on Investment and Payback Analysis should be weighed up appropriately and ranked upon what the business estimate more important and what best suits the goals, objectives and overall needs of the company. Net Present value: The result after calculating net present values of future cash inflows there is an earning opportunity of $2316/= so its a good opportunity and profitable project for the company and they have to accept the project. Payback period result: the PCC Company will recover their invested amount in approximately 4 years of payback period for this type of projects and when calculation is done the result is about 4 years for this project which is less than 5 years so the project will be approved. Return on Investment: the result that comes is 31%. Means the return on investment is 31% so its a profitable project and company should sign this project. M3. Explain the format of financial statements of Toyota, and interpret the past and present financial situation. Toyota motor company is a multi national company which has many franchises in different countries. Format of financial statements of the Toyota Company is different from the proprietorship and partnership. Toyota is using the corporate format of financial statements. The information needed for the company in the financial statements is:

Working capital Current assets

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Toyota Company is a profitable company in the market. While observing the companys past balance sheets (2007 & 2008) there are different information about the components of the financial statements. Some are increasing and some are decreasing. The components affected are

There is an increase in the account receivable turnover. The company has less accounts receivable as compared to past performance and is getting more cash. There is an increase in the asset turnover. The company has increased sales thus it has sold more services to customer and in this case it is the companys product, cars. There is an increase in the inventory turnover as compared to the past. It means that company changed inventory 30.18 times during the year which is a very good sign and sold more cars.

The project which PCC Company has made is more efficient and very profitable for the company. Net Present Value: - By applying the Net Present Value (NPV), it calculates the net present values of future cash inflows, there is an earning opportunity of 57333/= for the company. They are getting profit of 11466.6/= per year. So this project is very profitable for the company and it should be accepted.

Payback period: - The result of this technique is that the company will receive the orignal invested amount in 4 years for such projects and the remaining one year will be its profit. so this project is very beneficial for the company because advantage to accept this project is that, there is a less time and easy to recover the amount which the company has spent on the project.

D3. Point out the weaknesses/ strengths of the chosen organization and recommend the steps that should be taken in order to improve the financial situation organization wide and industry wide.

Strength and weakness of the TOYOYA Company and strategies for improvement of their position: After investigation of the past two year performance ratios here are some points in which they can improve their weakness and can make better their performance.
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In current ratio portion in the financial ratio report, clearly shows that the company is in good performing position as compare to the past performance. The company can easily pay off its debts. Moreover companys current liabilities have also decreased from the past.

Weaknesses in financial ratios of 2007 and 2008

Performance of the Toyota Company in working capital there is a decrease in the working capital by comparing their two years act. The companys current assets have decreased.

Strategies to improve their financial position

There is decreasing in the working capital in the 2008 report as compare to the 2007. so for increasing working capital for their company they should have a proper cash flow forecast. In cash flow forecast they should include any impact of the companys meet from sudden events such as a changeable market, loss of a large customer and bigger business competitors.

BIBLOGRAPHY

Conduct interview from: Website Books

Akber Khan (Employer of Toyota Company) www.toyota-indus.com Book title: business essentials Publisher: BPP learning Media Ltd

Other sources

www.finance.gov.pk www.investorwords.com www.careers-in-finance.com

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en.wikipedia.org/wiki/Finance ^ Business.timesonline.co.uk ^ Gove, P. et al. 1961. Finance. Webster's Third New International Dictionary of the English Language Unabridged. Springfield, Massachusetts: G. & C. Merriam Company. ^ finance. (2009). In Encyclopdia Britannica. Retrieved June 23, 2009, from Encyclopdia Britannica Online: Finance

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