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LAHORE ELECTRIC SUPPLY LAHORE ELECTRIC SUPPLY COMPANYCOMPANY
MUHAMMAD NOMAN KHAN
MC080405183
MASTER OF BUSINESS ADMINISTRATION
MBA FINANCE
LAH
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LEC
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UP
PLY
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LAHORE ELECTRIC SUPPLYCOMPANY
INTERNSHIP REPORT ON
LAHORE ELECTRIC SUPPLY
COMPANY
33
Brief introduction of the organization
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Overview of the organization
LESCO stands for Lahore Electric Supply company.LESCO is an electricity distribution company. LESCO provides electricity to the peoples.
Business volume Public Limited Company Authorized Share Capital is 5,000,000,000 Paid up Share Capital is 5000 ordinary share of 10 each.Total consumer are 2814399 with increasing rate 6.7
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Cont….
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Competitors of the organization
LESCO is a Monopolistic Organization
There is no Competitors in Lahore Region
Reasons of Monopoly
1: New Entrance is restricted 2: High initial fixed Cost
55
Organization Hierarchy Chart
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Hierarchy of Organization Structure
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Training Program
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Name of Department in which I gotTraining
1: MDI Department 01-05-2010 To 15-05-2010
2: Accounts Department 15-05-2010 To 31-05-2010
3: Admin Department 01-06-2010 To 15-06-2010
4: Finance Department 15-06-2010 To 30-06-2010
Departments Duration
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Detail Description of the Tasks Which are performed in different department
MDI Department“MDI is a Department in which industrial bills are Prepare and calculated”
1: Preparation of MR list
2: Checking of Readings and Units
Following are the Task which are performed in MDI Department
Training Program Cont……
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3: Sending the MR list to WCC
4: Calculation of MDI Bills
5: Providing the Customer Services
6: Making the MDI Payment List
7: Issued MCO
8: Issued RCO
9: Issued ERO
10: Filling different CP’s like CP 137, CP 138 and CP52
Training Program Cont…
9
Training Program Cont…
Accounts Department
Following are the Task which are performed in Accounts Department
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•Making the cash book summary
•Making the stock summary
•Making last paid summary
•Making the debit and credit summary
•Making the pay roll summary
•Posting the entries in the ledger
•Posting the entries in trial balance etc
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Preparation of Ledger and Trail Balance L
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Training Program Cont…
After preparing the summaries of each all the entries
are putt in to ledger.
Ledger is a statement in which initially entry is post.
After posting the entry in the ledger trial balance is
prepared.
Trial balance shows the all accounts separately.
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Annual Accounts
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Training Program Cont…
Annual accounts are prepared in the end of
accounting period.
An annual account includes final accounts.
This includes income statement or profit and loss
accounts and balance sheet.
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Admin Department
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Training Program Cont…
Preparation of Service Book of employees
Maintain the record of employees
Maintaining the attendance register
Maintaining the leave register
Responsible of negligence behavior of employees
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Department Hierarchy
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Structure of Finance Department
Finance Director
1:Finance Manager (CA)
3:Deputy Manager Accounts H/Q
4:Deputy Manager Accounts (F.F)
2:Manager Finance (CP & C)
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Finance Operations
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Structure of Finance Department
Finance manager is responsible of all operation in the finance department.
Finance mangers allocate the annual budget on the basis of activity for example
Area,
No of consumers.
No of transformers etc.
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Accounting Operations
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Structure of Finance Department
Deputy Manager Finance is responsible all accounting operation of finance department.
He control the all accounting policies of accounts
in LESCO head office.
1: Preparing annual accounts
2: Preparing balance sheet
3: Preparing profit and loss
account or income statement
4: Preparing Cash Flow statement etc
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Accounting System of the OrganizationL
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Functions of Finance Department
Initially LESCO Accounting system was maintained on manual basis.
Now a days LESCO maintain its accounts on ERP System or ERP Software.
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Finance System of the OrganizationL
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Functions of Finance Department
Finance system of the LESCO is maintained and controlled by Finance Directorate.
Which have sub ordinate finance manger (corporate accounting) and Finance Manger (CP&C).
There are two deputy mangers which controls the work of accounts officers
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Source of Funds
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Functions of Finance Department
LESCO is Government based Company and it is maintained and controlled by Government of
Pakistan.
LESCO takes funds from NEPRA.
In the beginning Wapda provides the fund to all the distribution companies. But now a days
NEPRA provides to the LESCO.
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Allocation of Funds
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Functions of Finance Department
LESCO have 7 circle, 33 Divisions and 160 sub divisions. Finance manger allocates the fund according to the needs of every circle, Division and sub
divisions. Funds all pass on annual basis but distributes in parts according to the needs of the
departments.
1: Funds for salaries of employees2: Funds for TA/DA 3: Funds for office expenditures etc
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Critical Analysis
Profit & loss Account
YEAR ENDINGJune 30, 2009 June 30, 2008 June 30, 2007 June 30, 2006
M. Rs. M. Rs. M. Rs. M. Rs.
REVENUE
Energy Sales 90,006 68,277 63,314 55,381
Rental of meters and equipment 460
396 255 362
Revenue from Electricity 90,466
68,673 63,569 55,742
Amortization of Deferred income 486
449 384 318
TOTAL REVENUE 90,952
69,122 63,953 56,061
2121
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Profit & loss Account cont..
OPERATING COST
Cost of Electricity 82,197 72,449 56,688 50,369
Other operating cost excluding depreciation
10,304
7,270 6,622 5,884
Depreciation on operating fixed assets 1,165
1,034 897 803
TOTAL OPERATING COSTS 93,666
80,754 64,207 57,056
Operating Loss/Profit (2,713) (11,632) (253) (996)
Other Income 2,819 1,989 1,729 1,436
Profit/(Loss) before interests & Tax
105
(9,643) 1,476 441
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Less Financial Charges 257
1,377 404 342
Less Worker's Profit Participation Fund
-
- - -
Less Provision for taxation -
- 111 -
Profit /(Loss) for the year (151)
(11,020) 960 98
Unappropriated Profit / (Loss) brought forward
(8,461)
2,559 1,598 1,500
Available for application (8,612) (8,461) 2,559 1,598
Profit & loss Account cont..
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Balance Sheet
EQUITY & LIABILITIES
June 30, 2009
June 30, 2008
June 30, 2007
M. Rs. M. Rs. M. Rs.
SHARE CAPITAL AND RESERVES
AUTHORISED SHARE CAPITAL
5,000,000,000 ordinary shares of Rupees 10 each
50,000.00
50,000.00 50,000.00
ISSUED, SUBSCRIBED AND PAID UP SHARE CAPITAL
1,000 Ordinary shares of Rupees 10 eachfully paid up in cash 0.01 0.01 0.01
Deposit for shares 6,738 6,738 6,738
Issuence of Redeemable Capital - 4,050 -
Accumulated Profit / Loss (8,613) (8,461) 2,558
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Deferred credit18,597 15,443 11,758
Term finance certificates6,500 7,500 -
Long Term Loans1,140 1,333 2,381
Employees'Retirement obligations13,317 10,475 8,380
Consumers' SECURITY DEPOSITS3,653 2,943 2,637
48,207 37,693 25,157
Balance Sheet Cont..
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CURRENT LIABILITIES
Creditors, deposits and accrued liabilities
19,293 10,223 2,700
Current Maturity of Term Finance Certificate
1,500 500 -
Current Maturity of Short Term Loans
233 62.5 265
Provision for taxation 102 102 111
21,128 10,888 3,077
Total Equity & Liabilities67,460.
00 50,908.30 37,530.00
Balance Sheet Cont..
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ASSETS
June 30, 2009
June 30, 2008
June 30, 2007
M. Rs. M. Rs. M. Rs.
NON-CURRENT ASSETS
TANGIBLE FIXED ASSETS
Operating fixed assets 26,092 21,311 17,977
Capital work in progress 2,645 2,130 1,794
28,737 23,440 19,770
Long term advances 75 51 52
Long term Deposits and deferred costs
0.35 0.36 0.36
28,812 23,491 19,823
Balance Sheet Cont..
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CURRENTASSETS
Stores, spareparts and looseTools
2,390 2,151 2,144
Trade Debtors 8,113 7,686 6,298
Loans, advances and other Receivables
18,958 8,046 4,971
Cash and bank Balances
9,186 9,534 4,295
38,648 27,417 17,707
Total Assets 67,460.00 50,908.30 37,529.99
Balance Sheet Cont..
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2009 2008 2007
M. Rs.
M. Rs.
M. Rs.
Profit/(loss) for the year (151)(11,02
0)960
Adjustment for non cash charges & other Operating Expenses
Depreciation 1,165 1,034 897
Amortization of Deferred Income (486) (449) (384)
Provision for Retirement Benefits 3,137 2,482 2,280
Extra-Ordinary Items 257
Financial Charges - 1,377 404
Provision for taxation 1,542 - 111
5,613 4,444 3,308
Cash generated from operating activities before 5,462 (6,576
)4,269
Cash Flow Statement
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(Increase)/ Decrease in current assets
Store & Spares (239) 7 305
Trade debts (1,969) 1,388 968
Loan, advances and other receivable(10,912
)3,075
(7,915)
Short Term Loans - - -
Creditors, accrued and other liabilities 9,153 (7,026
)8,425
Effect on cash flow due to working capital changes (3,967)(2,555
)1,784
Net cash Generated from operating activities 1,495 (4,020
)2,485
Pension Benefits Paid 522 388 356
Financial charges paid 112 880 404
Net cash (Used In)/ Generated from operating activities
860 (5,297
)1,724
Cont…
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Cash flow from Investing Activities
Fixed capital expenditure incurred (6,461) (4,704) (4,414)
Net cash generated from Investing activities (6,485) (4,703) (4,424)
Repayment of Long Term Loans (23) (2,280) (303)
Increase in Deposit for Shares - - 521
Increase in Deposit for issuance of redeemable capital
950 4,050 -
Issue of Term finance certificates - 8,000 -
Net cash generated from Financing activities 5,278 15,239 3,784
Net cash (Decrease)/ Increase in cash and cash equivalents
(347) 5,239 1,084
Cash and cash equivalents at the beginning 9,534 4,295 3,211
Cash and cash equivalents at the end of year 9,186 9,534 4,295
Cont…
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Liquidity Ratio
“Liquidity Ratios Measure a Firm’s Ability to
Meet its current obligations”
Ratio Analysis
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Name FORMULA 2009 2008 2007
Current Ratio
Current Asset /Current Liability
38648/21128=1.829
27417/10888=2.518
17707/3077=5.75
Acid Test Ratio
Current Assets-inventory/Current liability
38648-2390/21128= 1.71
27417-2151/10888=2.32
17707-2144/3077= 5.05
Sales to Working Capital
Sale / working capital
90,006/1.829=4921.5
68277/2.518=27115.6
63,314/5.756= 10999.7
Working capital
Current Assets – Current Liabilities
38648-21128=1.829
27417-10888=2.518
17707-3077=5.756
A. Liquidity Ratio
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“Leverage Ratios measure the degree of
protection of suppliers of long term
funds”
B. Leverage Ratios
Leverage Ratio
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Name FORMULA 2009 2008 2007
Time Interest Earned
EBIT/Total interest
105/257= 0.41 (9643)/1377= -7.00
1476/404=3.653
Fixed Charge Coverage
EBIT+ Fixed Charge (Before tax)/ Fixed Charge (Before tax)+interest
105+1140/1140+257=1245/1397= 0.891
(9643)+1333/1333+1377= -8310/2710= -3.06
1476+2381/2381+404=3857/2785=1.385
Debt Ratio Total Debt/Total Assets
8113+18958/67460=0.40
7686+8046/50908= 0.309
6298+4971/37530=0.300
Debt to Tangible Net worth Ratio
Total liabilities/ net worth – net intangible Assets
DATA NOT AVAIABLE
DATA NOT AVAIABLE`
DATA NOT AVAIABLE
B. Leverage Ratios
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Current Worth / Net worth Ratio
= {Net profit (after interest and tax) / Share holder's fund} × 100]
(151)/6738*100= -2.24
(11020/6738*100= - 163.55
960/6738*100= 14.2
Debt / Equity Ratio
(Total Liabilities) / (Shareholders Equity
69335/(1875)= -36.97
48581/2327= 20.87
28234/9296= 3.03
Fixed Asset Ratio / Equity Ratio
Shareholders funds / Total Assets
6738/67460= 0.179
6738/50908= 0.132
6738/37530= 0.179
Long term Assets versus Long term Debt
Long term Assets/ Long term debt
28812/27071=1.064
23491/15732=1.493
19823/11269=1.75
B. Leverage Ratios
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“Profitability Ratio measure the earning Ability of a Firm”
Name FORMULA 2009 2008 2007
Net Profit Margin
Net profit after Taxes/ Sales
(151)/90466= - 1.66
(11020)/68673= - 0.16
960/63569= 0.015
Return on Assets
Net Income/Total Assets
(151)/ 67460= -2.23
(11020)/ 50908=-0.21
960/37530=0.025
DuPont Return on Assets
Net Income/ sales * sales/ Assets * Assets/ Equity
{(151)/90466}*{90466/67460}*{67460/(1875)}= - 0.080
{(11020)/68673}*{6867350908}*{50908/2327}=4.7
{960/63569}*{63569/37503}*{37503/9296}=0.10
Operating Income Margin
Operating Income/Net Sales
2819/ 90466= 0.031
1989/ 68673= 0.028
1729/63569=0.027
C. Profitability Ratios
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Operating Assets Turnover
net sales/operating assets
90466/ 26,092= 3.467
68673/ 21311= 3.22
63569/ 17977=3.53
Sales to Fixed Assets
sales / fixed assets 90466/ 28812= 3.13
68673/23491=2.923
63569/19823= 3.20
Return on Investment (ROI)
EBIT+ financial cost/ Stockholders equity + fixed liabilities
105+257/(1875)+1140=362/-735= -0.49
(9643)+1377/2327+1333= -8266/3660= -2.25
1476+404/9296+2381= 1880/11677= 0.16
Return on Total Equity
Net Income/Total Equity
(151)/(1875)= - 0.08
(11020)/2327=- 4.735
960/9296=0.1032
Gross Profit Margin
Sales - Cost of Goods Sold/Sales
90466-82197/90466=0.09
68673-72449/68673=- 0.05
63569-56688/63569=0.1082
Cont…
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D. Activity Ratios
“Activity Ratios measure a firm’s Ability to convert different accounts within their
balance sheet into cash or sales”
Name FORMULA 2009 2008 2007
Accounts Receivable Turnover
annual sales / average accounts Receivable
90466/8113= 11.15
68673/7686= 8.93
63569/6298=10.09
Average Collection Period
(Average Debtors) / ( Sales) x (365 days or 12 months
8113/9066*365=32.73days
7686/68673*00=40.85 days
6298/63569*100=36.161
AccountsPayableTurnover
Cost of Goods Sold /Accounts Payable
82197/19293= 4.26
72449/10223=7.08
56688/2700= 20.9=21
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Inventory Turnover
Cost of Goods Sold/Inventory
82197/2390=34.39
72449/2151= 33.68
56688/2144
= 26.44
Average Ageof Inventory
365 days/inventory Turnover
365 days/ 34.39=11 days
365 days/33.68=11days
365 days /26.44=13.8 days
Operating Cycle
Average ageof inventory + collection period
Collection period= 365/accounts Receivable turnover ratioCp=365/11.15=32.73 days11 + 33 = 44 days
CollectionPeriod = 365/accounts receivable turnover ratioCp=365/9=41 days 11+41= 52 days
Collectionperiod= 365/accountsreceivabe turnover ratioCp=365/10=37days14+37= 51 Days
Fixed Assets Turnover
Cost of sales or sales/Fixedassets
82197/28812=2.85
72449/2349=3.08
56688/1923=2.859
Cont…
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E. Market Ratio
“Market Ratios are common used by the investors to assess the performance of a
business as an investment and also the cost issuing stock ”
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NOTE
LESCO is not a listed company in any stock exchange
and company also facing loss from last two years.
LESCO is owned by Government of Pakistan and there
is no shareholder. There are no chances of any type of
dividend given to shareholder due to loss or non
availability of data Market Ratios cannot be calculated.
E. Market RatioCont…
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F. Statement of Cash FlowRatios
“Cash Flow ratios indicates Liquidity,
Borrowing capacity and profitability”
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F. Statement of Cash FlowRatios Cont..
NAME FORMULA 2009 2008 2007
Operating Cash Flow/Total Debt
Operating cash flow/ total debtOCF= EBIT+-Taxes=1476+897-11= 2262
2262/27071=0.08
2262/15732=0.14
2262/11269=0.200
• Operating Cash Flow/Current Maturities of Long TerDebt and CurrentNotes Payable
Operating cash flow/ current maturity of long term debt – note payable
2262/23-19293=2262/-19270= - 0.117
2262/2280-10223=2262/ -7943= - 0.28
2262/303-2700=- 0.944
Operating Cash Flow/Cash Dividends
Operating cash flow – capital expenditure / operating cash flow
2262-6461/2262=- 4199/2262= - 1.85
2262-4704/2262= - 2442/ 2262=1.079
2262-4414/2262= - 2152/ 2262= - 0.9513
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Horizontal Analysis
Formula = Current Year Amount – Base Year
Amount / Base Year Amount*100
ITEM 2009 & 2008 2008 & 2007
Revenue from electricity
90466-68673/68673= 0.317
68673-63569/63569 = 0.080
Total Revenue
90466 – 68673 / 68673 = 0.31
69122 – 63953 / 63953 = 0.08
Cost of Energy 82197 – 72449 / 72449= 0.13
72449 – 56688/56688= 0.278
Total Operating Cost 93666-80754/80754= 0.159
80754-64207/64207= 0.257
Financial Cost 257-1377/1377= -0.813 1377-404/404= 2.408
Deferred credit 18597-15443/15443= 0.20
15443-11750/11750= 0.314
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Vertical Analysis
Formula = Line item / Base Year * 100
ITEM 2009 % 2008 % 2007 %
REVENUE FROM ELECTRICITY
90466/90952*100= 99.46 %
68673/69122*100=99.35 %
63569/63953*100=99.39 %
COST OF ELECTIRICITY
87.75 89.71 88.289
DEPRECIATION ON FIXED ASSETS
1.243 1.28 1.397
FINANCIAL CHARGES
58.75 12.49 153.75
DEFERRED CREDIT
38.58 41 46.7
LONG TERM LOANS
2.36 3.53 6.316
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Industry Analysis
• Different companies those are working under WAPDA compete each other every one want to achieve its goal in the form of income and Revenue but we can’t say a same as real competition.
• LESCO is one of those companies of the Wapda who has no competitors. This is a monopolistic organization in this region.
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Trend Analysis
“A firm's present ratio is
compared with its past and
expected future ratios to
determine whether the
company's financial condition is
improving or deteriorating over
time”
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Trend Analysis Cont…
Name 2008 2009 Trend Analysis
Current Ratio 27417/10888=2.518
38648/21128
=1.829
Current Ratio trend has decreased from 2008 to 2009. This means the company is becoming weak.
Acid Test Ratio
27417-2151/10888=2.32
38648-2390/21128
= 1.71
Acid test ratio has decreased from 2008 to 2009, this means its ability to pay short term creditors has weak.
Inventory Turnover
72449/2151= 33.68 times
82197/2390=
34.39 times
The inventory turnover ratio trend has increased from 2008 to 2009 this means the company sells off its inventory fastly.
Debt Ratio 7686+8046/50908= 0.309
8113+18958/67460
=0.40
The debt ratios trend show that the debt ratio of company increasing this means company becoming weak and very far too self sufficiency.
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Trend Analysis Cont..
Gross Profit Margin
68673-72449/68673=- 0.05
90466-82197/90466=0.09
Gross profit margin trend show that the gross profit ratio increased as compared to 2008. This means company is making more from each sale.
Net Profit Margin
(11020)/68673= - 0.16
(151)/90466= - 1.66
Net profit margin ratio trend shows that that net profit margin ratio showing loss from last two years.
Return on Assets
(11020)/ 50908=-0.21
(151)/ 67460= -2.23
Return on assets trend shows that the return on assets showing negative value and there is no return on assets from last two years.
Return on Total Equity
(11020)/2327=- 4.735
(151)/(1875)= - 0.08
Return on equity trend shows that the return on equity showing negative value and there is no return on total equity from last two years.
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Future prospectus of the organization
Establishment of mobile customer
services center at each circle
Distribution system rehabilitation
under System augmentation
program for reduction in energy
losses.
New Grid Stations and
augmentation/extension of existing
Grid Stations and Transmission
Lines.
Purchase of new vehicles for field
formation.
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SWOT Analysis of the Organization
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SWOT Analysis of the Organization
•Having a large number of consumers
•Using ERP system and ERP software
•Using electronic meter instead of other meters
•One window service facility at each sub-division
•Giving electricity to whole Lahorians.
Strengths
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SWOT Analysis of the Organization Cont…
Weaknesses
• Lack of water dam in Pakistan.
• Heavy line losses of 13.2% per year.
• Lack of Education and professional skill in employees .
• Lack of information about ERP system.
• Customer’s guidance is not sufficient.
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SWOT Analysis of the Organization Cont…
Opportunities
• ERP system providing accurate result .
• Establishment of mobile customer services center at each circle.
• New grid station and augmentation of existing grid station.
• Importance of IT is on the rise day by day.
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SWOT Analysis of the Organization Cont…
Threats
• Increasing chances of Corruption in future.
• Increasing demand of electricity.
• Increasing Political influence.
• Increasing chances of high prices in future.
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Conclusion
In summing up we can say that LESCO have very
important responsibility to supply the electricity but
there are some weakness in the LESCO. LESCO
requires latest technology in his IT department. But
in LESCO peoples have not much educated. Mostly
People’s are illiterate. They don’t know how to use
Computer system. Due to this delay in work.
Situation will be better after the full implementation of
ERP system. LESCO playing very important role
Because there is no other company in LAHORE
Area who performed this work.
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Recommendations
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LESCO needs improvement in the following areas.
Employee needs high Education and professional Skills.
There should be more chances of Career Development.
LESCO should arrange training program for employees
LESCO should encourage the employees to get high
education and training during his job. There should be no political influence during
recruitment, promotions, only deserved person should be promote.
Behavior of the Employees towards consumer should
be good.
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THANK YOUTHANK YOU
FOR YOUR ATTENTIONFOR YOUR ATTENTION
