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OCT 22, 2009

Financial Analysis of Buxly Paints Company

PHYSICAL SET UP OF ORGANIZATION

HEAD OFFICE:

Buxly Paints Limited has a very well established head office which is
situated on Polytechnic Road of Sindh Industrial & Trading Estate, Karachi.
It is in the same building in which the production department exist. All the
activities and related paper work from purchase to production and then to
sales, billing and credits is done here.

FACTORIES:
 Buxly Paints Limited has three factories to produce quality paints. All
these factories are situated in S.I.T.E. area of Karachi. These factories are
titled as Works I, Works II (Unit-I & Unit-II). But due to the new
management which realize the problem of extra prime cost and conversion
cost due to enlarge production capacities and due to very low turnover, the
production is restricted only in works-I and production and offices are closed

And transferred in the W-I.

AREA OFFICES:

Buxly paints limited has divided its paint market into two regions,
Southern region and Northern region. The sales and market of Southern
region is handled by General Sales Department which is in the Head Office
premises while the Northern region is controlled by two Sales Offices which
are situated in Rawalpindi and Lahore.

Personnel Department

I n the world of today’s industrial life, the importance of personnel

department cannot be denied. The function of any personnel department
is to manage the people who are at work. In BUXLY Paints Ltd. , personnel
department is newly established on January 1, 1997, previously there was an
establishment department which was practicing some preliminary practice of
personnel management. After realizing the needs of the organization, a
restructuring process took place on the behalf of Managing Director.

After the takeover of Berger the factory has no proper personnel working
department the person who is taking care of all the functions of personnel
department has both the responsibilities of personal and factory admin
manager and he is the wonderful person taking care of all the affairs of the
both spheres. He has only one coordinator the age old and devoted employee
Mr.Mehboob Ali who assist him in all the affairs of the factory policies
regarding the HR.

There is also workers union in the company which was established in

1958.the union produced many great problems of legislation and shut down
of the factory due to the acquisition of new management and factory has
faced a lot of crucial stages due to union and now after a year the union
problems are going to be settled by the entire effort of new admin manager
and legislation activities.

Functions Of Personnel Department:

The personnel department is engaged in exercising the following

types of jobs:

 Maintenance of the attendance and daily work joining & leaving records.

 Developing and updating the Bio-Data of all the employees.

 Issuing office orders especially for selection & recruitment, leaves,

retirement, promotions, increments and allowances etc.
 Creating, keeping and updating the policy files according to the direction
of top management.

 Guiding management to take decisions according to the policies

especially in situations like increment, promotion & upgrading
considerations, disciplinary violations and termination’s.

 Assisting the management in the coarse of dealing and encountering with

union affairs especially at the time of revision of biennial union-
management contract.

Policy Issues In Relation To Human Resources

Following are the major areas of human resources in which the

company has some specified policies and these issues are kept in the form of
files in personnel department. There is no order of papers in these files.
Being policy files, these should have only the final decisions on policy
matters but these are having a pile of papers including letters, irrelevant
office notices and a lot of other irrelevant material. Moreover the documents
in the files are not ordered chronologically. Mr.Mehboob Ali is now
responsible for the arrangement of the policy files and documents after the
downsizing of the employees without any designation and additional
benefits. The solution is that the department should be run in systematic
manner by having a complete and separate office setup and proper coding of
all these related things.

The policies as I notes are as follows:

Employees Classifications & Pay Scales:

The employees in Buxly Paints Limited are broadly classified into

following categories.

Staff Productive Workers Non Productive

Woks-I 25 22 10

The above classification is a general kind of division showing the

overall strength of the employees however this categorization is further
classified into staff and workers in accordance with pay scales, this is shown
below :

Pay Scales Senior Staff Junior Staff

Grade I 2770-200-3770-250-5520 550-60-1150-80-1550-100-2050
Grade II 3880-260-5700-300-7200 700-80-1500-100-2000-120-2600
Grade III 5040-320-7280-370-9130 1000-100-2000-120-2720-140-
3280
Grade IV 7500-375-9375-410-12245- 1300-120-2500-131-3175-145-
450- 3875

The division of workers in various categories in accordance with their pay

scales is shown below:

Class ‘B’ Class ‘A’

UN Skilled 400-40-800-50-1050-55-1325 450-50-950-55-1225-60-1525
Semi Skilled 500-55-1055-60-1355-65- 550-60-1150-65-1475-70-1825
1680
Skilled 600-60-1250-70-160-75-1975 650-70-1350-75-1750-80-2135
Leading Hand 700-80-1500-85-1925-90- *****
2325

These pay standards of the staff & workers are revised periodically at the
direction of Directors.
Recruitment & Selection:

There is no concrete policy for the selection & recruitment in Buxly

Paints Limited. Most of the new jobs are filled by the sons of old employees
working there which is the single criteria for most of the jobs. e.g. the son of
technical manager is assistant programmer in computer section. The son of
chief accountant is sales person and acting upon the policy of ‘looking busy,
doing nothing’., the son of Ex-Senior general manager operations is chemist
in BUXLY PAINTS LIMITED. From all these, except the son of senior
general manager operations, any body is not doing up to the mark. Besides
this what is written in the policy file is that the directors are directly
involved in these matters with discretionary authority, however while
recruiting a person in certain Department , the Head of that Department is
asked for the initial screening of the applicants and the final interview is
taken by the Executive Director or sometimes by the Managing Director.

The newly recruited employees are asked to fill a Surety or Indemnity

Bond which is a kind of legal service agreement between the employer and
the employee. The probationary period of all categories of employees is of
three months but the Managing Director have the full authority to increase or
decrease (very rare) the duration of this period by judging the performance
of new employees.

Promotions:

The criteria of promotion in the company is mainly based on the

seniority and a minimal kind of importance is being given to performance .
while promoting the employees from one pay scale to another it is strictly
cared that total strength of scale 2 should not exceed 40% of those in scale 1,
the total strength of scale 3 should not exceed 50% of incumbents of scale 2
and those in scale 4 should be a maximum of 40% of scale 3 while the total
strength of the employees in scale 1 is determined by considering the
changing of the organization.

Allowances:

In Buxly Paints Limited, following types of allowances are being

given to employees:

House Rent Allowance: According to the lastly decided biannual contract

which will be valid up to 30-06-98, it is the policy that the staff members
who are drawing their basic wage upto RS. 1000 per month will be paid a
sum of RS. 840 per month as house rent allowance.

The staff members whom basic wage exceed RS. 1000 per month will be
paid house rent allowance at the rate of 51% of their basic salary plus RS.
320 per month.

Conveyance Allowance: The policy about conveyance allowance as was

lastly decided in biannual contract mentioned above are as follows:

All workers are paid RS. 360 as conveyance allowance

All staff members drawing basic wage up to RS. 1000 per month are paid a
sum of RS. 410 as conveyance allowance
All Staff members drawing basic wage exceeding RS. 1000 are paid
conveyance allowance @ 17% of their basic wage plus RS. 234 per month
as conveyance allowance.

Attendance Allowance: As mentioned in the biannual contract, the

attendance allowance is given to the employees on the following basis:

• On full attendance during the month, RS. 125 per month per head

• On one day leave in a month, a sum of RS. 100 payable to each of such
worker in that month.

• On two days leave a sum of RS. 80 per month payable to such worker/staff
member.

• The workers/staff members availing leaves or being absent for more than
two days in a month are not entitles to attendance allowance.

• This monthly attendance allowance is in addition to annual attendance

award.

Recreation / Vacation Allowance: Buxly Paints Limited also pays

special recreation & vacation allowance to its employees @ RS. 2250 per
annum on the occasion of annual vacations.

Bonuses And Awards:

Buxly Paints Limited announces and pays bonuses to all the

employees in every financial year. The company also gives a “17-Year
Service watch” plus prize bonds on completion of 17 years of any employee
with the organization. Company also gives ‘hard work, loyalty and devotion
award’ on any good performance to its employees so as to present a tribute
to hardworking, loyal and devoted employees. On the time of retirement, a
retirement award is given to the employees. Moreover, annual gifts of paints
are also being given to employees to increase their morale and motivation
level. But here is it is important to note that from last four years there was no
promotion and bounces for the employees due to the long years in the
factory economic conditions. During my stay at Buxly the new management
announces the increments and bounces for the employees.

Leave Entitlements:

In Buxly Paints Limited, an earned leave of 25 days per annum is

allowed to all the employees. In case of less absences the employees can
enact these leaves upto an accumulation of three years. For Medical and
casual leaves , employees are given a maximum period of 15 days with pay.
All the employees are given 15 minutes time relaxation so as to join the
office and even then if a person come late for five days his one annual leave
is deducted by the management.

Training Courses & Apprenticeship:

Buxly Paints Limited rarely sends its employees to professional

institutes for training purposes but it is the policy of the management that
whenever an employee will be sent to any institute then all the expenses of
that training will be beard by the company and the person will be paid his
regular salary throughout the training period.
 The company also appoints different people as trainee employees
especially in the section of Research and Control Laboratories, which are
mostly the trainee chemists. The time period of this type of training is
usually one year. These appointments do not carry any pay scales but these
are paid agreed salaries. Any sort of allowances, bonuses, leaves
entitlements or gratuity and provident fund is not a matter of legitimacy to
these appointments.

Along with this Buxly also provide the internship to the local and country
wide business schools and institutes for their graduates for the learning of
the business activities and have a proper and planned schedule for that
purpose and provide them with all the facilities regarding their needs and
fully accommodate the internees by the stipend and lunch facilities.

Graduity & Provident Fund:

The policy prevailing in Buxly Paints Limited depicts that the

statutory graduity is not applied to those employees who have their
Provident Fund Accounts in the company. The rate of provident fund is
8.33% of the basic pay. At the end of service, retirement or death, it is paid
to employees with interest. Otherwise employees are paid graduity on the
basis of number of employment years, on number of years, the pay of some
days per year is given as graduity. Schedule of graduity is as follows:

• 1-5 years 25 days

• 5-10 years 27 days

• 10-12 years 30 days

 • 12-15 years 32 days

• 15-20 years 40 days

• 20-25 years 45 days

• 25 and greater 50 days

Union-Management Affairs:

All the workers and the junior staff in Buxly Paints Limited are
unionized. This union was established in 1958, since then it is working for
the rights and welfare of employees. The biennial Union-Management
contract is one of the efforts of union and of management also to satisfy the
workers and to smoothly run the organization.. This is the agreement which
takes place after every two years, in this contract the wage standard of
workers are revised, increase in allowances and bonuses are mutually agreed
upon. Due to the mismanagement and work shirking practice of the previous
management the company suffer a lot of union problems and has to face the
crucial situation of shut down of production and legalities. But now by the
takeover of the new management the things are coming on their normal flow
and a successful down sizing takes place and company cover the losing
market by reducuing its factory overheads and prime cost and producing the
same sales with one –fourth of previous strength. In order to deal with the
union affairs management appointed the factory manager Mr.Niazi to solve
the matter with peace and mutual agreement and now the new union is
organized and all the legalities are being fulfilled.

Lunch Subsidy & Mess System:

 There is one canteen in Buxly Paints Limited, at Head Office. This
canteen is basically providing the lunch and tea facility to staff members.
The workers are not served with lunch but are paid the same amount as
lunch subsidy. The amount is as follows:

• For and on behalf of each staff member, a sum of RS. 10 per attended day
plus a fixed amount of RS. 75 per head per month are paid to officer’s
mess

• All the workers are paid a sum of RS. 10 per attended day plus a fixed
amount of RS. 75 per head per month as lunch subsidy.

• No deductions are made from RS. 75 fixed amount except on availing more
than 25 days annual leave in a month.

Social Security & Old Age Benefits:

These are the institutions, which demand a fixed percentage of the pay
of all the employees from the employer so that the benefits should be given
at the time of retirement, death or any mishap during work. Under the policy
of social security Buxly Paints Limited deposits 7% of the wages of each
worker to Social Security Department and in case of any serious accident of
any of the employees all the medical expenses are beard by the Government.

The age of retirement in Buxly Paints Limited is 60 years and during their
service the company pays 5% of each employee wage to the government
under the system of Employees Old Age Benefit and 7% to the social
security so the these employees can get pension after their retirement.
Finance Department

The most dominant and big department in BUXLY is accounts

department. The department is headed by a chief accountant and under him a
cashier is shown in the hierarchy that coordinate the overall activities of the
chief accountant and along with him the new management appointed its own
accountant to have a check and balance over the financial records and
business activities. The chief accountant is the person who is enjoying the

authority in the organization after MD. Most of the decisions that he makes
by his conservative approach to do the things are not in the benefit of the
organization. The department processes all the formal accounting practices
in order to give information to the management, to the share holders and to
the government in the form of different financial statements etc. One thing,
which I noted in this department, is that work design in this department as is
in the whole organization is not clear. The proof for my opinion is the saying
of one key post holder in this department “ The work which anybody cannot
do, I have to do it.”

The person in this department are very much exhausted by the personality of
their ultimate boss who is the chief accountant, and it is not only their saying
but I do observe all the activities of that cool and rigid personality, at the
moment he is giving order for some document or statement on the same time
he is going to snub the person that why are you doing the work and leave
this work and do this new work. This factor basically demotivates the
employee in the department and they do not show loyalty for the
organization.
All the accounts department is computerized and all the process of general
voucher entry to the formation of reports are done with help of computers
and MIS department. The different persons having their designation of
senior accounts officer and junior officers are working on their terminal and
directly report to higher management and the chief accountant. The chief
accountant has no knowledge of computers and he always find shouting on
his sub ordinates and going on the policy “ do nothing and looks busy”.

Creditors:

Mr. Mohammed Anayat is an accounts officer responsible to handle the

record and transactions of creditors i.e. purchases. He records each and
every purchase .In it, he deals with all the purchase of raw materials,
containers etc. from local market and as well as from purchases. He also
deals with the payments of the creditors and the promise dates to the
customers for receiving their cheques.

Most of the creditors are very much annoyed from Buxly by not paying them
on the promise date. This is destroying the credibility of the organization in
the market as well in the customers.

Debtors

. In the same manner, one accounts officer is to so the same nature of job but
for debtors. The person concerned is Mr. Azmatt. He deals with sales. The
documents under his concern are invoices, sales register, party ledger and a
monthly trial balance that he makes from these documents.
He is the very competent person and is appointed from the Berger side as a
senior accounts officer. He also deals with the banks loans and the personnel

Department and the payroll on the computerized software.

General Control

Another accounts officer is for general control there is no any proper officer
who take care of the other financial affairs because due to computers all the
reports can be generated by the software, but there is a need of a person who
takes care of other activities including the general entry vouchers and similar
works because it will reduce the job burden from the other workers and they
will be able to perform their duties with full interest and heartedly.

Cash Handling:

Mr. cashier in BUXLY PAINTS LIMITED. He is responsible to maintain a

specific amount of cash to give to the employees as their salaries, daily
allowance and for other petty expenses. He pays the amount after seeing the
passed voucher signed by a competent authority. He is a competent person
but the company is not using its qualities and efforts and always be busy in
the cash affairs and banks instead of being in the office. After the acquisition
he is also taking care of the shares department along with his original job
and for this neither he nor any person doing extra from his job is paid for the
jobs they are doing in spite of their original work.

Junior Accountant

The junior accountants are for the purpose of making sales invoices and for the
production orders. They keep all the records and accounts details for the finished
goods used in the whole regions and making the sales invoices and the challans
for the production and sales orders.

The whole finance department is under the crisis because the people here are just
demotivated due to sudden acquisition of the Berger and drastic downsizing has
made the worker’s loyalty against the organization and secondly the behavior of
their ultimate boss make them just to pass the time only to the minimum level
and not to put extra efforts in the organization.

Management Information Sciences

The management information system (MIS) is the most important and the best
working department of the Buxly Paints, which is the more organized and
systematic department.

As being the person of the MIS I have a great interest in this department and I
work with all the persons of the department and learn a lot with all the people.
The department basically adjacent with the accounts department and help the
higher management in generating different reports and documents.

The configuration of the MIS department is given as:

There are three servers in the MIS department,

1- Print server

2- Branch System

3- Factory System

There are six persons in the MIS department. All are very much experienced and
knowledgeable regarding their work. The four persons are from the Berger side
and other two are from the Buxly side. The detail of software and hardware is
shown as

Software

The software in the Buxly are very competent and properly made and are
provided by the Berger side. The whole database is made-up of latest version of
“Oracle” and along with this the office people take a lot of help from the
software’s of office automation i.e. M/S Office, Exel etc.

The operating system of the machines is LINEX on the server and the terminals
are supported with other operating system as well and the software is run by the
help of TERMLITE (a software by which we can use linex base software in
Windows environment).

HARDWARE

The number of terminals and hardware are shown as

 Terminals (8)

 U.P.S (1)

 Printers (3)

 Storage Devices (cartridge tapes)

The division of terminal is as follows

1- PA of MD

2- Senior Accounts Officer (receivables & personal)

3- Raw material & inventory Officer(data base administrator)

4- Accounts Officer (creditors)

5- Senior Accounts Officer (general entry & voucher)

6- Junior accounts Officer (receivables & sales invoices)

7&8 are for the servers and are restricted to the data base administrator.

The activities performed by MIS department are as follows

 Entry of journal voucher.

 Checking the balance of payment to creditors.

 Maintaining the accounts receivable

 Payroll & personnel information

 Preparing the sales invoices

 Raw material records

 Issuing of job cards

For all these purposes and other termed reports Buxly has very competent
data base administrator and working persons having the skill of doing
thing in a computerized environment.

The whole department of MIS work is very perfect and up to the mark. The
performance of the MIS is comparatively better than other department but
there are some flaws which effect the productivity of the department which
are discussed in detail at the end of the report.

The major problem with the MIS is that it is much influenced by the Chief
Accountant, he just try to govern the department as per his own wishes and all
the people are being disturbed by his activities. The main problem is that he
didn’t know any thing about the computers and just want to place orders. The
 MIS require a great concentration and peace of mind but the atmosphere is
very tense and people are performing both the activities of accounts and the
record of the data regarding the finance , sales , invoices , raw material etc. the
jobs of people are so much enlarged and enriched but the reward is very low
as compared to the industry standards , so it just de motivate the people of the
organization.

Sales & Marketing

Sales & Marketing

The key department for any organization is its sales &marketing department
and it serves as the ears and eyes of the organization. They perform the key
role to the growth of company market share.

I have spend a couple of weeks in general sales and marketing department. It

is the first time that Buxly has acquired a Marketing person for the promotion
of its product ranges.

First of all I would like to state that there are three types of paints in which
factory deals and they are given as

1- Enamel

2- Distemper

3- Epoxy

These three types of paints are classified into two major categories

 Decorative Paints

 Industrial Paints.
 The whole sales and marketing department is demotivated due to hectic and
undefined work loads. The sales department has very poor facilities of
transport and communication. They have to perform a lot of irrelevant jobs
along with the sales. The repute of Buxly is going to be destroyed due to not
fulfilling the small orders. These customers are than transferring to other
brands due to less effective production people. The sales people has to ran
after the production managers and along with the taking of orders.

The hierarchy is shown as

The all sales representative are given daily assignment as per the direction by the
general manager to the regional manager and than they decide their daily visits to
customers.

The performance of the sales employees is daily evaluated by the regional

sales manager and is being reported to the general manager. Senior sales
manger has divided the all four sales officers in to different areas of
consideration as industry, commercial, government bids and tenders,
decorative etc. the sales officers of Buxly are very kind to tell the process
and procedure and they guide me about the process of order taking to the
collection of the money.

Their procedure starts from the order copies , usually there are four copies of
order taking,

 One copy to the customer

 Second to the production

 Third to sales officer

 Billing copy

The commercial order lead time is 2-3 weeks and for the industrial one there
are 4- weeks.
The sales force of Buxly goes through the market as per their specified
areas. Buxly has very small marketing and promotional activities to permote
its wide range of products. The orders are taken on the basis of personal
relations and on the behalf of very sound good will in the market of old
customers and specially in the field of government and defense departments.

Up till now the sales force has dual nature of job that is to sale and market
the product as well.

Burt by the hiring of an experienced marketing person the administration is

planning to go for the marketing activities.

The major loss which is going to be occur is the continuous reduction in the
commercial as well as the industrial customers due to very slow and less
effective production & promotion processes.

Although factory have still potential industrial as well as commercial buyers,

but the thing is that firm is loosing the customers not on the basis of quality
but mismanagement of the key resources of the organization and by this they
are loosing their valuable customers.

DISTRIBUTION SYSTEM OF
BUXLY
Buxly has distributed the whole country in to three regions and each region
has its own regional manger and sales force.

THE REGIONS ARE

 1- South

2- North

3- Central

The regions send their report and have their own targets in a specific time
periods and also they monitor the activities of sales force and demand of the
customers for the paints.

The paint market for Buxly is very wide but due to lack and deficiencies it is
lagging behind to the other companies. The customer are satisfied by the product
it self but the problem exist in the organization itself. The main and key factor in
the sales is that our employee should be motivated and trained for the work they
are performing. But in case of Buxly except three employees all are having very
less knowledge of the paints and even sometimes they blank in telling the price of
the products.

The sales people have no technical or any task force which can give different
schemes of colors to the customers. Even there was very short number of
color cards for shade matching and to give some material to customers.

BUXLY’S PAINT MARKET

Market of paints has been a challenging job in one country because people
consider that paint is a decorative item, Even today it is considered as a
luxury and not valued as a protective element. The greater portion of our
population lives in villages, where people are illiterate and consequently
lacking the knowledge of paints. Even in cities people rely upon painters and
painters have their own technology and preferences. In spite of all these
draw backs in the market many companies in the field of paints striving,
with the help of their marketing activities, to gain high business. They have
realized that the market is growing with substantial potential as a
consequence of increasing literacy rate, standard of living, infrastructure
development, industrial growth and more and more emphasis on Defense
Strength.

The above-mentioned phenomenon enforced Buxly to divide its

market of paint consumers into four categories.

• GENERAL

• INDUSTRIAL

• CONSTRUCTION

• Govt. & SEMI-Govt. CUSTOMERS.

General Consumers:

This is the most important category of consumer because it constitute

the major portion of BUXLY’s sales. This category use decorative items for
the use in decorating their houses, shops etc.

Construction Consumers:
 These categories of consumers include contractors, Civil Engineers,
Associates, Construction Companies, Builders etc. These type of consumers
buy paint mainly for the decoration of Plazas, Apartments and flats which
are build for commercial or residential purposes. Price Considerations and
Discounts systems of more importance under this category. Under this type
of customers Buxly is selling to A. Karim & Sons, Hussain Constructors,
Rabia Project Construction, Imperial Constructors, Chapal Builders and may
other small contracts.

Competitors Of Buxly Paints Limited:

Buxly Paints Limited is encountering these types of compassion that

very in their degree of intensity. These categories of competition are
described below.

• Foreign Competitors

• Inter-Industry Competition

• Intra-Industry Competition

Buxly Paint Limited is facing severe kind of competition with the

Multinational Giants like ICI, Berger and the every day emerging
mushrooms in the Industry. The 80% of volume of paints sold in the country
is from these mushrooms while the rest of 20% is sold by the so-called
organized sector that also includes Buxly. The multinationals with their
unlimited resources & diversified strategies making the survival of Buxly
more difficult. On the other hand the substantial increase of small
manufacturers of paints is also affecting the prosperity of the company
because of the following facts:

The mushrooms are doing business under the fixed tax structure but
their level of operating activities is very high as a result they have to bear
low cost of production and consequently their prices are very low.

Peculiar Brands Of Buxly:

Following are the same of special most commonly & Renowned and
Purchased brands of Buxly.

• 413 Synthetic Enamel

• Weather Fighter

• Plastic Bound Distemper (PBD)

• 413 Silk Enamel (Mat Finish)

• 413 Acrylic Emulsion

• Buxtone Plastic Emulsion

Financial Analysis

The financial analysis of the factory presents us the true picture of the
factory and its performance regarding the utilization of resources, worth and
its profitability.

We will first analyze the ratios of balance sheet and income statement items of
the factory financial records.
Ratio Analysis

The ratio analysis of the last two years of the factory financial resources ids
follows as

Name of ratio 1999 2000

Current ratio 1.275382 1.064952
Quick ratio 0.860441 0.692923
Average collection period 94.36674 79.2276
Account receivable turnover 3.814903 4.543871
Inventory turnover 5.024244 4.820792
Fixed asset turnover 7.44675 5.990286
Total asset turnover 1.548095 1.454376
Debt ratio 0.983371 1
Long term debt to capitalization 0.03537 0.035176
Debt to equity 2.161311 3.068889
Time interest earned -0.31392 -1.78428
Gross profit margin 0.017665 0.13595
Operating profit margin -0.0112 -0.06808
Net profit margin -0.03052 -0.09576
ROI -0.04725 -0.13928
Return on equity -0.15191 -0.5667
Earning per common share -3.94666 -9.39748

Short-term liquidity analysis is especially important to creditors, suppliers,

management, and other concerned with the ability of a firm to meet near term
demands for cash. The evaluation of Buxly Paints we observe that the current and
the quick ratios have shown a downward trend as we can see from the ratios
calculated on the page annexed. It seems that the financial condition of the
company is getting worse day by day. We observe that the liquidity of the firm is
also decreasing with the passage of time. When we compare its performance with
the previous year we observe that the short-term liquidity has shown a
considerable decline. But along with it we observe the improvement in the
collection period of the firm, which has decreased from 95 days to 79 days, which
is a considerable improvement with respect to the collection procedures of the
firm. So with this we observe that the account receivable turnover is also
improving which is a healthy sign for the company. Well we observe that the
inventory turnover has decreased with the passage of time, which is also not good
for the company. If the situation is such and company is in production we see
that the company is piling its inventory. This has also a harmful effect on the
current ratios of the company too. As the current ratio will consist of a major
portion of the inventory which is also not a very good cash equivalent. As it
requires some time to convert into cash.
We observe that the debt ratios are also not showing a favorable picture as we see
that the debt to equity ratio has shown an increase in it. This increase is also
considerable. This shows that the risk of the organization is increasing day by
day. We need to know the reason of this increase in the debt. We need to observe
that is it that the firm is covering the fixed charges efficiently. Long-term debt to
capitalization ratio is not showing a marked increase. The bad thing is that the
times interest earned are going in negative with the passage of time. So we see its
really in hot water. What the company is doing generating short-term debts with
the help of its liquidity. So we do not see a considerable change in the long-term
ratio. Well a negative value of the interest coverage ratio is showing a big
question mark to its future.

Although we see that the gross profit has increased with the passage of time
but the operating profit has decreased. Which shows that that company
expenses has increased. That gross profit margin is also not improved too
much. So what we observe in this case is that company is going through a
critical time. Well all the other profitability ratios, which I have calculated is
growing in the negative direction showing a poor performance of the
company. Well one more thing is that company has not paid dividend so
dividend ratios could not be calculated. The return on investment and equity
both are negative showing it not a good venture to invest in.

Well observing the financial conditions of the firm it seems that the only
source through which it could generate finances is short-term finances and
that too is a difficult job. Well the investor would not be interested in a
company who is showing negative returns and at the same time not paying
any dividends. The long-term borrowing also seems impossible. So the
suggestion for the company is to merger with another company or another
company could acquire this company.

Over view of company financial position

This 47 years old company of SITE, Karachi, has witnessed changes at the
highest level of its hierarchy and reduction of "quite sizeable staff". The idea
that lean organisation will improve profit ability has been popular
management concept in the country.
During the year under review, the company's sales at Rs 141.31 million
gross profit at Rs 19.21 million has registered decline by 24%, and 42%
respectively compared to the preceding year's. The company turned
operating loss at Rs 9.62 million (1998-99: Operating loss at Rs 2.08
million) and loss after taxation at Rs 13.53 million 1998-99: Less at Rs 5.68
million). The accumulated loss has wiped out its capital. But there is
negligible amount of long term debt and current ratio reflects easy liquidity
position. The share place has gone below par after remaining much above
par value during the last half of last year. The directors lamented, "The
company has tried its utmost to persuade the government to finish off double
taxation but has failed so far.

There has been across the board changes at the highest echelon of the hierarchy
of Buxly Paints Limited. Wasim Alam Khan resigned from the post of the Chief
Executive and in his place Yousuf Babar Khan was appointed as new Chief
Executive. Nasim Alam Khan Chairman and founder director resigned and
Wasim Alam Khan was appointed as Chairman. Sheikh Ejaz Majid was appointed
director in place of Nasim Alam Khan. Abdul Qadir H. Moochhala, resigned and
Muhammad Saeed was appointed as director.
The company is the manufacturer and marketer of paints, pigments, protective
surface coatings varnishes and other related products.
Buxly Paints Limited was incorporated 47 years ago in the province of Sindh. Its
manufacturing facilities were set up at the prime location of the oldest industrial
zone of the country at SITE, Karachi. Therefore the factories of the company are
located on the prime and valuable real estate. Its fixed assets were re-valued twice
once in 1976 and the other time in 1989 by professional and reputable values. The
amount of Rs 24.34 million has been booked in the account of Surplus on
Revaluation of Fixed Assets.
The shares in the company are quoted on all stock exchanges of the country. At
present, its 10-rupee share is quoted at Rs 8.25 at 17.5% discount to its par value.

The price has dipped below par value with the arrival of the new millennium
as during the last half of the preceding year 2000, the price band had
remained between the high/low of Rs 13 and Rs 11 per share. The stock
quotation appears to be barometer of the financial position of its balance
sheet.
During the year under review the company has turned higher loss at Rs
13.53 million compared to the preceding year's. Compared to the paid up
capital of Rs 14.40 million its accumulated losses swelled to Rs 14.86
million leaving an impaired equity base of in negative figure of Rs 0.46
million.
The total asset base suffered contraction to Rs 97.16 million from previous
year's figure of Rs 118.27 million.
OVERVIEW (January , 2000)

This 47 years old company of SITE, Karachi, has witnessed changes at the
highest level of its hierarchy and reduction of "quite sizeable staff". The idea
that lean organization will improve profit ability has been popular
management concept in the country.
During the year under review, the company's sales at Rs 141.31 million
gross profit at Rs 19.21 million has registered decline by 24%, and 42%
respectively compared to the preceding year's. The company turned
operating loss at Rs 9.62 million (1998-99: Operating loss at Rs 2.08
million) and loss after taxation at Rs 13.53 million 1998-99: Less at Rs 5.68
million). The accumulated loss has wiped out its capital. But there is
negligible amount of long term debt and current ratio reflects easy liquidity
position. The share place has gone below par after remaining much above
par value during the last half of last year. The directors lamented, "The
company has tried its utmost to persuade the government to finish off double
taxation but has failed so far."

There has been across the board changes at the highest echelon of the
hierarchy of Buxly Paints Limited. Wasim Alam Khan resigned from the
post of the Chief Executive and in his place Yousuf Babar Khan was
appointed as new Chief Executive. Nasim Alam Khan Chairman and
founder director resigned and Wasim Alam Khan was appointed as
Chairman. Sheikh Ejaz Majid was appointed director in place of Nasim
Alam Khan. Abdul Qadir H. Moochhala, resigned and Muhammad Saeed
was appointed as director.
The company is the manufacturer and marketer of paints, pigments,
protective surface coatings varnishes and other related products.
Buxly Paints Limited was incorporated 47 years ago in the province of
Sindh. Its manufacturing facilities were set up at the prime location of
the oldest industrial zone of the country at SITE, Karachi. Therefore the
factories of the company are located on the prime and valuable real
estate. Its fixed assets were re-valued twice once in 1976 and the
other time in 1989 by professional and reputable valuers. The amount
of Rs 24.34 million has been booked in the account of Surplus on
Revaluation of Fixed Assets.
The shares in the company is quoted on all stock exchanges of the
country. At present, its 10-rupee share is quoted at Rs 8.25 at 17.5%
discount to its par value.
The price has dipped below par value with the arrival of the new
millennium as during the last half of the preceding year 2000, the price
band had remained between the high/low of Rs 13 and Rs 11 per
share. The stock quotation appears to be barometer of the financial
position of its balance sheet.
During the year under review the company has turned higher loss at
Rs 13.53 million compared to the preceding year's. Compared to the
paid up capital of Rs 14.40 million its accumulated losses swelled to Rs
14.86 million leaving an impaired equity base of in negative figure of
Rs 0.46 million.
The total asset base suffered contraction to Rs 97.16 million from
 previous year's figure of Rs 118.27 million.
But there are redeeming factors also as there are negligible figures in
the account of long term debts in both the years under comparison.
Moreover the current ratios in the years under comparison were at
1.47%/1.25 which are much above the benchmark ratio of "one".
Production declined by 24% to Rs 1.449 million litres from the previous
year's figure of Rs 1.909 million litres.
The accelerated slide in the profitability requires planned recovery
strategies. Some glimpses of remedial measures are apparent in the
Directors' Report, such as efforts to reduce expenses including
separation of "quite sizeable staff".

===================================================
Performance Statistics (in Million Rupees)
June 30 2000 1999
===================================================
Capital & Liabilities
Share Capital Paid-up: 14.40 14.40
Accumulated (Loss): (14.86) (2.05)
Shareholders Equity: (0.46) 12.35
Surplus on Revaluation of F/A: 24.34 25.06
L.T. Debts: 0.46 0.86
Deferred Liabilities: 4.21 5.94
L.T. Deposits: 0.53 0.53
Current Liabilities: 68.08 73.53
Tangible Fixed Assets: 23.59 25.00
L.T. Deposits: 1.07 1.49
Current Assets: 72.50 91.78
Total Assets: 97.16 118.27
Sales, Profit & Payout
Sales: 141.31 186.19
Gross Profit: 19.21 32.89
Operating (Loss): (9.62) (2.08)
Other Income: 2.69 0.54
Claim for Refund for Excise Duty: - 3.43
Depreciation: 1.71 1.87
Financial Charges: 5.39 6.64
(Loss) Before Taxation: (12.32) (4.75)
(Loss) After Taxation: (13.53) (5.68)
(Loss) Per Share (Rs): (9.40) (3.95)
Share Price (Rs)
Dated 19-01-2001: 8.25 -
Financial Ratios
Price/Earning Ratio: (-) -
Book Value Per Share: (0.31) 8.56
Price/Book Value Ratio: (-) -
Debt/Equity Ratio: 2:98 2:98
Current Ratio: 1.47 1.25
Asset Turn Over Ratio: 1.45 1.57
Days Receivables: 80 92
Days Inventory: 76 73
Gross Profit Margin (%): 13.59 17.77
 Operating Margin (%): (6.80) (1.12)
Net Profit Margin (%): (9.57) (3.05)
Plant Capacity & Production
(000' liters)
A) Actual Production: 1,449.75 1,909.04

B) Capacity: The capacity of the company's plant

is indeterminable as it is a multi-product
Plant involving varying processes of manufac-
turing."

SWOT Analysis
In this analysis the whole organization is being squeezed in to few
words which can help it to survive in this competent world.

Strengths

Strengths are those things that by availing them we can capitalize and have
a result in the form of profitability. The strengths the Buxly have are

 The age old name of the organization

 The quality products

 The bigger govt.contarators

 Having ISO &U.K.R.S advantage

 Satisfied old generation as the first manufacturer in subcontinent

Weakness

 The conflicting union problem

 Misuse of organizational resources and mismanagement.

 No technical team

 No promotional activities

 Low market share

  Low and waiting production processes

 No forecasting for the raw material as per demand.

Threats

 The new emerging companies are prevailing the opportunities from

those areas where Buxly has loose control e.g local customers, human
resource.

 The competitors are using the better promotion skills, which help them
to defend against Buxly.

 Huge job burden on the employees is demotivating them and they just
maintain their existence in the factory.

Opportunities

Buxly has the vast range of opportunities to restructure itself as a competitive

firm given as

 To use their technology of paint research and develop new

high-class paints used in local industries.

 To have the good management in the organization having good

benefits and rewards.

 They have a greater opportunity to expand its products whole

over the country because the organized sector is producing
only 20% of paint and remaining is being prepared by
mushroom sector.

 Buxly have the past experience of exporting paints to middle

east and far east countries, so by improving the quality and
standard they can again capture the market of these countries
again.

 They have a wider opportunity to use the distribution of the

Berger Paints which can reduce their cost as well.
  By using the facilities of Berger they can cash themselves due
to their goodwill in the market.

 Buxly should come in the auto paints market due to their past
experience and R&D skill.

These are the strengths, weakness, opportunities & threats, which are key to
access the compatibility of the business. The main purpose is that the
company should capitalize the strength by availing the opportunities and
avoiding the threats by overcoming the weaknesses.

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