1.

Introduction
Financial Management means planning, organizing, directing and controlling the financial activities such
as procurement and utilization of funds of the enterprise. It means applying general management
principles to financial resources of the enterprise.

1.1 What is Financial Management?

Financial management is concerned with acquisition, financing and management of assets with some
overall goal in mind. Thus the decision function of financial management can be broken down into three
major areas: the investment, financing and assets management decisions.

1.1.1 Investment Decision

The investment decision is most important of the firm’s three decision when it comes to value creation. It
begins with a determination of the total amount of assets needed to be held by the firm. Picture the firm’s
balance sheet in your mind for a moment. Imagine liabilities and owner’s equity being listed on the right
side of the balance sheet and its assets on the left. The financial manager needs to determine the dollar
amount that appears above the double line on the left-hand side of the balance sheet that is, the size of
firm. Even when this number is known, the composition of the assets must still be decided. For example,
how much of the firm’s total assets should be devoted to cash or inventory? Also, the flip side of
investment disinvestment must be ignored. Assets that can no longer be economically justified may need
to be reduced, eliminated, or replaced.

1.1.2 Financing Decision

The second major decision of the firm is the financing decision. Here the financial manager is concern
with the makeup of the right hand side of the balance sheet. If you just look at the mix of financing for
firms across industries, you will see marked differences. Some firms have relatively large amount of debt,
whereas others are almost debt free. Does the type of financing employed make a difference? If so, Why?
and, in some sense, can a certain mix of financing be thought of as best.

In addition dividend policy must be viewed as an integral part of the firm’s financing decision. The
dividend-payout ratio determines the amount of earning that can be retained in the firm. Retaining a
greater amount of current earnings in the firm means that fewer dollars will be available for current
dividend payments. The value of the dividends paid to stockholders must therefore be balanced against
the opportunity cost of retained earnings lost as a mean of equity financing.

Once the mix of financing has been decided, the financial manager must still determine how best to
physically acquire the needed funds. The mechanics of getting a short term loan, entering into a long term
lease arrangement, or negotiating a sale of bonds or stock must be understood.

1.1.3 Assets Management Decision

The third important decision of the firm is the asset management decision. Once assets have been
acquired and appropriate financing provided, these assets must still be managed efficiently. The financial
manager is charged with varying degrees of operating responsibility over existing needs. These

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responsibilities require that the management of current assets than with the fixed assets. A large share of
the responsibility for the management of fixed assets would reside with the operating managers who
employ these assets.

1.2 Objectives of Financial Management

The financial management is generally concerned with procurement, allocation and control of financial
resources of a concern. The objectives can be-

1. To ensure regular and adequate supply of funds to the concern.

2. To ensure adequate returns to the shareholders which will depend upon the earning capacity,
market price of the share, expectations of the shareholders.
3. To ensure optimum funds utilization. Once the funds are procured, they should be utilized in
maximum possible way at least cost.
4. To ensure safety on investment, i.e, funds should be invested in safe ventures so that adequate
rate of return can be achieved.
5. To plan a sound capital structure-There should be sound and fair composition of capital so that a
balance is maintained between debt and equity capital.

2. Importance of Financial Management

In a big organization, the general manger or the managing director is the overall incharge of the
organization but he gets all the activities done by delegating all or some of his powers to men in the
middle or lower management, who are supposed to be specialists in the field so that better results may be
obtained.

For example, management and control of production may be delegated to a man who is specialist in the
techniques, procedures, and methods of production. We may designate him “Production Manager'. So is
the case with other branches of management, i.e., personnel, finance, sales etc.

The incharge of the finance department may be called financial manger, finance controller, or director of
finance who is responsible for the procurement and proper utilization of finance in the business and for
maintaining co-ordination between all other branches of management.

Importance of finance cannot be over-emphasized. It is, indeed, the key to successful business operations.
Without proper administration of finance, no business enterprise can reach its full potentials for growth
and success. Money is a universal lubricant which keeps the enterprise dynamic-develops product, keeps
men and machines at work, encourages management to make progress and creates values. The importance
of financial administration can be discussed under the following heads:-

2.1 Success of Promotion Depends on Financial Administration.

One of the most important reasons of failures of business promotions is a defective financial plan. If the
plan adopted fails to provide sufficient capital to meet the requirement of fixed and fluctuating capital an
particularly, the latter, or it fails to assume the obligations by the corporations without establishing
earning power, the business cannot be carried on successfully. Hence sound financial plan is very
necessary for the success of business enterprise.

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2.2 Smooth Running of an Enterprise.

Sound financial planning is necessary for the smooth running of an enterprise. Money is to an enterprise,
what oil is to an engine. As, Finance is required at each stage of an enterprise, i.e., promotion,
incorporation, development, expansion and administration of day-to-day working etc., proper
administration of finance is very necessary. Proper financial administration means the study, analysis and
evaluation of all financial problems to be faced by the management and to take proper decision with
reference to the present circumstances in regard to the procurement and utilization of funds.

2.3 Financial Administration Co-ordinates Various Functional Activities.

Financial administration provides complete co-ordination between various functional areas such as
marketing, production etc. to achieve the organizational goals. If financial management is defective, the
efficiency of all other departments can, in no way, be maintained. For example, it is very necessary for the
finance-department to provide finance for the purchase of raw materials and meting the other day-to-day
expenses for the smooth running of the production unit. If financial department fails in its obligations, the
Production and the sales will suffer and consequently, the income of the concern and the rate of profit on
investment will also suffer. Thus Financial administration occupies a central place in the business
organisation which controls and co-ordinates all other activities in the concern.

2.4 Focal Point of Decision Making.

Almost, every decision in the business is take in the light of its profitability. Financial administration
provides scientific analysis of all facts and figures through various financial tools, such as different
financial statements, budgets etc., which help in evaluating the profitability of the plan in the given
circumstances, so that a proper decision can be taken to minimize the risk involved in the plan.

2.5 Determinant of Business Success.

It has been recognized, even in India that the financial manger splay a very important role in the success
of business organization by advising the top management the solutions of the various financial problems
as experts. They present important facts and figures regarding financial position an the performance of
various functions of the company in a given period before the top management in such a way so as to
make it easier for the top management to evaluate the progress of the company to amend suitably the
principles and policies of the company. The financial manages assist the top management in its decision
making process by suggesting the best possible alternative out of the various alternatives of the problem
available. Hence, financial management helps the management at different level in taking financial
decisions.

2.6 Measure of Performance.

The performance of the firm can be measured by its financial results, i.e., by its size of earnings Riskiness
and profitability are two major factors which jointly determine the value of the concern. Financial
decisions which increase risks will decrease the value of the firm and on the to the hand, financial
decisions which increase the profitability will increase value of the firm. Risk an profitability are two
essential ingredients of a business concern.

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3. Role of the Financial Management
Financial activities of a firm is one of the most important and complex activities of a firm. Therefore in
order to take care of these activities a financial manager performs all the requisite financial activities.

A financial manger is a person who takes care of all the important financial functions of an organization.
The person in charge should maintain a far sightedness in order to ensure that the funds are utilized in the
most efficient manner. His actions directly affect the Profitability, growth and goodwill of the firm.

Following are the main functions of a Financial Manager:

3.1 Raising of Funds

In order to meet the obligation of the business it is important to have enough cash and liquidity. A firm
can raise funds by the way of equity and debt. It is the responsibility of a financial manager to decide the
ratio between debt and equity. It is important to maintain a good balance between equity and debt.

3.2 Allocation of Funds

Once the funds are raised through different channels the next important function is to allocate the funds.
The funds should be allocated in such a manner that they are optimally used. In order to allocate funds in
the best possible manner the following point must be considered

• The size of the firm and its growth capability

• Status of assets whether they are long term or short tem
• Mode by which the funds are raised.
These financial decisions directly and indirectly influence other managerial activities. Hence formation of
a good asset mix and proper allocation of funds is one of the most important activity

3.3 Profit Planning

Profit earning is one of the prime functions of any business organization. Profit earning is important for
survival and sustenance of any organization. Profit planning refers to proper usage of the profit generated
by the firm. Profit arises due to many factors such as pricing, industry competition, state of the economy,
mechanism of demand and supply, cost and output. A healthy mix of variable and fixed factors of
production can lead to an increase in the profitability of the firm. Fixed costs are incurred by the use of
fixed factors of production such as land and machinery. In order to maintain a tandem it is important to
continuously value the depreciation cost of fixed cost of production. An opportunity cost must be
calculated in order to replace those factors of production which has gone thrown wear and tear. If this is
not noted then these fixed cost can cause huge fluctuations in profit.

3.4 Understanding Capital Markets

Shares of a company are traded on stock exchange and there is a continuous sale and purchase of
securities. Hence a clear understanding of capital market is an important function of a financial manager.
When securities are traded on stock market there involves a huge amount of risk involved. Therefore a
financial manger understands and calculates the risk involved in this trading of shares and debentures. It’s

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on the discretion of a financial manager as to how distribute the profits. Many investors do not like the
firm to distribute the profits amongst share holders as dividend instead invest in the business itself to
enhance growth. The practices of a financial manager directly impact the operation in capital market.

3.5 Financial Analysis

Financial analysis identifies how discretionary funds might be used to implement new programs and strategies.
Baseline funds support current, ongoing operations of the organization and are used to pay current operating
expenses, provide adequate working capital, or maintain current plant and equipment. Strategic funds are used to
purchase new assets, such as equipment, facilities, and inventory; to increase working capital; to support direct
expenses for research and development, marketing, advertising, and promotions; and in the private sector, for
mergers, acquisitions, and market development. The strategic funds available to an organization can be determined
by subtracting baseline funds from total assets (revenue or appropriations). The available strategic funds should be
allocated to each program in priority order according to its potential contribution to the achievement of identified
goals and objectives.

Various models can be used to project financial statements, to analyze cash flow requirements, to optimize financial
leverage, to compare lease versus purchase options for difference depreciation schedules, to evaluate the impacts of
proposed acquisitions, and to assess the impacts of risk and uncertainty on financial decisions. Many of these models
can be consolidated or combined so that different managers can use the same assumptions to design models to meet
their particular needs.

In recent years, computer-based methods of analysis have become a significant tool for financial analysis.
Interactive software facilitates the use of the computer as an on-line, real-time decision support system (DSS).
Computer-assisted methods of financial analysis provide a basis for the continuous fine tuning of financial plans so
as to anticipate things to come and adjust to unanticipated events that may arise as plans and programs are
implemented.

3.6 Forecasting

A forecast is an approximation of what will likely occur in the foreseeable future. The objective of
forecasting is to provide a basis on which to measure differences between actual events and the plan that
was adopted to achieve certain objectives. Thus, forecasts provide management with a sound basis for
action as the future unfolds and events begin to diverge from the predictions. Problems can be identified
quickly and the nature and extent of corrective actions clearly defined.

The notion that forecasting is impossible in the public sector is furthermost from the truth. The cash
requirements of government are based on budgeted expenditures, which are finite and known in advance.
Revenues are tax-based and, therefore, estimable. Public organizations must develop reliable estimates of
their cash flow positions in order to maximize returns on their financial assets.

Forecasts form the basis for a cash budget, which is used to monitor how much money will be available
for investment, when it will become available, and for how long. A cash budget tracks the movement of
cash in and out of the treasury. An astute financial manager can use a cash budget to identify early signs
of an impending cash problem and to indicate appropriate steps to avert the problem. Without a cash
budget, a manager cannot obtain a long-term view of cash flow patterns and, therefore, cannot effectively
plan future cash requirements. The investment strategy of any organization must also be strongly
correlated with the accuracy and timeliness of its cash budget.

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3.7 Cash Mobilization

Cash mobilization techniques fall into two areas: (1) acceleration of receivables and (2) control of
disbursements. Receivables are those funds that come into the organization's treasury. Cash flow can be
expedited by collection systems that provide for advance billing and payment on or before receipt of
goods and services. Disbursements are funds paid out to vendors and others who have provided services
to the organization. The timing of disbursements is a important decision that has implications for the
liquidity position of any organization. Delaying cash outflows enables an organization to optimize
earnings on available funds. Good cash management practices generally dictate that disbursements are
made only when due. Public organizations may find some of these cash mobilization techniques
unacceptable. A local government, for example, must evaluate the possible effects on its taxpayers and
clients of aggressive collection and disbursement practices. The objectives of cash management must be
artfully blended with the need to maintain good public relations with vendors and the community at large.

Adequate credit must be available if any public organization is to survive in the short term. Lines of credit
are commitments by banks to make loans available subject to certain mutually agreed upon conditions
and are important hedges against unanticipated contingencies, such as temporary financing needs and
short-term cash flow shortages.

Keeping a tight rein on bank balances has become an increasingly popular cash management principle.
Money not needed to meet operating costs or for compensating balances required by banks should be
invested in interest-yielding securities. All receipts--checks, money orders, and cash--should be deposited
as soon as possible. Idle funds, such as checks sitting in safes, cash registers, or desk drawers overnight,
could earn income for the organization if invested in short-term securities.

Linkages Among the Financial Management Cycles

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4. Organization

4.1 History of Unilever

In the 1890s, William Hesketh Lever, founder of Lever Bros, wrote down his ideas for Sunlight Soap –
his revolutionary new product that helped popularize cleanliness and hygiene in Victorian England. It was
'to make cleanliness commonplace; to lessen work for women; to foster health and contribute to personal
attractiveness, that life may be more enjoyable and rewarding for the people who use our products'.

In a history that now crosses three centuries, Unilever's success has been influenced by the major events
of the day – economic boom, depression, world wars, changing consumer lifestyles and advances in
technology. And throughout we've created products that help people get more out of life – cutting the
time spent on household chores, improving nutrition, enabling people to enjoy food and take care of their
homes, their clothes and themselves.

4.1.1 Balancing profit with responsible corporate behavior

In the late 19th century the businesses that would later become Unilever were among the most
philanthropic of their time. They set up projects to improve the lot of their workers and created products
with a positive social impact, making hygiene and personal care commonplace and improving nutrition
through adding vitamins to foods that were already daily staples.

Today, Unilever still believes that success means acting with 'the highest standards of corporate behavior
towards our employees, consumers and the societies and world in which we live'. Over the years we've
launched or participated in an ever-growing range of initiatives to source sustainable supplies of raw
materials, protect environments, support local communities and much more.

Through this timeline you'll see how our brand portfolio has evolved. At the beginning of the 21st
century, our Path to Growth strategy focused us on global high-potential brands and our Vitality mission
is taking us into a new phase of development. More than ever, our brands are helping people 'feel good,
look good and get more out of life' – a sentiment close to Lord Leverhulme's heart over a hundred years
ago.

4.2 Timeline

19th century

Although Unilever wasn't formed until 1930, the companies that joined forces to create the business we
know today were already well established before the start of the 20th century.

1900s

Unilever's founding companies produced products made of oils and fats, principally soap and margarine.
At the beginning of the 20th century their expansion nearly outstrips the supply of raw materials.

1910s

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Tough economic conditions and the First World War make trading difficult for everyone, so many
businesses form trade associations to protect their shared interests.

1920s

With businesses expanding fast, companies set up negotiations intending to stop others producing the
same types of products. But instead they agree to merge - and so Unilever is created.

1930s

Unilever's first decade is no easy ride: it starts with the Great Depression and ends with the Second World
War. But while the business rationalizes operations, it also continues to diversify.

1940s

Unilever's operations around the world begin to fragment, but the business continues to expand further
into the foods market and increase investment in research and development.

1950s

Business booms as new technology and the European Economic Community lead to rising standards of
living in the West, while new markets open up in emerging economies around the globe.

1960s

As the world economy expands so does Unilever and it sets about developing new products, entering new
markets and running a highly ambitious acquisition programmed.

1970s

Hard economic conditions and high inflation make the '70s a tough time for everyone, but things are
particularly difficult in the Fast Moving Consumer Goods (FMCG) sector as the big retailers start to flex
their muscles.

1980s

Unilever is now one of the world's biggest companies, but takes the decision to focus its portfolio, and
rationalize its businesses to focus on core products and brands.

1990s

The business expands into Central and Eastern Europe and further sharpens its focus on fewer product
categories, leading to the sale or withdrawal of two-thirds of its brands.

The 21st century

The decade starts with the launch of Path to Growth, a five-year strategic plan, and in 2004 further
sharpens its focus on the needs of 21st century-consumers with its Vitality mission.

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4.3 Introduction to Unilever
Our brands are trusted everywhere and, by listening to the people who buy them, we've grown into one of
the world's most successful consumer goods companies. In fact, 150 million times a day, someone
somewhere chooses a Unilever product.

Look in your fridge, or on the bathroom shelf, and you're bound to see one of our well-known brands. We
create, market and distribute the products that people choose to feed their families and keep themselves
and their homes clean and fresh.

Focusing on performance and productivity, we encourage our people to develop new ideas and put fresh
approaches into practice. Hand in hand with this is a strong sense of responsibility to the communities we
serve. We don't only measure success in financial terms; how we achieve results is important too. We
work hard to conduct our business with integrity - respecting our employees, our consumers and the
environment around us. Unilever is one of the world's leading suppliers of fast-moving consumer goods.
Here are some recent highlights from our three global divisions - Foods, home care and personal care.

4.4 Brands of Unilever:

Unilever is currently one of the biggest consumer goods company in the world having various brands.
Their leading brands have international appeal because they meet a need or fulfill a desire that people
share, no matter where they live. Some of their major brands available in Pakistan are:
Personal care brands:
Axe, Dove, Lifebuoy, Lux, Pond’s, Rexona, Closeup, Sunsilk
Food:
Knorr, Lipton, Rafhan, Supreme, Walls, Energile, Broke bond A-1, Blue band
Home care brands:
Comfort, Surf excel, Rin, Vaseline

4.5 Vision Statement

We help people around the world meet every day needs for nutrition; hygiene and wellbeing, with brands
that help people look good, feel good and get more out of life. Unilever has also the vision that’s better
future for children A better future for farming & farmers.

4.6 Purpose & principles

Our corporate purpose states that to succeed requires "the highest standards of corporate behavior
towards everyone we work with, the communities we touch, and the environment on which we have an
impact."

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4.7 Organizational Chart

Chairman (CEO)

Vice Chairman

Management
Committee

Personnel Director Sales Marketing Operations Commercial Technical Finance/Acc

Director Director Director Director Director Director
& Logistics

General Sales Marketing

Manager Manager

Fabric & Home Spread & Cooking Personal Wash Personal & Skin Beverage & Tea
Care Deptt. Category & Soap Care Product Category
Category

Product Assistant
Manager Manager

4.8 Departments
Human Resources
Empower people to perform at their very best
Business to business
Exploit potential in a fast-growing food market
Research & Development
Bring ideas to life to create and improve brands
Customer Development
Pioneer new products categories and concepts
Information Technology
Use technology to drive competitive advantage
Supply Chain
Optimize sourcing production and delivery
Finance
Be at the heart of strategy, budgets and planning
Marketing
Understand, create and build demand for our brands

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5. Financial Management of Unilever

5.1 Unilever Finance Team

Seizing opportunities and delivering against aggressive targets

5.1.1 Input to the end Result

Unilever finance team members continuously try to bring products to customers that meet their needs and
at a price they can afford. Everything they do is based on this premise. For example, finance has direct
input into Unilever’s long-, medium- and short-term plans as well as their cost-reduction programs and
innovation projects.

5.1.2 Improving Performance

Within one of Unilever’s operating companies, the finance role offers a single view of the business—from
its processes and operations to the ways it can improve performance. Moving on from there, finance team
members can specialize in areas such as financial control or internal audit, treasury, or mergers and
acquisitions. Finance professionals deal with challenges that cross brands, professions, and geographical
regions. Developing a deep understanding of the strategies that drive Unilever’s growth and profitability,
team members are at the forefront of delivering the company’s strategic goals.

5.1.3 How Finance Team Members Work

The company’s operating structure is divided into three work streams. Finance Business Partners embed
best practices and enhance decision-support skills. Accounting and Information applies information
management processes to create value for the business. Expertise services work across everything from
insurance and risk to investor relations and pensions. This structure is designed to make Finance an
influential force at the heart of the business by offering world-class expertise in areas where they can add
real value.
5.1.4 Reconciliation

Reconciliation functions are also performed in financial section. Following Reconciliation Statements are
prepared in finance department.

• Reconciliation Statement Between Wall’s Ice cream and Rahim Yar Khan Factory
• Reconciliation Statement Between Engineering stores & Payment section
• Reconciliation Statement between Karachi Tea Factory (KTF)
• Reconciliation Statement between Karachi edible oil The & Ghee Factory
• Reconciliation Statement between Head office and R.F
• Reconciliation Statement between Brook Bond And R.F

5.1.5 Working capital:

To know the financial position of the business each month of the financial year “working Capital report”
is prepared. With the help of Working Capital Report, company knows how much capital is circulated in

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business. And also know that how many accounts receivable, accounts payable and inventories exist. Two
copies of Working Capital report are prepared. One is sent to head office monthly basis while second is
for office use.

5.1.6 Summary of Credit Sales of POD/Estate Shop

For factory employees including all management and non-management, certain company’s manufactured
goods are sold to them on subsidy like as soaps, Ghee, Wheat, tea etc on concision rates. For this purpose
one shop has been opened by Company in Lever Estate named “POD or Estate Shop”.

From POD shop daily “Cash Sales Summary” is received with cash memo to the Accounts Department.
At the end of each month one JV is passed for this subsidy and charged to. This summary Is prepared
according to book month because it is internal transaction of the company.

5.1.7 Assets Transferred advice:

Assets transferred advice is that memorandum which is used to transfer various assets from one location
to another location. So we may say that it is “inter Unit advice”. Four copies of ATA are prepared, of
their authorization; one copy is send to Account Department and others to respective departments.

Along with the above function finance team of Unilever has perform other five steps to control the
finance.

5.2 Define “Finance of the Future”

In order to understand the context of the finance team’s current participation in achieving Unilever’s
goals, we need to first look at the origin of the finance team’s redesign. At a meeting several years ago,
Unilever’s top 200 finance professionals set a strategic direction for the team to become “Partners in
Value Creation.” The team identified what they would look like 10 years into the future. They determined
a major transformation was necessary not only in the leadership and culture of the team, but also in the
underlying financial systems and processes. In the past, Unilever had operated with a very decentralized
organization structure, and, as a result of this structure, the finance team had collaborated on projects but
had never truly worked with one consistent directive globally.

5.3 Develop Strategic Thrusts

The team developed strategies known as “Strategic Thrusts,” which aligned with Unilever’s overall
strategy. These five strategies include innovative business partnering, people and organization, dynamic
performance management, world-class financial processes, and financial flexibility. Here’s a look at each
of them.

Innovative Business Partnering (IBP)—Upgrade capabilities to better enable the finance team to add
direct value to the business and influence and support Unilever’s strategy. This thrust included developing
a practical toolkit for decision support and focused on finance professionals who work with brands and
customers specifically.

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People and Organization—develop a leading-edge finance team to focus on changes required in
behavior, design and implement a learning plan, and create a compelling career proposition to attract and
retain the best talent.
Dynamic Performance Management—Apply IBP to the organization’s framework. This thrust focuses
on the forecasting processes and developing relative performance targets, rolling forecasts, and trend
reporting.

World-Class Financial Processes—Simplify financial processes and improve underlying transactions

processing, accounting, and information management by forming shared finance services as well as
enterprise-wide financial systems.

Financial Flexibility—Optimize tax, finance, and legal structures to provide funds for growth and
improve the effectiveness and transparency of external dialogues with investors and management around
value creation. These strategic thrusts drive the agenda for the finance team and help frame their
objectives in a consistent manner to drive change in every Unilever business.

5.4 Create Global Finance Excellence Center

To build a compelling vision that all finance team members globally would embrace, the finance team
organized the five Strategic Thrusts under the umbrella of the Finance Excellence Center, which is a team
with only nine global members. The team includes vice presidents of finance and finance directors from
different Unilever businesses around the world. The team created a worldclass website whose mission is
to:

• Leverage local best practices globally,

• Help finance professionals create value as influential business partners
• Equip the team with world-class capabilities, and u Enable Unilever Finance to deliver
consistently outstanding performance.
• The Finance Excellence Center was developed to bring financial strategy to life. This is
accomplished by:
• Stimulating and facilitating best-practice creation and sharing, Providing learning opportunities,
Translating external trends into Unilever initiatives, Identifying necessary financial competencies
and skills.

5.5 Develop Innovative Business Partners

Unilever embraced innovative business partnering to maximize the value of finance to build brand value
and drive growth. As one of the five thrusts, IBP helps Unilever achieve its goal of delivering top one-
third total shareholder return among its peer group and the growth it promised to shareholders. According
to David Calle, the founding leader of this thrust and currently vice president of finance customer
development, this involved identifying competencies required to deliver the company’s overall strategy
with:

• Better measurement (consistent, external, brand health focus),

• Improved return on brand/customer investment,

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 • Better planning (brand and customer orientation, value-creation focus), and
• Improved innovation success rate through better analysis.

“The global team developed best practices and specific examples for finance business partners that
provided them the context for how they should work with their local teams. These tools were organized in
a framework for brand development, brand building, customer development, and the supply chain. In
addition, the entire program was underpinned with a robust training and recognition program,” David
Calle says. Table 1 features three of the tools.

Business Partnering Skills—providing skills that help finance partner with internal and external
customers more confidently and competently. These include building rapport, managing differences, and
highlighting value. Balanced Scorecard Approach—providing a balanced scorecard approach to
external analysis (strategy, marketing, financial, customer, and culture), including methodologies for war
gaming, benchmarking, and financial analysis.

5.6 The New Finance Structure

The final step in the finance team’s transformation was to reorganize into three main areas to quickly
adapt to a new strategic direction. The finance business partners were separated from financial shared
services and expertise services. Finance business partners include planning and analysis, sales finance,
supply chain finance, and brand finance. Shared services include all financial transactions and
information management. Expertise services include tax, treasury, and mergers and acquisitions. This new
structure now allows the 1,000 finance business partners to focus on brand development, brand building,
customer development, and supply chain by becoming Innovative Business Partners so they can better:

• Analyze decisions,
• Ensure alignment of investment with business insight,
• Monitor business performance with financial and non-

Financial Performance:

During 2012, the social and economic environment continued to be challenging. Ongoing inflationary
pressure and energy crisis further impacted the consumer purchasing power. In this challenging
environment, the Company strengthened its position and continued to report double digit growth both at
the top and bottom line. We continued to bring enhanced nutrition, health and wellness benefits to the
consumers, greater brand differentiation and increased value for shareholders. The good growth was
fuelled by effective product mix management and increased support behind our brands.

Summary Financial performance:

PKR Million 2012 2011 Change

Sales 79,088 64,824 +22.0%

Gross Profit margin 27.2% 25.8% +1.4%

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Operating Profit margin 13.9% 13.0% +0.9%
Net Profit after tax margin 7.4% 7.2% +0.2%
Net Profit after tax 5,865 4,668 +25.6%

Earnings per share 129.32 102.94 +25.6%

Total sales grew by 22% to PKR 79.1 billion. Export sales have reached PKR 6.0 billion (2011: 5.3
billion) recording a healthy growth of 15%. The Gross Profit (GP) margin has increased by 140 bps as
compared to last year. Increasing fuel prices, higher depreciation and maintenance costs has been offset
by comparatively lower increase in commodity costs, improvement in product mix and cost saving
initiatives. During the year, the Company heavily invested in various projects related to capacity
enhancement and infrastructure improvement. The capital expenditure for the year was PKR 14.4 billion.
This, along with the working capital business requirements, has led to additional funding resulting in
higher financial costs. Despite all these challenges, the net profit of the Company increased by 25.6%
versus last year.

Dividends:

Keeping in view the good financial performance of the Company, the Board of Directors has
recommended to pay final cash dividend of Rs. 70 per share.

Corporate Governance:

Unilever Pakistan is committed to maintaining high uncompromised standards of good corporate

governance without any exception. The Directors are pleased to state that the Company is compliant with
the provisions of the Code of Corporate Governance as required by SECP and formed as part of stock
exchange’s listing regulations. Statement of compliance with Code of Corporate Governance is as under.

Statement of Compliance with Code of Corporate Governance

The Directors confirm that:
• The financial statements prepared by the management of the Company present fairly its state of
affairs, the results of its operations, cash flows and changes in equity.
• Proper books of accounts of the Company have been maintained.
• Appropriate accounting policies have been consistently applied in preparation of financial
statements and accounting estimates are based on reasonable and prudent judgment.
• International Financial Reporting Standards, as applicable in Pakistan, have been followed in
preparation of financial statements and any deviation has been adequately disclosed and
explained.
• The system of internal control is sound in design and has been effectively implemented and
monitored.
• There are no significant doubts upon the Company’s ability to continue as a going concern.
• There has been no material departure from the best practices of corporate governance, as detailed
in the listing regulations.
• The un-audited value of investments of employees funds are as follows

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(PKR millions): 2012 2011

Provident Fund 1,516 1,431

Gratuity Fund 788 639
Pension Fund 1,144 881
i) Statements regarding the following are annexed or disclosed in the notes to the accounts:
ii) Key financial data for the last six years
iii) Pattern of shareholdings
iv) Trading in shares of the Company by its Directors, CEO, CFO and Company Secretary

6. SWOT Analysis
SWOT analysis, is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities and
threats involved in a project or in a business venture. It involves specifying the objectives of business
venture or project and identifying the internal and external factors that are favorable and unfavorable to
achieving that objective. The SWOT analysis classifies the internal aspects of the company as strengths
and weaknesses and external situational aspects as opportunities and threats.

 Strengths: Attributes of the organization that is helpful to achieving the objective.

 Weaknesses: Attributes of the organization that is harmful to achieving the objective.
 Opportunities: External conditions that is helpful to achieving the objective.
 Threats: External conditions which could do damage to the business's performance.

6.1 Strengths:
Strengths are internal factors to the organization. Major strengths of Unilever are as following:

 Unilever Pakistan Limited has a good name as a market leader in consumer products
 Unilever has got Sound and experienced management with qualified executives running
operations.
 Excellent marketing department assisted by a highly regarded marketing research unit.
 They have strong in their marketing strategies.
 Largest producing company of consumer product in Pakistan.
 The first and most important strength of Unilever is the image of the company itself.
 Unilever products have good reputation among their customers because of good product quality.
 Diversity of its product line is also a major strength of Unilever.

6.2 Weaknesses
Weaknesses are that what the organization cannot do but its competitors can do better than it.
 High rates of skin care products in the market.
 Few new products are introduced in the market there is no decision about this by the
management.
 Decisions are made at upper level of the organization.
 The size of corporation is so huge that it’s difficult to manage all the units and their specific
departments. So sometimes some products get more attention and some stay hidden from sight.

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6.3 Opportunities
Opportunities are the chances for an organization to do better.
 They can increase more their product lines in the view of their competitors. They must
increase product line in food line.
 The rapid expanding urban population in Pakistan is the key opportunity for Unilever to
extend its sales.
 Awareness growing in rural areas due to education and children with family members abroad
sending foreign income is also potential customers for Unilever.
 Unilever can also stretch their market to rural area, where there could be a large market for
their products in the future.

6.4 Threats
Threats are the hurdles for an organization to proceed.

 Increasing of companies as their competitors is threat for them. They should do more work on
their marketing strategies.
 Rise in the inflation rate in the world because of economic crisis can also results to fall in sales
of the company due to low purchasing power of consumers.
 There are many competitors of Unilever in Market including P&G, Nestle and Kraft Foods who
are fighting hard to leave one another behind.
 Instability of Pakistani Political system has always been a major threat for companies operating
in Pakistan and it’s not different for Unilever. Changing political system affects Pakistani
economy as well as organizations operating under it.
 Unilever management should pay attention in rural area to capture the market rapidly.

7. Data Collection Method

Data collection is very important technique for the research study to complete report on the specific topic
or problem. Data Collection is an important aspect of any type of research study. Inaccurate data
collection can impact the results of a study and ultimately lead to invalid results. Data collection methods
for impact evaluation vary along a continuum. At the one end of this continuum are quantitative methods
and at the other end of the continuum are Qualitative methods for data collection.

Data is two types first are the primary data which is collected through the personal interview,
questionnaires, phone calls, surveys and email. Because it the primary source of getting data from
different techniques and more reliable than the secondary data. Secondary data is most time used in
making reports because its access is easy, it is collected from printed material, books, journals,
magazines, articles, reports & internet.

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8. Conclusion
Financial Management means planning, organizing, directing and controlling the financial activities
such as procurement and utilization of funds of the enterprise. It means applying general management
principles to financial resources of the enterprise.

Unilever is a very strong multinational corporation with a lot of strengths, including its strong
management, to run its operations to the heights of success. Financial management of Unilever Pakistan
plays an important role it the growth of its success and making the company more profitable over its
competitors. It also has a few weaknesses but those are very minor ones that are present with every
organization and it also has got the resources and managerial muscle to cope with those weaknesses and
threats. The financial management structured problems are solved with the help of programmed
decision making for these rules, policies & procedures are developed. The unstructured problems are
solved by non-program decision making they require custom base solution. Company’s financial
management perform different tasks to give high revenue to the company like as define the future,
corporate governance and developing the business partner through which they can share their reserve
resources in the best way utilization. It is more beneficial for the company’s success.

9. Recommendations
The Unilever Pakistan should encourage the employee’s participation in decision making, because the
great ideas can come after anywhere so the employees must be encouraged to contribute in organizational
decision making. The after making of decision should be discussed at lower level so that the employees
develop understanding for new decisions taken by the management. Financial management of Unilever
Pakistan generate the idea of reducing price, is not effective decision in long term, but Unilever should
more focus on quality because quality provide them complete advantages and that will add value to
customer. Unilever should also strategize to maintain its competitive edge over the local competitors in
the country where it is placing its self. The price wars make it difficult for Unilever to maintain this edge.
Financial management should take more steps to improve the company financial performance like proper
check and balance on the sales sheets along with revenue summry send by the sales department, wise
check on the overhead expenses, entertainment expenses and marketing expenses. Cost saving steps gives
the benefit to company and it is easy for financial management to handle all costs easly.

Financial management of the Unilver Pakistan should make the reconcilition regarding all the expenses
and the payment with the respective departments. Reconcilition of assets with the assets department, sales
voulume reconcilition with the sales department. With this there is less chance of missappropriation and
embazlment of funds.

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10. References
http://exportpakistan.blogspot.com/2013/01/internship-report-unilever-pakistan.html. (2013, January
18). Retrieved from www.exportpakistan.blogspot.com:
http://www.exportpakistan.blogspot.com

Horne, J. C. (n.d.). Fundamentals of Financial Management. Islamabad: National Book Foundation.

http://www.freemba.in/articlesread.php?artcode=289&substcode=18&stcode=10. (n.d.). Retrieved

September 16, 2013, from www.freemba.in: http://www.freemba.in

http://www.managementstudyguide.com/role-of-financial-manager.htm. (n.d.). Retrieved September

14, 2013, from www.managementstudyguide.com: http://www.managementstudyguide.com

http://www.unilever.pk/aboutus/ourvision/. (n.d.). Retrieved September 13, 2013, from

www.unilever.pk: http://www.unilever.pk/aboutus/ourvision/.

Robbins, S. P. (n.d.). Management Theory & Practice. Islamabad: National Book Foundation.

Secretary, C. (2012). Management Reoprt of Unilever Pakistan. 1-150.

Steiss, A. W. (n.d.). http://www-personal.umich.edu/~steiss/page4.html. Retrieved September 14, 2013,

from www-personal.umich.edu: http://www-personal.umich.edu

Tarasovich, B. (2009). finance flies high. 29.

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