Relience Weaving Mills Ltd

Reliance Weaving Mills Ltd.

RELIANCE WEAVING MILLS LTD is located in Multan. Reliance weaving

Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group established RWML on

April 7, 1990 as a public limited company and obtained certificate for commencement of

business on May 14, 1990.

I visited RELIANCE WEAVING MILLS LTD three times for my report and was

always warmly welcomed by their management and employees. All machinery installed

in the mill is American. Plans and strategies are made in the head Office. Raw materials

purchase decision is also made in the Head Office. Employees work in three shifts,

whereas these are both permanent and on daily wages.

The mills units is supported by different facilities as canteen, store room, laboratory,

godown, and many others. The production process is divided into two sections:

In this report I have done SWOT analysis of RWML. Good quality with

reasonable price is the major strength of RWML. Export sales cover major portion of

total sales due to good quality. They contain very low portion of local market.

Centralized decision-making is one of the weaknesses of the RWML, but good

management covers this weakness in an appreciable manner. So for as Account

department is concerned though there is a little bit workload on the employees, but inside

friendly environment helps a lot to cover these tasks without fatiguenes and boredom.

Finaly I have given some recommendations to cover these threats. My suggestions were

highly appreciated by the management of RWML.

Internship Report Muhammad Fahim Khan 1




INTRODUCTION TO TEXTILE SECTOR

Textile includes all the business related with yarn and cloths, so all the business from

Cotton Ginning to Cloth and Apparel manufacturing comes under the Textiles. There are

different functions of Textiles, which are as under:

Ginning

This is the first stage where cotton is separated from the seeds. Raw material of this stage

is Cotton Seed. RELIANCE WEAVING MILLS LTD does not deal in this function.

Spinning

Raw material of this stage is Ginned Cotton. This cotton is spun to make yarn. Yarn

produced in various qualities, this is the main raw material of RELIANCE WEAVING

MILLS LTD, which is purchase from local market.

Weaving

In weaving unit yarn is converted into cloth through power looms or through hand

driven machines. RELIANCE WEAVING MILLS LTD, engaged in this function.

Processing and Dying

Cloth is further processed and it could be used for a lot of purposes, like Bed Sheets and

Garments etc.

Cutting and Stitching

This is a final use of cloth in which Cloth is cut and stitching made by the exporter than it

commercializes to various importers of the garments through wide world marketing

department.



History of the Textile Industry

Whilst farmers were developing new and better methods of agriculture, life in other areas

of work had changed little for hundreds of years. Early in the 18th century, most of the

population still lived in small, rural settlements. Few people lived in towns, as we now

know them.

Many people worked as producers of woolen and cotton cloth. They cleaned, combed,

spun, dyed and many people worked as producers of woolen cloth. They cleaned,

combed, spun, dye and wove the raw material into cloth. They did this work in their own

houses. This type of production has become known by the general term of the Domestic

(or Cottage) Industry.

Work within the Cottage Industry was usually divided up between the members of one

family. The women and girls were responsible for cleaning the sheep fleeces, carding the

wool and spinning it. The process of weaving was physically hard work and,

traditionally, it was the men who were responsible for it.

Generally, at regular intervals, a cloth merchant visited each handloom weaver’s cottage.

He would bring the raw material and take away the finished cloth to sell at the cloth hall.

As soon as the new wool arrived, it was washed to clean out all the dirt and natural oil.

After this, it was dyed with color and carded. This was the process of combing the wool

between two parallel pads of nails, until all the fibers were laying the same way.

Next, the carded wool was taken by the spinner and, using a spinning wheel, the thread

was wound onto a bobbin. The unmarried daughters of the household who were called

spinsters often performed this part of the process. The term spinster still exists in English

to mean an unmarried lady. The spun yarn was then taken to the loom to be woven. In a

weaver's cottage, the loom was often to be found on an upper floor. There were large



windows in the room to let in plenty of daylight. The loom was worked by both hand and

foot movements. Working the loom was quite strenuous work, which is why it was

traditionally the work of the men of the household.

TEXTILE INDUSTRY IN PAKISTANTextile is the important sector of Pakistan’s economy. It is playing the important t role in

economy of Pakistan and fulfilling the 65% export target.

PERFORMANCE

The textile industry which is endowed with a strong base of weaving had started its

journey from almost non existence in 1947 with a meager size of 3000 shuttle looms that

is too in the unorganized sector with only 10 textile units. The industry has gone through

a long way and now possesses 220 units, 45000 looms in which include more or less

30000 shuttles looms. The textile industry is not only catering to the entire local

requirement but sharing out 65% of the total foreign exchange earning.

Pakistan being the fifth largest cotton producing country provides a strong base for

development sustenance of the textile industry. In spite of tremendous growth in all the

peripheral areas of the textile industry includes cotton, ginning spinning, processing and

made up sector. This industry which is the main pillar of the economy has not attained its

optimum potential so far.

The textile industry at present is passing through a transition phase. It is sailing smoothly

under the protected cover of quota systems. How ever it has to face the rough water to

open the sea when globalization of trade is implemented under` WTO agreement in 2004.

CAPACITY INSTALLED OPERATIVE

PERIOD. UNITS LOOMS LOOMS

1999-00 55 6600 5500

2000-01 59 7080 6100

2001-02 91 10920 9128

2002-03 105 13125 11125

2003-04 115 14375 12950



2004-05 153 19125 19556

2005-06 166 20750 19840

2006-07 157 19480 17850

PRODUCTIONPERIOD GREY CLOTH

IN METERS (000)

2000-01 602250

2001-02 667950

2002-03 999516

2003-04 1218187

2004-05 1428025

2005-06 2141382

2006-07 2172400

CURRENT POSITION OF

TEXTILE INDUSTRY

With the exception of the period from 1958-59 to 1974-75; the textile industry could not

maintain, a sustainable growth, and registered its growing rate at the nominal level in the

country. In the organized sector there are 452 textile companies of which 212 are not

listed and 240 textile units are listed on KSE/LSE comprising of 157 spinning units, 29

weaving units and 54 composite units. While the total number of textile units both listed

and unlisted is however is around 452 approximately.

The weaving capacity of the textile industry in our country is static at 9000 shuttle looms

for past many years. The capacity of conventional looms is also around 19840, which



have no match with quantum jump the industry ahs taken in this spinning sector. Instead

of going for value added products the frenzy for setting up spinning projects dictated the

mind of the textile industry over the years which took the 4.1 million spindles in 1996-97

instead of going to more value added textile products like dying bleaching units in the

country.

CAPACITY UTILIZATION (%)

PERIOD LOOMS

1999-00 79.50

2000-01 81.00

2001-02 82.90

2002-03 85.10

2003-04 86.20

2004-05 87.00

2005-06 88.00

2006-07 90.00

EXPORTS

The textile exports projection in the trade policy 1999-00 worth 6.5 billions $ of major

textile products include cotton yarn with the target of 1800 million $, grey cloths 1680

million $, ready made garments 1050 million $, tent and canvas 55 million $, knit wear

950 million $ and made-ups 965 million $.

The industry has to achieve these targets in the face of difficult t6rading conditions

especially the disturb economies of Asian countries, threat of imposition of anti dumping

duties on our gray cloths by the European Union countries, (E.U. has withdraw and anti



dumping duty w.e.f 1.01.2002) cotton yarn of 20/s in Japan and constant decrease in

imports from South Korea, all together posting an uphill task of achieving the export

targets for the textile industry during the financial year. Duty drawback (rebate) is

reducing from time to time and changing in sales tax refund to export oriented units,

which is very poor sigh for the exporter of the value added items.

PROBLEMS OF THE TEXTILE SECTORThe textile industry has been crisis ridden for some time because of shortage of raw

material due to three successive cotton crop failures. The main problems it is facing are

as under;

1) The production of lint cotton ahs remained below the target.

2) The shortage and non-availability of the lint cotton in the domestic market has led

to the price-hike in domestic market.

3) Competitor’s installation of over capacity in some production lines or closure of

spinning capacity due to higher prices and short supply.

4) Docile labor-intensive technology, needed to be changed to cost efficient capital

intensive.

5) Lack of institutional finance for modernization efforts.





RELIANCE WEAVING MILLS LIMITED

MULTAN

GROUP PROFILE

The company has been sponsored by FATIMA GROURP in Multan. The sponsors are

already engaged in the field of manufacturing Sugar, Cotton lint yarn, Grey cloths. Their

company, RELIANCE COMMODITY PVT. LTD has been awarded Best Performance

Trophies for the years 1997-98 to 99-00 in the field of export of Molasses declared the

top 5 company of the Pakistan. The sponsors have also taken up the managing control of

a band new spinning unit at Rawat Distt. Rawalpindi form UBL through bidding.

Following are the companies included in the group:

Sr. # Company Name

1. FATIMA SUGAR MILLS LTD.

2. RELIANCE WEAVING MILLS LTD.

3. RELIANCE COTTON PVT. LTD.

4. RELIANCE COMMODITIES PVT. LTD.

5. RELIANCE EXPORT LTD.

6. RELIANCE FIBRES LTD.

7. FATIMA FERTILIZER COMPANY LTD.

8. FAZAL CLOTH MILLS LTD.

9. AHMED FINE TEXTILE MILLS LTD



COMPANY PROFILE

Reliance weaving Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group

established RWML on April 17, 1990 as a public limited company and obtained

certificate for commencement of business on May 14, 1990.

Authorized capital of RWML at the time of incorporation was Rs.250 million and

presently RWML has authorized and paid up capital of Rs.700million which has

gradually increased and at present subscribed share capital of company stands at Rs.

308109370 , listed at Karachi and Lahore Stock Exchanges and also inducted into Central

Depository Company (C.D.C). The company has issued 1st tranche of Term Finance

Certificate (TFC’s) of Rs. million in February 2002, which has been fully subscribed.

These TFC’s are listed at Karachi Stock Exchange and has also been declared as eligible

security in C.D.C.

The principal business of the Company is manufacture and sale of cotton yarn and grey

woven fabric. RWML production capacity consists of two main segments, Weaving and

Spinning, both are ISO-9002 Certified for its quality. Today Reliance weaving Mills

Limited is the 3rd largest weaving mill in Pakistan with modern and technologically

advanced greige weaving plant. The we4aving units are situated at Multan and the

Spinning unit at Rawalpindi. The details are as under:



Weaving units:

Weaving unit is situated at Fazalpur; Khanewal Road, Multan commenced its commercial

production on May 01, 1993 with 96 Tsudakoma air jet weaving machines imported from

Japan along with modern auxiliary machinery to produce high quality cloth for export

markets. Further and additional 20 Tsudakoma air jet weaving machines form Japan were

installed in 1999 coupled with yarn doubling and twisting machines to produce value

added fabrics. The installed production capacity of the unit is approximately 16.085

million meters per annum. Further more, a captive power plant consisting of 2.5 MW

Capacities are also installed in the weaving unit-1 by which the company is saving

power cost and production losses.

During the last financial year, the company has implemented and expansion project for its

weaving unit at a cost of a about Rs.500 million, comprising 108 Tsudakoma air jet

weaving machines from Japan along with modern auxiliary machinery to produce high

quality cloth for export markets. The project started its commercial production from

October 01, 2001. The installed production capacity of the unit is approximately 21.70

million meters per annum.

Another 48 air jet looms expansion plan in existing weaving unit # 2 is at advance stage,

which will result in increase in production approximately by 9.00 million meters per

annum. Now weaving unit comprise of 295 Tsudakoma with production capacity of 57.6

million meters of grey cloth annually.



Spinning Unit:

The spinning unit of the RWML is located at Mukhtarabad, Rawat, and District

Rawalpindi in the province of Punjab. The unit commenced its commercial production on

October 01, 1999 with 14400 spindles with a very good combination of European and

Japanese machinery with allied accessories. It produces high quality yarn for in-house

consumption and for export markets. The installed capacity after conversion into 20/s

count is approximately 4.849 million kgs.

The spinning unit has 35,520 spindles with an installed capacity of 12.30 million kgs of

yarn converted at 20/s count. Cotton yarn produced is used in weaving units for

manufacturing of fabric being sold in local and export market.



ORGANIZATION’S (RWML) HIERARCHY

Internship Report Muhammad Fahim Khan

CHIEF EXECTIVE

14

FINANCE MANAGER

MKTINGMANAGER

PURCHASEMANAGER

ACCOUNTSMANAGER

INTERNAL AUDITOR

C.F.O.

DCA ASSISTANT ACCOUNTANT

CHAIRMAN

CHIEF ACCOUNTANT




VISION STATEMENT

The company is interested to install complete textile finishing plant including bleaching,

dyeing, mercerizing, calendaring, folding, printing plant in the existing weaving units at

Multan to make it a complete composite unit, which can explore local and international

market of high value products. The company would keep its emp0hasis on product and

market diversification, values addition and cost effectiveness. We want to fully equip the

company to play a meaningful role on the sustainable basis in the economic development

of the country.

MISSION STATEMENT

The mission of the company is to operate state of the are textile plants capable of

producing yarn and fabrics.

The company will conduct its operations prudently assuring customer satisfaction and

will provide profits and growth to its shareholders through:

Manufacturing of yarn and fabrics as per the customer’s requirements and

market demand.

Exploring the global market with special emphasis on Europe

and USA.

Keeping pace with the rapidly changing technology by continuously

balancing, modernization and replacement (BMR) of plant and machinery.

Enhancing the profitability by improved efficiency and cost controls.

Recruiting, developing, motivating and retaining the personnel having

exceptional ability and dedication by providing them good working

conditions, performance based compensation, attractive benefit program and

opportunity for growth.

Protecting the environment and contributing towards the economic strength of

the country and function as a good corporate citizen.



COMPANY’S QUALITY POLICY

COMMITMENT TO EXCELLENCE

All of our priorities action and products must be recognized as an

expression of unique quality.

We are dedicated to produce fabrics and yarn of the best export quality to

meet the requirement and expectations of our customers.

We strive for continuous improvement in day-to-day quality work;

organize the training and necessary feedback on our performance.

THE PROJECTThe project of setting up 96 looms was successfully completed and the company

commenced commercial production on May 01, 1993. The capacity of the project is

15.50 million Mtrs. Grey Cloth per year. In addition to further 20 looms was a installed in

1997 along with doubling machine and self power generation plant of 2.5 MW was

installed in 1999.

PLANT AND MACHINERY

IMPORTED

The imported plant and machinery for the project are purchased from world renowned

manufacturers of textile industry machinery. The production facilities are supported bay a

very modern quality control department equipped with laboratory and testing equipment

based on latest technology.



The imported plant and machinery includes:

120 Shuttless Looms from Tsudakomna.

Humidification Plant & Chilly Equipment from Luwa Switzerland.

Overhead Travelling Cleaner from Luwa Switzerland.

Sizing machine from Sucker & Mullar Germany.

Knotting machine from Tomen Corp. Germany.

Air Compressor & Dryer from Atlas Capco Belgium.

Warping Machine from Benninger Switzerland.

Vaccum Cleaning plant from Germany.

Power Generator from UK.

3 sets power Generator (Gas) from Caterpillar Switzerland.

The above plant and machinery was imported with the foreign currency financial

assistance of Muslim Commercial Bank Limited.

LOCAL

The plant and machinery locally purchased up to 20% of the total machinery, which is as

under:

Bailing Press

Motor Lifter 2 Nos.

Beams 100 Nos.

Electric material from semins.

Folding Machines 3 Nos.

Equipment for workshops.

Electric appliances.

Fire fighting equipment.

Both the imported and local machinery was brand new at the time of purchase.



COST OF PROJECT AND MEANS OF FINANCE

ESTIMATED COST

Pak. Rs. In (Million)

Imported machinery 210.50

Import incidentals 25.20

Local machinery 13.50

Land, Building, Others 44.80

Total Estimated cost 294.00

ACTUAL COST

Imported machinery 199.00

Imported incidentals 22.40

Local machinery 15.60

Land, building, others 47.00

Total actual cost 284.00

The company has successfully completed the project within the projected cost by saving

at least 11.00 (m) from the imported machinery due to forward booking of US $ on L/Cs

through speculation with the bank.



FINANCINGThe project has been financed through;

Pak.Rs. In (M)

Share holder’s equity 109.55

Redeemable capital 3.00

FC loan I.BR.D Line world bank 146.45

Local Bank Loan 13.60

Directors Loan 4.80

Local suppliers 6.60

Actual project cost 284.00

COMMERCIAL PRODUCTION

The company has commenced commercial production from May 1, 1993.

FINANCIAL YEAR

The financial year of the company is from October 1st to September 30th.

RAW MATERIAL

The basic raw material for the company is cotton yarn, which is easily available in

Pakistan.

LABOUR AND TEACHNICAL KNOW-HOW

The textile industry, being the oldest and largest industry in the country, there is cheap

labor available, both skilled as well as unskilled. The company has hired experienced

team, which is engaged in the running of existing manufacturing facilities.



BUILDING AND CIVIL WORKS

Main factory building

Godowns 4 Nos.

Office buildings admin and ISO

Labor and staff quarters

Power house

The total covered area is approximately 120,120sq. Feet (13,345sq. meters).

UTILITIES

SELF POWER GENERATION

The project has a self-powerhouse of 2.5MW consisting of 3 power Generators imported

from caterpillar to provide smooth power to the Mills.

FEUL

Fuel requirement of the powerhouse is Sui Gas which is special installed by company on

self finance scheme by cost of Rs.10.055 (M) and also have a diesel generator in case of

any electric failure.

WATER

The total requirement of water for the project is met out of regular supply form the Tube-

well.



PRODUCTIONYear/Month

Ended

Production

(000 Mtrs.)

Capacity

Attained %

30 September, 1998 12104 78.00

30 September, 1999 13255 85.00

30 September, 2000 13065 84.00

30 September, 2001 13530 87.00

30 September, 2002 13680 88.00

30 September, 2003 13193 85.00

30 September, 2004 14339 89.00

30 September, 2005 15539 96.00

30 September, 2006 15980 96.00

30 September, 2007 16587 97.20

It is difficult to describe precisely the production capacity in weaving mills since it

fluctuates widely depending on various factors such as count of yarn spun looms speed,

width and construction of cloth. It also varies according to the production pattern adopted

in a particular year.



SALES(Cloth)

Year Total sales

Rs. (million)

Export sales

Rs. (million)

% of Export sales

To Total sales

1999 123415 54260 43.96

2000 402426 295639 73.46

2001 448905 395895 88.19

2002 667242 614060 92.03

2003 727163 660883 90.89

2004 723822 714587 98.72

2005 800382 755064 94.34

2006 1306888 1228367 93.99

2007 1252560 1115277 85.34

Exports are increasing due to increase in demand in various markets because of

withdrawl of quota.



COMPANY DIVIDEND POLICY

The company is declaring regular dividend to its shareholders since previous 5

years.

The shareholders of the company are fully satisfied by the company

management decisions regarding dividends as well as operational matters.

Due to regular payment of dividend in each year to the shareholders the

market value of the company’s share has increased to its face value to Rs.23

per share.

Following dividends paid by the co.

2004 10% cash dividend

2005 23.50% cash dividend



SHAREHOLERS’S RIGHTS

None of the holders of the issued shares of the co. has any special or other interest in the

property of profits of the company other than of as holder of ordinary shares in the capital

of the company.



PROCESS OF WEAVING UNITRWML UNIT-2 is engaged in the following functions.

WEAVING

Different types of the cloths are produced in the Weaving department. Weaving process

includes the following steps.

Yarn receiving and issuing

Doubling/twisting

Loading on sizing

Sizing

Loom shed

Cutting/Folding and Packing

Yarn Receiving and IssuingFollowing is the process of yarn receiving and issuing:

Yarn receive

Yearn tested through lab

Yarn record maintained in computer

Yarn requisition/issuing

Yarn Receive

First of all in weaving unit yarn received by yarn clerk from the spinning unit. Yarn clerk

check and count the bags and arrange its stacking in very arrange manner.

Yarn Tested In Lab

After receiving the yarn at least 2 cones are send to the lab to check the weight/quality

count and length.

Yarn Record

After receiving the correct result of the yarn from lab, it is recorded in stock register

maintained in computer.



Yarn Requisition/Issuing

Yarn is issued to warping department after receiving the requisition from the General

Manager/Production Manager.

YARN DOUBLING/TWISTINGThe company has own doubler and twister machine in which yarn is doubled and twisted

before issuing to warping section. But it must be noted that this process can only be

operated due to demand of the certain construction to the cloth.

WRAPINGAfter receiving the yarn it is loaded on creel frame for the purpose of warping. There is

one set in one time comprising of 12 Beams in which yarn warped for sizing. It is called

one set ready.

SIZINGIn this department one set consisting of 12 beams loaded on the sizing machine where all

the chemicals are mixed and thread passed way from this mixture and prepare one full

beam at the required length, which is commonly consisting of 55000 to 60000.

Following are the chemicals used in the sizing machine:

P.V.A Imported from Japan

Textile wax from B.A.S.F. Pakistan Ltd.

Starch from Rafhan Maize FSD.

The above chemicals are mixed from the sizing machine through revolving

machine.

After sizing the beams these are transferred to the stock of the sizing department

and issued to production department as and when required otherwise these are

held in this department with marking of its specification on that beam so that it

can easily be located out of various beam’s stock.

LOOMS SHEDInternship Report Muhammad Fahim Khan 26


In this process, there are 116 looms installed by the company, which is the main

process where yarn converted in grey cloth. Beam received from the sizing

department is loaded on the loom and vacant beam replace with the beam gater.

New beam knotted with the remaining thread of old beam with help of a modern

knotting machine. These looms are adjustable. Its width can be or decreased with

the requirement of construction of cloth.

WARP/WEFTThere are two concepts of warp and weft in the looms shed. Warping is called the

running of sized beam in state away and weft is called running of yarn cones in

side away.

Machinery operation

In the looms shed there are more or less 40 workers are appointed on the looms.

Each person is responsible for his three looms regarding breakage of thread,

quality of cloth and efficiency of the loom production.

This department has all the technical as well as maintenance staff in the loom

shed so that any discrepancies may timely be removed and production may not

suffer.

PACKING



There are two kinds of cloth packing one is bales shape band and other is in roll.

All these packing are made with polythene bags which received from the store

room bales are exported to Japan, Hong Kong, China and Taiwan. While roll

packing are exported to USA and European countries.

Normal packing

1 Bale = 500 Meters and 600 Yards

1 Roll = 350 Yards

Piece length

1to 10 mtrs use in cut piece sale

11 to 20 mtrs use in local normal sale

21 to 50 mtrs use for export

The packing may be changed in accordance with the demand of customers as well

as the nature of consignment.

PRODUCTION REPORTS

Different reports are prepared when yarn is received from sizing section to

completion of cloth. All records are maintained completely.

Yarn receipt report in weft

Sized beam receipt report

Waste report

Leno (cuttari)

Rags (cloth)

Cut pieces

Daily used report

Efficiency report

Daily production report





MARKETING MIX

Marketing mix is the marketing tasks that the company is to acquire its objectives in the

target market.

4 P’S

1. PRODUCT

2. PRICE

3. PLACE

4. PROMOTION

1. PRODUCT

RWML produces high quality cloth only. They produce all kinds of construction

as demanded by to customers. Its exports are more than 90% of its produce and

remaining they sell in the local market. They sell to the well known local buyer

like Al-Abid Silk Mills ltd. Fateh Textile Ltd. Chenab Ltd., which are the top

leading companies of the Pakistan subsequently they export the cloth after

processing. RWML take the advantage of second exporter from the govt.

department.

TYPES OF CLOTH BEING PRODUCED

100% Cotton Grey Cloth of the following main types is being produced.

20*20/108*56=63”

20*16/128*60=61.5”

10*10/80*54=55”

30*30/100*60=72”



2. PRICE

Pricing is an important element in the marketing process for any company. The

price policy of co. should be in such a way that it should produce a reasonable

profit for the co. and should satisfy the customer. Following tow factors are very

important.

Fixed cost

Variable cost

FIXED COST

Fixed cost is the costs which remain always same in total whether produce large

quantity or small quantity. Fixed cost per unit rises as the quantity produced

decreases and vice versa. Some of the importent factors of fixed cost are;

Salaries

Rent

Local taxes

VARIABLE COST

Variable cost changes in total with the change in quantity produced. It increases in

total as quantity increases but remains same on per unit basis. Some examples are;

Material cost

Labor cost

FOH



RWML’S PRICING STRATEGIESRWML adopts following pricing strategies:

Direct selling

Through agent selling.

Direct selling

If co. sells directly then price components will be as follows;

Fixed cost+variable cost+Desired profit

Through agent selling

Through agent selling pricing components are:

Fixed cost+variable cost+Desired profit + Middleman’s commission

Pricing Procedure in Local Market

RWML sells only extra quality left from the foreign order in the local market.

They call tenders when they want to sell the production in the local market. They

sell to those person whose tender price will be high.

Pricing Procedure for Export

Pricing procedure for export is different from the local procedure they charging

the price in foreign factors before charging the mind certain factors before

charging the price in foreign market. When any customers want to purchase the

products after negotiation they fix the price. Some important factors are inland

freight, sea freight clearing charges etc.



3. PLACE ( Distribution Channels)

RWML exports more than 90% of its product. They are using two types of

distribution channels in export.

Direct channel.

RWML====Customer

Indirect Channel.

RWML==Middleman=====Customer

Mostly RWML exports its products through ship. They are alos using other

modes of transportation as well:

Trucking

Shipping

Air line

Major export countries are as under;

1. Japan

2. Korea

3. Hong Kong

4. USA

SALES PROMOTIONRWML has no any promotion media to promote its products, because Japanese

machines Tsudakoma are producing only cloth. Mainly Japanese and Hong Kong

clients import the cloth form RWML.



.EXORT ORDER EXECUTION

Scope: this procedure is applicable for all sorts of cloths being produced.

Purpose: To maintain and increase the exports with better quality goods and

services.

PROCEDURE

Inquiry

Customer inquiries are received via telex, Fax and letters and E-mail. These are directly

sent to C.E for review. After C.E’s review these are sent to export dept. in charge. After

careful analysis, these inquires are replied after C.E.’s approval.

Costing

Costing sheet prepares for C.E.’s approval. In absence of C.E. dept. in- charge approves

price.

Costing approval

C.E. gives approval or may suggest any other price to be offered.

Contract review and issue

Section in charge takes following steps before issuing a contract; prepare contract review

check sheet.

1. The requirements are adequately defined and involvements of production

areas are specified.

2. In house/ out house have the capacity to meet the order requirements?

Prince quotation

In getting approval of costing and review of customers requirements, prices are quoted to

customers for confirmation.

Confirmation of sale contract



If customer confirms the price offered, sale contract is issued to the customer with

complete details of price, quality, delivery, payments, terms etc.

Letter of credit (L/C)

Customers establish/ open L/C well before shipment time. In case of delivery in receipt

of L/C, concerned section in charge reminds customer. After receipt of L/C, these are

checked with regard to ordered goods, prices, shipment details, marketing, shipment

negotiation etc. discrepancies in L/C are noted and informed to customer for rectification.

Dispatch of goods/cloth

Packed cloth is dispatched to the customers. If the shipment is to be custom cleared from

Multan dry port, goods are sent to Karachi on trucks with all necessary records.

Dispatched goods are detail noted in relevant registers.

Shipment

RWML is having all well-known shipping companies namely;

Samin Enterprises.

Pre-shipment documents are sent to Samin enterprises next day by dept. these goods are

custom cleared at Multan dry port. Documents are sent to clearing agent same day or

next6 day and followed up to ensure that these goods are custom cleared without any

unnecessary delay. In case of dry port, original bill of loading and 4th copy of shipping

bills are collected from office agent for obtaining the rebate timely. If the consignment is

cleared from Multan dry port than there is no need of follow up the consignment.

Following are the companies, which are used for sea shipment.

1) APL CO. USA

2) UNITED MARINE AGENCIES

3) UNIQUE MARITIME AGENCIES

4) RIAZEDS PVT. LTD.

5) CHUGTAI BAOS. KARACHI



RATE OF SEA FREIGHT

HONGKONG 350$

JAPAN 450$

MANILA 375$

USA 950$

CHINA 350$

MIS Reports

Balance order instructions are updated periodically. Balance order list up dated

fortnightly for their information. Sale comparison reports are updated in computer

network on monthly basis, it comprises one month’s status of shipment, party wise and

country wise invoice values, complaints and claims.

Customer complaints.

After receiving goods, if customer find and defect / fault in the quality of cloth, he

complains the same. Complaints are entered in complaint received register after taking

complaint it is raised on corrective action and issued to responsible person/ dept. after

getting reply, it is informed to the customer. Case is taken to remove the defects and to

further restrain the faults. Complaints are processed quality and efficiently. After that

claim is valued in US $ and Pak Rs. Than credit the customer account by couching the

accounting entry and subsequent paid to customer in shape of FDD or FTT subject to

realization the amount of concerned consignment.





ADMINISTARATION DEPARTMENTThis is very important department of the organization as named shows, this dept. has to

administer all the operations of the organization. Sections of this department are divided

into offices as under;

Labor office

Security guard office

Gate office

Time office

LABOR OFFICE

As required by labor dept of the govt. of Pakistan, this office has been setup to deal with

all the matters that are related with labor. The dept. is under the labor officer. He is

responsible to resolve all the disputes, conflicts, misunderstandings and any other kind of

matter, which may arise from time to time with the labor and the immediate supervisor or

with any other person in the organization.

It is the duty of the labor officer to inform the legal requirements concerning the labor

and company affairs as well as any changes in rather labor laws.

It is the duty of the labor officer to satisfy itself regarding payment bonus, gratuity, and

other benefits to labor and to keep their morale and motivational level high.

SECURITY GUARD OFFICE

The main objective of the security office is to safe handling of the goods from /to the mill

premises. For the achievement of such objective a team of security guards has been

employed by the company. All the keys relating to the mills office, labor colony,

(quarters) are lying into the responsibility of the security officer

No out side visitor can enter in the mills premises without the permission of the Admin

Manager.

a) Whenever any visitor wants to enter into the mill, security guard firstly

contact with the authority in the mill top grant the permission to enter into

the mill’s premises.



b) They are the guardians of the every thing of the co.

c) They are in uniform of dark army color.

d) They sere and check the outward going pass of certain things when these

going to out of the mills premises.

GATE OFFICE

This office has been made to keep the record of each and every thing coming in and

going out of the Mills gate.

For this purpose gate office clerk maintains two type of registers called;

1) Outward going pass register

2) Inward coming pass register

When every thing including raw material, stores supplies, or any other things comes into

the mills premises a document named as I.G.P is made in which information like date of

supplier, description, quantity of the material and any other remarks are written. In the

same way O.G.P is prepared for out going things etc. and they made a summary on daily

basis and fax to head office.

TIME OFFICE

1. It keeps the attendance records, which is than used to calculate the salary

to be paid to the workers on monthly basis.

2. It keeps the records of the over time single as well as double, leaves,

number of days worked of all the workers and than calculate their over

time on the basis of the gross salary of each workers.

3. It keeps the records of gratuity, bonus, pensions and other benefits

including CPL (cash paid leave ) to each employee.

4. It keeps the records of Social Security, DOBI, Education Cess etc. of all

employees.

5. This office keeps and maintain the time record of all the workers.



PREPARATION OF ACCOUNTSFollowing accounts are prepared in the Accounts Department of “RELIANCE

WEAVING MILLS LTD.”

1. Store Creditor/Purchases

2. Export Debtor/Realization

3. Store Consumption

4. Fuel and Power

5. Salary and Wages

6. Site Expansions

7. Inter Unit

8. Administration Expenses

9. Selling Expenses

10. M/up on T.F.C.

11. Social security/E.O.B.I

12. Banks

HBL

FBL

FBL (LOAN)

ABL

SPCB

PETTY CASH FUND

Cash is given to Mr. Afzaal hussain the site cashier for meeting the different site

expenses and these are;

Yarn freight

Store freight

Building capitalized/repair and maintenance

Labor welfare charges



The balance is maintained up to Rs. 100000 minimum every time.

PURCHASE PROCESS

First of all purchase requisition is issued to the different suppliers. Then the quotations

are received from the different supplier and evaluated by the purchase manager Mr.

Subhan sb. (C.A) then a purchase order is made. Three copies are maintained for the

purchase order;

One to the supplier

One to the accounts department

One is remained with the purchase department

Purchase includes;

Raw material (Local)

Starch (Local)

Beveloid (Local)

Softner-52 (Local)

Chemical PVA imported (Duepont USA)

Yarn (Australia)

MAJOR MARKET OF RWML

Major market of RWML is differentiated on the basis of sale;

Export sale (85%)

Export sale is made to;

Europe

Hong Kong



Local sale (15%)

Local sale is made to;

Nishat

Chenab

Bismillah

Nishat (Chunian)

INTERNAL AUDIT

Inter audit is done by Mr. Sabir Bhatti Sb. is the ‘Internal Audit Manager’ with his four

Assistants; on daily basis of all the vouchers.

STORE INVENTORY SYSTEM

A daily purchase report of Store and Spares is received at the Head Office from the site

and then it is booked in a bill payable voucher/Store Purchase Voucher by the accounts

officer Mr. Muhammad Sulaiman Sb.

Site stock inspection is also done at the end of each month by 3 or 4 accountants.



OPENING OF LETTER OF CREDIT

One of the most important functions of the commercial banks in the world is to

finance the imports and exports trade. There are several ways of financing international

trade, of all the methods available at present, the documentary letters of credit are most

important because they undertake the beneficiaries to obtain money either immediately or

within a mutual agreed period, provided the beneficiary fulfills the conditions lay down

in the letter of credit.

Ariticle-2 of the uniform custom and practice for documentary credit of the international

chamber of commerce (ICC) defines the documentary credit as under;

“Any arrangement, however, named or described, whereby a bank (the issuing

bank), acting at the request and on the instructions of a customer (the applicant)

or its own behalf is to make payment to or to the order of a third party (the

beneficiary) , or is to accept and pay bills of exchange (draft/drafts) drawn by the

beneficiaries, or authorizes an other bank to negotiate, against stipulated

documents, provided that terms and conditions of credit are compiled with.”

Form the above definition it means that a documentary letter is a bank’s written

undertaking given to the exporter of the payment of a certain amount of money on behalf

of the importer provided the exporter tenders to the bank or its overseas agent, the

specified document within a specified period in accordance with the terms of

understanding.

L/C TREATMENT IN RWML

The company has to import following items for the continuation of its operation.

1. Machinery

2. Spare parts and Chemicals



The company has to request to open L/C for these imports. All the work related to the

L/C is prescribed in the purchase order and send it to bank duly signed by import

department.

For opening of L/C amount of margin 10% of the total invoice cost and L/C opening

charges are deducted by L/C opening bank. This amount is debited to the L/C account

created for that particular L/C # , by debiting the margin and charges recovered by the

bank.

An entry is made.

L/C # XYZ Dr.

Margin Dr.

Bank Cr.

When the imported items come into the counter, bank inform to get release the

documents. By depositing the amount of the L/C is of sight nature. If the L/C is of

deferred (30, 60, 90, 120 days) nature then the rate of the currency or the mark up

required to deposit by the company in addition to L/C value is decided between the bank

and the company provide some guarantee to the bank or the bank decides on the credit

worthiness of the company.

Amount deposited to the bank is then debited to the L/C account by debiting the bank is

then debited to the L/C account by debiting the bank or payable. An entry is made:

L/C # XYZ Dr.

Bank/Import bill payable Cr.

After releasing the documents these are sent to the agent sitting in Karachi who then

release the shipment from the port by paying all the expenses to cargo, carriers, customs,

sales tax, income tax authorities.

The company sends time to time the amounts to the agent for the particular L/C #. If there

is no payment is made to the bank then bank create the PAD is favor of the company and

recovered form the RWML otherwise make the loan duly a mutual consideration.



L/C # XYZ Dr.

Import bill payable Cr.

Clearing agent after releasing the consignment dispatched it to the company and along

with all documents (bill of entry and receipts of the expenses stated above). The company

after checking all the documents sends the remaining amount if any to the agent. By

making the same treatment in the company’s account.

When all the amounts are paid to the agent for that certain L/C then the entry is made to

close the account of the agent for that particular L/C. the entry is:

L/C # XYZ Dr.

Agent Cr.

EXPORT BILLS NEGOTIATION

This term is specified to the exports. When the company makes export sales, the buyer

opens an L/C in favor of the company. As described earlier the L/C may be of different

kinds from sight to 90& 120 days.





SWOT ANALYSIS

STRENGTHS

1. Imported machinery

2. Strong market image

3. Awareness of product

4. High financial resources

5. Committed and competent staff

6. Strong industrial group

WEAKNESSES

2. Costly management staff

3. De motivated staff

4. No promotional activities

5. No other incentive except saalay and bonus

6. Centralized control

7. Centralized decision making

OPPORTUNITIES

2. Potential in market

3. Market in USA & E.U. due to withdraw of quota

4. Throughout local market in Pakistan

THREATS

1. New entrance

2. Economic instability

3. Tough competition

4. Increasing cost of production

5. War

6. Price fluctuations

7. Political instability





MY LEAARNING ARE AS FOLLOWS

1. How we have to respond and quote prices upon difference inquires from the

customer.

2. How the working is being done.

3. Issuance of selling contract to customers

4. After looking on contract, how we have to proceed further in order to fulfillment

of desired requirement.

5. How correspondence has to against different orders and different customers.

6. The important matter is to understand the perception from customer and his

expectation because it differs from customer to customer and to order.

7. Push up the processing team to help in making timely shipment.

8. Preparation of different sorts of reports

9. How to respond to the assignments given by the CEO.

10. Purchase of yarn and its recording in the books of accounts

11. Payment of petty cash expenses and their recording.





Purpose of Financial Analysis

The purpose of financial statement analysis is to make a quick assessment about a firm’s

financial situation .It is also used to identify the major strengths and weaknesses of a

business enterprise.

Tools of Financial Statement Analysis

(1) Financial Ratio Analysis

(2) Common Size Income Statements

Financial Ratios

Financial ratios are a ratio of 2 numbers, at least one of which comes from the firm’s

financial statements. A financial ratio has very little meaning unless it is compared to

some other ratio. Two types of comparisons are cross-sectional analysis and time-

series analysis.

Cross-Sectional Analysis Compare ratio for firm A at time t to industry average

Time-Series AnalysisCompare ratio for firm A at time t to ratio for

firm A at time t-1, etc.

Financial ratio analysis is a fascinating topic because it can tell us so much about

accounts and businesses. When we use ratio analysis we can work out how profitable a



business is, we can tell if it has enough money to pay its bills and we can even tell

whether its shareholders should be happy!

Ratio analysis can also help us to check whether a business is doing better this year than

it was last year; and it can tell us if a business is doing better or worse than other

businesses doing and selling the same things.

What do we want ratio analysis to tell us?

We have to start working on ratio analysis with the following question in our heads:

What are we trying to find out?

We can use ratio analysis to try to tell us whether the business

is profitable

has enough money to pay its bills

could be paying its employees higher wages

is paying its share of tax

is using its assets efficiently

has a gearing problem

is a candidate for being bought by another company or investor

And more, once we have decided what we want to know then we can decide which ratios

we need to use to answer the question or solve the problem facing us.

Users of Analysis Information

Now we know the kinds of questions we need to ask and we know the ratios available to

us, we need to know who might ask all of these questions! This is an important issue

because the person asking the question will normally need to know something particular.

Of course, anyone can read and ask questions about the accounts of a business; but in the

same way that we can put the ratios into groups, we should put readers and users of

accounts into convenient groups.



The list of categories of readers and users of accounts includes the following people and

groups of people:

Investors

Lenders

Managers of the organization

Employees

Suppliers and other trade creditors

Customers

Governments and their agencies

Public

Financial analysts

Environmental groups

Researchers: both academic and professional

The users of accounts that we have listed will want to know the sorts of things we can see

in the table below: this is not necessarily everything they will ever need to know, but it is

a starting point for us to think about the different needs and questions of different users.

Investors To help them determine whether they should buy shares in the

business, hold on to the shares they already own or sell the shares

they already own. They also want to assess the ability of the

business to pay dividends.

Lenders To determine whether their loans and interest will be paid when

due.

Managers Might need segmental and total information to see how they fit into

the overall picture.

Employees Information about the stability and profitability of their employers

to assess the ability of the business to provide remuneration,



retirement benefits and employment opportunities.

Suppliers and other

trade creditors

Businesses supplying goods and materials to other businesses will

read their accounts to see that they don't have problems: after all,

any supplier wants to know if his customers are going to pay their

bills!

Customers The continuance of a business, especially when they have a long

term involvement with, or are dependent on, the business.

Governments and

their agencies

The allocation of resources and, therefore, the activities of

business. To regulate the activities of business, determine taxation

policies and as the basis for national income and similar statistics

Local community Financial statements may assist the public by providing

information about the trends and recent developments in the

prosperity of the business and the range of its activities as they

affect their area.

Financial analysts They need to know, for example, the accounting concepts

employed for inventories, depreciation, bad debts and so on.

Environmental

groups

Many organizations now publish reports specifically aimed at

informing us about how they are working to keep their

environment clean.

Researchers Researchers' demands cover a very wide range of lines of enquiry

ranging from detailed statistical analysis of the income statement

and balance sheet data extending over many years to the qualitative

analysis of the wording of the statements.



Which ratios will each of these groups be interested in?

Interest Group Ratios to watch

Investors

Return on Capital Employed

Lenders

Gearing ratios / Leverage Ratio

Managers Profitability ratios

Employees

Return on Capital Employed

Suppliers and other trade creditors Liquidity

Customers Profitability

Governments and their agencies Profitability

Local Community This could be a long and interesting list

Financial analysts Possibly all ratios

Environmental groups Expenditure on anti-pollution measures

Researchers Depends on the nature of their study



Horizontal Analysis



BALANCE SHEETCOMMON SIZE HORIZONTAL ANALYSIS

ASSETS: 2007 2006

(Rupees )

in %

Non-current assets

Property, Plant and

equipment

Intangible assets

Long-term investment

Long-term deposits

Current assets

Stores, spares and loose tools

Stock-in-trade

Trade debts

Loan and Advances

Trade deposits and payments

Short term Investment

Mark-up accrued

Other receivables

Tax refunds due from

government

Cash and bank balances

1,906,640,987

1,033,593

69,999,586

2,421,340

103,050,338

772,397,644

157,754,493

187,188,985

1,122,041

125,667,584

7,088,261

8,289,791

45,560,675

41,794,462

1,963,229,490

-----------

69,999,586

2,421,340

92,855,401

746,643,801

229,707,309

142,601,992

5,804,422

523,546

7,088,261

1,612,193

49,793,062

32,572,103

(56,588,503)

1,033,593

-----------

------------

10,194,937

25,753,843

(71,952,816)

44,586,993

(4,682,381)

125,615,238

------------

6,677,598

(4,232,387)

9,222,359

-2.88

100

-----

-----

10.98

3.45

-31.32

31.267

-80.67

23993

-------

414.19

-8.50

28.31



Total Current assets 1,449,914,274 1,309,202,090 140,712,184 10.75

TOTAL ASSETS

EQUITY AND

LIABILITIES:

3,430,009,780 3,344,852,506

2007 2006

(Rupees)

85,157,274 2.546

In %

Share capital and

reserves

Authorized Capital

30,000,000 ordinary shares of

Rs 10 each

Issued, subs and paid-up capital

Reserves

Unappropriate profit

Non-current liabilities

Long term Finance & other

Capital

Subordinated loans

Deferred liabilities

Current liabilities

Trade and other payables

Interest and mark-up accrued

Finance under markup

arrangement

Current portion of non-current

liabilities

Total Liabilities and

30,000,000

308,109,370

395,081,250

165,798,067

868,988,687

711,913,668

63,375,000

8,589,216

783,877,884

128,588,478

56,488,753

1,336,646,814

255,419,164

1,777,143,209

30,000,000

246,487,500

395,081,250

195,501,910

837,070,660

988,791,218

36,875,000

16,238,327

1,041,904,545

124,134,603

43,259,876

1,174,824,009

123,658,813

1,465,877,301

3,344,852,506

-------------

61,621,870

--------------

70,296,157

31,918,027

(276,877,550)

26,500,000

(7,649,111)

(258,026,661)

4,453,875

13,228,877

161,822,805

131,760,351

311,265,908

---

24.99

-------

35.96

3.81

-28

71.86

-47

-24.76

3.59

30.58

13.77

106.55

21.23



Equity 3,430,009,780 85,157,274 2.546

Profit and Loss Account

Common size Horizontal analysis 2007 2006

(Rupees) in %

Sales

Cost of sales

Gross profit

Other operating income

Administrative expenses

Distribution and selling costs

Other operating expenses

Finance costs

Profit / (loss) before taxation

Provision for taxation

Profit for the year

Earnings per share

3,400,998,361 (3,054,593,695)

346,404,666

39,344,127

(50,282,001)

(49,671,260)

(6,048,989)

(232,381,335)

47,365,208

(15,447,181)

31,918,027

1.04

3,122,414,478 (2,699,848,853)

422,565,625

17,840,572

(48,421,073)

(39,031,369)

(9,584,861)

(199,406,645)

143,962,249

(20,433,058)

123,529,191

4.01

278,583,883354,744,842

(76,160,959)

21,503,555

1,860,928

10,639,891

(3,535,872)

32,974,690

(96,597,041)

(4,985,877)

(91,611,164)

8.92

13.21

-18

120

3.84

27.25

36.89

16.54

-67.10

-24.40

-74.16



BALANCE SHEETCOMMON SIZE HORIZONTAL ANALYSIS

ASSETS: 2006 2005

(Rupees)

In %

Non-current assets

Property, Plant and

equipment

Long-term deposits

Current assets


Stock-in-trade

Trade debts

Loan and Advances

Trade deposits and payments

Tax refunds due from

government

Other receivables



1,963,229,490

2,421,340

1,965,650,830

92,855,401

746,643,801

229,707,309

150,177,167

5,804,422

49,793,062

1,612,193

70,523,132

32,572,103

2,036,092,537

2,421,340

2,038,513,877

80,312,683

706,726,900

204,540,457

286,804,021

3,893,245

60,515,927

3,021,926

------------

8,434,247

(72,863,047)

--------------

(72,863,047)

12,542,718

39,916,901

25,166,852

(136,626,854)

1,911,177

(10,722,865)

(1,409,733)

70,523,132

31,737,856

-3.59

-------

-3.57

15.62

5.65

12.30

-47.64

49.08

-17.72

-46.65

100

37.63

Total Current assets 1,379,688,590 1,354,249,406 25,439,184 1.88

TOTAL ASSETS 3,345,339,420 3,392,763,283 (47,423,863) -1.398



EQUITY AND LIABILITIES:

2006 2005

Share capital and

reserves

Authorized Capital

30,000,000 ordinary shares

of Rs 10 each

Issued, subs and paid-up capital

Reserves



Long term Finance & other

Capital


Current liabilities

Current portion of long term

liabilities

Finance under markup

arrangement



Total Liabilities and Equity

30,000,000

246,487,500

395,081,250

195,501,910

837,070,660

1,025,666,218

16,238,327

1,041,904,545

123,658,813

1,174,824,009

124,621,517

43,259,876

1,466,364,215

3,345,339,420

30,000,000

246,487,500

395,081,250

96,621,469

738,190,219

1,158,062,811

18,400,700

1,176,463,511

139,361,140

1,193,844,369

109,756,482

35,147,562

1,478,109,553

3,392,763,283

------------

------------

98,880,441

98,880,441

(132,396,593)

(2,162,373)

(134,558,966)

(15,702,327)

(19,020,360)

14,865,035

8,112,314

(31,745,338)

(47,423,863)

In %

------

------102.34

126.46

-11.43

-11.75

-11.44

-11.27

-1.59

13.54

23.08

-2.15

-1.398




Common size Horizontal analysis

2006 2005

(Rupees in) in %

Sales

Cost of sales

Gross profit





Finance costs


Provision for taxation

Profit for the year

Earnings per share

3,122,414,478 (2,699,848,853)

422,565,625

17,840,572

(48,421,073)

(39,031,369)

(9,584,861)

(199,406,645)

143,962,249

(20,433,058)

123,529,191

5.01

2,061,671,982 (1,803,756,782)

257,915,200

20,305,651,

(27,691,287)

(38,357,316)

(7,248,742)

(93,157,973)

111,765,533

(15,789,023)

95,976,510

3.89

1,060,742,496896,092,071

164,650,425

(2,465,079)

20,729,786

674,053

2,336,119

106,248,672

32,196,716

4,644,035

27,552,681

51.4549.68

63.84

-12.14

74.86

1.76

32.22

114.05

28.81

29.41

28.71



Vertical Analysis



BALANCE SHEETCOMMON SIZE VERTICAL ANALYSIS

ASSETS: 2007 2006

Non-current assets

Property, Plant and equipment

Intangible assets

Long-term investment

Long-term deposits

Current assets


Stock-in-trade

Trade debts

Loan and Advances

Trade deposits and short-term payments

Mark-up accrued

Other receivables


Tax refund due from government


55.59 %

0.03 %

2.04 %

0.07 %

3.00 %

22.52 %

4.6 %

5.46 %

0.032 %

0.21 %

0.241 %

3.66 %

1.33 %

1.22 %

58.69 %

--------

2.04 %

0.07 %

2.78 %

22.32 %

6.87 %

4.26 %

0.17 %

0.21 %

0.048 %

0.016 %

1.49 %

0.97 %

Total Current assets 42.27 % 39.14%

TOTAL ASSETS 100.00% 100.00%



EQUITY AND LIABILITIES: 2006 2005

Share capital and reserves

Authorized Capital 30,000,000

ordinary shares of Rs 10 each

Issued, subscribed and paid-up capital

Reserves



Long term Finance and other payables

Loan from related parties- subordinated loans


Current liabilities



Finance under markup arrangements

Current portion of non-current liabilities


8.98 %

11.52 %

4.83 %

25.33 %

20.76 %

1.85 %

0.25 %

3.75 %

1.65 %

38.97 %

7.45 %

51.81 %

100 %

7.37 %

11.81 %

5.84 %

25.03%

29.56 %

1.102 %

0.48 %

3.71 %

1.29 %

35.12 %

3.7 %

43.82 %

100 %




Common size vertical analysis

2007 2006

Sales

Cost of sales

Gross profit





Finance costs


Provision for Taxation

Profit for the year

100 %(89.81 %)

10.19%

11.57 %

(1.48 %)

(1.46 %)

(0.178 %)

(6.83 %)

1.39 %

(0.45 %)

0.94 %

100 %(86.47 %)

13.53%

10.57 %

(1.55 %)

(1.25 %)

(0.31 %)

(6.39 %)

4.61 %

(0.65 %)

3.96 %



BALANCE SHEETCOMMON SIZE VERTICAL ANALYSIS

ASSETS: 2006 2005

Non-current assets

Property, Plant and equipment

Long-term deposits

Current assets


Stock-in-trade

Trade debts

Loan and Advances

Trade deposits and short-term payments

Tax refund due from government

Other receivables



58.69 %

0.72 %

58.76%

2.78 %

22.32 %

6.87 %

4.49 %

0.17 %

1.49 %

0.048 %

2.108 %

0.97 %

60.01%

0.07 %

60.84%

2.37 %

20.83 %

6.03 %

8.45 %

0.11 %

1.78 %

0.09 %

--------

0.25 %

Total Current assets 41.24 % 39.92%

TOTAL ASSETS 100.00% 100.00%



EQUITY AND LIABILITIES: 2006 2005

Share capital and reserves

Authorized Capital 30,000,000

Ordinary shares of Rs 10 each

Issued, subscribed and paid-up capital

Reserves



Long term Finance and other payables


Current liabilities

Current portion of long term liabilities

Finance under markup arrangements s

Trade and other payable



7.37 %

11.81 %

5.84 %

25.02 %

30.66 %

0.49 %

3.696 %

35.11 %

3.73 %

1.29 %

43.83 %

100 %

7.27 %

11.64 %

2.85 %

21.76 %

34.13 %

0.54 %

4.11 %

35.19 %

3.24 %

1.036 %

43.57 %

100 %




Common size vertical analysis

2006 2005

Sales

Cost of sales

Gross profit





Finance costs


Provision for Taxation

Profit for the year

100 %(86.47 %)

13.53%

10.57 %

(1.55 %)

(1.25 %)

(0.31 %)

(6.39 %)

4.61 %

(0.65 %)

3.96 %

100 %(87.49 %)

12.51%

10.98 %

(1.34 %)

(1.86 %)

(0.35 %)

(4.52 %)

5.42 %

(0.77 %)

4.66 %





INTERPRETATION

Horizontal Analysis

Horizontal analysis of 2007 and 2006 at RWML shows that sales increased by 8.92 but

CGS increased by 13.21% that show rising prices of raw material. Due to this factor

Gross Profit increased by 18%, but firm was able to reduce its operating expenses,

financial charges, taxes and to increase other income by considerable amount. This

helped to fill gap created by CGS and as result NPAT increased by 74.25%. While

looking to balance sheet, fixed assets decreased by 2.88% but long term investments

increased by 30%. Investment in stock in trade decreased by 19.18%. Firm account

receivable increased that means firm was not good to collect receivable. Cash balance

increased by 28.39%. Non-current liabilities decreased by 13% that shows efficiency. But

in the short-term liabilities increased to 49%.

Horizontal analysis of 2006 and 2005 at RWML shows that sales increased by 51.45%

but CGS increased by 49.68% that show rising prices of raw material. Due to this factor

Gross Profit increased by 63.84%, but firm was able to reduce its operating expenses,

financial charges, taxes and to increase other income by considerable amount. This

helped to fill gap created by CGS and as result NPAT increased by 28.71%. While

looking to balance sheet, fixed assets decreased by 2.4% but long term investments

increased by 30%.



Vertical analysis

In Vertical analysis, CGS size has decreased from previous year that is good sign. Size of

gross profit in proportion to sales has increased and that is the case with operating profit

as well. But taxes and other charges size has decreased in proportion to sales. But

important thing to note is that NPAT has increased by 0.94%, 3.96% and 4.66% in 2007,

2006 and 2005 respectively proportion to sales. Investment in fixed assets look to

increased slightly but this factor is due to appreciation mainly and investment in fixed

assets has increased but element of depreciation has reduced its value. Long-term

investments and long term loans and advances are decreasing slightly in comparison with

previous year. Firm has more inventory than previous year. This is because of increase in

sales. Trade debts have lesser weight in total assets than in 2007 a compare to 2006 and

2005. Now interesting thing to note is that value of total current assets in total assets has

increased by 2% and 4% in proportion to total assets. SHE has increased from 51% in

2007 to 43.82% in 2006 and 43.57% in 2005 that mean owner’s contribution is equal to

that of creditor. Long-term liabilities are decreasing from 34.138% in 2005 to 30.66% in

2006 and 29.56% in 2005.



Ratios Analysis



Ratio Analysis

We have to analyze firm from five point of view.

Liquidity Analysis

Activity Analysis

Debt Analysis

Profitability Analysis

Marketability Analysis

LIQUIDITY ANALYSIS

FORMULASi. Current Ratio = Current Asset Current Liabilities

ii. Acid test ratio or quick ratio = Current Asset- Inventory Current Liabilities

ACTIVITY ANALYSIS

FORMULAS

i. Inventory turn Over = Cost of goods sold Inventory

ii. Average Age of Inventory = No. of working days Inventory turn over

iii. Average collection period = Account Receivable Average Sale per day

iv. Account receivable turn over = No. of working days Average Collection period



v. Account Payable turn over = No, of working days Average Payment Period

vi. Fixed asset turn over = Net sale Net fixed Asset

PROFITABILITY RATIOS

FORMULAS

i) Gross Profit Ratio on Sale = G.P x 100 Net Sale

ii) Gross profit ratio on cost = G.P x 100 C.G.S

iii) Operating Profit ratio = operating Profit x100 Sale

iv) Net Profit ratio = Net Profit after taxes x100 Net sale

v) Return on asset (ROA) = Net Profit after taxes x100Total asset

MARKET ABILITY RATIOS

FORMULAS

i) Earning Per Share (EPS) = N.P.A.T. - Divto P. share Out Standing Stock

ii) Dividend Pay out ratio = Dividend P.S x100EPS



CALCULATION OF RATIOS

LIQUIDITY ANALYSIS

It shows the firm’ ability to pay its short-term obligation on time.

CURRENT RATIO

2005 2006 2007

1: 0.74times 1: 0.84times 1: 0.98times

The ratios show that the company’s current liabilities and current assets are almost equal.

So the co. is in a position to meet its current liabilities on time.

QUICK OR ACID TEST RATIO

2005 2006 2005

1: 0.75times 1: 0.59times 1: 0.48times

The company’s quick ratio has increased. So the company is liquid position is very

strong.

ACTIVITY ANALYSIS

Activity analysis shows the speed through which various current accounts are converted

into cash and measures the efficiency of management that how productively it is utilizing

assets to generate desire results.



INVENTORY TURNOVER RATIO

2005 2006 2007

3.2times 4.8times 6.0times

The co. is converting the inventory 6.0times in 2007 into cash against the conversion of

4.8times of 2006 and 3.2times in 2005. It means that the sale of the co. has been

increased.

DEBTOR COLLECTION PERIOD

2005 2006 2007

92 days 87days 44days

Company’s credit collection performance is depended upon L/C by the buyer. So the

company’s debtor collection period mostly depends upon the opening of letter of credit.

CREDITOR’S TURNOVER RATIO

2005 2006 2007

10.3 times 11.50times 12.20times

This ratio shows that the co. is making payment to the creditors within reasonable time

period.



FIXED ASSETS TURNOVER RATIO

2005 2006 2007

0.93times 1.24 times 2.02 times

PROFITABILITY ANALYSIS

The efficiency of the firm can be analyzed through its profits.

GROSS PROFIT RATIO

2005 2006 2007

16.32% 15.59% 15.30%

Cost of goods sold has remain more or less constant while conversion rate of $ is being

higher therefore G.P. is very ideal.

NET PROFIT RATIO

2005 2006 2007

1.40% 1.57% 2.7%

The company’ profit is increasing with the passage of time. It is because of its 90%

exports.



OPERATING PROFIT RATIO

2005 2006 2007

10.57% 10.70% 10.85%

There is little increase in profit of the co. It is because of hiring of new employees which

increases the salaries of the co.

RETURN ON ASSETS

2005 2006 2007

2.69% 3.48% 7.49%

Return on assets ratio has increased because of increase in profits.

MARKETABILITY ANALYSIS

EARNING PER SHARE

2005 2006 2007

Rs.2.48 Rs.2.67 Rs.2.82

The shareholders are earning Rs.2.82 against one share in 2007, which is more

than in 2006 & 2005.



DIVIDEND DECLARATION

2005 2006 2007

6.7% 7.50% 7.50%

LEVERAGE ANALYSIS

Leverage analysis is used to measure the degree of indebt ness (up to what extent

the firm is in debtness).

DEBT RATIO

2005 2006 2007

57% 68.78% 76%

DEBT-EQUITY RATIO

2005 2006 2007

186% 322% 220%

RWML is heavily depending on the outsider’s financing.

COVERAGE RATIO ANALYSIS

Coverage ratio is used to see the ability of a firm to pay its fixed financial cost.i-e.

Interest payment

Lease payment t

Dividend to preferred stockholders

TIME INTEREST EARNED RATIO



2005 2006 2007

1.27times 1.36times 1.56times

RWML is paying interest 1.56times in a year, which is greater than previous

years.

DECISIONS ON THE BASIS OF RATIO

ANALYSIS

SHORT-TERM CREDITOR

On the basis of analysis it is wise to invest as a short-term supplier of funds in

RWML because firm’s current ratio and quick ratio are in positive. Moreover the

firm’s working capital is positive in both the years.

LONG-TERM INVESTOR

As the firm’s debt ratio is good in both the years’ I-e 76%, 72.54% and 68.78% in

2005, 2006 and 2007 respectively.. So, on the basis of this it is wise to invest in

RWML as long-term supplier of funds.

LONG-TERM EQUITY INVESTOR

As the co. operating and net profit ratios are increasing in both the years and

earning per share ratio is also increasing. Moreover the co. is declaring dividend every

share and has a strong image in the market, having a good market price of its stock. So

RWML is quiet suitable for the investor to invest in it.





COMMENTS AND SUGGESSIONS After a short careful analysis, I come to know that the financial position of

the co. is much better than the other weaving units in textile industry.

There is tough competition in textile exports. Buyers are demanding

quality and economy in their purchase contracts. They are becoming

quality conscious. RWML has vast markets of Japan, USA, Taiwan, H.K

therefore co. is going to the installation of 200 looms with complete back

up process as well.

RWML is saving a huge cost in the field of marketing because its Chief

Executive is extra vigilant. In this respect co. is saving more of less.

RWML has no marketing department to promote and introduce its

products in international market. There is a crucial need for having

disciplined and coordinated program of marketing to boost up the exports.

There is a need of searching the new customers in international market. So

that they can enhance their sale volume because of going to its expansion

as double capacity.
