This action might not be possible to undo. Are you sure you want to continue?
my every pressure of knowledge is one, most knowing” . (Al-Quran) I am very thankful to ALLAH Almighty who gave me the opportunity, courag e and confidence to explore more knowledge to complete this report and for His ( ALLAH) blessings that have brightened every part of my life, and my parents whos e prayers always supported me in every task of my life. While working on this re port, I was guided by my experience, knowledge and interest in this report. Beyo nd of all the material available I am very thankful to my respected and honorabl e resource person “Mr. Azhar Farooq” for giving me such knowledge about the subj ect that makes this report a very motivating. This becomes possible only due to his very unique style of conveying the knowledge and through his motivational be havior I am able to complete this complex task. Besides this I would like to thank other officials who showed their kind concern towards the completion of this report.
S/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
DESCRIPTION PAGE NO. Acknowledgement 01 Executive Summary 03 Introduction 04 Brief History Of The Company 05 Nature Of The Organization 06 Unique Feature Of The Company 07 Business Volume 08 Organizational Structure 09 Departments Student Worked More Application Of Class Room Learning Internee’s Learning In Organization Financial Analysis 25 SWOT Analysis 37 PEST Analysis 42 Suggestions For The Organization Conclusion 46 References 47
12 23 24
EXECUTIVE SUMMARY The Fatima Enterprises Ltd (FEL) is one of the largest and well reputed organiza tions in Textile industry and is working under the supervision of Mian Sheikh Ni shat Ahmad. Fatima Enterprises Ltd was incorporated in 13 Nov, 1976, as a public limited company nationalized but with the great effort of Sheikh Fazal Rehman i t was repurchased form the Govt. Fatima Enterprises Limited has taken ISO 9001 a s a first step towards total quality management and its implementation has been executed in all plants. Currently the spinning unit has been installed the capac ity of 40,000 spindles. Fatima Enterprises Ltd is producing three type of yarn; Cotton Yarn, PC Yarn an d Woolen Yarn. The main departments of Fatima Enterprises Ltd are as follows. Purchase Department Accounts Department Finance Department Marketing Department Export Department Sales Tax Department Fatima Enterprises exports its products in the following countries; Bahrain, Dubai, Hong Kong, United States of America, Turkey, Spain, Korea, Italy and Singapore etc. They export the Cotton Yarn, PC Yarn and Woolen Yarn to the above mentioned countries. There future plan is to maintain a stable level of pr ofit by increasing value to the customers and modernizing the equipments.
INTRODUCTION TEXTILE INDUSTRY IN PAKISTAN: -
Over the years, Pakistan is said to be the single crop economy i.e. cotton and t extile that claims the lion’s share in terms of the contribution in the national economy of Pakistan. Despite efforts to bring in diversification in country’s o verall economic get-up, the textile sector continues to be the most important se gment of the national economy. Its share in the economy, in term of GDP, exports , employment, foreign exchange earnings, investment and revenue generation altog ether placed the textile industry as the single largest determinant of the econo mic growth of the country. Increase in the cotton production and expansion of textile industry has been impressive in Pakistan since 1947. Cotton – bales increase from 1.1 million bales in 1947 to ten million bales by 2000. Number of mills increased from 3 to 600 and spindles from about 177,000 to 805 million similarly looms and finishin g units increased but not in the same proportion. It employs 50% of industrial l abor force and earns 65% foreign exchange of total exports. Pakistan’s textile i ndustry experts feel that Pakistan has fairly large size textile industry and 60 -70% of machines need replacement for the economic and quality production of pro ducts for a highly competitive market. But unfortunately it does not have any fa cility for manufacturing of textile machinery of balancing modernization and rep lacement in the textile mills which need to think about joint ventures for the p roduction of complete spinning units with china, Italy and production of shuttle less looms with Korea, Taiwan and Italy. The first textile commission, which was constituted by the first material law go vernment in 1960 had, inter-alia, recommended that an economic size textile unit
should preferably have 25,000 spindles and 500 looms. No new mill with only 12, 500 spindles and without looms should be sanctioned. However, no need was paid t o the advice by the sanctioning authorities with the result that an excess capac ity had tented to build up in the spinning sector. In 1992, a foreign consultant form was hired by the government to look into the stagnating conditions in the local textile industry. One of the observations of the foreign consultant was “Pakistan has failed to make real progress in the int ernational market and is being over taken by many of the neighboring competitor countries. The spinning sector, traditionally the core of the industry, is alrea dy in the crisis with many spindles lying idle and mills being forced to close. Worse still, this sector will be hit by the projected decline of its major marke ts in Japan and Hong Kong in the coming years.” Cotton textile industry has been premier industry in Pakistan and a majo r source of export earning and employment. It also helps in value addition to th e manufacturing sector of the economy. During the six years between 1993 and 199 8, production of yarn (in quantity terms) registered a steady annual growth rate of 302% in Bangladesh and 405% in India. On the contrary, Pakistan registered a growth rate of 101% per annum in yarn production although it ranked third after China and India in the global yarn production during the same six years. The rise in export of value-added products from Pakistan was another poi nt of encouragement for the textile sector. “The export of value-added products rose to 57.4% from 53.9% last year-a clear sign that we are moving in the right direction, “said the Chairman of all Pakistan textile mills association. Pakistan’s textile sector is getting rid of old impediments and gearing itself up for the new opportunities in the new trade regime . • BRIEF HISTORYOF THE COMPANY
The Fatima Enterprises Ltd (FEL) is one of the largest and well reputed organiza tions in Textile industry and is working under the supervision of Mian Sheikh Ni shat Ahmad. Fatima Enterprises Ltd was nationalized in 1972 but with the great e ffort of Sheikh Fazal Rehman it was repurchased form the Govt. and incorporate d in 13 Nov, 1976, as a public limited company. Fatima Enterprises Ltd has taken ISO 9001 in 1998 as a first step towards total quality management and its imple mentation has been executed in all plants. Currently the spinning unit has been installed the capacity of 60,000 spindles. At initial stage, when the company was taken over, it was very small company, ha ving authorized capital of 700000 shares @ Rs. 10 each in 1977 with issued capit al of 50000 shares @ Rs 10 each. But now, it has gotten progress and reached at top level. At present, Fatima Enterprises Ltd. is well known enterprise, having authorized capital of 25000000 shares @ Rs 10 each and issued and subscribed cap ital of 14231052 shares @ Rs. 10 each. Since well before the1950s, Fatima Enterprises has graduated from raw c otton ginning to spinning and finally into weaving. They now operate 3 ginning f actories, 2 Spinning Units and 1 weaving Unit. Fatima Enterprises has built a reputation of excellence in quality and commitment to leadership since its establishment. In just a matter of a few year s they have established their selves as one of the leading manufacturers and exp orters of superior quality cotton yarns in Pakistan. As manufacturers of ‘A’ gra de knitting/weaving cotton yarn, Fatima weather it is a dream to be the best or commitment of company with textile sector Fatima did achieve its deserving statu s where it stood up as one of the major exporter of Pakistan. It got its place-p aved ways for further developments with ever improving quality and never looked back. YES it did it!!!!!!!
• NATURE OF THE ORGANIZATION There are two types of the business Manufacturing Business Merchandising Business Fatima Enterprises Limited is a manufacturing concern firm which is prod ucing cotton yarn, woolen yarn and PC yarn which is exported to different countr ies. Fatima Enterprises Limited is manufacturing products in Okara, Multan, Muz zafar Ghar and Rahim Yar Khan. Cotton yarn is producing in Okara and Woolen and PC Yarn is producing in Muzzafar Ghar. • UNIQUE FEATURES OF THE COMPANY: -
One of the leading manufacturers and exporters of superior quality cotto n yarns in Pakistan. Fatima Enterprises has built a reputation of excellence in quality and c ommitment to leadership in the year 1991. Over the years they have built a reputation of being one of the leading manufactures and exporters of ‘A’ grade knitting/weaving cotton yarn while maint aining USTER top 5% results from Pakistan. Their present spinning unit, located in the industrial city of Muzaffar Garh, comprises of 36,000 operational spindles and they hope to expand by progre ssing towards spinning in the near future. Strict Quality Management has helped them in making their final products superior and competitive granting them the edge needed to compete in global mar kets. Fatima Enterprises received ISO certification in 1998. All the units ever growing enterprise are ISO certified. They also have started workout for ISO 14000 Social Program. They have Cotton testing equip. HVI Spectrum for fiber length, cotton fi neness, color grading, trash etc…. They have Yarn testing equip. Uster Tester 3 & 4 for checking irregulari ty, imperfection & hairiness of yarn etc….. • BUSINESS VOLUME: -
The Fatima Enterprises Ltd (FEL) is one of the largest organizations in Textile industry at initial stage, when the company was taken over, it was very small company. At present, Fatima Enterprises Ltd. Is well known enterprise sub scribed capital of 14231052 shares @ Rs. 10 each? Having authorized capital of 2 5000000 shares @ Rs 10 each and issued and subscribed capital of 14231052 shares @ Rs. 10 each. They now operate 3 ginning factories, 2 Spinning Units and 1 weaving Unit. 1) Fatima Textile Unit #2 Okara 2) Solvent Plant Extraction Plant 487-A Vehari Road Multan 3) Fatima Textile Unit #1 Muzaffar Garh, 4) Ginning Section &oil Mill Bahawalpur Road Multan 5) Ghee Unit#1 Nasir Abad Bahawalpur Road Multan 6) Ginning Section & oil mill Industrial Area Raheem Yar Khan 7) Ginning Section &oil Mill Dera Budoo Bwp road Multan 8) Fatima Sugar Mill Muzafar Garh At present they are one of the leading manufacturers and exporters of su perior quality cotton yarns in Pakistan. Fatima Enterprises exports its products
in Bahrain, Dubai, Hong Kong, United States of America, Turkey, Spain, Korea, I taly, and Singapore etc. They export the Cotton Yarn, PC Yarn and Woolen Yarn to the above mentioned countries. There future plan is to maintain a stable level of profit by increasing value to the customers and modernizing the equipments.
INTRODUCTION OF THE DEPARTMENT
During my internship mostly I have worked in the following departments. • Finance Department
This is the major department of the company. This is located in Fatima E nterprises Ltd head office Multan. It prepares different kinds of financial repo rts and gives information to management for decision making purpose. Finance department prepares the Income Statement, Balance Sheet, Trial Balance, Cash Flow, Production report for the whole month, stock taking report, yield com parison report etc. these all reports are useful for the management to make prod uction plan, financing decision and other important matters. The head of this de partment is Finance Manager. Objectives: Following are the main objective of finance department: To prepare monthly and half yearly reports To keep the record of inventory and stock To maintain a liquid position To maintain adequate cash to run the operations of business To reconcile the bank statements To make payments to the suppliers To deal with sale tax and income tax departments Preparation of bank payment and bank receipt vouchers Prepare profit and loss accounts and Balance sheet Keep record for the payments of salaries
COMPONENTS OF FINANCE DEPARTMENT: Finance department are consists on the following sections: Payable, Contraction Bank negotiation and reconciliation Store costing Excise PAYABLE, CONTRACTION: In this section usually payable is paid to the supplier of all goods including s tationary, maintenance goods, cement etc. Payable is made according to the contr act and instruction of the CFO.
BANK NEGOTIATION AND RECONCILIATION: This section starts working when documents reach from bank to head office. Docum ents are recorded in documents receipt register and in bank register. A report i s given to the CFO on daily basis about the customer and payment date. He makes decision either to grant discount to him or not. STORE COSTING: Goods receipt note, the store costing section receives the related bills. They a re checked against purchase order and Performa invoice in terms of quantity, spe cification, price etc. After this, a bank payment voucher is prepared and sent t o this section, which issue the checks to the related parties and posts in the l edger. EXCISE: Excise section deals with the outgoing products for issuance of Gate pass. This working of excise section starts after sale, when loading program is received fr om export sale and local sale processing. According to this program Gate pass is prepared and issued to the go-down keeper. After issuing a Gate pass, its detai ls are recorded in the register and then sale invoice is prepared in which actua l value and sale tax value is mentioned.
Export means the exchange of goods or products from inside country to any foreig n country with any currency equal to the value of product or goods. There is the demand of Fatima Enterprises finished products all over the world. They try to meet the demands of the world. They also try to compete with Quality and on time delivery in any environment according to its respondents. Fatima Enterprises ex ports its products in the following countries; Bahrain, Dubai, Hong Kong, United States of America, Turkey, Spain, Korea, Italy and Singapore etc. They export the Cotton Yarn, PC Yarn and Woolen Yarn to the above mentioned coun tries. INTRODUCTION: Export section has an important value for any type of business. This sec tion helps to earn maximum for its owner. The company has the manager of export and import. The Import/export manager Dr. Nafees Iqbal is an asset of Fatima ent erprises limited. He performs his duty in different manners than others. There i s a one assistant working under the import/export manager. They perform all the activities of import and export with the help of top management. Export Functions: The following are the main functions, which an export department performs: To build good relationship with the buyers. Co-ordination with the buyers and the production department. Getting orders from the buyers and try to fulfill them in time. Improve the quality of the product with the interaction of buyer and the production department. Prepare and arrange the documents of export. Prepare the documents for the taxation and excise purpose. Objectives: Following are the objectives of export section: To survive in the world market. To earn foreign exchange for the development of the country.
Increase the export to obtaining the optimum profit. Export for the growth of the company as well as the country. To avail the opportunities the foreign market. Export documents contain the following things: Exporting of any commodity in the foreign market was very complex and risky in t he past. But now the export documentation provides the security from different r isks. When the goods are exported, a number of documents are to be prepared. Contract Bill of Exchange Invoice Packing list Bill of lading Copy of Letter of Credit Transportation documents Bill of Lading: Bill of Lading is also the important document in export. Fatima Enterprises load s the products from Port of Karachi. This document also includes the shipper/exp orter address, Consignee (to the order of bank), port of loading, also port of d ischarge or place of delivery, container #, detail of product, origin of country , purpose of export and gross weight etc.
Copy of Letter of Credit: Letter of Credit defined as in simple words “THE TRUST OF PERSON ON OTHER PERSON” The copy of “Later of Credit” is the most important in the document of Export. L etter of Credit is the guarantee for Exporter from Importer through bank. Import er opens the Letter of Credit in the bank and pays negotiable amount for this se rvice provided by the bank. The Importer pays the negotiable amount to bank betw een 2% to 4%. He also gives the sum of money to Broker which is also negotiable. They deal with any party through band to bank. The importer opens the L/C by giving the terms and conditions which are suitable for him/her. Now the Exporter sends some amendments to Importer through bank. A mendment is the change from Exporter in the terms and conditions showed by the I mporter. Some time the Importer accepts the terms and conditions according to th e Exporter. In Fatima Enterprises all the work of Import and Export is properly done. They h ave well established department separate from other sections. Types of letter of credit: Confirmed or unconfirmed Fixed or Unfixed or Revolving Clean or Documentary Revocable or Irrevocable
When any demand is raised at the mills, it is signed by the purchase committee. Similarly head office demand is signed by the head of the department and these a re sent to the purchase committee for approval. After approval, these are sent t o the purchase office where these demands are classified in to local and out sta
tion demands. The outstations demands include out of Multan or out of Pakistan. The demands ou t of Pakistan are sent to the head office. Big items such as tin plates, chemica ls are purchased by calling tenders and the lower tender is accepted. Other pur chases like oil, cotton seeds and chemicals are purchased by collecting the rate s from different brokers and other related agencies and then concerned item is p urchased. When selling party is approved purchase order is sent to that party. When goods are received at factory, delivery challan book entry is made. Two copies are sen t to the store in charge at mills. Most of the goods from local markets and out station are purchased on credit basis. REJECTION OF PURCHASES: All the items purchased are sent to the perspective departments and are checked by the head of the departments e.g. chemicals, Oils being demanded by the produc tion department. Then chief chemist checks those chemicals. If the item is up to standard then it is accepted by preparing the quality repor t and sent to the commercial department. Similarly all the cash purchases are su bject to the approval of quality. If goods like chemicals are out of standard then rejection report is made by the checking department and sent to the purchase department.
CASH PURCHASES: Some goods are purchased on cash basis for the mill needed. In this case bill is received after making the cash payments and bill is stamped as "CASH PAID". These purchases include office stationary equipments, and some time repairing it ems. BOOKS & REGISTERS WORKING: Separate ledgers are maintained for recording all sales and purchases items. • Store spare parts. • Electric goods. • General goods. • Packing materials. • Individual party ledger. The following information is recorded in above registers:• The date, name of items and department. • Demand number. • Date of purchase. • Name of party. • Quantity of items. • Rates of purchase items.
• ACCOUNT DEPARTMENT Fatima enterprises has separate account department under the control of chief Ac countant who is responsible for the financial affairs of the organization and to keep control on all inflows and outflows of cash and funds. Similarly he is res ponsible for tax affairs of the corporate affairs which are handed by the secret ary of the company, Mr.Iqbal. His main assignment is to handle the shareholder a nd the Board of Director s meetings. He also prepares the Agenda and papers of t he meeting after this he prepares the minutes of the meetings of the Board of Di rectors. Accounts Department: • Chief Accountant. • Accountant. • Assistant Accountant. • Computer Operator. Objectives: • To provide a permanent a systematic record of the business transactions. • The periodically results as to profit and loss should be ready and accur ate. • To keep the financial data up to date so that it can be ready to show th e higher management whenever demanded. • To provide the media between production and marketing. • It is useful for the future planning. • To enable the trader to compare the different items such as sales, purch ase, opening stock and closing stock of one period with similar items of proceed ing periods. • It is useful for preparing arithmetical accuracy of the transaction. • To provide most reliable information about business. • To provide correctness of the assets and liabilities. FUNCTIONS OF ACCOUNTS DEPARTMENT: The major functions of accounts department are as under:• Maintaining the record of the account receivable. • Record of payments by bank. • • • • • • • • Record of payments by cash. Maintaining the record of raw material purchased. Maintaining the record of sale of Yarn, waste etc Record of store purchases. Record of insurance. Record of the expenses i.e., manufacturing and marketing. Record of wages and salaries. Preparation of financial statements.
VOUCHERS: The major vouchers which are prepared in the Fatima Enterprises:• Adjusted Journal Voucher. • Cash Payment Voucher. • Cash Receipt Voucher. • Bank Payment Voucher. BOOKS: The following are the Books, which are maintained by the Enterprise: • Cash Book. • General Ledger. • General Journal.
Local Customer Ledger. Bank Book.
CASH BOOK: In Cash Book all cash transaction are entered. This book has two sides:• Payment Side. • Receipt Side.
BANK BOOK: Most of the business is carried out through banks. So this book is maintained to record all the transaction occurred in the bank against the mill. It shows the inflows and outflows of the cash at the bank, in sub ledgers the posting is made daily. I can see the bank balance of any bank with which I have an account from the bank book at any time because separate sheets have been allocated for separ ate banks. GENERAL JOURNAL: All kind of daily transactions occurred at the mill are recorded in this book an d then transactions are transferred to their concerning ledgers against concerni ng accounts. GENERAL LEDGER: Following are to be maintained in the general ledger:• Allied Bank limited Hussain Agahi. • Muslim Commercial Bank Hussain Agahi. • National Bank of Pakistan Mumtazabad. • Cash Receipt. • Sonahri Bank Ltd. • Predential Commercial Bank Ltd. • Askari Commercial Bank Ltd. • Platinum Bank Ltd. • Yarn sale • Waste sale • Local sale parties • Sales tax • Export sale • Yarn stock • Cash payments • Profit & Loss Account. From disposal of assets. • Profit & Loss Account. From disposal of stores. • Financial Charges. 6. APPLICATION OF CLASS ROOM LEARNING: -
During my 8 weeks internship in Fatima Enterprises Limited I have seen t he application of class room learning in the organization. I have discussed fou r management functions Planning, Organizing, Leading and controlling in the clas s room. In Fatima Enterprises Limited I have seen how management practically do these functions in the organization how they plan their activities, established strategies to achieve those goals how tasks are grouped how they motivate peopl es to communicate them to achieve their goals. How they evaluate the preference of the employees in the organization. I have discussed First Line Manager, Midd le Manager and Top Manager in the class room. I have seen them in Fatima Enterp rises Limited how they work in the organization. Organization culture always affect people working in the organization I have practically how the culture of the organization affect people in the organi zation. Environment always affects the performance of the organization I have s
een how the external and internal environment of the organization affect on its performance. It is always difficult to take decision in uncertain and complex en vironment. Currently due to the uncertain environment of the Pakistan Top of Fa tima Enterprises Limited are facing difficulties to take the right decision. I have discusses in the class room how organization go global and I have seen it i n Fatima Enterprises Limited because I have worked in import and Export Departme nt of Fatima Enterprises Limited. I have discussed Management by Objectives in Fatima Enterprises Limited decision are made at Top level. First line Manager, M iddle Manager and employees are not invited to participate in making plans to ac hieve the goals. In international Finance I have discusses how trading is done between th e parties at international level and which certain documents are required to do these trading safely means to hedge the different types of risks which types of contracts and documents are used. Fatima Enterprises Limited is doing the impor t and export in textile sector so I have practically seen how they use certain d ocument like Letter of Credit, Bill of lading, payment Draft, Acceptance Draft, Bill of Exchange, Air way Bill etc. in their business to hedge the risk how the organization used open account in international trading how government institute are providing help to different organization to increase the export of the coun try. In the accounts department I have seen how different types of vouchers, Ledger, Trail Balance, Income Statement, and Balance Sheets are prepared which I have st udied in the Financial Accounting. How the calculation of markup on Bank loan i s done and how the bank reconciliation is prepared in the organization I have se en all these in Fatima Enterprises Limited during my internship. 7. INTERNEE LEARNT IN THE ORGANIZATION
During my 8 weeks internship I have worked in different departments of Fatima En terprises Limited there I learnt how to work in a team to achieve the goal of th e organization how to behave in different situation how to follow the culture of the organization. In the Accounts department I have learnt how to prepare Purc hase Vouchers, Sales Vouchers, Journal Vouchers, Bank payment Vouchers, Bank Rec eipt Vouchers, Ledgers and Trail Balance in Visual Basic software. In the Finance Department I have learnt how to prepare Bank Reconciliation of an organization and calculation of markup on Bank Loan. In the Sales Tax Departme nt I have learnt how to calculate and claim the refund on the Sales Tax through the software of Refund Claim Preparation System on Invoices and how to submit ta x through online by using the web site of www.fbr.gov. In the Export Department I have learnt how to use different types of documents t o hedge the risk in international trading, how to open Letter of Credit, Open Ac count to do the trading at international level and how to deal with the Brokers, Carriers, Middle man and Different parties at international level to do the tra ding. In the Purchase Department I have learnt how to deal with the different types of sellers to purchase the Raw Material for the production of the product and how to set the payment conditions to the creditors and how to make the payments avai lable at time.
The figures in financial statements, do not tell the whole truth. To obtain mean ingful information relationship between relevant figures must be examined. For
instance: • Relationships which help to find the liquidity of the business. • Relationship which reflect the effectiveness of the financial policies a dopted and the potential fund raising ability. • Relationships which help to evaluate the effectiveness of operational po licies. To achieve the aim, I undertake Ratio Analysis. Ratios provide the means of sho wing the relationship which exists between figures on the Balance Sheets and Inc ome Statements. The analysis is undertaken to assess important characteristics of business like liquidity, solvency and profitability. A study on these aspect s enables drawing conclusions as to financial requirements and capabilities of b usiness units. Ratios may be classified in a number of ways to suit any particular purp ose. Different kinds of ratios are selected for different types of situations. Liquidity Ratio Activity Ratio Solvency Ratio Profitability Ratio
Liquidity Ratio Liquidity ratios are used to measure a firm’s ability & solvency of the firm to meet short-term obligations. They compare short-term obligations to shor t-term resources available to meet these obligations. It consists of two ratios Current & Quick ratio. Years CR QR 2004 0.99 0.47 2005 0.96 0.34 2006 1 0.54 2007 0.9 0.36 2008 0.89 0.27
Current ratio signifies the ability of a firm to cover its current liabi lities with its current assets. Only in 2006 current ratio of the firm was 1 oth erwise it is less than 1 which shows that Fatima Enterprises Limited does not ha s sufficient cash to pay its short term obligations. The Quick ratio signifies t he ability of a company to meet its current liabilities out of its current asset s. The quick assets figure includes all current assets except inventories and pr epayments. The purpose of excluding the inventories is to visualize
whether the company is capable of meeting its liabilities quickly because the in ventories take much time to be converted into cash. The quick ratio of Fatima En terprises Limited also showing that firm is not able to pay its short term oblig ations quickly because only in 2006 it was 0.54 otherwise it is less than 0.54 which shows Fatima Enterprises L imited un ability pay its short term debts. Net Working Capital Ratio Net working Capital measures the financial position of the firm, weather it is able to pay back other expenses after paying back its current liabilities . It is measured as current assets - current liabilities.
2005 2006 -87987 24482
2007 2008 -382935 -625555
It is clear from the table and graph of the net working capital that only in yea r 2006 the firm has positive net working capital. In year 2006 the firm paid hug e amount of interest expenses due to which it suffered from loss but its net wor king capital in year 2006 was positive. In year 2008 Fatima Enterprises Limited has deficit of more than 600000 from net working capital. From net working capit al I can conclude that Fatima Enterprises Limited is not performing well from la st five years because although in year 2006 Fatima Enterprises Limited had positive net working capital but it was not enough to pa y its other expenses as well as long term obligations. Activity Ratio Activity ratios are also known as Efficiency Ratios or Turnover Ratios o r Asset Management Ratios. They relate basically to how efficiently a firm is us ing its assets. Years FAT TAT IT 2004 4.48 1.87 5.65 2005 2.18 0.96 2.44 2006 1.9 0.77 2.6 2007 2.02 0.92 2.61 2008 2.27 0.9 1.94
The fixed assets turnover ratio measures the efficiency of long term investment. It is also known as long term (investment) activity ratio. It reflects the le vel of the sales generated by investment in productive capacity. The level and trend of this ratio are affected by characteristics of its components.
From my analysis I have concluded that fixed assets turnover of Fatima Enterpris es Limited is decreasing continuously it means the firm is not using its fixed a ssets efficiently to generate profit and unable to pay back its long term obliga tion at time. Total assets turnover is used to find the relation ship of net sa les to total assets it is also known as capital turnover ratio. Total assets tu rnover of Fatima Enterprises Limited is also decreasing and inventory turnover h as decreased from 5.65 to 1.94 which shows the performance of Fatima Enterprises Limited is decreasing from previous five years. Solvency Analysis Leverage ratio signifies how much debt a company has created against its equity. In fact the creditors and the lenders are very much concerned about this. Debt r atio is very much important for the creditors’ point of view. Total debt include s both current liabilities and long term debt. Years D.R D/E 2004 85 57 2005 77 63.3 2006 85 117.2 2007 88 149.3 2008 88 170.5
Debt ratio measures the percentage of funds provided by the creditors. Creditors prefer low debt ratios because lower the ratio the greater the chances that the creditors will not bear the losses in the event of liquidation. Stock holders o n the other hand may want more leverage because it magnifies expected earnings. Debt ratio of Fatima Enterprises Limited is very high which is not a goo d sign for the company because debts ratio is showing that firm is depending upo n the debts. Long term debt paying ability of the company basically gives the indica tion that the company in the long run will be able to fulfill the financial as w ell as other obligations that are accrued on that. It usually shows the trend an d direction of operations that the company’s management is responsible for. Also tells about the capital structure of the organization. Debt ratio and debts to equity ratio of Fatima Enterprises Limited is showing that firm is unable to us e optimal capital structure because debt ratio of Fatima Enterprises Limited are very high and also debt to equity ratio of Fatima Enterprises Limited is increa sing continuously which shows that firm is depending upon debts and also not usi ng these debts efficiently which is increasing the burden of Fatima Enterprises Limited.
Interest Coverage Ratio Interest Coverage Ratio measure the protection available to creditors as the expend to which earning available for interest cover interest expenses. Years TIER 2004 233 2005 183 2006 75 2007 106 2008 109
Time interest earning ratio of Fatima Enterprises Limited shows that in 2006 it was able to pay its interest expenses to its creditors on time because i ts liquidity position was good to pay its short term obligations but in 2007,200 8 the efficiency of the firm to pay its interest expenses on its loan to its cre ditors has decreased again. Only in year2006 the firm paid its interest expenses in 75 days although the liquidity position of Fatima Enterprises Limited in previous two years was not allowing the Fatima Enterprises Limited to pay interest expenses in that yea r but Fatima Enterprises Limited paid its interest expenses in 2006 on time due to that the firm suffered from loss in 2006. From previous two years the performance of the firm was not good due to that the firm was not paying its interest expenses to its creditors on time which was in creasing pressure from the creditors on the firm and the good will of the firm w as also affected by non payment of interest expenses so Fatima Enterprises Limit ed was compelled to pay its interest expenses to the creditors in year 2006 in a difficult period. Due to that Fatima Enterprises Limited suffered from loss in that year. Profitability Ratio Profitability ratios show the combined effect of liquidity, asset manage ment & debt on operating results Profitability Ratios are used to check the firm ’s efficiency in generating profits. These ratios analyze the profitability from different dimensions and tell that whether the firm is meeting its expenses suc h as interest and other costs and moreover its generating some profit out of it. How effectively, the firm is utilizing its assets. Years GP OP NP 2004 6.68 4.72 2.82 2005 7.54 6.17 2.68 2006 6.47 4.81 -0.89 2007 7.98 6.68 0.45 2008 9.65 8.32 1.52
A company’s net profit must be sufficient enough to meet the requirements of app ropriations and the disbursement of a handsome amount as dividend. Net profit o f Fatima Enterprises Limited is decreasing continuously in 2006 Fatima Enterpris es Limited has suffered from net loss but in 2008 it has improved its performanc e. Operating profit of Fatima Enterprises Limited is fluctuating frequently
in previous five years because in 2006 the firm’s operating profit was at the l owest level so the firm suffered from loss in 2006 but it has improve a lot in n ext two years. Gross profit of Fatima Enterprises Limited decreased only in year 2006 b ecause the over all position of the firm was not good in that year but in later year it has improve its performance and growth of the firm. Return on Assets & Return on Equity Ratio The return on assets compares income with total assets. Years ROE ROA 2004 23.5 3.5 2005 9.8 1.2 2006 -19 -1.39 2007 1.84 0.001 2008 14.6 0.008
Return on assets can be interpreted in two ways. First it measures management a bility and efficiency in using the firm assets to generate profit. Second it re ports the total return accruing to all providers of capital independent of the s ource of capital. Return on equity compares net profit after taxes to the equity that shar e holders have invested in the firm. This ratio tells us the earning power on t he shareholders book value investment and it frequently used in comparing two or more firms in the industry a high return on equity reflects the firm acceptance of strong investment and effe ctive expenses management. If the firm has chosen to employees a level of debts that is high by industry standards a high ROE might simply be the result of ass uming excessive financial risk. Earning Per Share Earning per Share means how much a firm is earning against each share wh ich is invested by the shareholders in the firm. Common shareholders are direct ly consult with the earning per share of the firm. Years EPS 2004 6.68 2005 3.08 2006 -5.05 2007 0.5 2008 4.52
Earning per Share is commonly used to measure the performance of any firm. It i s used to compare operating performance of the firm. It shows that how much a f irm is earning against each share which is directly related to the shareholders of the firm because they received dividend on their investment in the firm. Pre ferred stockholders are not affected by the earning per share of the firm becaus e they received a fixed percentage of profit regardless of per share profit. Co mmon stockholders are directly affected by the earning per share of the firm bec ause they share profit as well as the loss of the firm. Earning per Share of Fa tima Enterprises Limited has decreased till 2006 but after that it has improve i ts performance. In 2006 Fatima Enterprises Limited suffered from loss due to th at its earning per share in that year was negative. Horizontal Analysis
From horizontal analysis of the Fatima Enterprises Limited I have conclu ded that over all performance of the firm from previous five years is not very g ood. Although after suffering from loss in 2006 the firm has improved its perfo rmance but it is unable to maintain its growth at the standard level. Cost of s ale of the firm has increased continuously, operating profit has decreased, and firm is using high debts due to that the interest expenses of the firm to pay th e creditors are high. Fatima Enterprises Limited is not using its assets efficiently because f rom my analysis I have concluded that Fatima Enterprises Limited is unable to ge nerate enough profit from its fixed assets to pay back its long term liability. The performance of the fixed is not up to standard that’s why firm is facing di fficulties from previous five years. From my analysis I have concluded that although the firm is getting net profit after suffering from loss in year 2006 but this profit is not sufficient to pay the enough amount of dividend to its common shareholders and to pay back the loans to its creditors which is affecting the over all performance of the fi rm as well as the good will of the firm in the textile industries. Currently the restriction on the export of textile products from the gov ernment has affected the performance of Fatima Enterprises Limited because it no rmally depends upon its exports but due to the restriction from the government i t is unable to export its products. From the local sale of its product Fatima E nterprises Limited is unable to produce enough profit to maintain its growth in the textile industries. Vertical Analysis Vertical analysis are very vital for measuring the performance of different indu stries or different firms in an industry because in the vertical analysis the pe rcentage are calculated with respect to sale in income statement and total asset s in balance sheet which eliminate the problem of size of the firms in an indust ry in different industries. That is why vertical analysis is commonly used for measuring the performance of any company. From vertical of Fatima Enterprises Limited I have concluded that the pe rformance of Fatima Enterprises Limited is not good from previous five years. I n the vertical analysis I have calculated the values of all items of Balance She et and income Statement in percentage with respect to the sales and total assets . From these calculations I come to know that the cost of sale has increased mo re than the percentage increase in sale. Fatima Enterprises Limited is depending upon high debts due to that it h as to pay more interest expenses to the creditors which is reducing the percenta ge of profit of the firm. Fatima Enterprises Limited is unable to receive its r eceivable on time due to which it faces shortage of cash time by time and unable to pay back to its creditors on time. It means its average collection period a s well as the average payment period of the firm are not good. On the basis of my conclusion I can say that the overall performance of Fatima Enterprises Limit ed is not good from previous five years. Conclusion: From Ratio Analysis, Horizontal and Vertical Analysis I have concluded t hat the overall performance of Fatima Enterprises Limited is not good. Although Fatima Enterprises Limited after suffering from loss in year 2006 has improved its performance but it will take time to get back its growth on track. Cost of sale of a company has increased which has reduced the gross prof it of the firm. Fatima Enterprises Limited is unable to use its fixed assets ef ficiently due to that it is unable to generate enough profit from its fixed asse ts to pay back its long term liability. Fatima Enterprises Limited is mostly de pending upon high debts which is not a good sign because it has to pay high amou nt of interest to the creditors on its loan. Liquidity and profitability analysis shows that firm is unable to pay ba ck its current liability from pervious five years. Dividend paid by the firm to
its shareholders is not so much attractive to attract the new investors. In ye ar 2006 the shareholders have to bear net loss of the firm. Although the firm is improving its performance but it will ta ke time to get back its lost image. Recommendations: Liquidity of the firm is weak due to the availability of cash to the fir m to pay back its short term obligation which should be improved. Account Receivable are not received on time which mean average collectio n period should be improved. Fatima Enterprises Limited is unable to generate enough profit from its fixed assets which means either the fixed assets are out dated or the workers ar e not skilled to use these assets. Inventory turnover of the firm is very low which shows its sales is not good which should be improved Fatima Enterprises Limited is using high debts on which it has to pay hi gh amount of interest and it is also discouraging for the new investors. Fatima Enterprises Limited should use optimal capital structure it means they should be balance between debts and equity finances Gross profit of the firm can be improved by reducing the cost of goods s old Fatima Enterprises Limited should do its operation efficiently to increa se its operating profit Net profit of the firm can be increasing by reducing the interest expens es, Cost of goods sold and Tax
STRENGTHS There are following strengths of Fatima Enterprises Fatima enterprises limited is the old company and has goodwill in the ma rket. The installed capacity of the textile units is enough and they also exte nding its capacity by installing 40,000 spindles in the Textile Unit II in Okara District. Approximately all the oil of Fatima Enterprises is sold to army of Pakis tan. Due to one customer they save a lot of expenses in respect of Marketing and Promotion. There is qualified and professional staff in all the departments. Environment is very friendly in the Fatima Enterprises, which creates th e sense of responsibility among the employees. Employees have the easy access to the Chief Executive in case of any pro blem. The weaving unit of the company started its production at the end of Aug ust. FEL has modem machinery to check the quality of yarn.
WEAKNESSES Machinery is very old in textile as well as in the ghee units. Due to th is reason the efficiency of Fatima Enterprises in the production department is v ery poor. Employees of Fatima enterprises limited are not satisfied to their salar ies. The salary package is not competent so, the employees seek towards the good offer in any other organization. Fatima enterprises limited has most of the units in the urban areas as o ne unit is situated on Vehari road, Mumtazabad Multan. So, there are no tax holi days or any concession in the tax. Even the manager has not free hand in the simple nature matter facing by the organization or the employee of organization. Production cost is very high due to the old machinery. So, the profit is very low due to high cost of goods. Centralization of authority is the major weakness; the Chief Executive o f the company is all in all of the organization, even in the simple nature of ma tter the chief executive takes decision. There is no participation of employees in decision making for the better ment of the organization. The staff is very short than needed, especially in the Import and Export section. No proper human resource management.
OPPORTUNITIES Fatima Enterprises Limited can establish its own weaving department to c apture local and foreign market as well. They can boost up their exports and can increase their profitability, be cause they have the potential to do some thing. They can install the new units in the tax holiday areas and can earn max imum in production. Raw material is easily available in home country due to the export restr ictions of government and due to good crop of cotton. They are financially sound companies in Pakistan, So, they can get the d ifferent advantages from the trust of banks in the matter of Import of the oil, tallow and chemicals etc. Due to the trust of banks on the Fatima group they can install the new u nits with the help of banks. The markup on loans of banks is very low, so they can avail this opportu nities. Fatima Enterprises Ltd. is ISO-9001& 9002 certified company so it has a chance to increase its exports all over the world. There will be an increase in its market in year 2005 after launch of fre e trade by WTO. THREATS High cost of production is also the threat of Fatima enterprises limited . Foreign investment in textile sector in Sri Lanka, Bangladesh and India is a danger in future for FEL. An increase in the China’s textile products is a danger for FEL.
Trading of quota as a commodity has been a great hurdle for exports. Due to shut down of electricity the production of Fatima enterprises lim ited is much disturbed. High competition in the international markets is also the threat for the Fatima enterprises.
PEST Analysis is very important that an organization considers its environ ment before beginning the marketing process. In fact, environmental analysis sho uld be continuous and feed all aspects of planning. The organization s marketing environment is made up of: 1. The internal environment e.g. staff (or internal customers), office tech nology, wages and finance, etc. 2. The micro-environment e.g. my external customers, agents and distributor s, suppliers, my competitors, etc. 3. The macro-environment e.g. Political (and legal) forces, Economic forces , Sociocultural forces, and Technological forces. These are known as PEST factor s.
Political Factors: -
The political factor has a huge influence upon the regulation of busines ses, and the spending poIr of consumers and other businesses. I must consider is sues such a 1. How stable is the political environment? 2. Will government policy influence laws that regulate or tax ymy business? 3. What is the government s position on marketing ethics? 4. What is the government s policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU, NAFTA, ASEA N, or others?
Economic Factors: 1. Marketers need to consider the state of a trading economy in the short a nd long-terms. 2. This is especially true when planning for international marketing. You need to look at: 3. Interest rates. 4. The level of inflation Employment level per capita. 5. Long-term prospects for the economy Gross Domestic Product (GDP) per cap ita, and so on. Socio cultural Factors: The social and cultural influences on business vary from country to coun try. It is very important that such factors are considered. Factors include: 1. What is the dominant religion? 2. What are attitudes to foreign products and services? 3. Does language impact upon the diffusion of products onto markets? 4. How much time do consumers have for leisure? 5. What are the roles of men and women within society? 6. How long are the population living? Are the older generations Ialthy? 7. Do the population have a strong/Iak opinion on green issues? Technological Factors: Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: 1. Does technology allow for products and services to be made more cheaply and to a better standard of quality? 2. Do the technologies offer consumers and businesses more innovative produ cts and services such as Internet banking, new generation mobile telephones, etc ? 3. How is distribution changed by new technologies e.g. books via the Inter net, flight tickets, auctions, etc? 4. Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc? • SUGGESTION FOR THE ORGANIZATION: -
After doing internship in Fatima Enterprises Limited as a manager I will suggest Decision should not be centralized, to achieve the goals and plans manag ement should be involved in decision making Ditterent types of incentive should be given to the employees to make th em efficient Promotion of the product should be done at local as well as internationa l level Team work should be encmyaged A proper training programe should be introduced to make the employees sk illed according to the needs Cost of sale should be reduced to increase the profit Fatima Enterprises Limited using high amount of debts which should be re duced to reduce the interest expenses Fatima Enterprises Limited is using out dated machineries which are not efficient in the production of the product New technology should be introduced Due to the current poIr crises Fatima Enterprises Limited is unable to f ulfill the orders of the customers, so it need its own poIr plant Government has restricted the export of the textile products due to that Fatima Enterprises Limited is facing problems to maintain its growth at interna tional level so it should be discussed with the Government Fatima Enterprises Limited is not focusing at local level, it can genera te profit from local market by promoting their products at local level Fatima Enterprises Limited mostly do the transcation on credit sale and unable to collect receivable at time which the cause of shortage of cash. So th e cash transcation should be done Average collection period should be reduced because Account Receivable a re not collected in time Dividend should be given in time to attract the new shareholders • CONCLUSION: -
The Fatima Enterprises Ltd (FEL) is one of the largest and well reputed organizations in Textile industry. Fatima Enterprises exports its products in th e following countries; Bahrain, Dubai, Hong Kong, United States of America, Turk ey, Spain, Korea, Italy and Singapore etc. They export the Cotton Yarn, PC Yarn and Woolen Yarn to the above mentioned countries. One of the leading manufacture rs and exporters of superior quality cotton yarns in Pakistan. Strict Quality Ma nagement has helped them in making their final products superior and competitive granting them the edge needed to compete in global markets over the years they have built a reputation of being one of the leading manufactures and exporters o f ‘A’ grade knitting/weaving cotton yarn. The overall performance of Fatima Enterprises Limited is not good from previous five years.