Reliance Weaving Mills Ltd.

INTERNSHIP REPORT
RELIANCE WEAVING MILLS LTD
Khanewal Road, Multan
Submitted by: MUHAMMAD ADNAN MBA (Finance) Registration #: 22 Session 2009-11

DEPARTMENT OF BUSINESS ADMINISTRATION

THE UNIVERSITY OF LAHORE

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It is with great respect that this work is dedicated to

MY PARENTS

whose blessings serve as inspiration to me without whom nothing would be possible.

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ACKNOWLEDGEMENT
Praise to Almighty Allah and His Prophet, Muhammad (PBUH) Who blessed me with the potential and ability to complete this study. I am also indebted to the eminent academicians my teachers, Mr. Khalid Aziz, Mr. Malik Mubashir from whom I have learned a great deal of knowledge, at different stages during my stay in the Department. In addition, my class-fellows, particularly deserve my deep and sincere gratitude for their cooperation, and assistance during this research. In the end, I find no words to express my feelings of gratitude and profound admiration to my affectionate father and mother for their invocations and benedictions, my brother for his moral support to carry myself through noble ideas of life, and my sisters for their devotions, innocent smiles and love. I can do no more than reaffirm my devotions to all members of my family.

M. Adnan Nazir

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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. decision is also made in the Head Office. Raw materials purchase 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 5

Reliance Weaving Mills Ltd.

INTRODUCTION TO TEXTILE SECTOR

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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. which are as under: There are different functions of Textiles,

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.

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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 Internship Report 8

Reliance Weaving Mills Ltd. 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 weavers 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 Internship Report 9

Reliance Weaving Mills Ltd. 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 PAKISTAN

Textile is the important sector of Pakistans economy. It is playing the important t role in economy of Pakistan and fulfilling the 65% export target.

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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 OPERATIVE
PERIOD. 1999-00 2000-01 2001-02 2002-03 UNITS 55 59 91 105 LOOMS 6600 7080 10920 13125

INSTALLED

LOOMS 5500 6100 9128 11125 11

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Reliance Weaving Mills Ltd. 2003-04 2004-05 2005-06 2006-07 115 153 166 157 14375 19125 20750 19480 12950 19556 19840 17850

PRODUCTION
PERIOD 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 GREY CLOTH
IN METERS (000)

602250 667950 999516 1218187 1428025 2141382 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 Internship Report 12

Reliance Weaving Mills Ltd. 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 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 LOOMS 79.50 81.00 82.90 85.10 86.20 87.00 88.00 90.00

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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 Internship Report 14

Reliance Weaving Mills Ltd. 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 SECTOR

The 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) Competitors 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. Internship Report 15

Reliance Weaving Mills Ltd. 5) Lack of institutional finance for modernization efforts.

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Reliance Weaving Mills Ltd.

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. # 1. 2. 3. 4. 5. 6. 7. 8. 9. Company Name FATIMA SUGAR MILLS LTD. RELIANCE WEAVING MILLS LTD. RELIANCE COTTON PVT. LTD. RELIANCE COMMODITIES PVT. LTD. RELIANCE EXPORT LTD. RELIANCE FIBRES LTD. FATIMA FERTILIZER COMPANY LTD. FAZAL CLOTH MILLS LTD. AHMED FINE TEXTILE MILLS LTD

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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 1 st tranche of Term Finance Certificate (TFCs) of Rs. million in February 2002, which has been fully subscribed. These TFCs 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 3 rd 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:

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Reliance Weaving Mills Ltd.

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.

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Reliance Weaving Mills Ltd. 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.

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ORGANIZATIONS (RWML) HIERARCHY

CHAIRMAN

CHIEF EXECTIVE

C.F.O.

FINANCE MANAGER

MKTING MANAGER

PURCHASE MANAGER

ACCOUNTS MANAGER

INTERNAL AUDITOR

CHIEF ACCOUNTANT

DCA

ASSISTANT ACCOUNTANT

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Reliance Weaving Mills Ltd.

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Reliance Weaving Mills Ltd.

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 customers requirements and market demand. Exploring the global market with special emphasis on Europe and USA.

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Reliance Weaving Mills Ltd. 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, personnel developing, having motivating ability and and retaining dedication the by

exceptional

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 corporate citizen. as a good

COMPANYS 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.

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Reliance Weaving Mills Ltd.

THE PROJECT
The 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 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. 25 Plant & Chilly Equipment from Luwa

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Reliance Weaving Mills Ltd. 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.

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COST OF PROJECT AND MEANS OF FINANCE

ESTIMATED COST
Pak. Rs. In (Million) Imported machinery Import incidentals Local machinery Land, Building, Others Total Estimated cost 210.50 25.20 13.50 44.80 294.00

ACTUAL COST
Imported machinery Imported incidentals Local machinery Land, building, others Total actual cost 199.00 22.40 5.60 47.00 284.00

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. Internship Report 27

Reliance Weaving Mills Ltd.

FINANCING
The project has been financed through; Pak.Rs. In (M) Share holders equity Redeemable capital FC loan I.BR.D Line world bank Local Bank Loan Directors Loan Local suppliers Actual project cost 109.55 3.00 146.45 13.60 4.80 6.60 284.00

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

FINANCIAL YEAR
The financial year of the company is from October 1 st 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

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Reliance Weaving Mills Ltd. 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.

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PRODUCTION
Year/Month Ended 30 September, 30 September, 30 September, 30 September, 30 September, 30 September, 30 September, 30 September, 30 September, 30 September, 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Production (000 Mtrs.) 12104 13255 13065 13530 13680 13193 14339 15539 15980 16587 Capacity Attained % 78.00 85.00 84.00 87.00 88.00 85.00 89.00 96.00 96.00 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.

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SALES (Cloth)

Year

Total sales Rs. (million)

Export sales Rs. (million) 54260 295639 395895 614060 660883 714587 755064 1228367 1115277

% sales

of

Export

1999 2000 2001 2002 2003 2004 2005 2006 2007

123415 402426 448905 667242 727163 723822 800382 1306888 1252560

To Total sales 43.96 73.46 88.19 92.03 90.89 98.72 94.34 93.99 85.34

Exports are increasing due to increase in demand in various markets because of with drawl of quota.

COMPANY DIVIDEND POLICY

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Reliance Weaving Mills Ltd. 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 companys share has increased to its face value to Rs.23 per share.

Following dividends paid by the co.

2004 2005 2006 2007 10% cash dividend 23.50% cash dividend 12.50% cash dividend 52.50% cash dividend

SHAREHOLERSS 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 UNIT

RWML UNIT-2 is engaged in the following functions.

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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 Issuing

Following 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.

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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/TWISTING
The 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.

WRAPING
After 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.

SIZING
In 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: Internship Report 35

Reliance Weaving Mills Ltd. 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 beams stock.

LOOMS SHED
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/WEFT
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Reliance Weaving Mills Ltd. There 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
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Reliance Weaving Mills Ltd. 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

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MARKETING MIX
Marketing mix is the marketing tasks that the company is to acquire its objectives in the target market.

4 PS
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.

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Reliance Weaving Mills Ltd. 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 important factors of fixed cost are; Salaries Rent Local taxes

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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

RWMLS PRICING STRATEGIES

RWML 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 + Middlemans commission

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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)

its product. They are using

RWML exports more than 90% of

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 also using other modes of transportation as well: Trucking Shipping Air line 43

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Reliance Weaving Mills Ltd.

Major export countries are as under; 1. Japan 2. Korea 3. Hong Kong 4. USA

SALES PROMOTION
RWML 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.

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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.Es 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. incharge 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.

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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 Internship Report 46

Reliance Weaving Mills Ltd. ensure that these goods are custom cleared without any unnecessary delay. In case of dry port, original bill of loading and 4 th 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 JAPAN MANILA USA CHINA 350$ 450$ 375$ 950$ 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 months status of shipment, party wise and country wise invoice values, complaints and claims.

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Reliance Weaving Mills Ltd.

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.

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Reliance Weaving Mills Ltd.

ADMINISTRATION DEPARTMENT
This 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 Internship Report 49

Reliance Weaving Mills Ltd. 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 mills 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.

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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.

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PREPARATION OF ACCOUNTS
Following accounts are prepared in the Accounts Department of RELIANCE WEAVING MILLS LTD. 1. 2. 3. 4. 5. 6. 7. 8. 9. Store Creditor/Purchases Export Debtor/Realization Store Consumption Fuel and Power Salary and Wages Site Expansions Inter Unit Administration Expenses 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 52

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Reliance Weaving Mills Ltd. 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 Beveloid Softner-52 (Local) (Local) (Local)

Chemical PVA imported (Duepont USA) Yarn (Australia)

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Reliance Weaving Mills Ltd.

MAJOR MARKET OF RWML

Major market of RWML is differentiated on the basis of sale; Export sale (85%) Export sale is made to; Local sale Europe Hong Kong

(15%) Nishat Chenab Bismillah Nishat (Chunian)

Local sale is made to;

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.

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

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Reliance Weaving Mills Ltd.

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 banks 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.

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Reliance Weaving Mills Ltd.

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 Margin Bank Dr. Dr. 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: Internship Report 57

Reliance Weaving Mills Ltd.

L/C # XYZ

Dr. Cr.

Bank/Import bill payable

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 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. to cargo, carriers, customs, sales tax, income tax

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 companys 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 Agent Dr. Cr.

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Reliance Weaving Mills Ltd.

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.

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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 salary 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

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Reliance Weaving Mills Ltd.

THREATS
1. New entrance 2. Economic instability 3. Tough competition 4. Increasing cost of production 5. War 6. Price fluctuations 7. Political instability

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Reliance Weaving Mills Ltd.

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Reliance Weaving Mills Ltd.

MY LEARNING 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.

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Reliance Weaving Mills Ltd.

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Purpose of Financial Analysis

The purpose of financial statement analysis is to make a quick assessment about a firms 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 firms 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 Time-Series Analysis

Compare ratio for firm A at time t to industry average Compare ratio for firm A at time t to ratio for firm A at time t-1, etc.

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Reliance Weaving Mills Ltd. 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. Internship Report 67

Reliance Weaving Mills Ltd.

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.

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Reliance Weaving Mills Ltd. 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 other creditors and Businesses supplying goods and materials to other trade 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 The allocation of resources and, therefore, the their agencies 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

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Reliance Weaving Mills Ltd. 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 statements. analysis of the wording of the

Which ratios will each of these groups be interested in?

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Reliance Weaving Mills Ltd. Interest Group Investors Ratios to watch Return on Capital Employed

Lenders

Gearing ratios / Leverage Ratio

Managers Employees

Profitability ratios Return on Capital Employed

Suppliers and other trade Liquidity creditors Customers Governments agencies Local Community Financial analysts Environmental groups Researchers This could be a long and interesting list Possibly all ratios Expenditure on anti-pollution measures Depends on the nature of their study and Profitability their Profitability

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Horizontal Analysis

BALANCE SHEET COMMON SIZE HORIZONTAL ANALYSIS

ASSETS:

2010 (Rupees )

2009 in %

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Non-current assets 1,906,640,987 Property, Plant equipment Intangible assets Long-term investment Long-term deposits Current assets and tools Stock-in-trade Trade debts Loan Advances Trade deposits and payments Short Mark-up accrued Other Internship Report 73 term Investment and 45,560,675 41,794,462 49,793,062 32,572,103 (4,232,387) 9,222,359 103,050,338 772,397,644 157,754,493 187,188,985 1,122,041 125,667,584 loose 8,289,791 92,855,401 746,643,801 229,707,309 142,601,992 5,804,422 523,546 7,088,261 1,612,193 10,194,937 25,753,843 (71,952,816) 44,586,993 (4,682,381) 125,615,238 -----------6,677,598 -8.50 28.31 10.98 3.45 -31.32 31.267 -80.67 23993 ------414.19 1,033,593 and 69,999,586 2,421,340 1,963,229,490 ----------69,999,586 2,421,340 (56,588,503) 1,033,593 ----------------------2.88 100 ---------

Stores, spares 7,088,261

Reliance Weaving Mills Ltd. receivables Tax due refunds from

government Cash and bank balances

Total Current assets TOTAL ASSETS

EQUITY AND LIABILITIES:

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

3,430,009,780 3,344,852,506 2010 (Rupees) 2009

85,157,274

2.546

In %

Share capital and reserves

Authorized Capital 30,000,000 ordinary shares 10 each paid-up capital Reserves 711,913,668 74

30,000,000 308,109,370 395,081,250

of Rs 165,798,067

30,000,000 246,487,500 395,081,250 195,501,910

837,070,660

------------61,621,870 -------------70,296,157 31,918,027 24.99 ------35.96 3.81 ---

868,988,687

Issued, subs and

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Reliance Weaving Mills Ltd. Unappropriate profit 63,375,000 8,589,216 988,791,218 36,875,000 16,238,327 1,041,904,545 (276,877,550) 26,500,000 (7,649,111) (258,026,661) -28 71.86 -47 124,134,603 43,259,876 1,174,824,009 123,658,813 1,465,877,301 131,760,351 311,265,908 4,453,875 13,228,877 161,822,805 3.59 30.58 13.77 106.55 -24.76

783,877,884 Non-current 128,588,478 liabilities

Long Capital Subordinated loans Deferred liabilities 56,488,753 1,336,646,814 term 255,419,164 1,777,143,209

Finance & other

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

85,157,274 Current liabilities

Trade and other payables Interest Finance markup arrangement Current of liabilities portion non-current and under mark-up accrued

21.23

2.546

Total Liabilities
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and Equity

Profit and Loss Account Common size Horizontal analysis 2010 2009 (Rupees) in %

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Sales Cost of sales Gross profit Other operating income Administrative expenses Distribution costs Other operating expenses Finance costs Profit / (loss) before taxation Provision for taxation (15,447,181) Profit for the year 31,918,027 Earnings per share 1.04 4.01 (91,611,164 ) 123,529,191 (4,985,877) (20,433,058) 47,365,208 143,962,249 (96,597,041 ) -74.16 and 346,404,666 39,344,127 (49,671,260) (6,048,989) (232,381,335) 422,565,625 17,840,572 (48,421,073) (39,031,369) (9,584,861) (199,406,645) (76,160,959 ) 21,503,555 1,860,928 10,639,891 (3,535,872) 32,974,690 -24.40 -67.10 3,400,998,361 (3,054,593,695) 3,122,414,478 (2,699,848,853) 278,583,88 3 354,744,84 2 -18 120 3.84 27.25 36.89 16.54 8.92 13.21

selling (50,282,001)

BALANCE SHEET COMMON SIZE HORIZONTAL ANALYSIS

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ASSETS:

2009 (Rupees)

2008 In %

Noncurrent assets Property, Plant and equipment Long-term deposits 92,855,401 746,643,801 229,707,309 150,177,167 Current assets Stores, spares loose tools Stock-intrade Trade debts Loan Trade deposits and payments Internship Report 78 and Advances 49,793,062 and 1,612,193 70,523,132 32,572,103 5,804,422 60,515,927 3,021,926 -----------8,434,247 80,312,683 706,726,900 204,540,457 286,804,021 3,893,245 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 15.62 5.65 12.30 -47.64 49.08 -17.72 -46.65 100 37.63 1,963,229,490 2,421,340 2,036,092,537 2,421,340 (72,863,047) --------------3.59 -------3.57

1,965,650,830 2,038,513,877 (72,863,047)

Reliance Weaving Mills Ltd. Tax refunds due Other receivables Short Cash bank balances term and Investment from government

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 2009 2008

(47,423,863) 1.398

EQUITY AND

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LIABILITIES:

In % Share capital and reserves

Authorized Capital 30,000,000 ordinary 10 each Issued, and capital Reserves profit subs paid-up 1,025,666,218 16,238,327 1,158,062,811 18,400,700 1,176,463,511

30,000,000 246,487,500 395,081,250 195,501,910

30,000,000 246,487,500 395,081,250 96,621,469

738,190,219 ----------------------98,880,441 98,880,441

----------102.34 126.46

shares of Rs 837,070,660

(132,396,593) (2,162,373) (134,558,966) -11.43

-11.75 -11.44

Unappropriate1,041,904,545

123,658,813

Noncurrent
Long Finance Deferred

1,174,824,009 124,621,517
term 1,466,364,215 &

139,361,140 1,193,844,369 109,756,482 35,147,562 1,478,109,553

(15,702,327) (19,020,360) 14,865,035 8,112,314 (31,745,338) -11.27 -1.59 13.54 23.08 -2.15

liabilities 43,259,876

other Capital 3,345,339,420

3,392,763,283 (47,423,863)
80

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Reliance Weaving Mills Ltd. liabilities

1.398

Current liabilities
Current portion of long term liabilities Finance under markup arrangement Trade Interest mark-up accrued and and other payables

Total Liabilities and Equity

Profit and Loss Account Common size Horizontal analysis 2009 2008
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in %

Reliance Weaving Mills Ltd.

(Rupees in)
Sales Cost of sales Gross profit Other operating income Administrative expenses Distribution costs Other operating expenses Finance costs Profit / (loss) and selling 422,565,625 17,840,572 (48,421,073) (39,031,369) (9,584,861) before (199,406,645 ) 111,765,533 taxation Provision for taxation 257,915,200 20,305,651, (27,691,287) (38,357,316) (7,248,742) (93,157,973) 5 (2,465,079 ) 20,729,786 674,053 2,336,119 106,248,67 29.41 2 28.71 (15,789,023) Earnings per share (20,433,058) 32,196,716 4,644,035 28.81

3,122,414,4 2,061,671,9 1,060,742, 78 53) 82 82)

496

51.45 49.68
63.84 -12.14

(2,699,848,8 (1,803,756,7 896,092,0 71

164,650,42 74.86 1.76 32.22

114.05

Profit for the year

143,962,249

95,976,51 123,529,1 91 3.89 5.01 0

27,552,681

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Vertical Analysis

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BALANCE SHEET COMMON SIZE VERTICAL ANALYSIS ASSETS: 2010 2009

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Reliance Weaving Mills Ltd. 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 short-term payments Mark-up accrued Other receivables Short term Investment Tax refund due from government Cash and bank balances 3.00 % 22.52 % 4.6 % 5.46 % 0.032 % 0.21 % 0.241 % 3.66 % 1.33 % 1.22 % 2.78 % 22.32 % 6.87 % 4.26 % 0.17 % 0.21 % 0.048 % 0.016 % 1.49 % 0.97 % 55.59 % 0.03 % 2.04 % 0.07 % 58.69 % -------2.04 % 0.07 %

Total Current assets

42.27 %

39.14%

TOTAL ASSETS EQUITY AND LIABILITIES: Share capital and reserves

Authorized Capital 30,000,000 ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Internship Report

100.00% 100.00% 2009 2008

8.98 %

7.37 % 85

Reliance Weaving Mills Ltd. Reserves Unappropriate profit 11.52 % 4.83 % 25.33 % 11.81 % 5.84 % 25.03%

Non-current liabilities
Long term Finance and other payables Deferred liabilities
20.76 % 29.56 %

Loan from related parties- subordinated loans1.85 % 0.25 %

1.102 % 0.48 %

Current liabilities
Trade and other payables Interest and mark-up accrued Finance under markup arrangements Current portion of non-current liabilities 3.75 % 1.65 % 38.97 % 7.45 %

3.71 % 1.29 % 35.12 % 3.7 %

51.81 %

43.82 %

Total Liabilities and Equity

100 %

100 %

Profit and Loss Account Common size vertical analysis 2010 2009

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Reliance Weaving Mills Ltd. 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 11.57 % (1.48 %) (1.46 %) (0.178 %) (6.83 %) 10.57 % (1.55 %) (1.25 %) (0.31 %) (6.39 %)

100 %
(89.81 %) 10.19%

100 %
(86.47 %) 13.53%

Profit for the year

1.39 %
(0.45 %)

4.61 %
(0.65 %)

0.94 %

3.96 %

BALANCE SHEET COMMON SIZE VERTICAL ANALYSIS ASSETS: 2009 2008

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Non-current assets Property, Plant and equipment Long-term deposits 58.69 % 0.72 % 58.76% Current assets Stores, spares and loose tools Stock-in-trade Trade debts Loan and Advances Trade deposits and short-term payments Tax refund due from government Other receivables Short term Investment Cash and bank balances 2.78 % 22.32 % 6.87 % 4.49 % 0.17 % 1.49 % 0.048 % 2.108 % 0.97 % 2.37 % 20.83 % 6.03 % 8.45 % 0.11 % 1.78 % 0.09 % -------0.25 % 60.01% 0.07 % 60.84%

Total Current assets

41.24 %

39.92%

TOTAL ASSETS EQUITY AND LIABILITIES: Share capital and reserves

Authorized Capital 30,000,000 Ordinary shares of Rs 10 each Issued, subscribed and paid-up capital Internship Report

100.00% 100.00% 2009 2008

7.37 %

7.27 % 88

Reliance Weaving Mills Ltd. Reserves Unappropriate profit 11.81 % 5.84 % 25.02 % 11.64 % 2.85 % 21.76 %

Non-current liabilities
Long term Finance and other payables Deferred liabilities
30.66 % 34.13 %

0.49 %

0.54 %

Current liabilities
Current portion of long term liabilities Finance under markup arrangements s Trade and other payable Interest and mark-up accrued

3.696 % 35.11 % 3.73 % 1.29 %

43.83 %

4.11 % 35.19 % 3.24 % 1.036 %

43.57 %

Total Liabilities and Equity 100 % 100 %

Profit and Loss Account Common size vertical analysis 2009

Sales Cost of sales Gross profit Internship Report

2008 100 %
(87.49 %) 12.51% 89

100 %
(86.47 %) 13.53%

Reliance Weaving Mills Ltd. Other operating income Administrative expenses Distribution and selling costs Other operating expenses Finance costs Profit / (loss) before taxation Provision for Taxation 10.57 % (1.55 %) (1.25 %) (0.31 %) (6.39 %) 10.98 % (1.34 %) (1.86 %) (0.35 %) (4.52 %)

Profit for the year

4.61 %
(0.65 %)

5.42 %
(0.77 %)

3.96 %

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 Internship Report 90

Reliance Weaving Mills Ltd. 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 Internship Report 91

Reliance Weaving Mills Ltd. 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 owners contribution is equal to that of creditor. Longterm liabilities are decreasing from 34.138% in 2005 to 30.66% in 2006 and 29.56% in 2005.

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Reliance Weaving Mills Ltd.

Ratios Analysis

Ratio Analysis

We have to analyze firm from five point of view. Liquidity Analysis Activity Analysis Debt Analysis Profitability Analysis 93

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Reliance Weaving Mills Ltd. Marketability Analysis

LIQUIDITY ANALYSIS FORMULAS i. 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 Internship Report 94

Reliance Weaving Mills Ltd.

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 Net Sale ii) Gross profit ratio on cost = G.P C.G.S Internship Report 95 x 100 x 100

Reliance Weaving Mills Ltd.

iii) Operating Profit ratio

operating Profit Sale

x100

iv) Net Profit ratio

= Net Profit after taxes Net sale

x100

v) Return on asset (ROA)

= Net Profit after taxes Total asset

x100

MARKET ABILITY RATIOS FORMULAS i) Earning Per Share (EPS) = N.P.A.T. - Divto P. share Out Standing Stock ii) Dividend Pay out ratio Internship Report = Dividend P.S x100 96

Reliance Weaving Mills Ltd. EPS

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Reliance Weaving Mills Ltd.

CALCULATION OF RATIOS
LIQUIDITY ANALYSIS It shows the firm ability to pay its short-term obligation on time.

CURRENT RATIO
2008 1: 0.74times 2009 1: 0.84times 2010 1: 0.98times

The ratios show that the companys 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

2008 1: 0.75times 2009 1: 0.59times 2008 1: 0.48times

The companys quick ratio has increased. So the company is liquid position is very strong.

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Reliance Weaving Mills Ltd.

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

2008 3.2times 2009 4.8times 2010 6.0times

The co. is converting the inventory 6.0times in 2010 into cash against the conversion of 4.8times of 2009 and 3.2times in 2008. It means that the sale of the co. has been increased.

DEBTOR COLLECTION PERIOD

2008 92 days 2009 87days 2010 44days

Companys credit collection performance is depended upon L/C by the buyer. So the companys debtor collection period mostly depends upon the opening of letter of credit.

CREDITORS TURNOVER RATIO

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Reliance Weaving Mills Ltd.

2008 10.3 times

2009 11.50times

2010 12.20times

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

FIXED ASSETS TURNOVER RATIO

2008 0.93times 2009 1.24 times 2010 2.02 times

PROFITABILITY ANALYSIS

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Reliance Weaving Mills Ltd. The efficiency of the firm can be analyzed through its profits.

GROSS PROFIT RATIO

2008 16.32% 2009 15.59% 2010 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

2008 1.40% 2009 1.57% 2010 2.7%

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

OPERATING PROFIT RATIO

2008 10.57% Internship Report 2009 10.70% 2010 10.85% 101

Reliance Weaving Mills Ltd.

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
2008 2.69% 2009 3.48% 2010 7.49%

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

MARKETABILITY ANALYSIS
EARNING PER SHARE
2008 Internship Report 2009 2010 102

Reliance Weaving Mills Ltd. Rs.2.48 Rs.2.67 Rs.2.82

The shareholders are earning Rs.2.82 against one share in 2010, which is more than in 2009 & 2008.

DIVIDEND DECLARATION
2008 6.7% 2009 7.50% 2010 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
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Reliance Weaving Mills Ltd. 2008 57% 2009 68.78% 2010 76%

DEBT-EQUITY RATIO
2008 186% 2009 322% 2010 220%

RWML is heavily depending on the outsiders 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

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Reliance Weaving Mills Ltd. Dividend to preferred stockholders

TIME INTEREST EARNED RATIO

2008 1.27times 2009 1.36times 2010 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

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Reliance Weaving Mills Ltd. On the basis of analysis it is wise to invest as a short-term supplier of funds in RWML because firms current ratio and quick ratio are in positive. Moreover the firms working capital is positive in both the years.

LONG-TERM INVESTOR
As the firms debt ratio is good in both the years I-e 76%, 72.54% and 68.78% in 2008, 2009 and 2010 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.

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Reliance Weaving Mills Ltd.

COMMENTS AND SUGGESTIONS

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.

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