Relience Weaving Mills Ltd 2013 14

Reliance Weaving Mills Ltd.

EXECUTIVE SUMMARY

RELIANCE WEAVING MILLS LTD is located in Multan. Reliance weaving

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

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

business on May 14, 1990.

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

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

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

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

whereas these are both permanent and on daily wages.

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

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

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 1


INTRODUCTION TO TEXTILE SECTOR

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

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

different functions of Textiles, which are as under:

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

Garments etc.

Cutting and StitchingThis 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.

Internship Report 2


History of the Textile Industry

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

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

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

now know them.

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

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

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

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

(or Cottage) Industry.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Internship Report 3


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

raditionally the work of the men of the household.

TEXTILE INDUSTRY IN PAKISTAN

Textile is the important sector of Pakistan’s economy. It is playing the important t role in

economy of Pakistan and fulfilling the 65% export target.

PERFORMANCEThe 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.

Internship Report 4


CAPACITY INSTALLED OPERATIVE

PERIOD. UNITS LOOMS LOOMS

2004-05 55 6600 5500

2005-06 59 7080 6100

2006-07 91 10920 9128

2007-08 105 13125 11125

2008-09 115 14375 12950

2009-10 153 19125 19556

2010-11 166 20750 19840

2011-12 157 19480 17850

PRODUCTIONPERIOD GREY CLOTH

IN METERS (000)

2004-05 602250

2005-06 667950

2006-07 999516

2007-08 1218187

2008-09 1428025

2009-10 2141382

2010-11 2172400

2011-12

Internship Report 5


CURRENT POSITION OF

TEXTILE INDUSTRY

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

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

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

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

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

and unlisted is however is around 452 approximately.

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

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

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

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

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

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

country.

CAPACITY UTILIZATION (%)

PERIOD LOOMS

2004-05 79.50

2005-06 81.00

2006-07 82.90

2007-08 85.10

2008-09 86.20

2009-10 87.00

2010-11 88.00

2011-12 90.00

Internship Report 6


EXPORTS

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

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

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

950 million $ and made-ups 965 million $.

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

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

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

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

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

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

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

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

Internship Report 7


RELIANCE WEAVING MILLS LIMITED MULTAN

GROUP PROFILE

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

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

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

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

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

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

Following are the companies included in the group:

Sr. # Company Name

1. FATIMA SUGAR MILLS LTD.

2. RELIANCE WEAVING MILLS LTD.

3. RELIANCE COTTON PVT. LTD.

4. RELIANCE COMMODITIES PVT. LTD.

5. RELIANCE EXPORT LTD.

6. RELIANCE FIBRES LTD.

7. FATIMA FERTILIZER COMPANY LTD.

8. FAZAL CLOTH MILLS LTD.

9. AHMED FINE TEXTILE MILLS LTD

Internship Report 8


COMPANY PROFILE

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

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

certificate for commencement of business on May 14, 1990.

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

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

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

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

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

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

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

security in C.D.C.

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

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

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

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

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

Spinning unit at Rawalpindi. The details are as under:

Internship Report 9


BOARD OF DIRECTORSMr. Fawad Ahmed Mukhtar CHAIRMANMr. Fazal Ahmed SheikhMr. Faisal Ahmed Mukhtar CEOChief Financial Officer Mr. Mukhtar Ahmad BalochCompany Secretary Mr. Amanullah Khan

AUDITORS

M/s Hameed Chaudhri & CompanyChartered Accountants, LahoreM/s Mahboob Sheikh & CompanyChartered Accountants, MultanCost Auditors M. Yousuf, Adil, Saleem & Co.,Chartered Accountants, Multan.

BANKERS

Allied Bank LtdUnited Bank LtdHabib Bank LtdMCB Bank LtdMeezan Bank LtdSoneri Bank LtdThe Bank of PunjabBank Islami Pakistan LtdBurj Bank LtdFirst National Bank ModarabaThe Bank of KhyberSaudi Pak Industrial & Agricultural Investment Company Ltd.NIB Bank LtdBank Alfalah LtdAl-Baraka Bank Pakistan LtdInsurer EFU General Insurance

Internship Report 10


Head Office 2 Floor, Trust Plaza, L.M.Q Road, MultanTel. No: 061-4514032-2, 061-4646236Fax No: 061-4511768, 061-4584587e-mail: [email protected] Office E-110, Khayaban-e-Jinnah, Lahore Cantt.Tel. No: 042-111-428-462

Website www.fatima-group.comMills Address Fazal Garh Sanawan, Tehsil Kot Addu, District Muzaffargarh.Tel. No: 066-2262512-4Fax No: 066-2450515



Weaving units:

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

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

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

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

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

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

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

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

power cost and production losses.

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

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

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

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

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

million meters per annum.

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

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

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

million meters of grey cloth annually.

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

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

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

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



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

count is approximately 4.849 million kgs.

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

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

manufacturing of fabric being sold in local and export market.

ORGANIZATION’S (RWML) HIERARCHY

Internship Report

CHIEF EXECTIVE

13

C.F.O.

CHAIRMAN



FINANCE MANAGER

MKTINGMANAGER

PURCHASEMANAGER

ACCOUNTSMANAGER

INTERNAL AUDITOR

DCA ASSISTANT ACCOUNTANT

CHIEF ACCOUNTANT


VISION STATEMENT

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

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

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

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

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

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

of the country.



MISSION STATEMENT

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

producing yarn and fabrics.

The company will conduct its operations prudently assuring customer satisfaction and

will provide profits and growth to its shareholders through:

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

market demand.

Exploring the global market with special emphasis on Europe

and USA.

Keeping pace with the rapidly changing technology by continuously

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

Enhancing the profitability by improved efficiency and cost controls.

Recruiting, developing, motivating and retaining the personnel having

exceptional ability and dedication by providing them good working

conditions, performance based compensation, attractive benefit program and

opportunity for growth.

Protecting the environment and contributing towards the economic strength of

the country and function as a good corporate citizen.



COMPANY’S QUALITY POLICYCOMMITMENT TO EXCELLENCE

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

expression of unique quality.

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

meet the requirement and expectations of our customers.

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

organize the training and necessary feedback on our performance.

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

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

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

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

installed in 1999.

PLANT AND MACHINERY

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

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

very modern quality control department equipped with laboratory and testing equipment

based on latest technology.

The imported plant and machinery includes:

120 Shuttless Looms from Tsudakomna.



Humidification Plant & Chilly Equipment from Luwa Switzerland.

Overhead Travelling Cleaner from Luwa Switzerland.

Sizing machine from Sucker & Mullar Germany.

Knotting machine from Tomen Corp. Germany.

Air Compressor & Dryer from Atlas Capco Belgium.

Warping Machine from Benninger Switzerland.

Vaccum Cleaning plant from Germany.

Power Generator from UK.

3 sets power Generator (Gas) from Caterpillar Switzerland.

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

assistance of Muslim Commercial Bank Limited.

LOCAL

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

under:

Bailing Press

Motor Lifter 2 Nos.

Beams 100 Nos.

Electric material from semins.

Folding Machines 3 Nos.

Equipment for workshops.

Electric appliances.

Fire fighting equipment.

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



Corporate InformationBOARD OF DIRECTORSMr. Fawad Ahmed Mukhtar CHAIRMANMr. Fazal Ahmed SheikhMr. Faisal Ahmed Mukhtar CEOChief Financial Officer Mr. Mukhtar Ahmad BalochCompany Secretary Mr. Amanullah Khan

AUDITORS

M/s Hameed Chaudhri & CompanyChartered Accountants, LahoreM/s Mahboob Sheikh & CompanyChartered Accountants, MultanCost Auditors M. Yousuf, Adil, Saleem & Co.,Chartered Accountants, Multan.

BANKERS

Allied Bank LtdUnited Bank LtdHabib Bank LtdMCB Bank LtdMeezan Bank LtdSoneri Bank LtdThe Bank of PunjabBank Islami Pakistan LtdBurj Bank LtdFirst National Bank ModarabaThe Bank of KhyberSaudi Pak Industrial & Agricultural Investment Company Ltd.NIB Bank LtdBank Alfalah LtdAl-Baraka Bank Pakistan Ltd



Head Office 2 Floor, Trust Plaza, L.M.Q Road, MultanTel. No: 061-4514032-2, 061-4646236Fax No: 061-4511768, 061-4584587e-mail: [email protected] Office E-110, Khayaban-e-Jinnah, Lahore Cantt.Tel. No: 042-111-428-462

Website www.fatima-group.comMills Address Fazal Garh Sanawan, Tehsil Kot Addu, District Muzaffargarh.Tel. No: 066-2262512-4Fax No: 066-2450515



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.

FEULFuel 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.

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

well.

PRODUCTIONYear/Month

Ended

Production

(000 Mtrs.)

Capacity

Attained %

30 September, 2002 12104 78.00

30 September, 2003 13255 85.00

30 September, 2004 13065 84.00

30 September, 2005 13530 87.00

30 September, 2006 13680 88.00

30 September, 2007 13193 85.00

30 September, 2008 14339 89.00

30 September, 2009 15539 96.00

30 September, 2010 15980 96.00

30 September, 2011 16587 97.20



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

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

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

in a particular year.

SALES(Cloth)

Year Total sales

Rs. (million)

Export sales

Rs. (million)

% of Export sales

To Total sales

2003 123415 54260 43.96

2004 402426 295639 73.46

2005 448905 395895 88.19

2006 667242 614060 92.03

2007 727163 660883 90.89

2008 723822 714587 98.72

2009 800382 755064 94.34

2010 1306888 1228367 93.99

2011 1252560 1115277 85.34

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

withdrawl of quota.



Description of Various Departments

Following are the main departments at RWML:

1.Human Resources

2.Export Department

3.Import Department

4.Information Technology Department

5.Production Department

6.Accounting Department

7.Shares Department

8.Marketing Department



ACCOUNTS DEPARTMENT

Following accounts are prepared in the Accounts Department of “RELIANCE

WEAVING MILLS LTD.”

1. Store Creditor/Purchases

2. Export Debtor/Realization

3. Store Consumption

4. Fuel and Power

5. Salary and Wages

6. Site Expansions

7. Inter Unit

8. Administration Expenses

9. Selling Expenses

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

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

12. Banks

HBL

FBL

FBL (LOAN)

ABL

SPCB



Accounts department of the RWML is responsible to arrange funds for working capital as

well as for purchase of assets and raw materials etc. Finance department is responsible to

maintain books of accounts conducting internal and external Audits, interaction with

Income Tax, Sales Tax Authorities and Financial Institutions. Dealing with company

suppliers, agents and other government institutions are also the responsibilities of this

department. Senior manager (Finance & Marketing) is the head of this department.

Finance department is run by executive director technical who is responsible to instruct

and guide senior manager finance and F & C. senior manager finance is responsible to

guide Deputy Manager Finance, who then facilitates finance executive and senior account

store, these two will further manage and guide their subordinates.

Senior manager F & C facilitates Deputy manager who is responsible to manage, guide

and control the chief accountant, Deputy chief accountant and senior cost accountant, sale

supervisor and costing assistant are also lead by the senior manager F & C.



Function of Accounts Department

o Preparation of financial statement

o Internal control

o Conduct of audit

o Comparison

o Order wise profit and loss account and their analysis

o Checking of wager and salary

o Procurement bills

o Purchase bills

o GRN



ACCOUNTS DEPARTMENT STAFF:

Senior Deputy Chief Accountant:

Senior deputy chief accountant is responsible to find the cost of the

production and to check the production efficiency report of the company.

Assistant Accountant:

This person is responsible for all cash transactions. Customer ledger,

cashbook and sales journals are maintained by him, preparation of cash

payment vouchers and cash receipt vouchers are also the responsibilities of

assistant accountant.

Senior Accountant:

This person is responsible for bank transaction for journal vouchers, bank

payment vouchers, bank receipt vouchers, maintaining of bankbook, supplier

payment ledger and journal. Moreover he is liable to prepare bank

reconciliation statement, supplier trial balance at the end of the month and

submit it to the chief accountant.

Chief Accountant:

The chief accountant is responsible for account section. He maintains the

general ledger and sales register. He is also responsible for submitting final

account / report to the management on monthly basis. He is the person who

conducts the audit. He looks after the sales tax affairs.



Store Accountant:

Store accountant handles all store requisitions, goods receipt notes inward

gate pass and outward gate pass. He maintains the

store ledger

Fixed asset ledger

Electric items ledger

Raw materials ledger

His additional responsibility is to conduct stocktaking at the end of each

month.

i) Management Of Funds:

It deals with the cash inflows and outflows major cash inflows

are following.

Sales Collection

Interest of Deposits

Sales of Wastes

Capital Gains

Major sources of cash outflow are:-

Purchase of raw materials.

Purchase of packing materials.



Purchase of fuels.

Wages and Salaries Payments.

Duties and Taxes.

ii) Book Keeping

MILLLS has separate accounts division for book keeping. The

main function of book keeping is to record the business

transaction in a set of books of accounts.

Daily Payments and receipts entries are recorded in

original book of entries.

Subsidiary ledgers are used to maintain debit and

credit account.

Main ledger is prepared for daily journal entries and

monthly trial balance is drawn through it. At the end

of the year annual accounts have been prepared.

iii) Pay RollIn this section attendance record is maintained EPS

(Employees Payroll System) prepare the pay

according to company rules.



Types of Vouchers Used at RWML

1.Bank Receipt Voucher2.Bank Payment Voucher3.Cash Payment Voucher4.Purchase Journal Voucher5.Sale Journal Voucher6.Journal Voucher7.Mill Journal Voucher

Bank Receipt Voucher

When any transaction is made through the bank, RWML prepares the bank vouchers. Bank receipt voucher is prepared when we received any cheque or amount is deposited by our customer into bank or bank gives us any income in shape of interest on our deposits.

Bank Payment Voucher

In RWML, the payment is made through cash, cheque or through the demand draft and telegraphic transfer. When payment is made through the bank, the company prepares the bank payment voucher to record the payment transactions in computer ledgers.



Cash Payment Voucher

When any amount is paid in form of cash to supplier, creditors, and employees or to any person, for this purpose RWML prepares the cash payment voucher. This voucher is also recorded in the cash book and the cash balance is credited at the time of payment.

Purchase Journal Voucher

When any type of item is purchased for credit then this voucher is prepared. The of the invoice is recorded on this voucher. On the basis of this voucher store incharge prepare the store ledger. Therefore, it is very important voucher for purchase section of the accounts department.

Sale Journal Voucher

When any type of sale is made at RWML it is recorded through sale journal voucher. Sale may be Yarn or Waste. This voucher is also used for recording purpose. A separate file for sale journal voucher is prepared.

Journal Voucher

This voucher is prepared for any other expenses except purchase, sale etc. Normally the for following types of expenses this voucher is prepared like payment of salary, wages, overtime, income tax, traveling expenses, conveyance expenses etc.



Mill Journal Voucher

This voucher is prepared for the expense of the Mill. Any expense which is made at the mill is recorded in this voucher. At the head office a separate file is maintained for the mill journal vouchers. All expenses like wages, overtime etc are recorded in this voucher.

Application for Amount Transfer

When the company wants to transfer the cash from its accounts to any other place or city or into any other account it transfer this amount through telegraphic transfer, pay orders, mail transfer or demand draft. Bank provides an application on which different modes of payment are printed. You have to select one mode of payment. This application contains the place for payment, account for payment, amount, date, phone no, bank charges and other contents. Similarly, the company also has the printed request form for the transfer of the balance from one account to another account.

Credit Note

Credit note is prepared when we credit the account of a party. For example, we have to receive Rs. 5000 from a party and now we are receiving Rs. 2000 from that party. At this time we will send credit note that we have credited your account by Rs. 2000. The balance will be Rs. 3000.



Debit NoteDebit note is sent to the account payable or supplier from whom we have purchased the goods on account. When we make payment to party, we send them debit note that we have debited your account. In this way their balance will be decreased.

Sales Tax Invoice Book

As the name suggested, sales tax invoice book is prepared for the taxation purposes. It is the requirement of the Income Tax Department to deduct the sales tax. The rate of sales tax is 15% of sales for the registered buyer while for the unregistered buyer is 18%. Sales tax invoice book is the record of total sales and the amount of sales tax deducted. This invoice is prepared in the Mill from where the goods are delivered to the buyer. As the company has sales office at Lahore so sale contract is made at Lahore. The copies of the sale contract are sent to the head office and the mill. The mills according to the instruction of the Head office deliver the goods to the buyer and the invoice is sent to the head office for the recording purpose. Because the sale contract record is maintained at the head office. If there is any ambiguity in the contract of sale they inform the sale office, Lahore to make correction and also give instruction to the site office.

Bill Book Waste

Bill book waste is the record of the sales of waste and the bill which is prepared for the customer for payment. This book is also known as cash memo or credit memo. This bill contains all the information about



the quantity sold, its quality, rate per unit, total amount, sales tax and all the other information related to the customer.

Bill Book of YarnThis book is prepared when the company sells the yarn to the customer. This bill book is also similar to the bill book of waste.



Risk management policies

The company issues financial instrument mainly to acquire finance to its

operations. The company issues financial instrument such as trade debts and

trade creditors arise directly forms the company ‘s operation.

Overall risk arising from the company’s financial instruments is limited.

Interest rate risk

Foreign exchange risk management

credit risk

Fair value of financial assets and liabilities



PURCHASE FACILITATING ACTIVITIES

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 are sent to the purchase committee

for approval. After approval, these are sent to the purchase office

where these demands are classified in to local and out station

demands.

The outstations demands include out of Multan or out of Pakistan.

The demands out of Pakistan are sent to the head office. Big items

such as tin plates, chemicals are purchased by calling tenders and the

lower tender is accepted.

Other purchases like oil, cotton seeds and chemicals are purchased by

collecting the rates from different brokers and other related agencies

and then concerned item is purchased.

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 sent to the store incharge 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 production department. Then chief chemist

checks those chemicals.

If the item is up to standard then it is accepted by preparing the

quality report and sent to the commercial department. Similarly all

the cash purchases are subject 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 items.



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.



PETTY CASH FUNDCash is given to Mr. Afzaal hussain the site cashier for meeting the different site

expenses and these are;

Yarn freight

Store freight

Building capitalized/repair and maintenance

Labor welfare charges

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

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

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

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

purchase order;

One to the supplier

One to the accounts department

One is remained with the purchase department

Purchase includes;

Raw material (Local)

Starch (Local)

Beveloid (Local)

Softner-52 (Local)

Chemical PVA imported (Duepont USA)

Yarn (Australia)



MAJOR MARKET OF RWML

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

Export sale (85%)

Export sale is made to;

Europe

Hong Kong

Local sale (15%)

Local sale is made to;

Nishat

Chenab

Bismillah

Nishat (Chunian)

INTERNAL AUDITInter 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 SYSTEMA daily purchase report of Store and Spares is received at the Head Office from the site

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

officer Mr. Muhammad Sulaiman Sb.

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



LEARNING AS AN INERNEEIt is difficult to write about what I learned at RWML. Because when I entered within

such a big organization, I was bombarded with lot of things at the same time that I could

not realize suddenly. But with the passage of time I got realized that my thinking style,

my punctuality, and my routines are just got better. I became a committed person. Some

of the skills that I have internalized at RWML Mills Ltd are discussed below;

Commitment :

I was kept rotated by my instructor to different persons within the department so that I

could get the maximum exposure to their working tasks, their abilities their commitment

to the work. They also assigned sometimes the task of their own to perform and I took

them as my boss is giving me orders and performed them with commitment. So I learnt

the skill that how to be committed to my seniors and to my work.

Teamwork experience:

When I entered the organization I considered myself as a part of team. Large

organizations are built by the teamwork efforts of the individuals. I learnt thee how to

perform tasks within a team, where lots of other people are also connected to you.

Managerial skills exposure:

I got exposure to other different skills that can be helpful in my future that how to

manage work, relations with officers, putting pressure in subtle ways to get work done in

time. I observed that you can’t be too lenient or too harsh to your employees. A manager

has to make relations to such a level that no feels that my manager is too lousy to control

his personnel nor too harsh to keep atmosphere stressful.



FINANCIAL ANALYSIS

Profit and Loss Account

Common size vertical analysis

2012 2011

Sales

Cost of sales

Gross profit

Other operating income

Administrative expenses

Distribution and selling costs

Other operating expenses

Finance costs

Profit / (loss) before taxation

Provision for Taxation

Profit for the year

100 %(86.47 %)

13.53%

10.57 %

(1.55 %)

(1.25 %)

(0.31 %)

(6.39 %)

4.61 %(0.65 %)

3.96 %

100 %(87.49 %)

12.51%

10.98 %

(1.34 %)

(1.86 %)

(0.35 %)

(4.52 %)

5.42 %(0.77 %)

4.66 %



Ratio Analysis

We have to analyze firm from five point of view.

Liquidity Analysis

Activity Analysis

Debt Analysis

Profitability Analysis

Marketability Analysis

LIQUIDITY ANALYSIS

FORMULASi. Current Ratio = Current Asset Current Liabilities

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

ACTIVITY ANALYSIS

FORMULAS

i. Inventory turn Over = Cost of goods sold Inventory

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

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

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

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



Average Payment Period

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

PROFITABILITY RATIOS

FORMULAS

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

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

iii) Operating Profit ratio = operating Profit x100 Sale

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

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

MARKET ABILITY RATIOS

FORMULAS

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

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



CALCULATION OF RATIOSLIQUIDITY ANALYSIS

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

CURRENT RATIO

2010 2011 2012

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

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

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

QUICK OR ACID TEST RATIO

2010 2011 2012

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

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

strong.

ACTIVITY ANALYSIS

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

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

assets to generate desire results.



INVENTORY TURNOVER RATIO

2010 2011 2012

3.2times 4.8times 6.0times

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

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

increased.

DEBTOR COLLECTION PERIOD

2010 2011 2012

92 days 87days 44days

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

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

CREDITOR’S TURNOVER RATIO

2010 2011 2012

10.3 times 11.50times 12.20times

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

period.



FIXED ASSETS TURNOVER RATIO

2010 2011 2012

0.93times 1.24 times 2.02 times

PROFITABILITY ANALYSIS

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

GROSS PROFIT RATIO

2010 2011 2012

16.32% 15.59% 15.30%

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

higher therefore G.P. is very ideal.

NET PROFIT RATIO

2010 2011 2012

1.40% 1.57% 2.7%

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

exports.



OPERATING PROFIT RATIO

2010 2011 2012

10.57% 10.70% 10.85%

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

increases the salaries of the co.

RETURN ON ASSETS

2010 2011 2012

2.69% 3.48% 7.49%

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

MARKETABILITY ANALYSIS

EARNING PER SHARE

2010 2011 2012

Rs.2.48 Rs.2.67 Rs.2.82

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

than in 2006 & 2005.



DIVIDEND DECLARATION

2010 2011 2012

6.7% 7.50% 7.50%

LEVERAGE ANALYSIS

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

the firm is in debtness).

DEBT RATIO

2010 2011 2012

57% 68.78% 76%

DEBT-EQUITY RATIO

2010 2011 2012

186% 322% 220%

RWML is heavily depending on the outsider’s financing.

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

Interest payment

Lease payment t

Dividend to preferred stockholders

TIME INTEREST EARNED RATIO



2010 2011 2012

1.27times 1.36times 1.56times

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

years.

DECISIONS ON THE BASIS OF RATIO

ANALYSIS

SHORT-TERM CREDITOR

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

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

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

LONG-TERM INVESTOROn 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.

SUGGESSIONS



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

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

There is tough competition in textile exports. Buyers are demanding

quality and economy in their purchase contracts. They are becoming

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

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

up process as well.

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

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

RWML has no marketing department to promote and introduce its

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

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

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

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

as double capacity.


Documents

Relience Weaving Mills Ltd 2013 14