Relience Weaving Mills LTD

Reliance Weaving Mills Ltd.
RELIANCE WEAVING MILLS LTD is located in Multan. Reliance weaving

Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group established RWML on
April 7, 1990 as a public limited company and obtained certificate for commencement of
business on May 14, 1990.
I visited RELIANCE WEAVING MILLS LTD three times for my report and was
always warmly welcomed by their management and employees. All machinery installed
in the mill is American. Plans and strategies are made in the head Office. Raw materials
purchase decision is also made in the Head Office. Employees work in three shifts,
whereas these are both permanent and on daily wages.
The mills units is supported by different facilities as canteen, store room, laboratory,
godown, and many others. The production process is divided into two sections:
In this report I have done SWOT analysis of RWML. Good quality with
reasonable price is the major strength of RWML. Export sales cover major portion of
total sales due to good quality. They contain very low portion of local market.
Centralized decision-making is one of the weaknesses of the RWML, but good
management covers this weakness in an appreciable manner. So for as Account
department is concerned though there is a little bit workload on the employees, but inside
friendly environment helps a lot to cover these tasks without fatiguenes and boredom.
Finaly I have given some recommendations to cover these threats. My suggestions were
highly appreciated by the management of RWML.
Internship Report Muhammad Fahim Khan 1


INTRODUCTION TO TEXTILE SECTOR
Textile includes all the business related with yarn and cloths, so all the business from
Cotton Ginning to Cloth and Apparel manufacturing comes under the Textiles. There are
different functions of Textiles, which are as under:
Ginning
This is the first stage where cotton is separated from the seeds. Raw material of this stage
is Cotton Seed. RELIANCE WEAVING MILLS LTD does not deal in this function.
Spinning
Raw material of this stage is Ginned Cotton. This cotton is spun to make yarn. Yarn
produced in various qualities, this is the main raw material of RELIANCE WEAVING
MILLS LTD, which is purchase from local market.
Weaving
In weaving unit yarn is converted into cloth through power looms or through hand
driven machines. RELIANCE WEAVING MILLS LTD, engaged in this function.
Processing and Dying

Cloth is further processed and it could be used for a lot of purposes, like Bed Sheets and
Garments etc.
Cutting and Stitching

This is a final use of cloth in which Cloth is cut and stitching made by the exporter than it
commercializes to various importers of the garments through wide world marketing
department.

History of the Textile Industry
Whilst farmers were developing new and better methods of agriculture, life in other areas
of work had changed little for hundreds of years. Early in the 18th century, most of the
population still lived in small, rural settlements. Few people lived in towns, as we now
know them.
Many people worked as producers of woolen and cotton cloth. They cleaned, combed,
spun, dyed and many people worked as producers of woolen cloth. They cleaned,
combed, spun, dye and wove the raw material into cloth. They did this work in their own
houses. This type of production has become known by the general term of the Domestic
(or Cottage) Industry.
Work within the Cottage Industry was usually divided up between the members of one
family. The women and girls were responsible for cleaning the sheep fleeces, carding the
wool and spinning it. The process of weaving was physically hard work and,
traditionally, it was the men who were responsible for it.
Generally, at regular intervals, a cloth merchant visited each handloom weaver’s cottage.
He would bring the raw material and take away the finished cloth to sell at the cloth hall.
As soon as the new wool arrived, it was washed to clean out all the dirt and natural oil.
After this, it was dyed with color and carded. This was the process of combing the wool
between two parallel pads of nails, until all the fibers were laying the same way.
Next, the carded wool was taken by the spinner and, using a spinning wheel, the thread
was wound onto a bobbin. The unmarried daughters of the household who were called
spinsters often performed this part of the process. The term spinster still exists in English
to mean an unmarried lady. The spun yarn was then taken to the loom to be woven. In a
weaver's cottage, the loom was often to be found on an upper floor. There were large

windows in the room to let in plenty of daylight. The loom was worked by both hand and
foot movements. Working the loom was quite strenuous work, which is why it was
traditionally the work of the men of the household.
TEXTILE INDUSTRY IN 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.
PERFORMANCE
The textile industry which is endowed with a strong base of weaving had started its
journey from almost non existence in 1947 with a meager size of 3000 shuttle looms that
is too in the unorganized sector with only 10 textile units. The industry has gone through
a long way and now possesses 220 units, 45000 looms in which include more or less
30000 shuttles looms. The textile industry is not only catering to the entire local
requirement but sharing out 65% of the total foreign exchange earning.
Pakistan being the fifth largest cotton producing country provides a strong base for
development sustenance of the textile industry. In spite of tremendous growth in all the
peripheral areas of the textile industry includes cotton, ginning spinning, processing and
made up sector. This industry which is the main pillar of the economy has not attained its
optimum potential so far.
The textile industry at present is passing through a transition phase. It is sailing smoothly
under the protected cover of quota systems. How ever it has to face the rough water to
open the sea when globalization of trade is implemented under` WTO agreement in 2004.
CAPACITY INSTALLED OPERATIVE

PERIOD. UNITS LOOMS LOOMS
1999-00 55 6600 5500
2000-01 59 7080 6100
2001-02 91 10920 9128
2002-03 105 13125 11125
2003-04 115 14375 12950
2004-05 153 19125 19556
2005-06 166 20750 19840
2006-07 157 19480 17850

PRODUCTION
PERIOD GREY CLOTH
IN METERS (000)
2000-01 602250
2001-02 667950
2002-03 999516
2003-04 1218187
2004-05 1428025
2005-06 2141382
2006-07 2172400
CURRENT POSITION OF
TEXTILE INDUSTRY
With the exception of the period from 1958-59 to 1974-75; the textile industry could not
maintain, a sustainable growth, and registered its growing rate at the nominal level in the
country. In the organized sector there are 452 textile companies of which 212 are not
listed and 240 textile units are listed on KSE/LSE comprising of 157 spinning units, 29
weaving units and 54 composite units. While the total number of textile units both listed
and unlisted is however is around 452 approximately.
The weaving capacity of the textile industry in our country is static at 9000 shuttle looms
for past many years. The capacity of conventional looms is also around 19840, which
have no match with quantum jump the industry ahs taken in this spinning sector. Instead
of going for value added products the frenzy for setting up spinning projects dictated the
mind of the textile industry over the years which took the 4.1 million spindles in 1996-97
instead of going to more value added textile products like dying bleaching units in the
country.

CAPACITY UTILIZATION (%)
PERIOD LOOMS
1999-00 79.50
2000-01 81.00
2001-02 82.90
2002-03 85.10
2003-04 86.20
2004-05 87.00
2005-06 88.00
2006-07 90.00
EXPORTS
The textile exports projection in the trade policy 1999-00 worth 6.5 billions $ of major
textile products include cotton yarn with the target of 1800 million $, grey cloths 1680
million $, ready made garments 1050 million $, tent and canvas 55 million $, knit wear
950 million $ and made-ups 965 million $.
The industry has to achieve these targets in the face of difficult t6rading conditions
especially the disturb economies of Asian countries, threat of imposition of anti dumping
duties on our gray cloths by the European Union countries, (E.U. has withdraw and anti
dumping duty w.e.f 1.01.2002) cotton yarn of 20/s in Japan and constant decrease in
imports from South Korea, all together posting an uphill task of achieving the export
targets for the textile industry during the financial year. Duty drawback (rebate) is
reducing from time to time and changing in sales tax refund to export oriented units,
which is very poor sigh for the exporter of the value added items.
PROBLEMS OF THE TEXTILE 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) Competitor’s installation of over capacity in some production lines or closure of
spinning capacity due to higher prices and short supply.
4) Docile labor-intensive technology, needed to be changed to cost efficient capital
intensive.
5) Lack of institutional finance for modernization efforts.

RELIANCE WEAVING MILLS LIMITED

MULTAN
GROUP PROFILE
The company has been sponsored by FATIMA GROURP in Multan. The sponsors are
already engaged in the field of manufacturing Sugar, Cotton lint yarn, Grey cloths. Their
company, RELIANCE COMMODITY PVT. LTD has been awarded Best Performance
Trophies for the years 1997-98 to 99-00 in the field of export of Molasses declared the
top 5 company of the Pakistan. The sponsors have also taken up the managing control of
a band new spinning unit at Rawat Distt. Rawalpindi form UBL through bidding.
Following are the companies included in the group:
Sr. # Company Name
1. FATIMA SUGAR MILLS LTD.

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

COMPANY PROFILE
Reliance weaving Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group
established RWML on April 17, 1990 as a public limited company and obtained
certificate for commencement of business on May 14, 1990.
Authorized capital of RWML at the time of incorporation was Rs.250 million and
presently RWML has authorized and paid up capital of Rs.700million which has
gradually increased and at present subscribed share capital of company stands at Rs.
308109370 , listed at Karachi and Lahore Stock Exchanges and also inducted into Central
Depository Company (C.D.C). The company has issued 1st tranche of Term Finance
Certificate (TFC’s) of Rs. million in February 2002, which has been fully subscribed.
These TFC’s are listed at Karachi Stock Exchange and has also been declared as eligible
security in C.D.C.
The principal business of the Company is manufacture and sale of cotton yarn and grey
woven fabric. RWML production capacity consists of two main segments, Weaving and
Spinning, both are ISO-9002 Certified for its quality. Today Reliance weaving Mills
Limited is the 3rd largest weaving mill in Pakistan with modern and technologically
advanced greige weaving plant. The we4aving units are situated at Multan and the
Spinning unit at Rawalpindi. The details are as under:

Weaving units:
Weaving unit is situated at Fazalpur; Khanewal Road, Multan commenced its commercial
production on May 01, 1993 with 96 Tsudakoma air jet weaving machines imported from
Japan along with modern auxiliary machinery to produce high quality cloth for export
markets. Further and additional 20 Tsudakoma air jet weaving machines form Japan were
installed in 1999 coupled with yarn doubling and twisting machines to produce value
added fabrics. The installed production capacity of the unit is approximately 16.085
million meters per annum. Further more, a captive power plant consisting of 2.5 MW
Capacities are also installed in the weaving unit-1 by which the company is saving
power cost and production losses.
During the last financial year, the company has implemented and expansion project for its
weaving unit at a cost of a about Rs.500 million, comprising 108 Tsudakoma air jet
weaving machines from Japan along with modern auxiliary machinery to produce high
quality cloth for export markets. The project started its commercial production from
October 01, 2001. The installed production capacity of the unit is approximately 21.70
million meters per annum.
Another 48 air jet looms expansion plan in existing weaving unit # 2 is at advance stage,
which will result in increase in production approximately by 9.00 million meters per
annum. Now weaving unit comprise of 295 Tsudakoma with production capacity of 57.6
million meters of grey cloth annually.

Spinning Unit:
The spinning unit of the RWML is located at Mukhtarabad, Rawat, and District
Rawalpindi in the province of Punjab. The unit commenced its commercial production on
October 01, 1999 with 14400 spindles with a very good combination of European and
Japanese machinery with allied accessories. It produces high quality yarn for in-house
consumption and for export markets. The installed capacity after conversion into 20/s
count is approximately 4.849 million kgs.
The spinning unit has 35,520 spindles with an installed capacity of 12.30 million kgs of
yarn converted at 20/s count. Cotton yarn produced is used in weaving units for
manufacturing of fabric being sold in local and export market.

ORGANIZATION’S (RWML) HIERARCHY
CHAIRMAN
CHIEF EXECTIVE
C.F.O.
FINANCE MKTING PURCHASE ACCOUNTS INTERNAL

MANAGER MANAGER MANAGER MANAGER AUDITOR
CHIEF
ACCOUNTANT
DCA ASSISTANT
ACCOUNTANT


VISION STATEMENT
The company is interested to install complete textile finishing plant including bleaching,
dyeing, mercerizing, calendaring, folding, printing plant in the existing weaving units at
Multan to make it a complete composite unit, which can explore local and international
market of high value products. The company would keep its emp0hasis on product and
market diversification, values addition and cost effectiveness. We want to fully equip the
company to play a meaningful role on the sustainable basis in the economic development
of the country.
MISSION STATEMENT
The mission of the company is to operate state of the are textile plants capable of
producing yarn and fabrics.
The company will conduct its operations prudently assuring customer satisfaction and
will provide profits and growth to its shareholders through:
• Manufacturing of yarn and fabrics as per the customer’s requirements and
market demand.
• Exploring the global market with special emphasis on Europe
and USA.
• Keeping pace with the rapidly changing technology by continuously
balancing, modernization and replacement (BMR) of plant and machinery.
• Enhancing the profitability by improved efficiency and cost controls.
• Recruiting, developing, motivating and retaining the personnel having
exceptional ability and dedication by providing them good working
conditions, performance based compensation, attractive benefit program and
opportunity for growth.

• Protecting the environment and contributing towards the economic strength of

the country and function as a good corporate citizen.
COMPANY’S QUALITY POLICY

COMMITMENT TO EXCELLENCE
• All of our priorities action and products must be recognized as an

expression of unique quality.
• We are dedicated to produce fabrics and yarn of the best export quality to
meet the requirement and expectations of our customers.
• We strive for continuous improvement in day-to-day quality work;
organize the training and necessary feedback on our performance.
THE 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 Plant & Chilly Equipment from Luwa Switzerland.
• Overhead Travelling Cleaner from Luwa Switzerland.
• Sizing machine from Sucker & Mullar Germany.
• Knotting machine from Tomen Corp. Germany.
• Air Compressor & Dryer from Atlas Capco Belgium.
• Warping Machine from Benninger Switzerland.
• Vaccum Cleaning plant from Germany.
• Power Generator from UK.
• 3 sets power Generator (Gas) from Caterpillar Switzerland.
The above plant and machinery was imported with the foreign currency financial
assistance of Muslim Commercial Bank Limited.
LOCAL
The plant and machinery locally purchased up to 20% of the total machinery, which is as
under:
• Bailing Press
• Motor Lifter 2 Nos.
• Beams 100 Nos.
• Electric material from semins.
• Folding Machines 3 Nos.
• Equipment for workshops.
• Electric appliances.

• Fire fighting equipment.
Both the imported and local machinery was brand new at the time of purchase.
COST OF PROJECT AND MEANS OF FINANCE
ESTIMATED COST
Pak. Rs. In (Million)
• Imported machinery 210.50
• Import incidentals 25.20
• Local machinery 13.50
• Land, Building, Others 44.80
• Total Estimated cost 294.00
ACTUAL COST
• Imported machinery 199.00

• Imported incidentals 22.40
• Local machinery 15.60
• Land, building, others 47.00
• Total actual cost 284.00

The company has successfully completed the project within the projected cost by saving
at least 11.00 (m) from the imported machinery due to forward booking of US $ on L/Cs
through speculation with the bank.
FINANCING
The project has been financed through;
P
ak.Rs. In (M)
• Share holder’s equity 109.55
• Redeemable capital 3.00
• FC loan I.BR.D Line world bank 146.45
• Local Bank Loan 13.60
• Directors Loan 4.80
• Local suppliers 6.60
• Actual project cost 284.00

COMMERCIAL PRODUCTION
The company has commenced commercial production from May 1, 1993.
FINANCIAL YEAR
The financial year of the company is from October 1st to September 30th.
RAW MATERIAL
The basic raw material for the company is cotton yarn, which is easily available in
Pakistan.
LABOUR AND TEACHNICAL KNOW-HOW

The textile industry, being the oldest and largest industry in the country, there is cheap
labor available, both skilled as well as unskilled. The company has hired
experienced team, which is engaged in the running of existing manufacturing
facilities.
BUILDING AND CIVIL WORKS

Main factory building
• Godowns 4 Nos.
• Office buildings admin and ISO
• Labor and staff quarters
• Power house
The total covered area is approximately 120,120sq. Feet (13,345sq. meters).

UTILITIES
SELF POWER GENERATION

The project has a self-powerhouse of 2.5MW consisting of 3 power Generators imported
from caterpillar to provide smooth power to the Mills.
FEUL
Fuel requirement of the powerhouse is Sui Gas which is special installed by company on
self finance scheme by cost of Rs.10.055 (M) and also have a diesel generator in case of
any electric failure.
WATER
The total requirement of water for the project is met out of regular supply form the Tube-
well.

PRODUCTION
Year/Month Production Capacity
Ended (000 Mtrs.) Attained %
30 September, 1998 12104 78.00
30 September, 1999 13255 85.00
30 September, 2000 13065 84.00
30 September, 2001 13530 87.00
30 September, 2002 13680 88.00
30 September, 2003 13193 85.00
30 September, 2004 14339 89.00
30 September, 2005 15539 96.00
30 September, 2006 15980 96.00
30 September, 2007 16587 97.20
It is difficult to describe precisely the production capacity in weaving mills since it

fluctuates widely depending on various factors such as count of yarn spun looms speed,
width and construction of cloth. It also varies according to the production pattern adopted
in a particular year.
SALES(Cloth)

Year Total sales Export sales % of Export sales

Rs. (million) Rs. (million) To Total sales
1999 123415 54260 43.96
2000 402426 295639 73.46
2001 448905 395895 88.19
2002 667242 614060 92.03
2003 727163 660883 90.89
2004 723822 714587 98.72
2005 800382 755064 94.34
2006 1306888 1228367 93.99
2007 1252560 1115277 85.34
Exports are increasing due to increase in demand in various markets because of

withdrawl of quota.
COMPANY DIVIDEND POLICY
• The company is declaring regular dividend to its shareholders since previous 5

years.
• The shareholders of the company are fully satisfied by the company
management decisions regarding dividends as well as operational matters.

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

market value of the company’s share has increased to its face value to Rs.23
per share.
Following dividends paid by the co.
2004 10% cash dividend

2005 23.50% cash dividend
SHAREHOLERS’S RIGHTS
None of the holders of the issued shares of the co. has any special or other interest in the
property of profits of the company other than of as holder of ordinary shares in the capital
of the company.
PROCESS OF WEAVING UNIT

RWML UNIT-2 is engaged in the following functions.
WEAVING
Different types of the cloths are produced in the Weaving department. Weaving process
includes the following steps.
• Yarn receiving and issuing
• Doubling/twisting
• Loading on sizing

• Sizing
• Loom shed
• Cutting/Folding and Packing
Yarn Receiving and 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.
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:
• P.V.A Imported from Japan
• Textile wax from B.A.S.F. Pakistan Ltd.
• Starch from Rafhan Maize FSD.
•
The above chemicals are mixed from the sizing machine through revolving
machine.
After sizing the beams these are transferred to the stock of the sizing department
and issued to production department as and when required otherwise these are
held in this department with marking of its specification on that beam so that it
can easily be located out of various beam’s stock.
• LOOMS 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

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
1to 10 mtrs use in cut piece sale
11 to 20 mtrs use in local normal sale
21 to 50 mtrs use for export
The packing may be changed in accordance with the demand of customers as well
as the nature of consignment.
PRODUCTION REPORTS
Different reports are prepared when yarn is received from sizing section to
completion of cloth. All records are maintained completely.
• Yarn receipt report in weft

• Sized beam receipt report
• Waste report
Leno (cuttari)
Rags (cloth)
Cut pieces
• Daily used report
• Efficiency report
• Daily production report


MARKETING MIX
Marketing mix is the marketing tasks that the company is to acquire its objectives in the
target market.
4 P’S
1. PRODUCT
2. PRICE
3. PLACE
4. PROMOTION
1. PRODUCT
RWML produces high quality cloth only. They produce all kinds of construction
as demanded by to customers. Its exports are more than 90% of its produce and
remaining they sell in the local market. They sell to the well known local buyer
like Al-Abid Silk Mills ltd. Fateh Textile Ltd. Chenab Ltd., which are the top
leading companies of the Pakistan subsequently they export the cloth after
processing. RWML take the advantage of second exporter from the govt.
department.
TYPES OF CLOTH BEING PRODUCED

100% Cotton Grey Cloth of the following main types is being produced.
20*20/108*56=63”
20*16/128*60=61.5”
10*10/80*54=55”
30*30/100*60=72”

2. PRICE
Pricing is an important element in the marketing process for any company. The
price policy of co. should be in such a way that it should produce a reasonable
profit for the co. and should satisfy the customer. Following tow factors are very
important.
• Fixed cost
• Variable cost
FIXED COST
Fixed cost is the costs which remain always same in total whether produce large
quantity or small quantity. Fixed cost per unit rises as the quantity produced
decreases and vice versa. Some of the importent factors of fixed cost are;
• Salaries
• Rent
• Local taxes
VARIABLE COST
Variable cost changes in total with the change in quantity produced. It increases in
total as quantity increases but remains same on per unit basis. Some examples are;
• Material cost
• Labor cost
• FOH

RWML’S PRICING 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 + Middleman’s commission
Pricing Procedure in Local Market

RWML sells only extra quality left from the foreign order in the local market.
They call tenders when they want to sell the production in the local market. They
sell to those person whose tender price will be high.
Pricing Procedure for Export

Pricing procedure for export is different from the local procedure they charging
the price in foreign factors before charging the mind certain factors before
charging the price in foreign market. When any customers want to purchase the
products after negotiation they fix the price. Some important factors are inland
freight, sea freight clearing charges etc.

3. PLACE ( Distribution Channels)

RWML exports more than 90% of its product. They are using two types of
distribution channels in export.
• Direct channel.
RWML====Customer
• Indirect Channel.
RWML==Middleman=====Customer
Mostly RWML exports its products through ship. They are alos using other
modes of transportation as well:
• Trucking
• Shipping
• Air line
Major export countries are as under;
1. Japan
2. Korea
3. Hong Kong
4. USA
SALES 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.
PROCEDURE
Inquiry
Customer inquiries are received via telex, Fax and letters and E-mail. These are directly
sent to C.E for review. After C.E’s review these are sent to export dept. in charge. After
careful analysis, these inquires are replied after C.E.’s approval.
Costing
Costing sheet prepares for C.E.’s approval. In absence of C.E. dept. in- charge approves
price.
Costing approval
C.E. gives approval or may suggest any other price to be offered.
Contract review and issue

Section in charge takes following steps before issuing a contract; prepare contract review
check sheet.
1. The requirements are adequately defined and involvements of production
areas are specified.
2. In house/ out house have the capacity to meet the order requirements?
Prince quotation
In getting approval of costing and review of customers requirements, prices are quoted to
customers for confirmation.
Confirmation of sale contract

If customer confirms the price offered, sale contract is issued to the customer with
complete details of price, quality, delivery, payments, terms etc.
Letter of credit (L/C)

Customers establish/ open L/C well before shipment time. In case of delivery in receipt
of L/C, concerned section in charge reminds customer. After receipt of L/C, these are
checked with regard to ordered goods, prices, shipment details, marketing, shipment
negotiation etc. discrepancies in L/C are noted and informed to customer for rectification.
Dispatch of goods/cloth
Packed cloth is dispatched to the customers. If the shipment is to be custom cleared from
Multan dry port, goods are sent to Karachi on trucks with all necessary records.
Dispatched goods are detail noted in relevant registers.
Shipment
RWML is having all well-known shipping companies namely;
Samin Enterprises.
Pre-shipment documents are sent to Samin enterprises next day by dept. these goods are
custom cleared at Multan dry port. Documents are sent to clearing agent same day or
next6 day and followed up to ensure that these goods are custom cleared without any
unnecessary delay. In case of dry port, original bill of loading and 4th copy of shipping
bills are collected from office agent for obtaining the rebate timely. If the consignment is
cleared from Multan dry port than there is no need of follow up the consignment.
Following are the companies, which are used for sea shipment.
1) APL CO. USA

2) UNITED MARINE AGENCIES
3) UNIQUE MARITIME AGENCIES
4) RIAZEDS PVT. LTD.
5) CHUGTAI BAOS. KARACHI

RATE OF SEA FREIGHT

HONGKONG 350$
JAPAN 450$
MANILA 375$
USA 950$
CHINA 350$
MIS Reports
Balance order instructions are updated periodically. Balance order list up dated
fortnightly for their information. Sale comparison reports are updated in computer
network on monthly basis, it comprises one month’s status of shipment, party wise and
country wise invoice values, complaints and claims.
Customer complaints.
After receiving goods, if customer find and defect / fault in the quality of cloth, he
complains the same. Complaints are entered in complaint received register after taking
complaint it is raised on corrective action and issued to responsible person/ dept. after
getting reply, it is informed to the customer. Case is taken to remove the defects and to
further restrain the faults. Complaints are processed quality and efficiently. After that
claim is valued in US $ and Pak Rs. Than credit the customer account by couching the
accounting entry and subsequent paid to customer in shape of FDD or FTT subject to
realization the amount of concerned consignment.


ADMINISTARATION 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 company. All the keys relating to the mills office, labor colony,
(quarters) are lying into the responsibility of the security officer
No out side visitor can enter in the mills premises without the permission of the Admin
Manager.

a) Whenever any visitor wants to enter into the mill, security guard firstly
contact with the authority in the mill top grant the permission to enter into
the mill’s premises.
b) They are the guardians of the every thing of the co.
c) They are in uniform of dark army color.
d) They sere and check the outward going pass of certain things when these
going to out of the mills premises.
GATE OFFICE
This office has been made to keep the record of each and every thing coming in and
going out of the Mills gate.
For this purpose gate office clerk maintains two type of registers called;
1) Outward going pass register
2) Inward coming pass register
When every thing including raw material, stores supplies, or any other things comes into
the mills premises a document named as I.G.P is made in which information like date of
supplier, description, quantity of the material and any other remarks are written. In the
same way O.G.P is prepared for out going things etc. and they made a summary on daily
basis and fax to head office.
TIME OFFICE
1. It keeps the attendance records, which is than used to calculate the salary
to be paid to the workers on monthly basis.
2. It keeps the records of the over time single as well as double, leaves,
number of days worked of all the workers and than calculate their over
time on the basis of the gross salary of each workers.
3. It keeps the records of gratuity, bonus, pensions and other benefits
including CPL (cash paid leave ) to each employee.
4. It keeps the records of Social Security, DOBI, Education Cess etc. of all
employees.

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

PREPARATION OF ACCOUNTS
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
PETTY CASH FUND

Cash is given to Mr. Afzaal hussain the site cashier for meeting the different site
expenses and these are;
• Yarn freight
• Store freight
• Building capitalized/repair and maintenance

• Labor welfare charges

The balance is maintained up to Rs. 100000 minimum every time.
PURCHASE PROCESS
First of all purchase requisition is issued to the different suppliers. Then the quotations
are received from the different supplier and evaluated by the purchase manager Mr.
Subhan sb. (C.A) then a purchase order is made. Three copies are maintained for the
purchase order;
• One to the supplier
• One to the accounts department
• One is remained with the purchase department
Purchase includes;
• Raw material (Local)
• Starch (Local)
• Beveloid (Local)
• Softner-52 (Local)
• Chemical PVA imported (Duepont USA)
• Yarn (Australia)
MAJOR MARKET OF RWML
Major market of RWML is differentiated on the basis of sale;
Export sale (85%)

Export sale is made to;
• Europe
• Hong Kong

Local sale (15%)
Local sale is made to;
• Nishat
• Chenab
• Bismillah
• Nishat (Chunian)
INTERNAL AUDIT
Inter audit is done by Mr. Sabir Bhatti Sb. is the ‘Internal Audit Manager’ with his four
Assistants; on daily basis of all the vouchers.
STORE INVENTORY SYSTEM

A daily purchase report of Store and Spares is received at the Head Office from the site
and then it is booked in a bill payable voucher/Store Purchase Voucher by the accounts
officer Mr. Muhammad Sulaiman Sb.
Site stock inspection is also done at the end of each month by 3 or 4 accountants.

OPENING OF LETTER OF CREDIT
One of the most important functions of the commercial banks in the world is to
finance the imports and exports trade. There are several ways of financing international
trade, of all the methods available at present, the documentary letters of credit are most
important because they undertake the beneficiaries to obtain money either immediately or
within a mutual agreed period, provided the beneficiary fulfills the conditions lay down
in the letter of credit.
Ariticle-2 of the uniform custom and practice for documentary credit of the international
chamber of commerce (ICC) defines the documentary credit as under;
“Any arrangement, however, named or described, whereby a bank (the issuing
bank), acting at the request and on the instructions of a customer (the applicant)
or its own behalf is to make payment to or to the order of a third party (the
beneficiary) , or is to accept and pay bills of exchange (draft/drafts) drawn by the
beneficiaries, or authorizes an other bank to negotiate, against stipulated
documents, provided that terms and conditions of credit are compiled with.”
Form the above definition it means that a documentary letter is a bank’s written
undertaking given to the exporter of the payment of a certain amount of money on behalf
of the importer provided the exporter tenders to the bank or its overseas agent, the
specified document within a specified period in accordance with the terms of
understanding.
L/C TREATMENT IN RWML
The company has to import following items for the continuation of its operation.
1. Machinery
2. Spare parts and Chemicals

The company has to request to open L/C for these imports. All the work related to the
L/C is prescribed in the purchase order and send it to bank duly signed by import
department.
For opening of L/C amount of margin 10% of the total invoice cost and L/C opening
charges are deducted by L/C opening bank. This amount is debited to the L/C account
created for that particular L/C # , by debiting the margin and charges recovered by the
bank.
An entry is made.
L/C # XYZ Dr.

Margin Dr.
Bank Cr.
When the imported items come into the counter, bank inform to get release the
documents. By depositing the amount of the L/C is of sight nature. If the L/C is of
deferred (30, 60, 90, 120 days) nature then the rate of the currency or the mark up
required to deposit by the company in addition to L/C value is decided between the bank
and the company provide some guarantee to the bank or the bank decides on the credit
worthiness of the company.
Amount deposited to the bank is then debited to the L/C account by debiting the bank is
then debited to the L/C account by debiting the bank or payable. An entry is made:
L/C # XYZ Dr.

Bank/Import bill payable Cr.
After releasing the documents these are sent to the agent sitting in Karachi who then
release the shipment from the port by paying all the expenses to cargo, carriers, customs,
sales tax, income tax authorities.
The company sends time to time the amounts to the agent for the particular L/C #. If there
is no payment is made to the bank then bank create the PAD is favor of the company and
recovered form the RWML otherwise make the loan duly a mutual consideration.

L/C # XYZ Dr.

Import bill payable Cr.
Clearing agent after releasing the consignment dispatched it to the company and along
with all documents (bill of entry and receipts of the expenses stated above). The company
after checking all the documents sends the remaining amount if any to the agent. By
making the same treatment in the company’s account.
When all the amounts are paid to the agent for that certain L/C then the entry is made to
close the account of the agent for that particular L/C. the entry is:
L/C # XYZ Dr.

Agent Cr.
EXPORT BILLS NEGOTIATION

This term is specified to the exports. When the company makes export sales, the buyer
opens an L/C in favor of the company. As described earlier the L/C may be of different
kinds from sight to 90& 120 days.


SWOT ANALYSIS
STRENGTHS
1. Imported machinery
2. Strong market image
3. Awareness of product
4. High financial resources
5. Committed and competent staff
6. Strong industrial group
WEAKNESSES
2. Costly management staff
3. De motivated staff
4. No promotional activities
5. No other incentive except saalay and bonus
6. Centralized control
7. Centralized decision making
OPPORTUNITIES
2. Potential in market
3. Market in USA & E.U. due to withdraw of quota
4. Throughout local market in Pakistan
THREATS
1. New entrance
2. Economic instability
3. Tough competition
4. Increasing cost of production
5. War
6. Price fluctuations
7. Political instability


MY LEAARNING ARE AS FOLLOWS

1. How we have to respond and quote prices upon difference inquires from the
customer.
2. How the working is being done.
3. Issuance of selling contract to customers
4. After looking on contract, how we have to proceed further in order to

fulfillment of desired requirement.
5. How correspondence has to against different orders and different customers.
6. The important matter is to understand the perception from customer and his
expectation because it differs from customer to customer and to order.
7. Push up the processing team to help in making timely shipment.
8. Preparation of different sorts of reports
9. How to respond to the assignments given by the CEO.
10. Purchase of yarn and its recording in the books of accounts
11. Payment of petty cash expenses and their recording.


Purpose of Financial Analysis
The purpose of financial statement analysis is to make a quick assessment about a firm’s
financial situation .It is also used to identify the major strengths and weaknesses of a
business enterprise.
Tools of Financial Statement Analysis
(1) Financial Ratio Analysis
(2) Common Size Income Statements
Financial Ratios
Financial ratios are a ratio of 2 numbers, at least one of which comes from the firm’s
financial statements. A financial ratio has very little meaning unless it is compared to
some other ratio. Two types of comparisons are cross-sectional analysis and time-
series analysis.
Cross-Sectional Analysis Compare ratio for firm A at time t to industry average

Time-Series Analysis
Compare ratio for firm A at time t to ratio for firm
A at time t-1, etc.
Financial ratio analysis is a fascinating topic because it can tell us so much about
accounts and businesses. When we use ratio analysis we can work out how profitable a

business is, we can tell if it has enough money to pay its bills and we can even tell
whether its shareholders should be happy!
Ratio analysis can also help us to check whether a business is doing better this year than
it was last year; and it can tell us if a business is doing better or worse than other
businesses doing and selling the same things.
What do we want ratio analysis to tell us?

We have to start working on ratio analysis with the following question in our heads:
What are we trying to find out?
We can use ratio analysis to try to tell us whether the business
• is profitable
• has enough money to pay its bills
• could be paying its employees higher wages
• is paying its share of tax
• is using its assets efficiently
• has a gearing problem
• is a candidate for being bought by another company or investor
And more, once we have decided what we want to know then we can decide which ratios
we need to use to answer the question or solve the problem facing us.
Users of Analysis Information

Now we know the kinds of questions we need to ask and we know the ratios available to
us, we need to know who might ask all of these questions! This is an important issue
because the person asking the question will normally need to know something particular.
Of course, anyone can read and ask questions about the accounts of a business; but in the
same way that we can put the ratios into groups, we should put readers and users of
accounts into convenient groups.

The list of categories of readers and users of accounts includes the following people and
groups of people:
• Investors
• Lenders
• Managers of the organization
• Employees
• Suppliers and other trade creditors
• Customers
• Governments and their agencies
• Public
• Financial analysts
• Environmental groups
• Researchers: both academic and professional
The users of accounts that we have listed will want to know the sorts of things we can see
in the table below: this is not necessarily everything they will ever need to know, but it is
a starting point for us to think about the different needs and questions of different users.
Investors To help them determine whether they should buy shares in the
business, hold on to the shares they already own or sell the shares
they already own. They also want to assess the ability of the
business to pay dividends.
Lenders To determine whether their loans and interest will be paid when
due.
Managers Might need segmental and total information to see how they fit into
the overall picture.
Employees Information about the stability and profitability of their employers
to assess the ability of the business to provide remuneration,

retirement benefits and employment opportunities.

Suppliers and other Businesses supplying goods and materials to other businesses will
trade creditors 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 activities of business.
their agencies To regulate the activities of business, determine taxation policies
and as the basis for national income and similar statistics
Local community Financial statements may assist the public by providing information
about the trends and recent developments in the prosperity of the
business and the range of its activities as they affect their area.
Financial analysts They need to know, for example, the accounting concepts
employed for inventories, depreciation, bad debts and so on.
Environmental Many organizations now publish reports specifically aimed at
groups informing us about how they are working to keep their environment
clean.
Researchers Researchers' demands cover a very wide range of lines of enquiry
ranging from detailed statistical analysis of the income statement
and balance sheet data extending over many years to the qualitative
analysis of the wording of the statements.

Which ratios will each of these groups be interested in?
Interest Group Ratios to watch

Investors Return on Capital Employed
Lenders Gearing ratios / Leverage Ratio
Managers Profitability ratios

Employees Return on Capital Employed
Suppliers and other trade creditors Liquidity

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

Horizontal Analysis
BALANCE SHEET
COMMON SIZE HORIZONTAL ANALYSIS
ASSETS: 2007 2006

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

government 45,560,675 49,793,062 (4,232,387) -8.50
Cash and bank balances 41,794,462 32,572,103 9,222,359 28.31
Total Current assets 1,449,914,27 1,309,202,09 140,712,18 10.75

4 0 4
TOTAL ASSETS 3,430,009,780 3,344,852,506 85,157,274 2.546
EQUITY AND 2007 2006

LIABILITIES: (Rupees) In %

Share capital and

reserves
Authorized Capital
30,000,000 ordinary shares of
Rs 10 each 30,000,000 30,000,000 ------------- ---
Issued, subs and paid-up capital 308,109,370 246,487,500 61,621,870 24.99

Reserves 395,081,250 395,081,250 -------------- -------
Unappropriate profit 165,798,067 195,501,910 70,296,157 35.96
868,988,687 837,070,660 31,918,027 3.81
Non-current liabilities
Long term Finance & other 711,913,668 (276,877,550)
988,791,218 -28
Capital 63,375,000 26,500,000
36,875,000 71.86
Subordinated loans 8,589,216 (7,649,111)
16,238,327 -47
Deferred liabilities
783,877,884 1,041,904,545 (258,026,661) -24.76
Current liabilities 128,588,478 124,134,603 4,453,875 3.59

Trade and other payables 56,488,753 43,259,876 13,228,877 30.58
Interest and mark-up accrued 1,336,646,814 1,174,824,009 161,822,805 13.77
Finance under markup
arrangement 255,419,164 123,658,813 131,760,351 106.55
Current portion of non-current 1,777,143,209 1,465,877,301 311,265,908 21.23
liabilities
Total Liabilities and 3,430,009,78 3,344,852,50 85,157,274 2.546
Equity 0 6

Profit and Loss Account

Common size Horizontal analysis
2007 2006
(Rupees) in %
Sales 3,400,998,361 3,122,414,478 278,583,883 8.92
(3,054,593,695) (2,699,848,853) 354,744,842
Cost of sales 13.21
Gross profit 346,404,666 422,565,625 (76,160,959) -18
Other operating income 39,344,127 17,840,572 21,503,555 120
Administrative expenses (50,282,001) (48,421,073) 1,860,928 3.84
Distribution and selling costs (49,671,260) (39,031,369) 10,639,891 27.25
Other operating expenses (6,048,989) (9,584,861) (3,535,872) 36.89
Finance costs (232,381,335) (199,406,645) 32,974,690 16.54
Profit / (loss) before taxation 47,365,208 143,962,249 (96,597,041) -67.10
Provision for taxation (15,447,181) (20,433,058) (4,985,877) -24.40
Profit for the year 31,918,027 123,529,191 (91,611,164) -74.16
Earnings per share 1.04 4.01
BALANCE SHEET
COMMON SIZE HORIZONTAL ANALYSIS

ASSETS: 2006 2005

(Rupees) In %
Non-current assets
Property, Plant and 1,963,229,490 2,036,092,537 (72,863,047) -3.59
equipment 2,421,340 2,421,340 -------------- -------
Long-term deposits 1,965,650,83 2,038,513,87 (72,863,047) -3.57
0 7
Current assets 12,542,718 15.62

Stores, spares and loose tools 92,855,401 80,312,683 39,916,901 5.65
Stock-in-trade 746,643,801 706,726,900 25,166,852 12.30
Trade debts 229,707,309 204,540,457 (136,626,854) -47.64
Loan and Advances 150,177,167 286,804,021 1,911,177 49.08
Trade deposits and payments 5,804,422 3,893,245
Tax refunds due from (10,722,865) -17.72
government 49,793,062 60,515,927 (1,409,733) -46.65
Other receivables 1,612,193 3,021,926 70,523,132 100
Short term Investment 70,523,132 ------------ 31,737,856 37.63
Cash and bank balances 32,572,103 8,434,247
Total Current assets 1,379,688,59 1,354,249,40 25,439,184 1.88

0 6
TOTAL ASSETS 3,345,339,420 3,392,763,283 (47,423,863) -1.398
2006 2005
EQUITY AND LIABILITIES:

In %
Share capital and
reserves
Authorized Capital
30,000,000 ordinary shares
30,000,000 30,000,000
of Rs 10 each
246,487,500 246,487,500
Issued, subs and paid-up capital ------------ ------
395,081,250 395,081,250
Reserves ------------ ------
195,501,910 96,621,469 102.34
Unappropriate profit 98,880,441
837,070,660 738,190,219 126.46
98,880,441
Long term Finance & other
1,025,666,218 1,158,062,811
Capital (132,396,593) -11.43
16,238,327 18,400,700
Deferred liabilities (2,162,373) -11.75
1,041,904,545 1,176,463,511
(134,558,966) -11.44
Current liabilities
Current portion of long term
123,658,813 139,361,140 (15,702,327) -11.27
liabilities
1,174,824,009 1,193,844,369 (19,020,360) -1.59
Finance under markup
124,621,517 109,756,482 14,865,035 13.54
arrangement
43,259,876 35,147,562
8,112,314 23.08
Trade and other payables
1,466,364,215 1,478,109,553 -2.15
Interest and mark-up accrued (31,745,338)
Total Liabilities and Equity

3,345,339,42 3,392,763,28 (47,423,863) -1.398
0 3


Common size Horizontal analysis
2006 2005
(Rupees in) in %
Sales 3,122,414,478 2,061,671,982 1,060,742,496 51.45
Cost of sales (2,699,848,853) (1,803,756,782) 896,092,071 49.68
Gross profit 422,565,625 257,915,200 164,650,425 63.84

Other operating income 17,840,572 20,305,651, (2,465,079) -12.14
Administrative expenses (48,421,073) (27,691,287) 20,729,786 74.86
Distribution and selling costs (39,031,369) (38,357,316) 674,053 1.76
Other operating expenses (9,584,861) (7,248,742) 2,336,119 32.22
Finance costs (199,406,645) (93,157,973) 106,248,672 114.05
Profit / (loss) before taxation 143,962,249 111,765,533 32,196,716 28.81

Provision for taxation
(20,433,058) (15,789,023)
4,644,035 29.41
Profit for the year 123,529,191 95,976,510 28.71

27,552,681
Earnings per share 5.01 3.89

Vertical Analysis
BALANCE SHEET
COMMON SIZE VERTICAL ANALYSIS

ASSETS: 2007 2006

Non-current assets
Property, Plant and equipment 55.59 % 58.69 %
Intangible assets 0.03 % --------
Long-term investment 2.04 % 2.04 %
Long-term deposits 0.07 % 0.07 %
Current assets
Stores, spares and loose tools 3.00 % 2.78 %
Stock-in-trade 22.52 % 22.32 %
Trade debts 4.6 % 6.87 %
Loan and Advances 5.46 % 4.26 %
Trade deposits and short-term payments 0.032 % 0.17 %
Mark-up accrued 0.21 % 0.21 %
Other receivables 0.241 % 0.048 %
Short term Investment 3.66 % 0.016 %
Tax refund due from government 1.33 % 1.49 %
Cash and bank balances 1.22 % 0.97 %
Total Current assets 42.27 % 39.14%
TOTAL ASSETS 100.00% 100.00%
EQUITY AND LIABILITIES: 2006 2005
Share capital and reserves

Authorized Capital 30,000,000
ordinary shares of Rs 10 each

Issued, subscribed and paid-up capital 8.98 % 7.37 %

Reserves 11.52 % 11.81 %
Unappropriate profit 4.83 % 5.84 %
25.33 % 25.03%
Long term Finance and other payables 20.76 % 29.56 %
Loan from related parties- subordinated loans 1.85 % 1.102 %
Deferred liabilities 0.25 % 0.48 %
Current liabilities
3.75 % 3.71 %
Trade and other payables
1.65 % 1.29 %
Interest and mark-up accrued
38.97 % 35.12 %
Finance under markup arrangements
7.45 % 3.7 %
Current portion of non-current liabilities
51.81 % 43.82 %
Total Liabilities and Equity 100 % 100 %

Common size vertical analysis
2007 2006

Sales 100 % 100 %

Cost of sales (89.81 %) (86.47 %)
10.19% 13.53%
Gross profit
11.57 % 10.57 %
Other operating income
(1.48 %) (1.55 %)
Administrative expenses
(1.46 %) (1.25 %)
Distribution and selling costs
(0.178 %) (0.31 %)
Other operating expenses
(6.83 %) (6.39 %)
Finance costs
Profit / (loss) before taxation 1.39 % 4.61 %

Provision for Taxation (0.45 %) (0.65 %)
Profit for the year 0.94 % 3.96 %
BALANCE SHEET
COMMON SIZE VERTICAL ANALYSIS
ASSETS: 2006 2005

Non-current assets
Property, Plant and equipment 58.69 % 60.01%
Long-term deposits 0.72 % 0.07 %
58.76% 60.84%
Current assets
Stores, spares and loose tools 2.78 % 2.37 %
Stock-in-trade 22.32 % 20.83 %
Trade debts 6.87 % 6.03 %
Loan and Advances 4.49 % 8.45 %
Trade deposits and short-term payments 0.17 % 0.11 %
Tax refund due from government 1.49 % 1.78 %
Other receivables 0.048 % 0.09 %
Short term Investment 2.108 % --------
Cash and bank balances 0.97 % 0.25 %
Total Current assets 41.24 % 39.92%
TOTAL ASSETS 100.00% 100.00%
EQUITY AND LIABILITIES: 2006 2005
Share capital and reserves

Authorized Capital 30,000,000
Ordinary shares of Rs 10 each

Issued, subscribed and paid-up capital 7.37 % 7.27 %

Reserves 11.81 % 11.64 %
Unappropriate profit 5.84 % 2.85 %
25.02 % 21.76 %
Long term Finance and other payables 30.66 % 34.13 %
Deferred liabilities 0.49 % 0.54 %
Current liabilities
Current portion of long term liabilities 3.696 % 4.11 %
Finance under markup arrangements s 35.11 % 35.19 %

Trade and other payable 3.73 % 3.24 %
Interest and mark-up accrued 1.29 % 1.036 %
43.83 % 43.57 %
Total Liabilities and Equity 100 % 100 %

Common size vertical analysis

2006 2005
Sales 100 % 100 %

Cost of sales (86.47 %) (87.49 %)
13.53% 12.51%
Gross profit
10.57 % 10.98 %
Other operating income
(1.55 %) (1.34 %)
Administrative expenses
(1.25 %) (1.86 %)
Distribution and selling costs
(0.31 %) (0.35 %)
Other operating expenses
(6.39 %) (4.52 %)
Finance costs
Profit / (loss) before taxation 4.61 % 5.42 %

Provision for Taxation (0.65 %) (0.77 %)
Profit for the year 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 18%, but firm was able to reduce its operating expenses,
financial charges, taxes and to increase other income by considerable amount. This
helped to fill gap created by CGS and as result NPAT increased by 74.25%. While
looking to balance sheet, fixed assets decreased by 2.88% but long term investments
increased by 30%. Investment in stock in trade decreased by 19.18%. Firm account
receivable increased that means firm was not good to collect receivable. Cash balance
increased by 28.39%. Non-current liabilities decreased by 13% that shows efficiency. But
in the short-term liabilities increased to 49%.
Horizontal analysis of 2006 and 2005 at RWML shows that sales increased by 51.45%
but CGS increased by 49.68% that show rising prices of raw material. Due to this factor
Gross Profit increased by 63.84%, but firm was able to reduce its operating expenses,
financial charges, taxes and to increase other income by considerable amount. This
helped to fill gap created by CGS and as result NPAT increased by 28.71%. While
looking to balance sheet, fixed assets decreased by 2.4% but long term investments
increased by 30%.

 Vertical analysis
In Vertical analysis, CGS size has decreased from previous year that is good sign. Size of
gross profit in proportion to sales has increased and that is the case with operating profit
as well. But taxes and other charges size has decreased in proportion to sales. But
important thing to note is that NPAT has increased by 0.94%, 3.96% and 4.66% in 2007,
2006 and 2005 respectively proportion to sales. Investment in fixed assets look to
increased slightly but this factor is due to appreciation mainly and investment in fixed
assets has increased but element of depreciation has reduced its value. Long-term
investments and long term loans and advances are decreasing slightly in comparison with
previous year. Firm has more inventory than previous year. This is because of increase in
sales. Trade debts have lesser weight in total assets than in 2007 a compare to 2006 and
2005. Now interesting thing to note is that value of total current assets in total assets has
increased by 2% and 4% in proportion to total assets. SHE has increased from 51% in
2007 to 43.82% in 2006 and 43.57% in 2005 that mean owner’s contribution is equal to
that of creditor. Long-term liabilities are decreasing from 34.138% in 2005 to 30.66% in
2006 and 29.56% in 2005.

Ratios Analysis

Ratio Analysis
We have to analyze firm from five point of view.

• Liquidity Analysis
• Activity Analysis
• Debt Analysis
• Profitability Analysis
• Marketability Analysis
LIQUIDITY ANALYSIS
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
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 x100

Total 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 x100

EPS

CALCULATION OF RATIOS
LIQUIDITY ANALYSIS
It shows the firm’ ability to pay its short-term obligation on time.
CURRENT RATIO
2005 2006 2007

1: 0.74times 1: 0.84times 1: 0.98times
The ratios show that the company’s current liabilities and current assets are almost equal.
So the co. is in a position to meet its current liabilities on time.
QUICK OR ACID TEST RATIO
2005 2006 2005

1: 0.75times 1: 0.59times 1: 0.48times
The company’s quick ratio has increased. So the company is liquid position is very
strong.
ACTIVITY ANALYSIS
Activity analysis shows the speed through which various current accounts are converted
into cash and measures the efficiency of management that how productively it is utilizing
assets to generate desire results.
INVENTORY TURNOVER RATIO

2005 2006 2007

3.2times 4.8times 6.0times
The co. is converting the inventory 6.0times in 2007 into cash against the conversion of
4.8times of 2006 and 3.2times in 2005. It means that the sale of the co. has been
increased.
DEBTOR COLLECTION PERIOD
2005 2006 2007

92 days 87days 44days
Company’s credit collection performance is depended upon L/C by the buyer. So the
company’s debtor collection period mostly depends upon the opening of letter of credit.
CREDITOR’S TURNOVER RATIO
2005 2006 2007

10.3 times 11.50times 12.20times
This ratio shows that the co. is making payment to the creditors within reasonable time
period.
FIXED ASSETS TURNOVER RATIO

2005 2006 2007

0.93times 1.24 times 2.02 times
PROFITABILITY ANALYSIS
The efficiency of the firm can be analyzed through its profits.
GROSS PROFIT RATIO
2005 2006 2007

16.32% 15.59% 15.30%
Cost of goods sold has remain more or less constant while conversion rate of $ is being
higher therefore G.P. is very ideal.
NET PROFIT RATIO
2005 2006 2007

1.40% 1.57% 2.7%
The company’ profit is increasing with the passage of time. It is because of its 90%
exports.
OPERATING PROFIT RATIO
2005 2006 2007

10.57% 10.70% 10.85%
There is little increase in profit of the co. It is because of hiring of new employees which
increases the salaries of the co.
RETURN ON ASSETS
2005 2006 2007
2.69% 3.48% 7.49%
Return on assets ratio has increased because of increase in profits.
MARKETABILITY ANALYSIS
EARNING PER SHARE
2005 2006 2007

Rs.2.48 Rs.2.67 Rs.2.82
The shareholders are earning Rs.2.82 against one share in 2007, which is more
than in 2006 & 2005.
DIVIDEND DECLARATION
2005 2006 2007
6.7% 7.50% 7.50%
LEVERAGE ANALYSIS
Leverage analysis is used to measure the degree of indebt ness (up to what extent
the firm is in debtness).
DEBT RATIO
2005 2006 2007
57% 68.78% 76%
DEBT-EQUITY RATIO
2005 2006 2007
186% 322% 220%
RWML is heavily depending on the outsider’s financing.
COVERAGE RATIO ANALYSIS

Coverage ratio is used to see the ability of a firm to pay its fixed financial cost.i-e.
• Interest payment
• Lease payment t
• Dividend to preferred stockholders
TIME INTEREST EARNED RATIO

2005 2006 2007
1.27times 1.36times 1.56times
RWML is paying interest 1.56times in a year, which is greater than previous

years.
DECISIONS ON THE BASIS OF RATIO

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

RWML because firm’s current ratio and quick ratio are in positive. Moreover the
firm’s working capital is positive in both the years.
LONG-TERM INVESTOR
As the firm’s debt ratio is good in both the years’ I-e 76%, 72.54% and 68.78% in
2005, 2006 and 2007 respectively.. So, on the basis of this it is wise to invest in
RWML as long-term supplier of funds.
LONG-TERM EQUITY INVESTOR

As the co. operating and net profit ratios are increasing in both the years and
earning per share ratio is also increasing. Moreover the co. is declaring dividend every
share and has a strong image in the market, having a good market price of its stock. So
RWML is quiet suitable for the investor to invest in it.

COMMENTS AND SUGGESSIONS

 After a short careful analysis, I come to know that the financial position of
the co. is much better than the other weaving units in textile industry.
 There is tough competition in textile exports. Buyers are demanding

quality and economy in their purchase contracts. They are becoming
quality conscious. RWML has vast markets of Japan, USA, Taiwan, H.K
therefore co. is going to the installation of 200 looms with complete back
up process as well.
 RWML is saving a huge cost in the field of marketing because its Chief
Executive is extra vigilant. In this respect co. is saving more of less.
 RWML has no marketing department to promote and introduce its

products in international market. There is a crucial need for having
disciplined and coordinated program of marketing to boost up the exports.
 There is a need of searching the new customers in international market. So

that they can enhance their sale volume because of going to its expansion
as double capacity.

Relience Weaving Mills LTD

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Reliance Weaving Mills Ltd.

RELIANCE WEAVING MILLS LTD is located in Multan. Reliance weaving

Internship Report Muhammad Fahim Khan 1

Internship Report Muhammad Fahim Khan 2

INTRODUCTION TO TEXTILE SECTOR

Processing and Dying

Cutting and Stitching

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History of the Textile Industry

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TEXTILE INDUSTRY IN PAKISTAN

CAPACITY INSTALLED OPERATIVE

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CAPACITY UTILIZATION (%)

PROBLEMS OF THE TEXTILE SECTOR

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RELIANCE WEAVING MILLS LIMITED

Following are the companies included in the group:

Sr. # Company Name

1. FATIMA SUGAR MILLS LTD.

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ORGANIZATION’S (RWML) HIERARCHY

FINANCE MKTING PURCHASE ACCOUNTS INTERNAL

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• Protecting the environment and contributing towards the economic strength of

COMPANY’S QUALITY POLICY

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

PLANT AND MACHINERY

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The imported plant and machinery includes:

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• Fire fighting equipment.

COST OF PROJECT AND MEANS OF FINANCE

• Imported machinery 199.00

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LABOUR AND TEACHNICAL KNOW-HOW

BUILDING AND CIVIL WORKS

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

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SELF POWER GENERATION

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

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Year Total sales Export sales % of Export sales

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

COMPANY DIVIDEND POLICY

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

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

Following dividends paid by the co.

2004 10% cash dividend

PROCESS OF WEAVING UNIT

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Yarn Receiving and Issuing

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