NATIONAL COLLEGE OF BUSINESS

ADMINISTRATION & ECONOMICS

MULTAN

Reliance Weaving Mills Limited

BY

NADEEM SHAHZAD

BACHELOR of SCIENCE
ACCOUNTING & FINANCE

OCTOBER 2017

i
 NATIONAL COLLEGE OF BUSINESS
ADMINISTRATION & ECONOMICS
MULTAN
Reliance Weaving Mills Limited
BY
NADEEM SHAHZAD
____________________________________________________________________________________

A dissertation submitted to SCHOOL OF BUSINESS ADMINISTRATION, in

partial fulfillment of the requirements for the degree of
Bachelor of Science
ACCOUNTING & FINANCE

Dissertation Committee:
____________________________
Chairman
____________________________
Member
____________________________
Member
____________________________
Pro-Rector
National College of Business
Administration & Economics Multan

ii
iii
 DECLARATION
This is to certify that this research work has not been submitted for obtaining
similar degree from any other university/college.

NADEEM SHAHZAD

OCTOBER 2017

National College of Business Administration & Economics Multan

Campus

iv
 11/B, Gulgasht Colony, Bosan Road Multan

COURSE COMPLETION CERTIFICATE

Ref. Dated:

It is certified that Course requirements of Mr. NADEEM

SHEHZAD Registration No. for the program BACHELOR OF
SCIENCE (Accounting & Finance)has been completed and his current
CGPA is

Prof. Dr. Farkhand Shakeel Prof. Dr. G. R. Pasha

Director (R&D) Pro-Rector

Copy to
1. The Director NCBA&E Lahore
2. The Director NCBA&E Multan Campus.
3. Notification file.

RESEARCH COMPLETION CERTIFICATE

v
It is certified that the research work contained in this thesis entitled
Reliance Weaving Mills Limited has been carried out and completed by
Nadeem Shahzad under my supervision during his Master of
Commerce program.

Muhammad Yousaf

Supervisor

ACKNOWLEDGEMENT

vi
I would like to thank Great ALLAH ALMIGHTY for His gracious blessing without whom I
would not be able to complete my project work.
I express my gratitude and obligations to Prof. Dr. G.R. Pasha (Pro-Rector of NCBA&E
Multan Campus) & Dr. Farkhand Shakeel (Head of Quality Control Cell) who did their
selfless and tireless efforts for providing us all facilities throughout the academic session and
their kind and loving attitude always encouraged us to work hard.
I would also like to take this opportunity to thank the National College of Business
Administration& Economics for having this project as a part of the degree requirement. I
gratefully acknowledge my respected supervisor, Mr. Muhammad Yousaf who has given me
the opportunity to learn at a deep level to prepare this report and has supported me throughout
this project with utmost cooperation and patience. His guidance helped me complete my project.
I would like to express my gratitude towards all my family & friends for their kind co-operation
and encouragement, which helped me in completion of this project.

NADEEM SHAHZAD
BACHELOR 0f
SCIENCE
Accounting & Finance

vii
 DEDICATED

TO
My beloved Parents who have always been a source of inspiration for me

viii
 Abstract
This research aims to investigate the Reliance Weaving Mills performance by using the different
ratio analysis comparison and also discuss their effect on firms performance. The study
addresses the following primary question: What are the various sources of finance and select
most advantageous sources to finance their long term investment that influence the capital
structure. The two main tool of ratio analysis are Liquidity Analysis& Long-term Debt and
Solvency Analysis used to determine the financial position of the company. For liquidity
analysis, the following ratios were used: current ratio, quick or acid-test ratio. cash flow liquidity
ratio and for Long-term Debt and Solvency Analysis, the following ratios were used, Debt to
Equity, Debt to Capital and Interest Coverage ratio. The main source of data collection is taken
from the annual financial reports of Reliance Weaving Mills for the indicated periods were
obtained from the net website. Necessary information derived from these financial statements
were summarized and used to compute the financial ratios for the five-year period is also known
as time series analysis and finally measure the best performance during five years analysis of
the company. The mathematical calculation was establishing for ratio analysis companies from
2012-2016.It is most important factors for performance evaluation. The graphical analysis and
comparisons are applying for better understanding. Liquidity ratio is conveying the ability to
repay short-term creditors and it total cash and while leverage/long-term debt and solvency ratio
measure a company's ability to meet long-term obligations.

Keywords: Reliance Weaving Mills, financial statement analysis, Short-term (Operating)

Activity Analysis, leverage/ Long-term Debt and Solvency ratios, liquidity ratios, Profitability
Analysis

ix
 SUMMARY

The first chapter provides an introduction of the study as well as background, research
significance. The second chapter provide the brief history of Reliance Weaving Mills. The next
chapter three provides a critical analysis of the literature review. After the literature review,
chapter four describe the financial statement and ratio analysis comparison. The fifth chapter
presents the data analysis results, the conclusion based on the research outcomes, and the
recommendation based on the interpretations and discussion of the empirical findings.

x
 Table of Contents
DECLARATION iv.

COURSE COMPLETION CERTIFICATE v.

RESEARCH COMPLETION CERTIFICATE vi.

ACKNOWLEDGEMENTS vii.
DEDICATION viii.
ABSTRACT ix.
SUMMARY x
Chapter 1: INTRODUCTION ix
1.1 Industry Overview 15
1.2 History ............................................................................................................................................... 15
1.3 Industry Sectors ................................................................................................................................ 16
1.4 Government Initiatives ..................................................................................................................... 16
1.5 Exports .............................................................................................................................................. 16
1.6 Competition ...................................................................................................................................... 16
Chapter 2: Brief History of Gul Ahmed Textile Mills 17
2.1 History of Gul Ahmed Textile Mills ...................................................... Error! Bookmark not defined.
2.2.1 Gul Ahmed Textile Pakistan Limited needs no introduction ........ Error! Bookmark not defined.
2.2.2 Now a force to be reckoned with ................................................. Error! Bookmark not defined.
Chapter 3: Review Article on Textile Sector of Pakistan 19
Chapter 4: Ratio Analysis of Gul Ahmed Textile Mills Limited 23
4.1 Financial Statements of Gul Ahmed Textile Mills Limited ................................................................ 23
4.1.1 GUL AHMED TEXTILE MILLS LIMITED ............................................................. 23
COMPARATIVE INCOME STATMENTS ................................................................................................. 23
FOR THE YEARS ENDED JUNE 30, 2012 to JUNE 30, 2016................................................................... 23
4.1.1 Graph Presentation .................................................................................................................... 24
4.1.2 GUL AHMED TEXTILE MILLS LIMITED ..................................................... 25
COMPARATIVE BALANCE SHEET ASSETS............................................................................................. 25
JUNE 30, 2012 to JUNE 30 2016 ............................................................. Error! Bookmark not defined.
4.1.2 Graph Presentation ....................................................................... Error! Bookmark not defined.

11
 4.1.3 GUL AHMED TEXTILE MILLS LIMITED ...................................................... 26
LIABILITIES AND SHARE CAPITAL AND RESERVES JUNE 30, 2012 to JUNE 30, 2016 .......................... 26
4.1.3 Graph Presentation ....................................................................... Error! Bookmark not defined.
4.2 Ratio analyses 28
4.2.1 Short Term Operating Activity Analysis ..................................................................................... 28
4.2.1 Graph Presentation ....................................................................... Error! Bookmark not defined.
4.2.2Long-term Investment Activity Analysis ..................................................................................... 29
4.2.2 Graph Presentation ....................................................................... Error! Bookmark not defined.
4.2.3 Liquidity Analysis ........................................................................................................................ 31
4.2.3 Graph Presentation ....................................................................... Error! Bookmark not defined.
4.2.4 Long-term Debt and Solvency Analysis ...................................................................................... 32
4.2.4 Graph Presentation ....................................................................... Error! Bookmark not defined.
4.2.5 Profitability Analysis................................................................................................................... 33
4.2.5 Graph Presentation ....................................................................... Error! Bookmark not defined.
Chapter 5: Conclusion & Recommendation Error!
Bookmark not defined.
5.1 Conclusion ............................................................................................ Error! Bookmark not defined.
5.2 Recommendation................................................................................. Error! Bookmark not defined.
References Error!
Bookmark not defined.

12
 LIST OF TABLE

4.1.1 Reliance Weaving Mills COMPARATIVE INCOME STATEMENTS 6

4.1. Reliance Weaving Mills COMPARATIVE BALANCE ASSESTS 8
4.1. Reliance Weaving Mills LIABILITIES AND SHARE CAPITAL AND RESERVES 10
4.2.1 Reliance Weaving Mills short-term operating activity ratios 14
4.2. Reliance Weaving Mills long-term investment activity ratios 19
4.2.3 Reliance Weaving Mills liquidity ratios 22
4.2.4 Reliance Weaving Mills debt and solvency ratios 25
4.2. Reliance Weaving Mills profitability ratios 29

13
 LIST OF GRAPH

4.1.1 Reliance Weaving Mills Net Performance 8

4.1.2 Reliance Weaving Mills Total Assets 10

4.1.3 Reliance Weaving Mills Shareholder's Equity 12

4.2.1Inventory turnover 16

4.2.1Receivables turnover 17

4.2.1Payables turnover 18

4.2.2 long-term (investment) activity graph 21

4.2.3liquitity Ratio 24

4.2.4Debt & Solvency Ratio 27

4.2.4Interest coverage 28

4.2.5 Return on Sale 31

4.2.5Return on Investment 32

14
 Chapter 1: INTRODUCTION

1.1 Industry Overview

Pakistan is the fourth largest cotton producer in the world. Because of its plentiful, indigenous
cotton supply, the textile industry is central to the Pakistani economy and is both a source of
employment and a source of exports. Pakistan's industrialization began in the 1950s with the
textile industry at its center. Today, textiles account for 38 percent of total manufacturing and 8
percent of GDP. The textile industry employs almost 40 percent of the industrial workforce.
Despite the critical role textiles play in the economy, most textile manufacturers are cottage or
small-scale industries. Pakistan relies on outside engineering and manufacturing expertise and
must purchase most of its equipment abroad. Recognizing the importance of the textile industry
to the nation's economy, the Pakistani government began taking steps in 2005 to rebuild the
competitiveness of this critical industry.

1.2 History

The Pakistani textile industry depends on domestic agriculture to supply its raw materials, thus
the success of the cotton crop is critical to the health of the textile industry. Cotton accounts for
14 percent (Cotton Fact Sheet Pakistan Nov-2015) of land under cultivation in Pakistan. Pakistan
has suffered from a number of cotton failures over the years, beginning in the early 1990s. These
crop failures drove up the price of cotton, and this coupled with a market recession and tightened
finance regulations led to a weakened textile industry.

15
1.3 Industry Sectors

The spinning sector is where the majority of Pakistan's textile industry is concentrated. Over the
years, spinning expanded while weaving declined. The rapid expansion of the spinning sector
was hastened by access to cheap raw materials---cotton---and cheap labor. This sector's
profitability was furthered by a protectionist fiscal policy and export subsidies. In keeping with
increased spinning capacity, cotton production has increased tremendously. The textile industry's
weaving sector is comprised of towels, bedding and hosiery and has been adversely affected by
tariffs and inflation over the years. The garment sector has undergone considerable
modernization and has developed great export potential.

1.4 Government Initiatives

In 2005, the Pakistani government created a special textile sub-committee in order to formulate a
new textile strategies and policy in the hopes of revamping the textile industry. The sub-
committee submitted a report entitled "Textiles Vision 2005" which included a number of
recommendations including improved product quality, equipment upgrade, developing human
resources, aggressive targeting of new markets and development of high-powered leadership for
the textile sector.

1.5 Exports

Cotton and yarn are Pakistan's primary textile exports. The textile industry accounts for over 60
percent (Statistics on textile industry in Pakistan 2015) of Pakistan's total exports. The All
Pakistan Textile Mills Association is the organization that regulates the industry, which is
currently facing a number of challenges, including the need to improve quality.

1.6 Competition

Pakistan must compete with other producers similar in conditions and comparative advantage.
The Pakistani Textile industry's biggest competitors are China, India, Indonesia and Turkey. The
cost of power in Pakistan is comparatively high.

16
 Chapter 2: Brief History of reliance weaving limited

Reliance Weaving Mills Ltd (RWML) is a public limited company listed on both Karachi and
Lahore Stock Exchanges. It was incorporated on April 07, 1990 and Securities & Exchange
Commission of Pakistan (SECP) granted certificate of Commencement of Business on May 14,
1990. The Company is established with the objective of setting-up a textile (Yarn & fabric)
manufacturing plant. Initially it started its production as weaving unit but later on it also involved
in manufacturing of yarn. The principal business of the Company is manufacture and sale of
cotton yarn and grey woven fabrics. Authorized Capital of the Company is Rs.700 million which
was gradually increased and at present subscribed share capital of the company stands at Rs.308
million. The production capacity was enhanced gradually by establishing Unit # 2, 3 & 4 at
different stages with annual capacity of 56.50 million meter of Grey Cloth (50 PPI) & 16.057
million KGs of yam (20/S count converted). This excellent performance was due to hard work
and dedication of all employees and the progressive approach and support from the top
management. Over the years, the plants have demonstrated an operational excellence which has
become a reference for the engineering and advisory companies whose process technologies are
used here. Delegations from China and Japan keep visiting the plant site for gaining firsthand
knowledge for the quality of production and this practice has also been adopted before deciding
to purchase a new plant.

Company has developed a special management team and it is managed by a team of highly
trained & skilled persons in their fields. Responsibilities that are assigned to special management

17
team are monitoring plant performance, development of new projects, handling capital
investment projects, advising management on technical matters and development of a
technological base along with consultancy functions. Since 1990, special management team has
made tremendous progress in the field of Plant Engineering, Project Management, Project
Feasibilities and Project Development. The development of special management team has
recognized the need to promote research and technological development activities. Nearly half of
the strength is located at the plant to provide assistance to the manufacturing units and feeding
vital plant data to the Head Office for immediate processing. Special management team is
equipped with latest computing facilities along with world renowned ORACLE Financial ERP
system.This technology enables special management team to provide most valuable assistance to
all the departments within the company. The success achieved so far by special management
team proves that the company now possesses requisite in house capabilities to ensure successful
completion of large scale projects within allocated budgets and assigned project schedules.

18
Chapter 3: Review Article on Textile Sector of Pakistan

Textile industry has been the bulwark of Pakistans economy. It contributes more than 60% of
the total export earning of the country, accounts for 46% of the total manufacturing and provides
employment to 38% of the manufacturing labor force. The availability of basic raw material for
textile industry, cotton, has played a vital role in the growth of the industry (SMEDA 2006).

Although there is so much issues about textile growth but Chairman of APTMA (Mr.
Muhammad Iqbal Ibrahim) in his annual review 2007-08 tells in his speech that Export of
textile products has reached $ 10.62 billion in the year 2007-08 from $ 5.5 billion in the year
2003-04 i.e. an increase of $ 5.12 billion in value term or by 93% and it still has the potential to
beat this rate of growth in future. The question is what we need to do to maintain or improve the
growth of this industry?

The way international trade is evolving is neither free nor fair. There is continued downward
pressure of unit prices of textile goods, while the raw material prices and cost of doing business
are increasing drastically.

Even though, Textile Industry of Pakistan is indeed passing through a very crucial juncture due
to the prevailing socio-economic and political climate. In particular, the Textile sector is exposed
to extreme competition after the phasing out of quota besides facing resistance from developed
countries in the name of Social Compliance, Environmental & Effluent Treatment Plants, Anti-
Dumping, Counter-Veiling and Safeguard Accusations. To increase competitiveness and quality
of products, textile industry requires investment in technology for meeting the new challenges.
Over the last few years the textile sector has invested about US$ 6.0 billion in modernization and
higher value addition, but due to continuous rise in cost of doing business resulting from
enhancement in the cotton prices, utilities, inflation and bank refinancing rate on exports,
Pakistan is becoming uncompetitive and loosing share in the international market.

I strongly feel that the time now is to address questions like why our Industry is vulnerable to
these cyclical downturns, why can't we sustain growth and economic performance on a

19
sustainable basis. We need to chalk down a strategy to diagnose and solve issues with a long-
term perspective to meet the challenging tasks of the textile sector.

When we talk about issues and evaluate them, we see that these are not new, they have been in
existence since a very long time now and relates to fundamentals of the textile business. As the
premier industry association of the country, APTMA is very well aware of its commitment to act
as a partner in national development. We have helped to set up and support two institutions of
technical excellence in textile engineering and design namely National Textile University &
Textile Institute of Pakistan and also contribute towards agricultural research vis--vis cotton.

Altaf Katchi (CEO of Axa International Pakistan) stated in his article Pakistan's Textile
Industry Gearing Up for Growth that Pakistan's textile industry is emerging as a major player
after the global economic meltdown in 2008. The financial and economic meltdown has resulted
in a permanent closure of many mills not only in the EU and the US but also in textile producing
countries like Turkey, Brazil and a few South American countries. As a consequence, this has
brought great opportunities for the textile sector in developing countries like Pakistan.

The foundations for the industry in Pakistan have always been very strong. Being major cotton
producing country and having a large, modern and efficient spinning and weaving industry as
well as the availability of man power are the strong pillars of the industry in Pakistan. The
economic meltdown was a wakeup call for the value-added industry that survival was for the
fittest; it also opened up new opportunities left by the closures in other parts of the world.

The industry found openings in the higher-end products that were no longer produced in the
West. Textile products originating from Pakistan may have been viewed in the past as cheap or
low cost products, but that perception is changing fast.

Mr. Majyd Aziz Balagamwala (Ex-chairman Karacahi Chamber of Commerce and Industry)
stated that The new government must now become very pro-active in the promotion of textiles,
both in the domestic market as well as in the global marketplace. When a couple of years ago,
the textile industry faced immense pressure from all fronts that added up into a precarious
position resulting in demands for a level-playing field vis--vis regional competitors and when

20
these demands reached a crescendo, the government set up a committee of stakeholders for
finding a plausible and workable package to get the textile industry out of the quagmire. The
Zubair Motiwala Commission developed and presented a broad-based package for the Prime
Ministers decision. Resultantly, on July 15, 2006 the ECC of the Cabinet announced the Rs 25
billion textile package. Further progress was made by the SBP decision and by the efforts of the
Textile Ministry to broad-base the R&D subsidy regime.

The textile sector of Pakistan appreciated and acknowledged the sagacious and far-reaching
decisions by the government to boost the textile sector and assist in its rehabilitation and its
capability to sustain itself in the global market. In spite of these incentives and measures, the
textile sector continued to face difficulties since the regional competitors went a step ahead to
maintain their position and their status. It is crucial that all the components of the textile sector
be encouraged and should be appropriately satisfied that they have been adequately backed by
the government. It is therefore imperative that the government must resolve on a priority basis
the residual issues that still impact negatively on these components of the textile sector. This
would definitely ensue into more employment, more exports, and more industrialization. The
vision that Pakistan would be a major player in the global textile market would then surely be a
reality. The recently elected government is at a vantage position to ensure that Pakistans textile
industry continues to be the economic engine and propel the nation into a prosperous country.

Rana Muhammad Farooq Saeed Khan (former Minister for Textile Industry) in his textile policy
speech on 12th August 2010, representing TEXTILE POLICY 2009-14 stated that The
Textiles Policy represents a new beginning for the textiles sector. Through this policy, the
government has not only set out a development road map but has provided necessary support
without which accelerated progress of textiles in Pakistan is not possible. It is now the
responsibility of the private entrepreneur and the business leaders, exporters, labor and all others
affiliated with this industry to transform the policy vision into reality. The exports target of $25
billion is ambitious but not beyond our potential. It is essential that we depend on our own
resources and neutralize the debt burden. Textiles offer a unique and realistic opportunity to
strengthen our economy for its sustainable growth. I appeal to our collective nationalism,
especially of all those associated with the textile sector to seize the opportunities enshrined in the
policy and endeavor to achieve our collective and individual goals. This alone will give reality to

21
the dream nurtured by our beloved leader, Shaheed Benazir Bhutto, for Pakistan to earn its
rightful economic, social and political place in the comity of nations.

Pakistan Textile journal in its September 2011 edition reported that Textile exports is expecting
to $13.0 billion in 2011-12.Weak demand and higher output has depressed world cotton prices
and will cost Pakistan more than $1 billion in key textile exports for the fiscal year 2011-12,
despite an expected bumper crop, said industry officials.

Despite severe losses to the cotton crop by 2010's floods, the value of Pakistan's textile exports in
2010-11 rose 35% to $13.80 billion from $10.22 billion the previous year, mainly because of
globally high cotton prices.

Pakistani manufacturers of ready-made garments, valued at $1.77 billion in exports last year, fear
exports will drop further, citing a significant fall in Christmas demand because of cotton price
volatility and Pakistan's chronic energy crisis making foreign buyers reluctant to place orders.

The International Cotton Advisory Committee said world cotton production would rise 8% to
26.9 million tons for the year. The extra production is expected to drive down prices.

Cotton prices, which doubled and peaked at $2.27 per pound in the first quarter of 2011 on tight
supplies and robust demand, have since fallen to less than half that level, where they remain.

Analysts, who expect the country's textile exports to total between $12.8 billion and $13.0 billion
in 2011-12, say the impact of the turmoil from the US downgrade on Pakistani textile exports
would not be much. Pakistan is expecting a bumper crop of more than 15 million bales. Some
industry officials say the increased volume will offset some of the negative impact of a price
fall.

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Chapter 4: Reliance weaving MILLS Limited

4.1 Financial Statements of Reliance weaving MILLS Limited

4.1.1 Reliance weaving MILLS Limited COMPARATIVE INCOME STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2012to JUNE 30, 2016
12 months June30, June30, 2015 June30, 2014 June30, June30,
ended 2016 2013 2012
Sale-net 10,049,388,785 10,878,061,963 11,412,197,431 9,514,176,854 8,698,693,299

Cost of sales (9,162,496,775) (10,036,195,878) (10,290,412,092) (8,297,100,023) (7,785,084,948)

Gross profit 886,892,010 841,866,085 1,121,785,339 1,217,076,831 9,136,083,51

Distribution (106,735,773) (162,883,030) (160,760,221) (125,648,491) (1,320,386,19)

and marketing
Expenses

Administrative (145,757,397) (148,971,212) (170,855,878) (136,574,156) (114,562,967)

expenses

Other (12,221,365) (18,966,387) (34,035,573) (53,377,227) (31,621,467)

operating
income

Finance costs (530,198,820) (688,184,829) (499,572,057) (431,571,441) (429,358,130)

Net change in ------------------ ---------------- ---------------- 48,360,211 58,257,789

fair value

Other income 26,271,716 38,370,052 33,547,079 30,372,915 24,266,509

Share of loss (11,032,679) (3,594,547) (109,360) -------------- --------------

from Associate

Profit/(loss) 107,217,692 (142,363,868) 289,999,329 548,638,642 288,551,466

before
taxation

Taxation (104,025,100) 44,445,125 (70,884,612) 21,508,821 (28,342,688)

Profit/(loss) 31,925,92 (97,918,743) 219,114,717 570,147,463 260,208,778

after taxation

23
4.1.1GraphPresentation

Reliance weaving Mills Limited

1400

1200

1000

800

600

400

200

0
2012 2013 2014 2015 2016
-200

-400

Gross profit profit and loss befor tex profit & loss after tex

24
4.1.2 Reliance weaving MILLS
LIMITEDBALANCE SHEET
ASSETS
Non-current-assets June30, June30, June30, June30, June30,
2016 2015 2014 2013 2012
Property, plant and 5,166,040,134 5,377,184,256 4,588,944,264 3,814,066,725 2,859,273,097
equipment
Intangible assets 5,566,298 6,512,528 7,458,758 ------------- ---------------
Long term investment 795,659,234 812,369,953 350,300,151 ------------- ---------------
Long term deposits 15,572,179 21,485,470 22,579,210 18,732,875 16,830,635

Deferred Tax assets 50,958,382 57,217,478 ------------ ------------- 52,841,915

Non-current assets 6,033,796,227 6,274,769,685 4,969,282,383 3,832,799,600 2,929,117,487

Stores, spares and loose tools 182,572,254 183,564,019 231,121,263 179,348,077 173,559,337

Stock and trade 2,346,348,668 1,576,370,718 2,383,599,123 2,467,182,505 1,489,257,667

Trade debts 528,177,761 953,668,369 1,028,674,651 856,468,672 786,122,927

Loans and advances 392,010,201 385,795,701 355,070,166 334,472,479 325,539,965

Trade deposit and pre 27,833,569 2,709,932 48,535,158 474,662 1,042,731

payments
Other receivables 3,262,618 24,271,704 23,212,841 25,466,624 21,399,506

Other financial assets 110,577,868 124,044,975 76,129,843 65,182,897 140,773,459

Tax refund due to the 449,300,370 540,943,099 458,800,820 297,165,172 43,571,348

government
Cash and bank balances 77,390,062 70,806,977 115,085,145 73,089,262 29,245,721

Current assets 4,117,473,371 3,862,175,494 4,720,229,010 4,298,850,350 3,093,908,113

Total assets 10,151,269,598 10,136,945,179 9,689,511,393 8,131,649,950 6,023,025,600

25
4.1.3 RELIANCE WEAVING MILLS LIMITED
LIABILITIES AND SHARE CAPITAL AND RESERVES
JUNE 30, 2012TO JUNE 30, 2016
June 30, 2016 June 30, 2015 June 30, 2014 June 30, 2013 June 30, 2012
Long term finance 1,943,687,503 2,077,763,923 1,668,120,571 1,033,590,171 439,404,906
Loans from related ------------- ------------- ------------- ------------- 3,800,000
parties
Liabilities against asset 2,951,747 24,159,376 40,659,185 27,061,479 29,867,886
Deferred liability 154,870,599 170,383,383 96,055,426 69,678,432 34,782,876
Total non current 2,101,509,849 2,272,306,682 1,804,835,182 1,130,330,082 507,855,668
liabilities
Current portion of N.C 744,035,075 730,302,318 392,698,943 212,683,984 209,762,023
liabilities
Finance under markup 3,559,807,898 3,592,816,725 3,746,957,017 3,525,957,251 2,655,260,929
agreements
Trade and other 868,988,009 689,189,195 609,270,876 570,515,841 392,979,415
payables
Provision for taxation ------------- ------------ 116,668,729 76,938,026 -------------
Markup accrued 103,341,124 108,569,795 123,872,544 69,058,564 54,805,648
Total current 5,276,172,106 5,120,878,033 4,989,468,109 4,455,153,666 3,312,808,015
liabilities
Total liabilities 7,377,681,955 7,393,184,715 6,794,303,291 5,570,935,580 3,820,663,683
Issues subscribed and 308,109,370 308,109,370 308,109,370 308,109,370 308,109,370
paid up capital
Reserve 179,977,706 191,534,188 165,094,059 154,147,113 198,882,959
Retained earning 1,651,175,945 1,609,792,284 1,787,680,051 1,631,638,337 1,155,253,969
Surplus on revalution 634,324,622 634,324,622 634,324,622 452,271,382 452,271,382
fix
Total equity 2,139,263,021 2,109,435,842 2,260,883,480 2,093,894,820 2,114,517,680
Total liabilities and 10,151,269,598 10,136,945,179 9,689,511,393 8,131,649,950 5,935,181,363
equity

26
27
4.2 Ratio analyses
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company. Proponents of fundamental analysis predominately use ratio analysis.

These are some important ratios

1) Short-term Operating Activity Analysis
2) Long-term Investment Activity Analysis
3) Liquidity Analysis
4) Long-term Debt and Solvency Analysis
5) Profitability Analysis

4.2.1 Short Term Operating Activity Analysis

Activity ratios measure how efficiently a company performs day-to-day tasks, such us the
collection of receivables and management of inventory.

Receivables Turnover = Net Sales

Average Accounts receivable
Inventory Turnover = Cost of goods sold
Average Inventory
Payables Turnover = Purchase
Accounts Payable

Reliance Weaving Mills Limited short-term operating activity ratios

June 30, June 30, June 30, June 30, June 30,
2016 2015 2014 2013 2012
Inventory turnover 4.67 5.07 4.24 4.19 4.93
Receivables turnover 5.12 5.49 4.70 4.80 5.50

Payables turnover 11.44 11.38 16.75 16.27 19.40

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Ratio Description
Inventory turnover An activity ratio calculated as
cost of goods sold divided by
inventory.
Receivables turnover An activity ratio equal to
revenue divided by receivables.
Payables turnover An activity ratio calculated as
cost of goods sold divided by
payables.
4.2.2 Long-term Investment Activity Analysis
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the
collection of receivables and management of inventory.
Net Fixed Asset Turnover = Net Sales
Net Fixed Asset
Total Asset Turnover = Net Sales
Total Asset
Equity Turnover = Net Sales
Equity
The company
RWMLs inventory turnover
ratio shows that inventory was
replaced constantly 4 to 5 times
over the year
Receivable turnover ratio
indicates that RWML is
operating on credit basis and
consistency of ratio depict that
RWML have reliable and fix no.
of customers
RWML payable turnover ratio is
more than double from
receivable turnover which is
perfect but over the years it
comes down from 19.4 to 11.4
which means either RWML
changed their supplier or existing
supplier changes the credit terms
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Reliance Weaving Mills Limited long-term investment activity ratios
June 30, June 30, June 30, June 30, June 30,
2016 2015 2014 2013 2012

Net fixed asset turnover 1.94 2.02 2.48 2.49 3.04

Total asset turnover 0.99 1.07 1.17 1.17 1.46

Equity turnover 4.69 5.15 5.04 4.54 5.23

Ratio Description The company

Net fixed asset turnover An activity ratio calculated as
total revenue divided by net
fixed assets.
Total asset turnover An activity ratio calculated as
total revenue divided by total
assets..
Equity turnover An activity ratio calculated as
total revenue divided by
shareholders' equity.
Net Fixed Assets Turnover
Ratio of RWML goes down
from 3.04 times to 1.94 times it
shows that RWML not using
their assets efficiently.
Total Assets Turnover Ratio of
RWML goes down from 1.46
times to 0.99 times it shows that
RWML not using their assets
efficiently.
Equity Turnover Ratio of
RWML is almost constant
around 5 times it shows that
RWML not invested in equity
and use the existing equity well
managed.

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4.2.3Liquidity Analysis
Liquidity ratios measure the company's ability to meet its short-term obligations.

1. Current Ratio = Current Assets

Current Liabilities
2. Quick Ratio = Current Assets - Inventory
Current Liabilities
3. Cash Ratio = Cash at Bank
Current Liabilities

Reliance Weaving Mills Limited liquidity ratios

June 30, June 30, June 30, June 30, June 30,
2016 2015 2014 2013 2012

Current ratio 0.78 0.75 0.95 0.96 0.90

Quick ratio 0.34 0.45 0.47 0.41 0.46

Cash ratio 0.01 0.01 0.02 0.02 0.00

Ratio Description The company

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Current ratio A liquidity ratio calculated as RWML is consider liquid
current assets divided by current because its Current & Quick
liabilities. Ratios both are positive and it
means RWML more current
assets than current assets
Quick ratio A liquidity ratio calculated as
(cash plus short-term marketable
investments plus receivables)
divided by current liabilities.

Cash ratio A liquidity ratio calculated as RWMLs cash ratio is also

(cash plus short-term marketable positive but it is less than 1
investments) divided by current which is alarming.
liabilities.

4.2.4Long-term Debt and Solvency Analysis

Solvency ratios also known as long-term debt ratios measure a company's ability to meet long-
term obligations.

Debt to Equity = Non-Current Liabilities

Owners Equity
Debt to Capital = Non-Current Liabilities
Total Capital
Interest Coverage = Earnings before interest and taxes (EBIT)
Interest Expense

Reliance Weaving Mills Limited debt and solvency ratios

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 June 30, June 30, June 30, June 30, June 30,
2016 2015 2014 2013 2012

Debt to equity 0.98 1.07 0.79 0.53 0.30

Debt to capital 6.82 7.37 5.86 3.66 1.64

Interest coverage 1.20 0.79 1.58 2.30 1.67

Ratio Description The company

Debt-to-equity ratio A solvency ratio calculated as RWML debt-to-equity ratio

total debt divided by total consistently improved from 0.30
shareholders' equity. to 0.98.

Debt-to-capital ratio A solvency ratio calculated as RWML debt-to-capital ratio

Interest coverage ratio
total debt divided by total debt
plus shareholders' equity.
A solvency ratio calculated as
EBIT divided by interest
payments.
improved over the year but
RWML use more debt than
capital every coming year which
is not a good indication.
RWML interest coverage ratio
improved from 2012 to 2013
and from 2015 to 2016.

4.2.5Profitability Analysis

Profitability ratios measure the company's ability to generate profitable sales from its resources
(assets).

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 Gross Profit Margin =Gross Profit x 100
Sales
Operating Profit Margin =Operating Profit x 100
Sales
Net Profit Margin =Net Profit x 100
Sales
Return on Equity (ROE) =Net Profit x 100
Shareholder Equity
Return on Assets (ROA) =Net Profit x 100
Total Asset

Reliance Weaving Mills Limited profitability ratios

June 30, June 30, June 30, June 30, June 30,
2016 2015 2014 2013 2012
Gross profit margin 8.82% 7.74% 9.83% 12.84% 10.50%

Operating profit margin 6.45% -4.66% 6.63% 9.79% 7.30%

Net profit margin 0.03% -0.90% 1.92% 5.99% 2.99%

Return on equity (ROE) 0.12% -3.57% 7.57% 22.27% 12.30%

Return on assets (ROA) 0.03% -0.97% 2.26% 7.01% 4.38%

Ratio Description The company

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Gross profit margin Gross profit margin indicates the
percentage of revenue available
to cover operating and other
expenditures.
Operating profit margin A profitability ratio calculated as
operating income divided by
revenue.
Net profit margin An indicator of profitability,
calculated as net income divided
by revenue.
ROE A profitability ratio calculated as
net income divided by
shareholders' equity.
ROA A profitability ratio calculated as
net income divided by total
assets.
RWML gross profit margin
declines over the years it shows
that company is in under pricing
RWML operating profit margin
is consistent most of the times it
means their operating expenses
are under control
RWML net profit margin
deteriorated year by year it is
alarming for them and it depicts
that company paid high finance
cost and taxes.
RWML ROE & ROA goes down
for every coming year it means
their efficiency level of using
equity and assets for generating
returns lowering every year.
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References:

1. Government of Pakistan, (2011). Economic Survey 2010- 11.

2. APTMA, Chairmans Review by Mr. Muhammad Iqbal Ibrahim 2007-08

3. EPB , (various editions), Export bulletin.(Monthly) Government of Pakistan.

4. Majyd Aziz Balagamwala ( Ex- President Karachi Chamber of Commerce and Industry)

article Pakistans textile Industry Needs Resurrection 2011.

5. Altaf Katchi (CEO of Axa International, Pakistan.) Pakistan's Textile Industry Gearing

Up for Growth December 2010.

6. Ministry of Textile website.

7. Federal Bureau of Statistics 2000-10.

8. World Trade Organization (WTO) website.

9. State bank of Pakistan, imports and exports (BOP, SBP) from SBP website.

10. International finance corporation (IFC) 2011.Annaual report on textile fabrics.

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