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INTERNSHIP REPORT ON
AHMED HASSAN TEXTILE
MILLS LTD.
SUBMITTED BY:MUHAMMAD SAJID IQBAL
ROLL #
M.COM
SESSION 2008-2010
SUBMITTED TO:
KHAWAJA GULAM
SHABBIR
GOVT COLLAGE OF COMMERCE MULTAN(Qasim purcolony)
BAHUDDIN ZAKARIYA UNIVERSITY
MULTAN
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Practice makes man perfect. A student must be given
an opportunity to work in the practical environment.
During the two years of my M. COM (ACCOUNTS), I
think these eight weeks of training period have
provided me that knowledge, which perhaps was
impossible through only reading books and solving the
questions. I am thankful to my Institute of management
sciences that gave me a chance to work in the practical
environment.
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I dedicate this to my Beloved Parents for all their love & attention
which has made it possible for me to make it up to this point and as
well as my Friend Shujat Abbas and Internship Advisor Mr.
Khawaja Gulam Shabbir, who bestowed me with the courage, the
commitment and the awareness to follow the best possible route, by
his unmatchable style and by best possible training.
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All the praises are for the almighty, Allah who bestowed me with the
ability and potential to complete this Internship. I also pay my
gratitude to the Almighty for enabling me to complete this Internship
Report within due course of time.
Words are very few to express enormous humble obligations to my
affectionate Parents for their prayers and strong determination to
enabling me to achieve this job.
I take this opportunity to record my deep sense of gratitude and
appreciation to my Internship Advisor Mr. Khawaja Gulam
Shabbir, Institute of Management Sciences, Bahauddin Zakaryia
University Multan for his constant encouragement and inspiring
guidance with his Wisdom.
I also appreciate the cordial co-operation from all my concern
Managers in the different departments of Ahmad Hassan Textile Mills
Ltd especially Mr. SOHAIL NADEEM (CFO) Mr Mehmood
(Manager Accounts) for providing me requisite information and
knowledge for compilation of my complete Internship.
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The company was incorporated in Pakistan on 03 December, 1989 as
a Public Limited Company. Its shares are quoted on Stock Exchanges
in Pakistan. It is principally engaged in manufacturing and sale of
yarn. The Company also have a Textile Weaving Unit.
The head office of the company is in Hassan Parwana, Multan. The
company manufactures and exports the yarn. This is in fact spinning
mill that buys cotton from outside as well inside from Ahmad Cotton
Industries and then converts into yarn. The company manufactures
yarn of export quality.
The major importers of yarn are America, Hong Kong, and Srilanka.
Major part of the sale involves exports. Local sales are very small in
quantity, reason behind this is 15% sales tax that company has to pay
on local sales, while on exports company has to pay only 1.25% with
holding tax to government including some bank charges. More over
some times thereof are chances of exchange gain and loss, which
results from increase and decrease in foreign exchange rates.
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BOARD OF DIRECTOR
Chairman Mian Muhammad Javed Anwar
Chief Executive Mian Muhammad Parvez
Director Mr. Muhammad Haris
Mr. Muhammad Aurangzeb
Mrs. Salma Javed
Mrs. Waheeda Parvez
Mr. Syed Raza Abbas Jaffari(Rep.N.I.T)
AUDIT COMMITTEE
Chairman Mr. Muhammad Aurangzeb
Members Mrs. Salma Javed
Mrs. Waheeda Parvez
CHIEF FINANCIAL OFFICER Mr. M. Sohail Nadeem
HEAD OF INTERNAL AUDIT Ms. Asma YounisCOMPANY SECRETARY Mr. Shamsur Rahman
AUDITORS M. Yousuf Adil Saleem & Co.,
Charted Accountants
Multan.
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BANKERS
Habib Bank Limited
Bank Al- Habib Limited
Allied Bank of Pakistan Limited
United Bank Limited
Bank Al- Falah Limited
MCB Bank Limited
Meezan Bank LimitedFaysal Bank Limited
REGISTERED OFFICE 46- Hassan Parwana Colony,Multan.
MILLS M.M. Road Chowk SarwarShaheed
Distt. Muzaffargarh.SHARES REGISTRARS M/s Vision Consulting Limited
3-C, LDA Flats, Lawrance Road,Lahore
STATUS
The Company is limited by shares incorporated in
Pakistan on December 03, 1989 as public company
limited by shares under Companies Ordinance 1984. Its
shares are quoted on all stock Exchanges in Pakistan.
Authorized Capital of 20,000,000 Ordinary Shares of Rs.
10/- each i.e.,Rs. 200,000,000/-. The issued, Subcribed
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and Paid up Capital of the Company is 14,408,248.80
Ordinary Shares of Rs. 10/- each full paid in cash i.e.,
Rs. 144,082,488/-
NATURE OF BUSINESS
The Principal Business of the Company is Manufacture
and Sale of Yarn and Cloth.
Quality:
To maintain the quality of fabric, natural characteristic of cotton fiber
i-e Strength, Uniformity, Fiber Fineness and Spinning value.
ISO 9001: 2000:
Achievement of ISO 9001:2000 is also pre- requisite of export and
requirement of international buyers.
VISION STATEMENT:
To be a world class and leading organization continuously
providing high quality textile products.
MISSION STATEMENT:
To be a model diversified textile organization exceeding
expectation of all stakeholders. We will achieve this by utilizing bestblend of state-of-the-art technologies, excellent business processes,
high performing people, and synergetic organizational culture.
CORE VALUES:
Our success will not be a matter of chance, but of
commitment to the following enduring beliefs and values that are
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engrained in the way we think and take actions to pursue a climate of
excellence:
Objective ofstudying the organization
My objective of studying the Ahmad Hassan Mills Limited is to know
about the following things:
1. How Company manages its revenue & expenditure Applications?
2. What factors are most important in developing a Finance policy?
3.To review the accounting transactions recoded in the revenue cycle.
4. To learn which documents, reports and records are used in the
revenue cycle.
5. How accounting transactions are processed by the application
system in the revenue cycle.
6. To see how control practices and procedures are applied in the
revenue cycle.
MANUFACTURING UNITS
The Company has two manufacturing units, one is
spinning unit and another is weaving units.
Spinning Unit:
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Spinning unit of Ahmed hassan textile mills is in
Muzaffargarh.
Installed Capacity 17,640
Count range 6/1 to 30/1(knitting
Weaving CD/CM)
Brand name MUGHAL
#Of Shifts per day 03
Production 6.3(M) Kg/Annum
# Of Working Days 365
MACHINE MAKE MODEL
#OFMACHINE
BLOW ROOM TRUETZSCHILER
2 Lines
Germany
CARD CROSOL MK-4 20
DRAWING TOYODA Japan DYH-500-C 09
TOYODA Japan DT- 110 03
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RIETER Switzerland RSB D 30
07
LAP FORMER TOYODA Japan SK-4 A 01
COMBER TOYODA Japan CM 10 06
SIMPLEX TOYODA Japan FL- 16 06
RING FRAMES
14400 SPINDLES TOYODA Japan RY-5 30
2880 SPINDLES TOYODA Japan EJM-128 06
AUTO CONERS MURATA Japan 7-II
06
7-V
02
AIR CONDITIONING S.T.L Pakistan
05
GAS WAUKESHA USA VHP-7110G
03
LABORATORY
USTER TESTER USTER Switzerland UT4-SX
01
RAW COTTON CHINA Y-101
01
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WEAVING UNIT:
Ahmed Hassan textile mills has one weaving units.
Weaving unit of Ahmed Hassan Textile mills is in
Muzaffargarh.
NO. OF LOOMS 130
WIDTH 190 CM (75") = 80
210 CM (82") = 18
340 CM (134") = 32
Total = 130
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PRODUCT RANGE
Percale
Canvas
Twill / Drill
Satin
Sheeting
Herringbone
BFC, RS
Broken Twill
Dobby Designs
&
Others
In 100% Cotton & Blended Forms.
WARPING
MACHINE
Make Benninger Swiss
Creel Size 1080
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Head Stock 2400 mm
Speed ( m / min ) 600 to 1200
Year of Manufacture 2000
Yarn Type CT, PC, CVC,
etc.
SIZING
MACHINE
Make Benninger-Zell
Creel Size 32
Head Stock 4000mm
Yarn Count 6 to 100
Yarn of Manufacture 2000
Size Boxes 2( with
prewetting)
Cylinders 14
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AIR JET LOOMS TOYODA
JAPAN
Make JAT-610 JAT-610 JAT-
710
Looms 72 24 12
Width 190cm 340cm
340cm
Speed 800 500
550
No. of frames 07 07 10
Salvage leno or truck-in
Fabric Construction light & medium weight
AIR CONDITIONING
Make Luwa Switzerland
No. of units 03
INSPECTION FRAMES
No. of frames 80
134
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12
04
ROLLING MACHINE
Machine
Max. roll size 400 kg. or mtr diameter
GENERATORS
Diesel CATERPILLAR USA.
L-7052G
FINANCIAL YEAR
Financial Year of Company starts on 1st
July and lasts till30th June.
PRODUCTS
Major Products of the Ahmed Hassan textile mills are:
Spinning division
Cotton Carded
Combed Yarn
Supima / Giza Cotton Yarn
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Plied Yarn Two for one Twisted
CVC, T/C Yarn
Core Spun Yarn with Lycra
100% Poiyester Yarn
100% Rayon Yarn
100% Acryllic Blended Tarn
Melange Yarn
Model / Teneel Yarn
Slub Yarn
Weaving division
Twills
Satin / Stripped Satins
Sheeting
Poplin
Canvas
Stretch Twill / Poplin
Ottomans ( Double Pick)
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RAW MATERIALS
Ginned Cotton
Polyester
Yarn
WORK FORCE
Company includes a lot of skilled and unskilled workers.Almost there are 800 skilled and unskilled employees.
PORTION OF EXPORTS
The company exports much of the production:
90 % export
10 % local
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ACCOUNTS DEPARTMENT
Accounting is the art or science of interpreting, measuring, and
communicating the results of economic activities whether you are
paying your phone bill, balancing your checkbook, preparing your
income tax return or managing an international corporation, you are
working with accounting. Accounts Manager makes the important
financial decisions with consultation of Director and Chief executive
of company.
Record of all departments like import department, Export department,
Purchase and sale department, are maintained here. Accountant is
very much busy person who gives instructions to six members of
finance department and checks their work time-to-time .His ten-year
experience has made the work easier for him. All types of tax rates,
recent changes in tax policies, different codes, companies names are
on his fingertips.
The accounts department is responsible for the entire accounting
process of the organization regarding the recording of transactions,
designing the accounting policies and accounting system, preparing
financial statements and computer application. If we consider a
company a cell then we can say that accounts department has role of
nucleus.
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Without accounts department there is no possibility of doing business
even sight weakness on the part of accounts department can badly
effect the performance of whole organization.
Functions of the Department
Very first and an important function of accounting department is
recording the business transactions on vouchers. This is also called
process of vouching. This is made for internal record keeping.
Auditors specifically audit vouchers. Wrong vouching will lead to
error in the system and ultimately create problems.
In order to see accounts in condense form ledger is used. From
daybook all the entries are posted in ledger. Ledger represents DR or
CR balance of each party. So from ledger we can see amount that is to
be paid to a party or the amount that is to be received and the balance
at the end of the month.
After this all the DR balances and CR balances are automatically
posted in trial balance through Cranium Software. The trial balance
must be equal at both sides. Otherwise there is any error in recording
the transactions.Now trial balance becomes the source of profit and
loss and balance sheet.
This department also designs the accounting policies. All the work in
this department is being take place on accrual basis. Profit and loss
accounts and balance sheet are prepared at the end of year. The
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financial year ends on June 30 of each year. The financial statements
are presented to shareholders.
The accounting department is mainly divided in to following three
sections:
1.Stores section
2.Salaries and Wages Section
3.General Accounting
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The Setup of Department
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C. F. O
Manager of Account
D.C.O Spinning D.C.O Weaving
Account Officer (Spg)
Accounts Officer (Weg)
Head of Internal
Audit
Audit Manger Finance Officer
Finance Officer
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Accounting System
Accounting System at here is centralized and on accrual basis.
Cranium Software is used for recording Accounting Transation.All
accounts are maintained in Multan head office. The process of
accounting system starts from the preparation of voucher. The
following are different types of vouchers prepared at Ahmad Hassan
Textile Mills:
Journal Voucher
Bank Voucher
Payment Voucher
Credit Voucher
Journal Voucher (JV)
As accounting system is on accrual basis, so accounting entries are
passed on journal voucher at first step. This is also known adjustment
voucher. This is prepared for adjusting entry. Vouchers are prepared
after every transaction. Accounts Manager and Director verify the
voucher respectively. If they have any question they can ask relevant
person if there is no enquiry then they will put their signatures on
voucher. Now it is time to record these vouchers in books of accounts.
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Bank Voucher (BV)
Bank voucher is used when any transaction is made with bank .
Amount may be drawn from bank and can be deposited in bank. You
can receive DR advice or CR advice from bank
DR Advice
When issued by bank, it means bank has deducted some amount from
your account or when has been made through your account
CR Advice
When issued by bank to you, it means some amount has been added
in your account .It normally takes place when some foreign
remittances has been received by bank in your account. This is
usually sent by your customer in foreign country to which exports has
been made.
Payment Voucher
This voucher is prepared at the time of making payments to any party.
Party name is debited with the amount to which payment has been
made. Payment vouchers are used for the payment up to Rs.5000.
Payments more than this are made through bank
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Credit Voucher
As name of voucher represents, this voucher is prepared when some
amount is received from any party. In this case party name is credited
by the amount that has been received.
REVENUE CYCLE APPLICATIONS
Customer request for G/S:
Confirmation letter
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Fabric sale contract :
Sale Order (Letter send to mill)
Sale order
Responsibility of Shipping department:
Check availability
Delivery
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When the customer received desired goods then the bill department
received the delivery notes and make the bill for those goods and
services or request for the payments so sale transaction is occur.
It make three copies
1st is send to sipping department for consumer invoice
2nd to store as billing records
3rd is sent to accounts department for collections
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Revenue cycle transactions and related
documents
Credit sale Sales order, shipping notice,
sales invoice,
Cash sale sales ticket
Cash receipt Remittance advice
Sales return Credit memo
Sales allowance Credit memo
Bad debts write-off Memo and aged a/c receivabletrail balance
REVENUE CYCLE REPORTS
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Control Reports: control reports may disclose the transactions,
or they may list changes made during file maintenance.
Registers: A register is a listing of all transactions of a certain
type that were processed during a single processing period.
Special purpose Report: most systems require three special
purpose accounting reports in the revenue cycle.
THREE KINDS OF REPORT
Control Reports: control reports may disclose the transactions, or
they may list changes made during file.
Registers: A register is a listing of all transactions of a certain type
that were processed during a single processing period.
Its includes
1. cash receipts register
2. invoice register
3. credit memo register
these are used in internal control , audit review , and six setups of
accounting cycle
Special purpose report
Customer statement: it is a list of all transactions in a
customers account during a specified time period.
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Aged a/c receivable trail balance: it is a list of all customers
and the balances they owe at a specified date. When this trail
balance is aged, each customer balance is categorized according
to how long it has existed.
Remittance list : a remittance list enumerates all currency and
checks received during one day.
These above kinds of reposts are used in the sales analysis reports the
marketing management department used it
to evaluate the profitability of products
the performances of sales personal
the effects of special advertising comparisons
Revenue Cycle Accounting Records
Computerized records : Accounting records kept by computerized
processes are in the form of computer files and databases. In
traditional data file system, revenue cycle applications use two
master files and as many as six transactions files.
Two master files
1. Customer master files includes (date, customer address, credit
limits, credit terms, and balances owed).
2. Inventory master file which contains(perpetual inventory records.
Records each items kept in inventory warehouse when merchandise is
shipped from the quantity on hand in the inventory master files.
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Applications in the revenue cycle routinely update the customer
master file record. This file has one record for each credit customer.
Customer number
Customer name
Billing-address
Shipping address
Credit-limit
credit-terms
Statement date
Statement-balance
Current-balance
Order Entry application:
its purpose is to record a customers request for goods or services.
Procedure for credit approval usually require the credit department to
establish a credit limit for each customer.
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Shipping application
The purpose of shipping application are to ensure that merchandise is
shipped prior to the date desired by the customer and that thecustomer is promptly billed for the merchandise.
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Billing application
The purpose of billing application are to prepare sales invoices
for merchandise that has been shipped and to record the sale in
the appropriate accounts. This application also produces credit
memos to document sales returns and sales allowances.
File Maintenance
A computer application system adds or deletes a master record
or makes changes to the reference data. In the revenue cycle,
maintenance is necessary when the organization obtains a new
customer or loses an old customer, or when the name, address, credit
limits, or credit terms of an existing customer change.
Expenditure Cycle Application System
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FINANCE DEPARTMENT
Basically financing decisions are made by Chief Financial Officer in
consultation with directors of the company. Manager finance is also
involved in decision making to some extent. Manager Finance is
responsible for managing all the finance activities like loaning
facilities, markups, dealing with banks and the most important activity
preparing the Drawing Power.
DRAWING POWER:
It is the most important activity that helps Chief Fianancial Officer in
making financing decisions. Basically drawing power is prepared in
excel sheet by applying some formulas to see what was the total limit
of each loaning facility and what limit is utilized and to what extent
we can utilize credit against pledge, mortgage or lease whatsoever. It
is the most important tool that helps management in managing the
finances. Good companies always manage their finances well.
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CHIEF
FINANCIAL
OFFICER
MANAGER
FINANCE
ASST. MANAGER
FINANCE
FINANCE
OFFICER
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MARKUPS:
Markup on each loan facility is calculated separately depending upon
the loan sanction advice by the bank. Markup rate is mentioned on the
sanction advice. On short term facility markup rate may be 1-month
KIBOR or 3 month KIBOR + SPREAD. One month KIBOR or three
month KIBOR rate may be the last working day of previous month.
Spread is the rate charged by the bank for providing loan facility. On
long term facility markup rate may be 6-months KIBOR average rate+ SPREAD.
BANK RECONCILIATION:
Bank reconciliation is very important to see whether the balance in
bank match with our book of accounts or not. If there is any
difference then there must be an error which is corrected by bank
reconciliation prepared in excel sheet. Wrongly posted vouchers are
corrected and missing bank advices are posted in the company
accounting system to match our ledger balance with that of bank
balance to ensure that all entries have been made correctly without
any error
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COMMERCIAL DEPARTMENT
The commercial department involves two most important departments
of the company i.e. purchase department and sales department. Mian
Naveed Ahmed who is director of the company and one of the owners
of company controls this important department.
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COMMERCIAL
DEPARTMENT
COMMERCIAL
DEPARTMENT
PURCHASE
DEPARTMENT
PURCHASE
DEPARTMENT
SALES
DEPARTMENT
SALES
DEPARTMENT
PURCHASE
DEPARTMENT
PURCHASE
DEPARTMENT
COTTON
PURCHASE
COTTON
PURCHASEStore
Purchase
PURCHASE
Store
Purchase
PURCHASE
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PURCHASE DEPARTMENT
The purchase department is divided into two
categories, cotton purchase department and store
purchase department.
COTTON PURCHASE DEPARTMENT
Cotton purchase department is most important
department in textile industry. Quality of yarn depends
upon cotton that has been purchased. It becomes most
important when there is business of export. There is no
question on quality. Because your minor mistake may
result in huge losses. Moreover you will loss your
credibility. Form director to cotton selectors all are
involved in cotton purchase process.
STORE PURCHASE DEPARTMENT
Stores incharge heads the store purchase department.
Purchase department is as under:
Director
Purchase Officer
Assistant Purchase Officer
Purchase Clerk
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The store purchase department is responsible for the
purchase of items like Spare parts of machinery, and
Packing material spares, electric items, Oil and
lubricants, Stationery items, Building Material and
General Store.
DOCUMENTS
Demand Requisition
Invoice of Purchase
Delivery Order
In Gate Pass
SALES DEPARTMENT
Sales department is one of the important departments in any industry.
If a unit produces best quality goods but have not competitive staff
then it would be difficult to sell the products. The structure of sales
department is as under.
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DirectorDirector
Manager Local
Sales
Manager Local
SalesManager
Export
Manager
Export
Commercial
Asst
Commercial
Asst
Export AsstExport Asst
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Ahmad Hassan Textile Mills is selling its product to local as
well as in international market. Thus the sales department of
the Ahmad Hassan Textile Mills is divided in to two sections
Procedure
The following activities are performed in the local sales
department.
The directors receive the order of yarn by Tele phone, fax or e-
mail.
Directors evaluate the capability to fulfill the order by
consulting daily stock repot from mills.
Directors give the instructions to local sales manager that
transfer the information on local sale contract slip.
Before issuing contract slip, sales manager checks the selling
limits of the particular party and discusses the matter with
Director if it is selling limit
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Sales
Department
Sales
Department
Local sales DepttLocal sales Deptt Export DepttExport Deptt
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Sales department writes the three copies of delivery order
signed by director
One copy is dispatched to the mill for issuing goods . afterreading the particulars of delivery order store in charge in the
factory will issue the goods .
One copy of delivery order is send to the accounts department
and third one is kept for record.
EXPORT DEPARTMENT
Ahmad Hassan Textile Mills started sales from local market and now
major portion of Production is exported outside Pakistan.
The export department is headed by Mian Javed Anwar who is
director of the company .The structure of this department is as under:
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DirectorDirector
Manager ExportManager Export
Export AssistantExport Assistant
TypistTypist
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Export Process
The export process starts from bargaining. A buyer contacts the
company for the purchase of yarn. The contact may directly or
through middleman.
When the price and quality of yarn is settled then contact form isfilled. The director of the company settles the terms and conditions.
After the settlement of terms and conditions the buyer bank opens
L.C. L.C is of two types. L.C at sight and L.C at usance. L.C at sight
means the L.C opening bank shall make the payment as soon as the
shipping documents are presented on its counter by the negotiatingbank. On the other hand L.C at usance has different periods of
maturity varying from 30 days to 150 days.
On receiving original L.C from buyer, seller will dispatch the goods
as per detail given in the L.C. After shipment usually following
documents are presented to negotiating bank for onward submissionto L.C opening bank counter:
Indent
Sales contract
Letter of Credit
Custom documents
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Packing list
Bill of landing
Bill of exchange
Certificate of origin
Inspection certificate
Form E
Form M
Shipping bill
IMPORT DEPARTMENT
AHT has also an import department. The import department is
responsible to import those items, which are not available in Pakistan.
The structure of this department is as under:
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Chief ExecutiveChief Executive
DirectorDirector
Senior Manager Import
Senior Manager Import
AssistantAssistant
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PROCEDURE
Senior Manager is responsible for import of machinery, equipment,
spare parts, raw material, etc.
An indent for import of item after the approval of Chief
Executive is sent to import department.
The Senior Manager import selects a subcontractor from
approved suppliers list.
In reply, a quotation from the subcontractor is received. A copy
of quotation is sent to concerned department for evaluation and
checking of specification.
The received items are sending to the mills where these are
opened. The items are checked against quotations. In case of any
damage, the import department is informed immediately. Import
department do the necessary arrangement for survey of goods
from insurance agencies.
IMPORT DOCUMENTS
There are different document are used when we are going to purchase
or import we required.
Performa invoice
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Open bond manufacturing certificate (OBM)
Form I
Importers certificate
Bill of entry
Invoice
Air way bill
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RATIO ANALYSIS
An index that relates two accounting numbers and is obtained by
dividing one number by the other.
To evaluate a firms financial condition and performance, the
financial analyst needs to perform checkups on various aspects of
the firms financial health. A tool frequently used during these
checkups is a financial ratio, or, index, which relates two pieces of
financial data by dividing one quantity by the other.
We calculate ratios because in this way we get comparison that may
prove more useful than the raw numbers themselves. For example,
suppose that a firm had a net profit figure this year of $1 million. That
looks pretty profitable. But what if the firm has $100million invested
in total assets. Dividing net profit by total assets, we get$1M/$100M=
.01, the firms return on total assets. The .01 figure means that each
dollar of assets invested in the firm earned a 1 percent return. A
saving account provides a better return on investment than this, and
with less risk. In this example the ratio proved quite informative.
Expression of Ratios:
Ratios can be expressed in the following ways:
Actual ratios are arrived at by dividing one number by another
e.g. current assets to current liability is 2:1
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Ratio between two numerical facts usually over a period of
time e.g. Stock turnover is three times a year.
Ratio between two numerical may be expressed in percentage.
Advantages of Ratio Analysis.
Through ratio analysis we can evaluate the financial health, operation
efficiency and profitability.
It gives a chance of inter firm comparison to measure efficiency and
helps management to resort some remedial measures.
Trend analysis helpful toward planning and forecasting.
It provides good help in decision making for investors and to the
financial institutions.
Classification of ratios:
Liquidity Ratios
Financial Leverage or Debt Ratios
Activity Ratios
Profitability Ratios
1. Liquidity Ratios
Liquidity ratios are used to measure a firms ability to meet short-term
obligations. From these ratios, much insight can be obtained into the
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present cash solvency of the firm and the firms ability to remain
solvent in the event of adversity.
30/06/2010 Change%
Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006
LiquidityRatios
Current Ratio 0.8 0.09 14.2% 0.7 2.1 0.9 0.9
Quick Ratio 0.2 0.04 24.6% 0.1 0.1 0.0 0.0
Cash Ratio 0.0 0.00 78.7% 0.0 0.0 0.0 0.0
Days inReceivables 28 2.96 12.0% 25 2 2 4
Working CapitalRatio 0.8 0.05 6.4% 0.7 0.5 0.9 0.8
Comments on the Liquidity Ratios:
The companys liquidity position as measured by the quick ratio has
improved minorly during the period. A normal Current ratio of 0.8:1
and only little (0.2:1) from the quick ratio (which excludes inventory).
The Current ratio seems appropriate as now a days the textile industry
is in crisis and comparing with of the previous it appears that these are
in line with them but the Quick ratio which is rather less than what
one would expect from the quick ratio and is a matter of serious
concern it appears that the company will be unable to settle itsCurrent liabilities (without stock) if demanded. A consideration of the
component elements of the current ratio suggests that decreases in the
inventory holding period and trade payables payment period have
largely offset each other. There is an increase in the collection period
for trade receivables (up from 25 days to 28 days) which would have
actually improve the current ratio. It appears that the company's credit
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control procedures are not so much active and sales are made to
customers without applying proper credit rating procedures and
proper credit approval, and much proportion of the sales being made
as credit sales, as receivables have significantly increased during the
year which supports the case. The changes in the above ratios do
explain the dramatic deterioration in the quick ratio, the real issue is
the Marketable Securities position, Ahmad Hassan Textile Mills
Limited has gone from having an inventory balance of 8.4 million in
2008 to Nil in 2009.
2. Financial Leverage (Debt) Ratios.
Ratios that simply show the extent to which firm is financed by debt.
LeverageRatios 30/06/2010 Change
%Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006
Long-TermDebt/Equity 72% 0.10 16.1% 62% 115% 58% 71%
TotalDebt/Equity 236% -0.08 -3.1% 243% 402% 349% 337%
Long-TermDebt/TotalAssets 21% 0.03 18.7% 18% 23% 13% 16%
TotalDebt/TotalAssets 70% -0.01 -0.9% 71% 80% 78% 77%
Comments on the Leverage Ratios:
From the Leverage ratios it can be seen that 70% of assets are
financed by Debentures. This is very high in absolute terms although
it has decreased minorly from last year. The effect of gearing means
that all of the profit after finance costs is attributable to the equity
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even though the equity represents only 30% of the financing of the net
assets. Whilst this may seem advantageous to the equity shareholders,
it does not come without risk. The interest cover is only of 0.8 times.
Low interest cover is a direct consequence of high gearing and it
makes profits vulnerable to relatively small changes in operating
activity. Although the interest cover have increased from the previous
year, any future downturn in the results of the Company would
expose the equity holders to much lower proportionate returns and
continued poor liquidity may mean payment of the loan interest could
present a problem. For example, small reductions in sales, profit
margins or small increases in operating expenses could result in losses
and mean that interest charges would not be covered.
3. Activity Ratios:
These ratios are also known as efficiency or turnover ratios. Measures
how effectively a firm is using its assets. It is calculated by dividing
cost of goods sold by average inventory or by dividing Net sales by
Inventory.
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Total Assets turnover:
The total asset turnover ratio tells us the relative efficiency with
which a firm utilizes the total assets to generate sales. This is
calculated by dividing the net sales with total assets.
Comments on the Activity Ratios:
Detailed analysis reveals that Companys performance is due to its
efficiency in the use of its net assets; it achieved a net asset turnover
of 1.1 times compared to same from last year. Put another way,
Company makes sales of 1.10 per 1 invested in net assets. The
decreases in the inventory holding period have increased the operatingeffectiveness of the company. The decrease in the inventory holding
period can be an indicator of Goods movement in Stocks as this
should reduce the obsolescence of inventory. The decrease in the
Payables payment period can be because the company might be
negotiating early payment terms and this also reflects the increase in
the working capital cycle (in days) as the Receivables Collection
period has been increased. The above ratios have contributed in the
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OperatingRatios 30/06/2010 Change
%Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006
AssetTurnover 1.1 -0.02 -2.3% 1.1 1.2 1.2 1.0
WorkingCapital
Turnover -9.9 -3.82 62.8% -6.1 6.2 -18.2 -18.2
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overall increase of the Working Capital Turnover from 6.1 (2008) to
9.9 (2009) as the working capital cycle have been induced this have
also increased the required amount of working capital by the company
to maintain its operations.
4. Profitability Ratios:
Profitability Ratios are of two types --- those showing profitability in
relation to sales and those showing profitability in relation to
investment. The ratios indicate the firms overall effectiveness of
operation.
Profitability in Relation to Sales
a. Gross profit ratio
This ratio tells us the profit of the firm relative to sales, after we
deduct the cost of producing goods. It also shows how much a firm is
effective in producing and selling goods above cost.
b. Net Profit Ratio
The net profit margin is a measure of the firms profitability of sales
after taking account of all expenses and income taxes. It tells us a
firms net income per dollar of sales
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ProfitabilityRatios 30/06/2010 Change
%Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006
Gross Margin 10% 0.02 19.8% 8% 9% 10% 11%
EBIT Margin 8% 0.05 142.0% 3% 6% 7% 8%
EBITDA Margin 8% 0.05 142.0% 3% 6% 7% 8%
Pretax Margin -2% 0.02 -60.6% -4% 0% 1% 5%
Effective Tax
Rate -26% -0.42 -260.1% 16% -14% 123% 12%
Posttax Margin -2% 0.01 -40.8% -3% 0% 0% 4%
Return onEquity -6% 0.11 -66.7% -17% 1% 8% 18%
Return onAssets 2% 0.01 136.5% 1% 2% 2% 2%
Return onCommon Equity -6% 0.17 -72.6% -23% 2% 18% 41%
InterestCoverage Ratio 0.8 0.25 46.8% 0.5 1.0 0.9 2.3
Interest toLong-Term
Debt -47% -0.10 28.4% -36% -31% -56% -15%
OperatingExpense/Sales 2% -0.03 -65.5% 5% 3% 2% 3%
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Comments on the Profitability Ratios:
Gross Profit have increased marginally as there is increase of % in
sales of about 20.6% and in cost of sales of about 18.5% from last
year and also because of the increase in prices of both raw material
and in finished goods. EBITDA and EBIT have slightly increased
because the net increase in the operating income. The effective tax
rate has increased because of the increased profits in the current year.
The decrease in the ROE (Return on Equity) from 17% (2008) to 6%
(2009) as it will not attract more equity investment in future which is
the cheapest source of finance and is a issue of serious concern.
Interest Cover have increased from 0.8 to 0.5 as this shows a good
sign that the company is now able to pay its finance cost almost
through its profits this can be because of the increase in the selling
price have increased the profit figure. Interest to Long term Debt %
have increased from 47% to 36% because the KIBOR rates have beenincreased by the State bank of Pakistan, as the textile sector is in crisis
the banks have changed their pricing policies. The Operating
Expenses to sales ratio have decreased from 5%(2008) to 2%(2009)
as this can be due to the decrease in the Selling and Marketing
expenses of about 55 million during the year because of the decrease
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in the Export Development Surcharge and Forwarding Expenses of
17% and 41% respectively from last year.
SWOT Analysis
Strengths:
ISO 9001-2000:
Strong Security
System
High quality
product
Latest
mechanized
machinery.
Tremendous
market image.
Highly qualified
and skilled
management
Highly
Motivated
Weaknesses:
They dont have
gas electric power
plant due to non-
availability of gas
on manufacturing
site.
.Bad decission
making at times.
. High debt ratio
Centralizeddecision making
Weak image in
the international
market
Small
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Workforce
Adequate
financial resources
Competitive
advantage
Equipped withMIS System
international
market share
Less promotional
activities
Lack of benefits
and rewards for
the employees.
. High cost of
production
Opportunity:
Organization Can
expand product
lines
Organization Can
capture new
market segments
around the world
Organization Can
reduce the cost by
proper utilization
of resources
Organization Can
hire more well-
Threats:
New Entry of
competitors
Buyer needs demands
changes
Political instability
Changed of government
policies
Globally Economic
instability
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educated and
experiencedperson
Learning as internee
It was a tremendous experience that I have availed with devotion and
commitment. I have an interest in textile industry thats because
Textile is the back bone of the economy of the country. But one thing
I want to share its not easy that looks it has a great toughness and
complications in its process but the overall it was nice and great.
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Conclusion
Ahmad Hassan Textile Mills Limited is one of the leading groups in
Pakistan. The system, the management style, the policies &
decentralized decision making environment is really remarkable. This
report is basically an attempt to identify the areas which need to be
improved.
In this era of technology, the Information is the key to success in
the business. This means that the successful businessman will be who
will have the right information at the right time. This comment leads
to the conclusion that the Information Sharing Process should really
be improved.
The overall analysis is indicating that the companys progress has
mainly attained through dedication of employees. The effectiveness of
its management, their willingness to take advantage of opportunities
and face challenges of changing economic picture, this all contributes
to the very much improved and sound position of company. This is
really appreciable for the devotion and hard work of all the employees
of the company.
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RecommendationsRecommendations for Improvements are:
. Company has installed a new spinning unit(unit 3) in 2009 by
availing many new loaning facilities. Due to this their debt ratio has
increased to large extent. Markup on loans has increased and
company is not able to generate sufficient revenue to cover up theseexpenses. So it is better for the company to improve their liquidity
position by reducing the debts.
. Company should make arrangements for electric gas power plant to
compete with other textile firms and also to reduce their cost of
production and to overcome electricity shortage.
At present facility of bonus is given only to production staff but such
incentives should also be given to Head office Staff.
Special incentives should also be given to Head on Eid and on other
special days should be given to the workers.
Medical facilities are given in mill but such facilities should also be
given to management.
Different training courses should be arranged for the up lifting and
improving the quality of work for employees
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They provide transportation facility to only female employees I think
male should also be provided with conveyance facility. This will
create the easiness for workers and reduce the wastage of time.
There is also a problem of work overload for the employees and it
should be control properly so that the employees are motivated.
Employees should be paid extra for the work which they done after
working hours.
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REFERENCES AND SOURCES :
I collect the all information about the Ahmad Hassan Textile MillsLimited (AHTML) for making internship report. The references &Source of information are as fellows:
Mr. Muhammad Sohail Nadeem (Chief Finance Officer).
Mr. Muhammad Mehmood Manager Accounts
Mr. Muhammad Saeed (D.C.A of spg)
Mrs. Nusrat Account officer
Mr. Muhammad Asif Manager (Marketing & Sales)
Mr. Sarfaraz Ahmad Senior cashier
Source:
http://www.ahtml.com.pk/