final project on mahmood textile mills ltd

MAHMOOD TEXTILE MILLS LTD

Mahmood Textile Mills Ltd

FINANCIAL PROJECT

DEPARTMENT

BUSINESS MANAGEMENT SCIENCES

UNIVERSITY OF EDUCATION

OKARA CAMPUS

UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA] 1


SUPERVISOR

MR. RANA IMTIAZ

RESEARCH AND DEVELOPED BY

SADAF AMBREEN

BBA (HONS) FINANCE

SESSION 2006-2010

ROLL NO 607(E)

SEMESTER 8Th



Dedication

I dedicate this project to

Almighty Allah, The Creator of worlds



And

Hazrat Muhammad (P.B.U.P), the cause of

The creation of the Universe

And

To my parents,

To the persons who loved me, persons whom

I loved and for all those who prayed for me.

Acknowledgment

First of all thanks to Almighty Allah, who have given me the strength and knowledge to

complete this project. I would like to specially thank for the help of my finance teacher



Sir IMTIAZ who helped me a lot regarding this project. I have learned a lot with the kind

guidance of Sir IMTIAZ and I think I have achieved my goal of learning practical things.

SADAF AMBREEN

BBA (Hons) Finance



Table of Contents

Sr. No Description

1. Executive Summary2. Vision Statement3. Mission Statement4. Company Achievement5. Production process6. Exports7. Purchases8. Personnel Management9. Organization Culture10. SWOT Analysis11. PEST Analysis12. BCG Matrix Analysis13. Summarized Balance Sheet14. Trend Analysis of Balance Sheet15. Vertical analysis of balance sheet16. Summarized Income Statement17. Trend Analysis of Income Statement18. Ratio Analysis19. Recommendations20. Conclusion




EXECUTIVE SUMMARY


Mahmood Textiles Mills Limited is a fully integrated organization. The company's shares

are quoted on Stock Exchange. The company's registered Head Office is located at Mehr

Manzil Lohari Gate Multan.

The company's mills are situated at Mahmoodabad, Multan Road, Muzaffargarh, and

Masoodabad, D.G. Khan Road, Muzaffargarh. The management body of the company

consists of persons, who are highly qualified and have vast experience in the field of

Textile.Members of the board are:

COMPANY PROFILE

Chairman khawaja muhammad masood

Chief Executive khawaja Muhammad iqbal

Directors khawaja Muhammad Ilyas

khawaja Muhammad Younus

jalal -ud- din roomi

Mrs. Maher fatima

Muhammad muzaffar iqbal



Bankers

The Bankers of the company are;

1. Muslim Commercial Bank Limited

2. United Bank Limited and

3. Habib Bank Limited.

Competitors

In whole country, the company has many competitors who produce and sell Yarn and

Fabric but the company considers the following as main competitors;

•Fazal Cloth Mills.

•Khokhar Mills.

•Yahya Mills.

Target Markets

The company does the activities of both. Export and Local Sale. In both the areas

company doesn't considers any market as its specific, permanent market. Demand from

any city from the country and any country from the world is welcomed. However in

Export following countries are major customers of Mahmood Textile Mills;

•Japan

•Hong Kong and

•Korea.

The company has four Spinning units and one Weaving unit. For the process of Spinning,

MAHMOOD TEXTILE MILLS fulfills its lint requirements from its own eight Ginning

factories located in different cities. In addition to that the company also purchases lint

from various outside, parties. In addition to producing the yarn, the company also

purchases the | yam from its various suppliers including competitors to make sure that

enough yarn is available for export. For the process of Weaving, the | company fulfills its

Yarn requirement from its own Spinning units. In addition to that company also

purchases the yam. The company produces both, 100% cotton and blended yarn and

fabric.

The company has a total of 103 looms in its weaving unit. Out of them 5 are big looms

with a width of 165" and remaining are of 153" width. All are SULZER PROJECTILE



LOOMS. Company has program to purchase 40 more looms to increase the capacity and

soon the company is also going to start another Spinning unit. The company meets its

electricity requirements from its own Electric Power Production Plant that is situated near

Muzaffargarh.




VISION STATEMENT



VISION STATEMENT

To be recognized internationally and locally as dynamic,

quality conscious and ever progressive

Textile Product manufacturer in the Textile Industry

Of Pakistan

VISION STATEMENT

To be recognized internationally and locally as dynamic,

quality conscious and ever progressive

Textile Product manufacturer in the Textile Industry

Of Pakistan



MISSION STATEMENT



MISSION STATEMENT

We are committed to the achievement of excellence in the

quality of our Product. We shall achieve quality by motivating

all employees towards the satisfaction of our customers.

Our motto:

Honesty

Fair Dealing

Buyer Satisfaction

Reliability

MISSION STATEMENT

We are committed to the achievement of excellence in the

quality of our Product. We shall achieve quality by motivating

all employees towards the satisfaction of our customers.

Our motto:

Honesty

Fair Dealing

Buyer Satisfaction

Reliability



COMPANY ACHIEVEMENT


ISO 9002

In this era of rapid technological changes and new innovations, every customer has

become quality conscious. Customers now days want the assurance of quality either

through product design or through image or the personality of the product. In response to

this trend, marketers all over the world are either offering to the customers, products with

high quality design specifications or they are concentrating on the image marketing.The

ISO 9000 is the answer of every customer demand through which the organizations can

assure customers of their products' high quality. Coping with this Mahmood Textile Mills

has also achieved "ISO 9002" Quality Award. It gives Mahmood Textile Mills the

international recognition as the producer of High Quality Yam and Grey Cloth. In the

whole world; it is now a general rule that without ISO Certificate, an organization cannot

export. Hence for Mahmood Textile Mills, ISO has become a basic requirement. At

MTM, management has a formal procedure to comply with the ISO 9002 requirements.

The organization keeps formal record of establishing and maintaining procedures for

every kind of activity starting from purchase of raw materials till the dispatch of finished

products. All the procedures documented in the ISO 9002 requirements are thoroughly

followed at each and every activity. Moreover MTM carries out periodic

Quality Control Audits to confirm its compliance with the ISO 9002 requirements The

Internal Audits are carried out almost once in a month, but the External Audits are carried

out after six months (Each External Audit costs almost Rs.90, 000). In each External

Audit, the auditors see the compliance of the organization with the ISO standards. They

see the various clauses of ISO that whether the organization is implementing them.

Moreover they see various ISO documents. They see people working, their awareness

about ISO and their training levels. The company is implementing following clauses of

ISO;

1. Management Responsibility.

2. Quality System.

3. Contract Review.

4. Document and Data Control.



5. Purchasing.

6. Control of Customer Supplied Products.

7. Product Identification and Traceability.

8. Process Control.

9. Inspection and Testing.

10. Control of Inspection, Measuring and Test Equipment.

11 .Inspection and Test Status.

12. Control of Non-Confirming Products.

13. Corrective and Preventive Action.

14. Handling, Storage, Packaging, Preservation and Delivery.

15. Control of Quality Records.

16. Internal Quality Audits.

17. Training

18. Statistical Techniques.

MTM proud to have achieved this award and hopes to keep up its compliance with it in

the long run.




COMPANY ACHIEVEMENT


WEAVING

MAHMOOD TEXTILE MILLS is producing Grey Cloth. The process of Weaving starts

from the Placement of Order by the buyer (The buyer places the order at the Head

Office). When the buyer places the order he/she makes specifications in the order as;

•Count specification for Warp and Weft.

•Number of Ends and Picks per inch.

•The Pattern of Warp and Weft

•The ratio of chemicals used for Sizing.

•Kind of packing required.

•Net Weight and Gross Weight of the Packing.

After the buyer places the order, the Director decides whether the yam should be

purchased or it should just be transferred from MTM's one of spinning unit to the

Weaving unit. Yarn Store When the yarn reaches the mills, it is sent to the Yarn Store. A

Yarn Store Assistant is there who is responsible for receiving the yam and shifting it in

the Yarn Store. He also maintains proper record for Yarn. The documentation of the Yarn

Store is done in the following manner.

Documentation for the Yarn Store

(1). Yarn Store Ledger

When the yarn reaches the mill, all the information is entered in the Yarn Store Ledger

Such as;

•Quality, Supplier, Count and Brand of Yarn.

•Date of Receipt and Issuance.

•Closing Balance and Opening Balance.

(2). Yarn Received and Issuance Report

In this report following type of information is inked.

•Count and Brand of Yarn.

•Date & Amount of Opening Balance, Receipt, Issued, Transfer, Closing Balance.

•Remarks (If any).

(3). Yarn Requisition



To start any process, a requisition for yarn is sent to the Main Office of the Mill

specifying the Quantity, Count and Brand of Yarn. Based on this requisition the Yarn is

issued from the Yam Store and the production process starts which is as under.

PRODUCTION PROCESS

Warping

The production process starts from Warping. From here the Preparatory section starts.

Yarn is transferred from the store to the Warping Department. In warping department,

there are two machines;

1. Machine on which cones are attached i-e Creel.

2. Other one is warping machine.

It takes the yarn from the cones and then according to the specification it

wraps the yarn on the beams. Here only warping is done (lengthwise yarn is enrolled). On

the machine every kind of detail about the requirement is fed. Also the workers do

continuous reporting during the process of Warping. After Warping is performed for a

certain quality, a detailed report is prepared about the whole process that explains;

1. For what Quality, Warping is done.

2. What was the Duration of the Process?

3. No. of Break Downs.

4. Workers' names.

5. Length of Yarn Enrolled.

6. No. Of Beams Produced.

7. Weight of Beams.

8. Date in which the Process was carried out.

If in any case like when cotton sticks in the yarn or when yarns breaks, the

machine automatically stops working so that the workers can correct the problem. During

the process a Floor Cleaner cleans any cotton, which flies of from the machines and falls

on the floor (Fluff).

It causes disruption. After the process the cones left over, which are partially used, also

called Short Cones are discarded off. The company also keeps control of Non



Conforming Products. For Warping Department proper documentation is done which is

explained as under;

Reporting done for Warping Department

(1). "Daily Yarn Performance on Warping” Report

This is very important report. The success of the whole Warping process can be judged

from this report because this report contains very important information. With the help of

this report, one can calculate the Amount of Yam consumed for the process. Weight of

Beams produced and the Amount of Yarn Wasted during the process etc.

(2). Stock Report (Beam Stock)

The Stock Report gives information as;

•No. of Beams Produced.

•Quality Code of the Beams and

•Length of the Beams.

Note

On each beam a sticker is attached that conveys information about the beam.

Sizing

Sizing department is the second department in Preparatory Section

Process

Basically here two large types of activities are performed in the process.

First, the ends of the Warped Beams are dipped into the Chemicals so that the yarn could

become tense strong and it could bear any jerk in the next department. There are various

chemicals used in this process. These are Maize Starch, PVA, Size CB, Wax, T.Wax, and

Arkofil.

After the ends are dipped into chemicals, they are separated from one another with the

help of needle like pins. Second, the Warped Beams are converted into a Sized Beam.

That is, the ends of all the warped beams are combined together and they are sized on a

single beam. For example, if there are eight warped beams each of 625 ends; then the

Sized Beam will be having 8*625=5000 ends.



Boiler

Boiler plays very important role in the Sizing department. The job of Boiler is to boil the

water with the help of certain fuel to convert it in Steam. This steam is then sent to the

Sizing department for the purpose of heating the Chemicals. Boiler is run by different

things such as. Furnace Oil, Coal and Sui Gas but at MTM it is run by the Sui Gas. The

Boiling Point is maintained at 100 degree centigrade. The pressure with which the steam

is sent to the Sizing dept. is kept at 150 Pounds/Square Inch. An FD (Force Drive) fan is

there to push the fuel into the Boiler. During the working of the Boiler, the level of water

is kept at a certain level. The water of the steam comes back from the sizing department

to the Boiling Room and is then reused.

Reporting for Sizing Department

Reporting at the Production Spot

Two types of reports are prepared at the production spot.

(1). One report is prepared "Set Wise". When a certain set ends, then after that a report is

prepared on which different information is listed such as;

•No. of Beams produced with their specification.

•No. of Beams brought in from the previous deptt

. •Yam Count and Quality Code

•Machine Stoppage.

•Date and Duration of the Set etc.

(2). A second report is prepared when the beam is issued to the Weaving dept. The

information on the report contains details as;

•No. of Beams moved to Weaving dept. along with their specification.

•Weave (Drawing Department)

. •Yam Count and Quality Code for each Beam.

Reporting at the Main Office of the Mills

At the Main Office of the Mills, "Stock Report of Sized Beams" is prepared. Along with

this a "Material Statement" is made which gives all the detail about the chemicals used in

the Sizing process.



Note

On each beam a sticker is attached that conveys information about the beam.

Drawing

In "Drawing" the activities are performed manually. In this department, the Drawers

work on the Sized Beams. Basically in this department, the Weave is given. The yarn is

passed in the reed frame according to the requirement of the design of the fabric. It is

actually the drawing section which has to take care of the construction of the cloth. In the

drawing section specific reeds are used for specific order. For an average order the reed

requires six to eight hours to be prepared. The supervisors produce different beams of

different specifications, under their supervision, for the Weaving Department actually,

here the drawers work on the part of a loom that is temporarily separated from the loom

for drawing purpose. This part contains following basic things;

•Reed

•Droppers

•Heild 1The yam (single) passes through, first, droppers and then Heild I (single yam).

After that according to the requirement of the quality, yarn is weaved i-e in Reed, the

weave is given. If weave is 3/1, then from reed single yam passes through dent of reed

and from next dent, 3 yarns pass. All this is done manually. After this whole work is

done, the whole pattern is carried to the Weaving Department and fixed on the loom.

Weaving

Introduction

Weaving department is the most important department for any textile mill. The basic and

huge investment of installation I-e LOOMS is done in this department. Scale of operation

is dependent on the working of this department. Efficiency of the whole unit depends

upon the efficiency of the looms in this department.



Process

A loom prepares the “Fabric". On every loom, maximum two beams can be attached.

The loom draws the yam from the beams and then weaves it and the finished Grey Cloth

is then, wrapped on a rod called "Cloth Roll". Here, the system of Reed, Heilds,

Droppers along with manually adjusted yam in them is brought from the drawing dept. by

a machine and is fixed over the looms. The loom weaves the cloth in the same manner as

it is designed by the drawers. So the design and construction of cloth made on looms

depends upon the design and construction that the workers of drawing department give to

it. Here basically the activity of "Wafting" is performed i-e "PICKS" are made here. The

weave (3/1 or 4/1 etc) depends upon the order. As described earlier the drawers make

weave by passing yarn through "Dents".

When the loom starts working the weaving is done by the "Projectile", which takes the

yam and passes it through ends according to the weave. "CAM" which is on the upper

side of the loom facilitates this process. During the process, there is a machine called

“AIR JET OVERHEAD CLEANER", which moves in paths between the looms and

sucks any wasted cotton or yam. This is to ensure that nothing sticks in the looms. Under

each shed there are usually 3 or 4 Air Jet Cleaners.

Loom Stoppage

The loom stops due to following reasons;

•When a yarn breaks, the loom stops.

•When a cone ends, the loom stops. The workers put on new cone.

•When a beam ends, the loom stops and the

"Knotting" or “Article is done.

•The loom can stop in case of malfunctioning. Every loom has got its own meter where

Different information is available as;

1. No. of rounds' completed. (In shift A, B, C)

2. RPM of the loom.

3. No. of rounds completed during the year i-e T counts. In this department special

attention is paid on each and every loom to avoid down time and supervisors and foremen

play main role here.



Knotting

One beam usually takes ten days to become empty. After that a new beam is attached to

it. This process is called "Knotting". In Knotting, the beam replaced is of same quality.

Article

When a beam becomes empty, then when the new beam of another quality is attached to

it, this process is called "Article".

Reporting for Weaving Department

Following reports are prepared to view the working of the Weaving Department.

(1). Efficiency Report

It is the most important report for any weaving unit. It tells the Efficiency of Looms, on

which efficiency of whole weaving unit depends upon. It is a daily report in which

Efficiency is calculated as:

Actual Picks / Total Picks * 100

(2). Article Report

This report is prepared daily by the sizing department to form a link between the sizing

and weaving department. This report specifies the Old and New Quality replaced on a

loom along with the Quality specification. It also tells the reading of the loom in all three

shifts, on which Article is done.

(3). Reading Report

A third kind of report is made by taking continuous information from the Weaving Dept.

A person called “Time Keeper" informs the Main Office about the reputation of the

Weaving dept. For every loom, this report gives it's •Present and Previous Reading.

•Difference of the two readings.

•T counts* and

•RPM



Folding

Next to the weaving department, is the Folding Department? After the cloth is prepared

on the looms, it is thoroughly inspected to ensure quality. Inspection, Cutting and

Packing is done in the same shed i-e "Folding Department".

Inspection

Unrolling the Cloth

First of all, in Inspection, the cloth is unrolled on the Unrolling Machine. Then this

unrolled cloth is taken to the machines where "Inspection Supervisors" check, correct and

mark the faults in the cloth. If the fault can be corrected at the spot, it is fine otherwise it

is marked and passed on to the cutting area. The workers on the unrolling machine list

various details about the process. Whenever a Cloth Roll enters the Folding department,

all the information related to it is listed in a report. A Daily Roll Cutting Card is also

made. This card gives details about the length of certain quality cloth cut in a day and

other related information. After the cloth is unrolled, it is sent for inspection. There, the

Inspection Supervisors inspect the cloth on machines and give points to the faults in the

cloth. On a chart called” Cloth Inspection Chart", they write different information as

•Inspector name

•Shift

•Loom no

•Quality

•Width

•Total yards/meters

•Type of faults and their points

•Grade of cloth.

Also the amount of cloth inspected by each inspector is written there. There is a formal

procedure for "Fabric Inspection”. The procedure follows one of two choices of

standards. One is "Ten Point Standard (J.I.S. Standard)". It is followed by Japanese. The



other is "Four Point Standard". It is followed by Americans. In both the standards the

"Grading" done is different.



Hence when the cloth is inspected, it is graded by counting the number of points in a

specific count of yards. More are the Points, lower is the Grade. Note that the fault

which is corrected at the inspection spot is not given any point. Only the fault that cannot

be corrected is given point. There are 17 kinds of faults that can be in a cloth if the fault

is serious and repetitive, and then an "Action Slip" is made. This is to take strict notice of

the fault so that B and C quality cloth must be avoided.

Folding

After the inspection activity is performed. Folding, Cutting and Packing is done. But first

the Folding activity is performed. Folding is done on the Folding Machine. A Folder is

there to do that activity on the machine. Every fold of cloth is of one meter.

Cutting

After folding, Cutting is performed. The Inspection Supervisors give the Cloth Inspection

Chart to the personnel of the cutting area that specifies the fault i-e place from which the

cloth is to be cut. Hence at the time of cutting, in order to ensure quality, the faulted

fabric (that is of either B or C quality) is separated from A Grade fabric. At a place of

fault, the Inspection Supervisors attach a Strip that gives the detail about the fault.

Moreover, whenever the buyer places an order, he specifies the cutting of the cloth. For

example he can say that he wants his fabric in ten cuttings each of 110 meters, or he can

say that the cloth should be in ten cuttings each one greater than 100 meters. Hence

according to this specification the cloth is cut. When the cutting activity is performed, all

its detail is entered in a register. For example; Quality of Cloth, Cutting Length (specified

by the buyer). Loom number.

•Length of A Grade Cloth.

•Length of B Grade Cloth.

•Length of C Grade Cloth.

•Length of Fents and

•Total Length.

Folding is done on the Folding Machine. A Folder is there to do that activity on the

machine. Every fold of cloth is of one meter.



Packing

When the cutting is done, then "Packing" starts but before packing, the cloth is weighted

to calculate its "Net Weight". After that according to the buyer's requirement the cloth is

packed either in the form of a Roll or Bail. After the packing the cloth is again weighted

to calculate its "Gross Weight". Before packing, cloth is first pressed to bring it in proper

shape. This activity is carried out by the "Hydraulic Pressing Machine".

After the packing is performed, a list is made that is called the "Packing List". It is given

to the buyer when the cloth is dispatched. Moreover on the bale or roll a Sticker is

attached that gives information about the packing.

For the organization's proper record, a "Daily Summary of Packing" is made to know the

amount of cloth made with reference to the Quality. A "Damage Report” is prepared

daily. It explains the cloth damaged in daily production (in every shift). Based on this

report the performance and efficiency of employees in every shift is calculated and

Rewards are given. Dispatch After the packing, the cloth is shifted to the “Fabric

Godown". There, proper record is kept about the amount of cloth and its quality and

weight. At the day of dispatch, the cloth is dispatched from the mill.

Spinning

The procedure for making "Yarn" is called Spinning. Spinning is a delicate process

because the yarn produced in this process should be exactly of the same quality and count

as specified by the buyer. There are many technical aspects involved in this process. At

each and every stage of yarn production, one has to take care of all the instructions and

technical things to produce a good quality yam.

Issuance of Bales

The production process starts from the issuance of cotton bales. Based on the order

(Contract) of yam, an estimate is made for the amount of cotton required for the process.

The cotton is then transferred from one of the Ginning factories to the Spinning unit or it

is purchased from the outside parties. When the cotton reaches the unit, the bales are

weighted and their moisture is checked. After that they are shifted to the Cotton Godown.



The moisture of cotton bales is again checked when they are issued for the production

process. At this time the laboratory personnel came to know that exactly how much

cotton would be needed for the production process with a particular amount of moisture.

Relating to this a Daily Moisture Report is also prepared

Blow Room

Blow Room is the first stage in the making of Yarn. Here there are different machines on

which different activities are performed in order to clean the cotton. So, the basic

objective of this room is to clean the cotton to assure quality in the product. First of all in

the blow room, there is a machine called “Plucker". In this, 20 bales of 20 different lots

are placed. It means that from every one lot one bale is taken. The role of this machine is

to separate the cotton layers because the cotton is in form of layers when the ginning

factory packs it. The machine does this role by sucking the cotton into it, sending it in a

"Condenser" which forwards the cotton to other place. The dust in the cotton is sent

outside the blow room through a pipe. After the Plucker has done its job then the job of

women start who clean the cotton by removing different impurities from it. Impurities

may include jute, leaves, plastic bags and other impurities. The cotton cleaned by ladies

is gathered on one side. Near this gathering of cotton there is a machine that is called

"Breaker". In this, cotton is loaded which is cleaned and its wastage called

"Dropping" is removed. It is first wastage that is removed with the help of machines.

After that the cotton moves along a path and reaches another machine called "Exi Flow".

This machine also cleans the cotton. After this the cotton reaches another machine called

"Multi Mixer". In this machine cotton is mixed. As explained before that cotton taken is

from 20 different bales. So the cotton is mixed together so that the mixed variety

produced should be good enough to produce a high quality yarn. After that the cotton

reaches a machine called “RM" which further purifies the cotton. After this machine has

done its job there are two workers who remove any impurity like jute left over by the

machine. After this, there is another machine, which is called “TX".

This machine exerts a very strong pressure on the cotton in order to remove any impurity

and then sends it to the “Filter Room". In the Filter room there are different machines that

clean the cotton very thoroughly to make sure that the cotton passed to the



"Carding Section" is clean to produce a high quality yam.

Lacreen- Dropping

Lacreen is the cotton containing different things such as leaves. Dropping is same as

Lacreen but it is worse than Lacreen. Other wastages are Card Fly and Filter Fan. So the

job of blow room is to clean the cotton to make sure that fine quality lint is there for the

production of Yam.

Carding Department

After the blow room, the job of carding department starts. Basically in this department

three different major activities are performed. They are "Carding, Drawing and

Simpering".

Carding

In Carding "Slivers" are made. These are long, soft and thick ropes of cotton. These

Slivers are placed in drums called "Cans".

The cotton passed to the "Carding Section" is clean to produce a high quality yam. Here

cleaning the cotton gets different kinds of wastage. These are

DRAWING

In the drawing section, a process is there where the lengths of the slivers is increased.

This process is called "Drafting".

Twelve (12) canes of slivers are placed in a sequence and after that slivers from these

canes are combined to form a single sliver of larger length. Here, thus, the slivers are

combined to form a single sliver of a larger length.

Comber and Carded Yarn

After the Drawing activity, the mill either makes "Carded Yam" or "Comber" or, both,

based on the order. Comber is finer than the Carded Yarn. For Comber, a special process

is there in a comber section where "Laps” are made. These are made by making rolls

from the slivers and removing any further waste (Comber Noil) to ensure quality. After



removing the waste, again the slivers are made to prepare them for the "Simplexing”

process. Another waste (Short Fiber) goes outside the process with the help of pipes.



SIMPLEXING

In the Simplexing section the Frames of carded yarn and comber are separately run. Here,

from slivers, “Roving” is made. This is basically thick yarn from which later the yam

with specified counts is made. These roving are wrapped on specially made thing called

"Bobbins". These roving are then carried over to the Ring department.

Ring Department

Here at the ring department, the yam with specified count is made. The Bobbins made in

the previous department are carried to this department where these are run on "Spindles".

At spindles the yarn is made which is of the count specified by the buyer. These Spindles

are run in frames. Each frame is of 480 spindles.

Auto Cone Department

After the yam is made on "Rings", it is carried over to this department which is called

"Auto Cone".

Basically in the previous department the yam has been made and the only objective of

this department is to join the yarn and bring it on the cones.

The "Rings" are placed on the machines that draw the yam from them one by one, joins

it and wraps it on the cones. Packing Department Here at the Packing dept, the cones are

packed. The packing is of two types. One is the

Export Packing and the other is the Local packing. Export packing is finer than the Local

packing. At this department a certain amount of moisture is maintained to add a certain

amount of weight to the yarn.

Note that a certain amount of temperature is also maintained in all the departments to

avoid some technical problems.

Yarn Godown

After packing, the yarn is transferred to the Yam Godown. In this Godown, all the record

is kept about the amount of yarn, its quality and the count.



Laboratory

The laboratory plays very important role in Spinning. Its role starts from the issuance of

the bales. When the bales are issued, the laboratory checks their moisture and a Moisture

Report are prepared for that. In each department the raw material is checked by the

laboratory for its moisture. More over the laboratory also prepares report of various

wastage for different departments. It keeps record of daily production, monthly

production and wastage etc.

Documentation for Spinning

Like Weaving, for Spinning unit proper documentation is done. The managers keep

record of each and every activity. For each and every order, the record about raw material

inventory, work in process inventory and finished good inventory is kept. The laboratory

prepares different reports relating with the production process. But in contrast to

Weaving, the reports prepared in the Spinning unit are less. Now, let’s have a view of the

reports that are prepared in the documentation of the Spinning.

(1). Cotton Stock Report

This report is prepared about the daily stock of cotton. This report contains information

as;

•Daily Incoming Cotton

• Cotton in Opening Balance

• Previous Outgoing Cotton

• Daily Outgoing Cotton and

• Remaining Stock of Cotton

(2). Daily Cotton Issuance Report

This report is prepared when the bales are issued to the Blow Room. This report contains

information as;

•Date of Issuance of Cotton.

•No. of Bales Issued. Station (Ginning factory from which the bales are transferred or

purchased).



•Purchase Weight of Bales

• Mills Weight of Bales.

• Shortage or Excess in Weight of the Bales (due to the moisture).

(3). Shortage and Excess Report

Due to the moisture in the bales Shortage or Excess occurs in the bales. Shortage occurs

when the moisture is lessened due to heat in the mills. Excess occurs if the bales are kept

exposed to any rain in the mills. That is why a report is prepared about "Shortage and

Excess". This report contains information as;

•Lot No.

• No. of Bales.

•Shortage.

•Excess.

•Station and Moisture.

(4). Cotton Summary Report

This report is about the Opening, Received and Issuance of cotton which is prepared in a

summary form. This report contains information as;

•Opening Balance of Cotton.

•Cotton Received.

•Total Balance

. •Cotton Issued to B/R (Blow Room).

•Closing Balance.

(5). Yarn Stock Report

This report gives information about the amount of Yarn in the Opening Balance, Yarn

Produced, yarn Packed (Export and Local) and yarn in the Closing Balance, in one day.

This report also contains other small reports about yarn as;

•Yarn's Clearance Report.

• Yarn's Production Report.

• Yam's Doubling Report.

• Hard Waste Report and •Shut Down Report.

(6). Production Accounts of each Month



In Production Accounts for a month, two reports are prepared.

(1). One report contains information as;

•No. of Spindles, Installed, Available and Worked.

•Moisture in Cotton and Yam.

•Cotton Opening Work in Process.

•Cotton Issued.

•Net Cotton Consumed



. •Recovery of Cotton from the Waste and

•Detail of Cotton Waste.




EXPORTS


EXPORT

Introduction

Export is the most distinctive recognition of Mahmood Textile Mills. It is the most

powerful weapon that MTM has got in the field of Textile. It is due to the export that

today MTM has got a distinction in the production of textile products. MTM exports

both, the Yarn and the Grey Cloth but major export is in the field of yarn. Hence yarn is

the major contributor to the earnings from the export. Currently Mahmood Textile Mills

has four brands of yarn. They are;

1. Cotton King

2. Palm

3. Zaitoon

4. Engine

In Fabric MTM have 214 qualities of grey cloth.

Export at Mahmood Textile Mills

The activity of Export is carried out at the Head Office of Mahmood Textile Mills. For

export, there is a separate department for export known as Export Department.

Procedure for Export at Mahmood Textile Mills

There are various steps involved in export. These are explained below.

1) Receipt and Checking of Letter Of Credit (Loc)

At Mahmood Textile Mills, the export procedure begins by the Sales Contract. After the

contract, the buyer opens Letter Of Credit (explained below). The concern person of

MTM studies the Letter Of Credit on receipt and makes sure that its particulars are

according to the sales contract. If there is any discrepancy between the sales contract and

LC, it is removed.

2) Letter of Credit:

After the contract is developed, the buyer opens Letter of Credit in his bank (foreign

bank) and that LC is sent to MTM's bank by that foreign bank. Then MTM's bank

forwards the LC to it. It is a document that is cashed when exporter hands over the



negotiable documents to its bank. In an LC the buyer quotes following important

explanation;

•Product Specification.

•Amount of the transaction in US dollars.

•Shipment detail

•Packing detail.

•Bank detail (that opens LC)

Note that LC has an expiry date. If the shipment cannot be made on time, then the LC

cannot be cashed and it is expired. Hence the expiry date compels the exporter to send

shipment on date.

2). Finalization of Production and Shipment Schedule

Then the preceding procedure is over, and then the concern responsible person f the

export department prepares the Shipment Schedule keeping in view i.e. booking. This

schedule is finalized by the director and then it is sent to i.e. GM at the mill who makes

the Production Schedule by keeping in view i.e. Shipment Schedule.

3). Custom Clearance, Shipment, Buyer Information

•When the goods are produced, the Office Manager finalizes and discusses all programs

with Manager Export before dispatching the goods from mills and makes arrangements

accordingly.

•When the goods are dispatched from mills the office manager informs the export

manager about the dispatch and gives Performa Detail of Dispatch (It is a small report

that gives the details about the dispatched products) which is used in maintaining the

export record.

•The Clearing Agent is also informed accordingly about the dispatch and all the

documents are sent to him after they are checked by the Audit Department.

•When the goods are dispatched from the mills, the buyer is informed

•The clearing agent arranges custom clearance and sends the Bill of Lading to the export

department.



3) Bill Of Lading:

When the goods are cleared from the custom and reach shipment, then the ipping

company issues Bill of Lading to the exporter. Bill of Lading intains following important

information;

•Shipper and Consignee's particulars.

•Place of Receipt, Loading and place of Delivery.

•Forwarding Agent.

•Country of Origin of Goods.

•Port of Discharge.

•Description of Goods and Packages.

•Container Numbers.

•Weight of Goods and

•Total Freight (in US $ and local currency).

4) Checking of bill of lading and Buyer Information

•against the Letter of Credit to make sure that there is no discrepancy between them. If

there is some, then it is the job of the agent to get it removed from the Shipping

Company.

•An Export Register is maintained where all the information is entered about When the

agent sends the Bill of Lading to export department, it is checked the documents.

•After checking the Bill of Lading, the buyer is also informed about the shipment by Fax

or by Phone. Now, before explaining the next step, it is necessary to tell you about the

Negotiable and Non-Negotiable Documents.

Negotiable Documents

These are the documents without which exporter cannot take payment from its bank.

These are the documents without which the buyer cannot receive the goods he imports.

Exporter transfers the negotiable documents to its bank and receives the payment which

is specified in the LC. This process is called Negotiation of Documents.



Our bank sends the documents to the foreign bank and the foreign bank transfers them to

the buyer and the buyer receives the goods from the shipping company and gets them

cleared from the custom.

Following documents are the Negotiable Documents',

•Letter of Credit.

•Bill of Lading.

•Invoice.

•Bill of Exchange.

•Packing List.

•Certificate of Origin.

•Insurance Policy.

•Form E and

•Beneficiary Certificate.

Non-Negotiable Documents

These are the non-original documents (either photocopies or faxes) of negotiable

documents that are given to the buyer just for providing him information about different

steps. With the help of these documents, exporter cannot take the payment from the bank

and the buyer cannot receive the goods. These documents are sent directly to the buyer

while the Negotiable documents are always sent via banks.

Negotiation of Documents

•After receipt/correction of Bill of Lading, export department prepares the documents for

negotiation/collection of the payment and sends them to the audit department for

checking.

•If the documents are passed by the audit dept., the director and the export manager sign

the bill of exchange. After their approval, the documents are sent to the bank for the

negotiation. Two copies of the Invoice and Bill of Lading are sent to the account section

for Freight and Sale Booking.

•After this, a person appointed by the export department follows up the documents in the

bank, removes any discrepancy, if pointed out by the bank and receives the payment from

the bank on the same day.



•After this, negotiation file is sent to the Rebate Assistant for the preparation of the rebate

cases.

Bill of exchange

Bill of exchange is a document that is used to draw money from the foreign bank.

Exporter sends this bill to its bank which forwards it to the foreign bank that opens LC.

Invoice

In MTM the invoices prepared are of two types;

(1). First, the invoice that is prepared is for the purpose of "Custom Clearance". Its only

objective is to clear the goods from custom checks. From the two types of Invoices, this

one is prepared first. The basic difference between the two is that, in first one, the

information about; Description of Goods, Unit Price and Amount of goods (in any

currency) is given to small extent for secrecy purposes. Only that much of information is

given that can serve the purpose of Custom Officers.

(2). the second type of Invoice is prepared for the purpose of "Negotiation of

Documents". This Invoice is submitted to the bank. Each and every information about the

transaction is given in full detail here.

Settlement/Payment of Expenses

•With each shipping company, the Director or the Export Manager settles the rate of Sea

Freight in American dollars for each destination.

•After or before receipt of Bill of Lading, Sea Freight Payment Performa•(explained

below) is filled by the export department which is then sent to the account section for

necessary action. •The Performa is checked by the account and audit department and is

sent to the Director for approval of Demand Draft Issuance. After approval account

section arrange Demand Draft.

•After that the Demand Draft is sent to the shipping company along with •the Performa

and its two copies are kept at the export department for recording purposes.

Sea Freight Payment Performa

It is a Performa made by the export department specifying the terms of transactions with

the shipping company. It is sent with the Demand Draft and contains following important

information;



•Containers' Numbers.

•Number and Date of Issuance of Bill of Lading.

•Invoice number.

•Destination.

•Freight in Rupees and US$.

Payment of Foreign Commission

•The export department prepares the Outstanding Commission Report and sends it to the

accounts department for the issuance of Demand Draft.

•After the verification accounts dept. hands over the documents to the audit dept.

•If the audit department passes the documents, then they are sent to the director for the

issuance of Demand Draft and the payment is made.

Payment of Local Commission

After the shipment is made, the agent sends request for the payment of Local

Commission. Export Manager checks the contents of the request and sends it to the

account department for payment along with some other concerned files. When the

account department checks it, it then sends it to the audit department for further

verification. After audit department's verification, account department gets the Demand

Draft issued from the director and sends it directly to the agent.

CF, CIF, AND FOB

In Mahmood Textile Mills, there are three different conditions in which the freight is

paid. These are;

•CF

•CIF and FOB

•CF

Means "Cost and Freight". It means that exporter will pay the freight till destination.

CIF

Means "Cost, Insurance and Freight". It means that along with paying freight till

destination, the exporter will also get the goods insured on his/her own expense.

FOB



Means "Freight on Board". In this the exporter will pay the freight till boarding only.

Remaining freight is paid by the buyer.

Getting Rebate from the Government

When the above steps are over, the job of Rebate Assistant starts.

•With the help of some documents such as Shipping Bill, he prepares the rebate case and

sends it to the custom for payment after the checking of audit department and export

manager.

•He then follows the case till receipt of payment.

•After the receipt of payment, he maintains its record and hands over the check to the

accounts department. Shipping Bill It is given to the exporter by the shipping company

when the ds are shipped on board. Its important contents are;

•Export Registration Number

•FOB in foreign currency

•Freight

•Rate of Exchange

•Exporter's and Consignee's particulars.

•Name of Vessel or Aircraft

•Port of Discharge.

•Country of Final Destination.

•Packages (description, marks and numbers)•Quantity (units and amount)•Description of

Goods.

•Export Value and

•Other information (Form E No., Unit Price, Vessels name etc.)

Other documents involved in Export Form E

Form E is attached with the documents when the goods are being cleared from the

custom. In this Form, the exporter informs the government that its specified bank will

collect the payment from the buyer within 120 days. It is so because there is a law in our

country that the proceeds from exports should be realized within 120 days after shipment,

otherwise State Bank of Pakistan takes strict notices to know, where is the foreign



exchange going. On this Form, exporter's specified bank also gives its statement about

the exporter that it knows the exporter and will collect the proceeds within 120 days. In

case of no realization, it will inform the State Bank about the circumstances. On Form E,

other information is made available as;

•Description of Goods in detail.

•Quantity (In bales, bundles, pieces, tons, Ibs, etc.)•Invoice Value (In $) and Terms.

•Destination, Port, Station.

•Name and Address of Consignee

•Name of Steamer or Air Company.

•Reference of Bill of Lading or Airway Bill.

•Port of Shipment/Post Office of Dispatch.

•Land Custom Post.



Packing List

For the purpose of Custom Clearance and later on providing it to the buyer, a Packing

List is prepared. It contains information as;

•Description of Goods.

•Bales numbers.

•Measurement.

•Total number of Packages.

•Total Gross Weight

•Total Net Weight.

It is a negotiable document and is sent via bank.

Shipment Detail to the Buyer

When the goods are shipped, a detail of dispatch is sent to the buyer that contains all the

information about the Goods and their Packing. It is a non-negotiable document and is

only for buyer information.

Certificate of Origin

Certificate of Origin, as it is clear from the name is to certify that the goods being

exported to the importing country are of Pakistan origin. There are some countries in

which goods of certain other countries are banned. Hence this is to make sure that the

imported goods are not banned in the importing country, by the government. This is also

a negotiable document and is sent via bank.

Bill of Export

When the exporter submits different documents to the custom office for the purpose of

Custom Clearance, the Custom Office, issues a Bill of Export. Based on this bill, goods

are cleared from the custom. It contains each and very information about all the

transactions. Buy-Back-Cum-Indemnity for Export/Inland Bills After the exporter has

negotiated the documents it signs a "Buy-Back-Cum-Indemnity for Export/Inland Bills".

In this it accepts that it will buy the negotiated documents back from its bank. at the

amount of bill of exchange plus all the bank charges and mark up at the rate specified by



the bank within settled number of days, in the event of the said documents being refused

to the bank by the bank opening/confirming the credit or

dishonored by the drawee after acceptance, insolvency of the drawee or the bank that has

opened the LC or any other reason whatsoever.




PURCHASES


PURCHASE

Every organization has the need to purchase the raw material, heavy machinery, daily

used products etc., so has Mahmood Textile Mills. At MTM there is a separate

department for purchase known as "Purchase Department"

At MTM the purchase falls in four categories.

1. Import

2. General Purchase

3. Cotton Purchase and

4. Yarn Purchase

Let's first have a look on MTM's Import.

Import

Mahmood Textile Mills imports the goods that are not produced locally. So far Import a

proper procedure is followed at MTM. or every organization to import, it has to, first,

register itself in the list of importers. After that, the Importer can import. MTM is also

registered in importer's list.

Import at Mahmood Textile Mills

•The necessity to Import arises from the need. When the need of some thing arises at the

mills, they make Purchase Demands and send it to the Import Department.

•When Purchase Demand reaches the Import Department, the Import In charge studies

the demand carefully and then sends the detailed information about the required item(s)

to the Indenture (Agents of foreign Manufacturers. They act as middleman) for

Indent/Performa Invoice.

•When the Indenture sends the Indent/Performa Invoice to the Import In charge. The

Import In charge sends it to the concerned department at the mills for the verification and

the confirmation of the demanded goods. The Head of the concern department evaluates

it after his approval sends it back to the Import In charge.

•When the Performa Invoice is confirmed. Import In charge sends application for opening

of Letter of Credit to the bank along with insurance Cover Note (Insurance is necessary



for import. Without insurance, bank refuses to open LC). The Indenture informs the

manufacturer about it and asks him to send the items.

•When the shipment clearing documents come at the bank, the Import in Charge receives

them from the bank and gives them to the Clearing Agent or Custom Clearance.

•The Clearing Agent, after clearing the document form the custom, makes delivery

Challan and sends them to the mills. Import In charge notes each and every detail about

the Import in the import Register.

Performa Invoice

The Performa Invoice is made by the Indenture to confirm the goods and r particulars, the

organization is demanding. Moreover it tells the importer about the Price, Payment, and

other Terms and Conditions. Forma Invoice has following contents;

•Exporter's Name and Address.

•Importer's Name and Address.

•Description of items.

•Quantity.

•Terms and Conditions.

•Country of Origin.

• Delivery Date.

• Mode of Payment.

Other Documents Involved In Import Open Bond

Manufacturing Certificate (OBM)

It is an incentive that the government offers to the importers. It is only for the goods

which are not manufactured in the local market (and must be imported).According to

this incentive, when the Importer imports the goods, then the government doesn't

receives Import duty on the goods, provided that the goods manufactured by the

Imported machinery or part, later on, must be then exported. Later, the excise

department is responsible to see whether the organization is fulfilling its obligations.



Form I

Form I is an application for permission under the Foreign Exchange Regulation Act,

1947 to purchase Foreign Exchange for payment of Imports. In this Form, the

Importer declares;

•That the mentioned payment is due and that he has not already obtained exchange

for payment for Imports nor he has made any other application for this purpose.

•That the amount of Foreign Exchange mentioned represents the correct prevailing

marker price for the goods on the date of contract in the exporting country.

•That he is neither connected with the exporter abroad directly nor indirectly nor do

he has any financial or other interest in the exporters. The Importer certifies that;

The imports are covered by a valid Import License/Import Permit/Sub

unauthorization/Authorization duly registered with the State Bank of Pakistan.

Importer undertakes that the remittances being made shall be utilized for e Import

mentioned and he shall clear the goods for consumption in Pakistan with in four

months from the date of application. A part of this Form I is completed by the

Authorized Dealer who certifies that the statements made by the applicant in the form

are to the best of its knowledge correct and it has seen documentary evidence in

support there of. The dealer also certifies that the remittance has been made in

accordance with method of payment as per existing Exchange Control Regulations.

Bill Of Entry

The Bill of Entry is just like Shipping Bill. With the help of this document, import

department clears the goods from the custom. It carries all the information about;

•The Importer.

•Letter Of Credit.

•Freight.

•Goods (Their price, units, weight, packages).

•Shipment detail.

•Sales Tax, Income Tax, Custom and Excise Duty.



Invoice

When the exporter negotiates the documents, he sends Invoice to Import department

that specifies;

•Goods imported by MTM

•Air Freight and Forwarding Charges.

•Port of destination.

•Payment (in importing country's currency).

•Type of Packing

Airway Bill

When the goods are sent by ship. Bill of Lading is made. When the goods are sent by

Air, Airway Bill is made. Airway Bill possesses following information;

•Airport of destination.

•Flight/Date.

•Amount of Insurance.

•Handling Information

•Number of pieces of goods

•Gross Weight and Net Weight.

•Rate/Charge.

•Nature and Quantity of Goods. It is a negotiable document. The exporter also sends

Certificate of Origin and Letter of Credit to the Import department which are both

negotiable documents.

General Purchase

The Purchase department of Mahmood Textile Mills purchases different parts and

daily used products from the local market too. But Installations and other heavy

machinery are imported, because they offer high-class quality and prolong warranty

periods. The goods purchased locally, fall in the category of General Purchase.

General Purchase at Mahmood Textile Mills

•Whenever some locally produced thing is required at the mills, the concern

department incharge checks that whether the thing lies in Mill's Store. If it is there, he



gets it issued from the store. If it is not there, then Purchase Demand (Purchase

Demands contain detailed information about required items like Quantity, Quality

and other specification) is made, which after approval of the Head of the department

goes to the Purchase department.

•After analyzing the Purchase Demand, Purchase In charge asks for Quotations from

various suppliers and makes Comparative Statements. Based on them he makes

Purchase Order which is then sent to the director for his approval.

•After Director's Approval, Purchase order is sent to the Approved Supplier.

•When the goods are received, they are sent to the mills with a Delivery Challan

•Store sends Goods Receipt Note after receiving the goods, to the Purchase

Department.

Note that Chemicals and Packing Material for Weaving and Packing Material for

Spinning is purchased on the basis of Daily Stock Report. For them Purchase demand

is not raised from mills. In Mahmood Textile Mills, the goods are only purchased

from Approved Suppliers. There is a formal system for the evaluation of the

Suppliers/Subcontractors. After the suppliers are evaluated the Approved Suppliers'

names are entered in Approved Supplier List. Those items that do not affect the

quality of the product can be purchased from unapproved suppliers. Also in case of

emergency this can be done.

Yarn Purchase

As mentioned earlier, Mahmood Textile Mills also purchase the yarn from outside

parties inspite of its own Spinning units. The yarn is only purchased from the

approved suppliers and it is made sure that the yarn purchased is of high quality to

produce a good high quality fabric.

Yarn Purchase at Mahmood Textile Mills

•Yarn Purchase is responsibility of the Director for Weaving. He receives

•Daily Yam Requirement and Daily Yam Stock Report (explained later) from

weaving mills and based on them he finalizes the purchase of yarn. The Brand is

selected by the Director



•Yam Purchase Assistant prepares the Purchase Order of Yam with concern of

Director and the Director approves the order after analyzing it.

•After Director's approval, order is placed to the supplier. •When the goods reach at

mills. Yam Go down In charge receives them and sends confirmation of receipt of

goods to the Head Office. Note that the order is made in anticipation. Hence no

shortage of yarn occurs at the mills.

Daily Yarn Requirement Report

The Daily Yarn Requirement Report carries information as;

•Amount of Yam (in meters) required for Warp. •Amount of Yarn (in meters)

required for Weft.

•Total Yarn (of different Counts) required for production of different qualities.

Daily Yarn Stock Report

Daily Yarn Stock Report carries information about yarn available for production. It

specifies the;

•Yam (of different Counts) available for production.

•Brands.

•Percent PC.

•Opening Balance.

•Receipt (Purchase, Return)

•Issued (for Warp and Weft)•Transfer and

•Closing Balance.

Cotton Purchase

MTM also carries the activity of Cotton Purchase. Inspite of the owners' own Ginning

factories, cotton is purchased from outside parties due to heavy requirement of cotton

for four (4) spinning units.

Cotton Purchase at Mahmood Textile Mills

•For Cotton Purchase, Director selects Ginning factories based on their Site Location.

On demand of cotton from the mills, he calls for sample from his selected Ginning

factories and sends the sample to the mills for testing.



• After testing, the sample is sent back to director for approval/disapproval along with

the Cotton Testing Report.

•In case of approval, the Assistant for Cotton Purchase makes Purchase Order for

Cotton.

Note that Purchase Order is only for outside parties. For owners' own ginning

factories, cotton is just transferred from one of ginning factory to the mill by a

Transfer Notice.

•After the Director's approval of the order, the order is sent to the supplier and the

Godown Keeper is also informed about the purchase order at the mill.

•When the Cotton reaches the mill, Godown Keeper receives it and informs at the

Head Office about the receipt of goods.

Local Sale

In addition to Export, Mahmood Textile Mills also sells the Yarn and Fabric in the

Local Market.

The Local Sale Director makes the contract and he is responsible for sale of cloth in

the local market. He takes help of the Local Sale Assistant. Usually, A Grade

products are exported and B and C Grade products are sold in the local market.

Obviously the rate for B and C Grade products is less than the A Grade products but

these are also easily sold in the local market as compared to the foreign market

because foreign market is more quality conscious than the local market.

Local Sale at Mahmood Textile Mills

•Local Sale Assistant receives Daily Stock Report for Cotton and Yam to see that the

stock is available for sale.

•Local Sale Assistant discusses with the Director, daily, about the dispatch of

products to inform him about the amount of yarn and cloth to be exported and the

amount of yarn and cloth available for local sale.

•When the buyer consults the director for purchase of either yam of cloth, the Local

Sale Assistant makes Purchase Order Detail for Cotton or Yam explained later) and

sends it to the buyer.



•The buyer, after specifying his/her requirements in the Purchase Order, sends it back

to the Local Sale Assistant.

•Local Sale Assistant sends this Purchase Order to the Office Manager, which then

sends the goods to the proper buyer.

•Local Sale Assistant prepares the Invoice and sends it to the buyer after getting it

approved from the Director.



Purchase Order Detail for Cloth

Purchase Order Detail for Cloth is made to know the buyer's requirements. It is then

sent to the buyer and based on this the Cloth is prepared for dispatch. The Order

contains following contents;

•Date and Buyer's Reference.

•Quality of Cloth required.

•Quantity of Cloth required.

•Dispatch Schedule.

•Number of Bales or Rolls needed etc.

Purchase Order Detail for Yarn

Purchase Order Detail for Yarn is also made to know the buyer's requirements about

yarn. It is sent to the buyer and based on this the Yam is prepared for dispatch. The

Order contains following contents;

•Order Number. •Buyer's Name.

•Required Weight per Cone.

•Required Net Weight per bag.

•Required Cones per Bag.

•Total Bags required.

•Yarn Count(s) required.

•Yam Quality required.

•Required Brand(s).

•Delivery Schedule:

•Date of Delivery.

•Bags per Container.

•Type of Packing required.



PERSONNEL MANAGEMENT


PERSONAL MANAGEMENT


Personnel Management is a very important activity for any kind of organization. The

personnel of any organization are its keys and with the help of them the organization

can do miracles in its business. It is but up to the organization that how it manages its

employees. Mahmood Textile Mills also does Personnel Management in its own

particular way. Let us now see how this organization carries out various activities in

the field of Personnel Management.

Recruitment and Selection

Whenever some unit of Mahmood Textile Mills starts its working the recruitment is

done on the basis of Sanction Strength. Sanction Strength is the estimate of the

workers, middle and top managers. The recruitment and selection of middle and top

managers, that occurs in a normal, day by day working is carried out in the Head

Office. For workers it is in the concerned unit. GM (General Manager) or TM

(Technical Manager) does that. A register is maintained in the Time Office which

gives information about;

No. of workers Enrolled.

No. of workers to be enrolled in future.

No. Of workers on Leave

No. of workers absent etc.

Orientation

Orientation is necessary for any kind of worker and the manager. The concerned

Officer or the Director is made responsible for conducting Orientation.

Training and Trail

Training and Trail is only for entry level positions. When a worker is selected, he is,

then, passed through a Trial Session for 6 or 7 days. The Foreman of the concerned

department conducts the trial. He reports to concerned in charge. If the person is

working well in trial, he is passed and in charge is informed that the person is fit for

the job. When a worker has successfully passed the trial, he is then placed

permanently and a "Worker Number" is allotted to him. His file is maintained with



reference to his worker number in which every kind of information about him is

inked. During the trial, the foreman also gives continuous training to the worker but

long training sessions are not carried out in the organization. Hence, the worker is

examined during his training that whether he can do the job.

Placement

The placement of the worker is temporary when he is selected and placed in a trial

session. The placement becomes permanent when the worker passes the trial. The

selection of the middle or the top managers is in the Head Office and at the time the

managers are selected, they are placement as permanent. For them there is no trial.

The job description is given to the worker or the manager after the selection and in

this respect the documented procedures of ISO 9002 for job description are followed.

Salaries

The salary of a single worker is Rs. 2100/- per month which is called Gross Salary.

Overtime is paid according to the hours worked over and above one shift of eight

hours. The salary of the middle and top managers is determined by the concerned

Director. There is lot of variation in it.

Rewards

The rewards given to the lower level are of two types

1. Rewards which are given to weavers.

2 .Rewards which are given to workers.

(1). the amount of reward which is given to the weavers is based on their work done.

When a certain weaver weaves the cloth, then the Time Keeper places a sticker

(Tape) on the Cloth Roll which describes,

1 Length of cloth weaved.

2 Name of weaver.

3 Loom number.

4 Quality.

5 Efficiency of loom etc.



After that at the Cloth Inspection level, the condition of the cloth is checked and

based on the condition of cloth weaved, that is "number of faults" etc., the reward of

weaver is determined.

(2). for second type of rewards which is given to the workers of other depts. the cloth

which is at the end inspected determines the rewards. From the cloth, the faults that

are due to the workers of different departments is seen. For example, in case of

Sizers, the managers see the faults in the cloth which are due to the sizers. The length

of the faulted cloth is subtracted from the total length of the beam and then based on

this length the reward is determined. Similarly the rewards given to the workers of

Warping, Drawing departments etc. follows the same rule. On various reports

prepared, different faults with respect to different departments are mentioned. Those

are taken into account. The rewards given to the middle and the top managers depend

on the will of the concerned Director.

Bonus

Bonus is given annually with respect to percentage of profit. (Percentage is

determined by the concerned Director).

Facilities

The facilities are provided to all the levels.•

The GM of the unit as been given a good reasonable home and a car.• Middle

managers have been allotted homes.

•Lower Managers are also been provided homes but for four lower managers there is

one home.

•Moreover the personnel are provided free Electricity and Gas into their home

Workers Union concept is different here. Union in at the mills (production units).

Unit #1, 2 and 3 has one union. Unit no. 4 and 5 has another union. Union's President

and Secretary are elected by the workers. But usually they are the persons whom the

owners want to be president or secretary. They take 1% share from the workers'

bonus but according to the workers they are of no use to them.



Attendance

For attendance every worker is given an "Attendance Card" and he brings it in the

unit in the morning when he comes to work. From that card the attendance is shifted

to a register for the purpose of making "Daily Attendance Report for a Shift". This

report contains information as;

No. of workers that should be on work.

No. of workers actually on work.

No. of workers in trial.

No. of workers present.

No. of workers absent. No. of workers that have come on time. No. Of workers that

have come late.

Leaves

The company has a leave system for the benefit of the workers and the managers. In

this system there are three kinds of leaves. They are;

1. Sick Leave (SL). They are 8 per year.

2. Casual Leave (CL). They are 10 per year.

3. Annual Leave or Earned Leave. They are 14 per year. If a person is on leave, then

his salary is not deducted, but if a person has taken his all leaves and is now absent

then his salary would be deducted for that day. According to the government's law;

If a person has taken all the 18 (SL & CL) leaves in a year and is now absent, then he

cannot take 14 Annual leaves the next year, even he was absent only once apart from

his 18 leaves. But the company has extended this benefit to 4 absentees apart from 18

leaves. By working more than 8 hours a worker can take either;

1. Overtime or

2. CPL (Compensation Pay Leave).

When ever a worker works more than 8 hours and does not takes overtime, then his

CPL is noted and against this he can take one leave without marking himself absent.

When a worker is newly selected, he cannot take leave for the first three months, but

his leaves are deferred in the proceeding months



Gratuity

Gratuity is another benefit which is given to the employees. It is the one month's

basic pay which is added to employees' Gratuity Account after completing his one

year in service. For example if the basic pay of an employee is Rs. 1000 per month,

then after one year Rs.1000 will be added to employees' Gratuity account but it will

not be given to him. When the employee will get resignation or he will get retirement

then the whole gratuity will be given to him. If the above employee has retired after

25 years then his gratuity after retirement will be 25,000 rupees. There is no contract

with the workers or managers for their job. However one has to inform one month

before his resignation so that the mills can arrange another worker or the manager.

Otherwise in case of no reporting, one month salary of that person is deducted. The

Personnel Management of the company is good but it is not like a Multinational

company. Especially the salaries of the middle managers are very low and the

rewards and fringe benefits are limited



ORGANIZATION CULTURE


ORGANIZATION CULTURE


The culture of the organization is very hard working where teamwork is appreciated

and there is no communication gap between the various levels of the hierarchy. As far

as the rules and regulations are concerned, employees are expected to stick closely

with them. No negligence on the part of the workers or the managers is tolerated. The

organization values a safe, stable, and predictable and rule oriented environment. All

the Owners of the mills have a very strong control on the behavior of the personnel.

No one is seen sitting idle and having a chat with someone, rather every one is seen

working hard and committed to the Quality. The organization encourages the workers

and the managers towards commitment to quality. Every department carries boards

and charts with beautiful messages like;

•HARD WORK IS A KEY TO SUCCESS.

•QUALITY IS THE ONLY WEAPON TO WIN CUSTOMERS'

•LOYALTY.

•COMMITMENT TO QUALITY IS OUR MOST DOMINANT TRAIT

•CUSTOMER IS THE ULTIMATE JUDGE

Hence whenever some one goes to the mills or at the Head Office, he finds every one

working in a much disciplined environment, the environment that is very important

for any good and successful organization.



UNIVERSITY OF EDUCATION OKARA CAMPUS [SUMAD PURA ROAD OKARA] 68 SWOT ANALYSIS


SWOT ANALYSIS

STRENGTHS:

The company has a vertical integration system

Adopting Farm-to-fabric strategy

Mahmood group consists of seven companies located in different cities of country

Company has many distinction certificates over the entire textile industry of Pakistan by ISO, Supima, Lycra and Oko-tex.

Its annual turnover ratio is US $ 215 million.

Company is playing a significant role in textile exports with 90% export ratio.

MTM has a strong dealer ship network and large sales force to cater to its needs.

Company is carrying its operations with the help of updated modern technology.



Broad production range.

Excellent environmental and working conditions.

Safety measures of international standard are exercised.

Significant contribution towards the economic and agricultural development of the country.

No deceptive n unethical practices in management.

It is also member of responsible corporate citizenship.

Company has own testing labs to maintain strict quality controls.

MTM enjoy fair dealing with competitive prices

It provides pre and post services to its customers.

Company also made an employee welfare and motivation association.

WEAKNESSES:

Lack of long term planning, decisions are made keeping in view the short term benefits.

Monetary sensitiveness to foreign exchange exposure.

Too much centralization beurucratic control effects timely decision making.

Less mobilization of resources.

There is a lack of joint research and development activities.

Company has dearth of trained manpower.

Some little exposure of high-tech technology.

Improper methods of inventory management.

Declines sales in economic zones of competitors.



More dependence on loans.

Fewer trends in long or short term investments in other sectors.

OPPORTUNITIES:

Great opportunities for joint ventures.

More ease for internationally integration because of the lower tariff barriers and

Removal of quantitative trade restrictions.

Proper placement of warehouses, automated in future.

With the help of government subsidiaries, purchase of raw material in bulk form will cut company’s cost.

Company can hire specialized people with innovative approach will help to Differentiate its products and maintain an edge over competitors.

Opportunity to appear as a multifunctional textile mill because of globalization factor.

Expansion of plants to meet the demand more efficiently.

THREATS:

Crises of gas and water can effect its production.

High production cost can create problems for company.

Threat of entry of new competitors in market.

Low price of market share as compared to competitors’ will effect investments.

No strong brand name can decrease company’s sales level.

Company’s registered office located away from main business cities so it creates hurdles for company to carry its operations efficiently.

As company has its own cotton forms, so in case of low input, it can effect its production.



PEST ANALYSIS OF Mahmood Textiles

Political instability

The political situation of Pakistan is not stable and after the war on terror it

has gone worse especially for the business sector, and due to inconsistent

policies of government every new government set different trade policies

with make difficult for the businesses to grow and be consistent in their

performance.

Govt. should apply sustainable policies for the beneficial of the exporters as

well as the investors.


PEST ANALYSIS


Economic situation

The economic condition of Pakistan affect the textile industry directly and

due to week economic condition textile industry is also not performing well.

Increasing inflation rate make the cost of production high and thus reduce

the profit margin of the investor.

Social situation

The change in the lifestyle of the people affects the demand of MTM

product and especially the demand for exports is affected by the changing

fashions and style in the importing countries so the company is needed to be

contemporary to meet the changing demand of customers.

Technological factor

Technological advancement in all the sectors of the country has changed the

entire socio-economic environment. Especially in the textile sector there is a

lot of technological development, but we still need more development to

meet the demand of outside world.



THE BOSTON CONSULTING GROUP (BCG) MATRIX

The BCG Matrix method is the most well-known portfolio management tool. It is

based on product life cycle theory. It was developed in the early 70s by the Boston

Consulting Group. The BCG Matrix can be used to determine what priorities should be

given in the product portfolio of a business unit. To ensure long-term value creation, a

company should have a portfolio of products that contains both high-growth products in

need of cash inputs and low-growth products that generate a lot of cash. The Boston

Consulting Group Matrix has 2 dimensions:

Market share


BCG MATRIX

http://www.12manage.com/methods_product_life_cycle.html


Market growth

The

basic idea

behind it is:

if a

product has a bigger

market share, or if the product's

market grows faster, it is better for the company.

The four segments of the BCG Matrix

Placing products in the BCG matrix provides 4 categories in a portfolio of a

company:

Stars (high growth, high market share)

o Stars are using large amounts of cash. Stars are leaders in the business.

Therefore they should also generate large amounts of cash.

o Stars are frequently roughly in balance on net cash flow. However if

needed any attempt should be made to hold your market share in Stars,

because the rewards will be Cash Cows if market share is kept.

Cash Cows (low growth, high market share)

o Profits and cash generation should be high. Because of the low growth,

investments which are needed should be low.



o Cash Cows are often the stars of yesterday and they are the foundation of a

company.

Dogs (low growth, low market share)

o Avoid and minimize the number of Dogs in a company.

o Watch out for expensive ‘rescue plans’.

o Dogs must deliver cash, otherwise they must be liquidated.

Question Marks (high growth, low market share)

o Question Marks have the worst cash characteristics of all,

because they have high cash demands and generate low returns,

because of their low market share.

o If the market share remains unchanged, Question Marks will

simply absorb great amounts of cash.

o Either invests heavily, or sells off, or invests nothing and

generates any cash that you can. Increase market share or deliver

cas

The BCG Matrix and one size fit all strategies

The BCG Matrix method can help to understand a frequently made strategy

mistake: having a one size fits all strategy approach, such as a generic growth target (9

percent per year) or a generic return on capital of say 9.5% for an entire corporation.

In such a scenario:

Cash Cows Business Units will reach their profit target easily. Their management

have an easy job. The executives are often praised anyhow. Even worse, they are

often allowed to reinvest substantial cash amounts in their mature businesses.

Dogs Business Units are fighting an impossible battle and, even worse, now and

then investments are made. These are hopeless attempts to "turn the business

around".

As a result all Question Marks and Stars receive only mediocre investment funds.

In this way they can never become Cash Cows. These inadequate invested sums

of money are a waste of money. Either these SBUs should receive enough



investment funds to enable them to achieve a real market dominance and become

Cash Cows (or Stars), or otherwise companies are advised to disinvest. They can

then try to get any possible cash from the Question Marks that were not selected.

Other uses and benefits of the BCG Matrix

If a company is able to use the experience curve to its advantage, it should be able

to manufacture and sell new products at a price that is low enough to get early

market share leadership. Once it becomes a star, it is destined to be profitable.

BCG model is helpful for managers to evaluate balance in the firm’s current

portfolio of Stars, Cash Cows, Question Marks and Dogs.

BCG method is applicable to large companies that seek volume and experience

effects.

The model is simple and easy to understand.

It provides a base for management to decide and prepare for future actions.

Limitations of the BCG Matrix

Some limitations of the Boston Consulting Group Matrix include:

It neglects the effects of synergy between business units.

High market share is not the only success factor.

Market growth is not the only indicator for attractiveness of a market.

Sometimes Dogs can earn even more cash as Cash Cows.

The problems of getting data on the market share and market growth.

There is no clear definition of what constitutes a "market".

A high market share does not necessarily lead to profitability all the time.

The model uses only two dimensions – market share and growth rate. This may

tempt management to emphasize a particular product, or to divest prematurely.

A business with a low market share can be profitable too.

The model neglects small competitors that have fast growing market shares

BCG Matrix of Mahmood Textiles Mills



Mahmood Textiles Mills has strong market position in Pakistan because of their

evergreen selling nature throughout the year that’s why it has large market share and its

products has till very strong potential to grow and penetrate not only in local markets but

also in foreign markets. Therefore according to BCG matrix product lines of Mahmood

textiles lies in Cash Cows due to large market share and high potential to grow.


BALANCE SHEET


MAHMOOD TEXTILE LIMITEDBalance Sheet

Assets 2005 2006 2007 2008 2009Current Assets Rs. Rs. Rs. Rs. RsCash and bank

balances172,814,896 16,049,950 9,686,177 7,584,259 1,486,068,648

Advances, deposits and

other receivables

97,068,120 169,580,242 117,185,853 88,430,076 2,310,941

Trade debtors (net)

48,589,001 67,760,129 44,812,703 69,394,339 187,557,975

Stock-in-tradeRaw material 69,433,646 239,587,504 678,544,478 813,116,252 1,085,638,458

Work in process 24,855,609 31,738,172 29,227,518 30,807,354 21,007,454Finished goods 126,440,912 117,640,324 146,632,574 95,951,990 92,354,018

Stock-in-trade(net)

220,730,167 388,966,000 854,404,570 939,875,596 1,198,999,930

Sales tax refundable

45,952,942 9,680,642

Short term investments

169,036,865 138,494,733



Stores, spares and loose tools

55,484,417 53,646,568 65,443,171 97,176,451 57,739,692

Total current Assets 594,686,601

696,002,889 1,260,569,339 1,386,908,3962,942,357,828

Fixed AssetsOperating Fixed

Assets708,267,837 701,075,042 738,093,535 1,665,827,350

Investment Property

14,058 14,058 1,563,628,509

capital work-in-progress

19,626,598 11,370,049 444,708,159

Long term Investment

146,806,000 146,806,000 146,806,000 134,804,956 207,547,729

Long term Deposits

1,644,030 1,833,030 1,180,685 3,771,143 4,347,499

Total fixed Assets

876,344,465 861,098,179 1,330,802,437 1,804,403,449 1,775,523,737

Total Assets 1,471,031,066 1,557,101,068 2,591,371,776 3,191,311,845 6,493,405,302LiabilitiesShort term liabilities

interest/markup on loans

1,908,804 1,411,284 15,995,363 13,793,090 4 9,005,607

current portion of long term liabilities

75,310,394 26,536,600 53,108,029 74,679,405 136,689,609

Short term finances

297,885 134,520,221 584,313,022 768,552,579 1,394,354,879

Creditors 42,281,203 47,569,156 53,767,978 66,037,846 40,664,725accruals and

other payables86,325,079 94,848,370 177,473,542 131,461,316 27,062,791

Provision for taxation

1,745,999 2,291,263 3,266,410 1,300,650 6,900,809

Dividends 40,326,746Total Current

Liabilities248,196,110 307,176,894 887,924,344 1,055,824,886 1,605,672,813

Long Term Liabilities

Long term loans and finances

66,341,447 39,804,847 366,446,223 550,618,900 304,349,426

Long term Payables

20,164,685 17,741,861 18,638,048 33,043,700 12,879,015

Total Long term Liabilities

86,506,132 57,546,708 385,084,271 583,662,600 317,228,441

Capital and Reserves

Issued’ subscribed and paid-up capital

99,739,890 99,739,890 99,739,890 99,849,890 715,520,000

capital reserve 7,120,600 8 2,500,000Inappropriate

Profit1,036,588,934 1,092,637,576 1,218,623,271 1,444,853,869 263,944,861

Total capital and reserves

1,136,328,824 1,192,377,466 1,318,363,161 1,551,824,359 979,464,861

Total Liabilities 1,471,031,066 1,557,101,068 2,591,371,776 3,191,311,845 2,902,366,115



and owner's equity

TREND ANALYSIS Assets 2005 2006 2007 2008 2009Current Assets Rs. Rs. Rs. Rs. RsCash and bank balances 100 9.287364904 5.604943338 4.388660454 859.92Advances, deposits and other receivables 100 174.7023039 120.7253762 91.10104945 2.38Trade debtors (net) 100 139.4556949 92.22808059 142.8190281 386.01Stock-in-tradeRaw material 100 345.0596617 977.2560093 1171.069501 1,563.56Work in process 100 127.6901805 117.589225 123.9452793 84.52Finished goods 100 93.03976232 115.9692474 75.88682214 73.04Stock-in-trade(net) 100 176.2178706 387.0810146 425.8029651 543.20Stores, spares and loose tools 100 96.68763033 117.9487405 175.1418799 104.06Total current Assets 100 117.0369213 211.9720432 233.2166882 494.77Fixed AssetsOperating Fixed Assets 100 98.98445269 104.2110762 235.1973735 -Investment Propertycapital work-in-progress 100 57.93183821 2265.844335 0 -Long term Investment 100 100 100 91.82523603 141.38Long term Deposits 100 111.4961406 71.81651186 229.3840745 264.44Total fixed Assets 100 98.26024051 151.8583719 205.9011634 202.61Total Assets 100 105.8509983 176.1602345 216.9438783 441.42LiabilitiesShort term liabilitiesinterest/markup on loans 100 73.93551145 837.9782838 722.6037875current portion pf long term liabilities 100 35.23630483 70.51885693 99.16214885 181.50Short term finances 100 45158.44067 196153.8923 258003.115 468,084.96Creditors 100 112.5066285 127.167569 156.1872447 96.18

accruals and other payables 100 109.8734818 205.5874655 152.2863547 31.35Provision for taxation 100 131.2293421 187.0797177 74.49316981 395.24Dividends 100 0 0 0 -Total Current Liabilities 100 123.7637826 357.7511122 425.3994497 646.94Long Term LiabilitiesLong term loans and finances 100 59.99996804 552.3639287 829.9772237 458.76Long term Payables 100 87.98481603 92.42915523 163.8691604 63.87

Total Long term Liabilities 100 66.52327028 445.1525714 674.7066208 366.71Capital and ReservesIssued’ subscribed and paid-up capital 100 100 100 100.1102869 717.39capital reserveInappropriate Profit 100 105.4070269 117.5608991 139.3854229 25.46

Total capital and reserves 100 104.9324316 116.0195124 136.5647272 86



.20 Total Liabilities and owner's equity 100 105.8509983 176.1602345 216.9438783

197.30

VERTICAL ANALYSIS OF BALANCE SHEET

Assets 2005 2006 2007 2008 2009

Current AssetsCash and bank balances 11.74787535 1.030758396 0.373785695 0.237653334 22.88581382Advances, deposits and other receivables

6.598645144 10.89076653 4.52215518 2.770963174 0.035589046

Trade debtors (net) 3.303057435 4.351684704 1.729304279 2.174476904Stock-in-tradeRaw material 4.720066599 15.3867664 26.18475991 25.47905976 16.72Work in process 1.68967261 2.038285931 1.127878225 0.965350787 1.42Finished goods 8.595393729 7.555085949 5.658492361 3.006662923 1.422274041Stock-in-trade(net) 15.00513294 24.98013828 32.9711305 29.45107347 18.46488667Sales tax refundable 0 0 0 1.439938941 0.14908421Short term investments 0 0 6.523064987 4.339743019 0Stores, spares and loose tools 3.771804572 3.445284902 2.525425784 3.045031502 0.889205114

Total current Assets 40.42651544 44.69863282 48.64486642 43.45888034 45.31301669Fixed Assets 0 0 0 0 0Operating Fixed Assets 48.14771444 45.02437616 28.4827342 52.19882703 0Investment Property 0 0.000902832 0.000542493 0 24.08025429capital work-in-progress 1.334206901 0.73020623 17.16110992 0 0Long term Investment 9.979802833 9.428161281 5.665184801 4.224123575 3.196284836Long term Deposits 0.111760386 0.117720682 0.045562162 0.118169053 0.066952528Total fixed Assets 3129801661 3075350639 4752865846 6444298032 6341156204Total Assets 100 100 100 100 100Liabilities 0 0 0 0 0Short term liabilities 0 0 0 0 0interest/markup on loans 0.129759598 0.09063535 0.617254658 0.432207527 0current portion pf long term liabilities

5.119565164 1.704231058 2.04941759 2.34008485 2.105052783

Short term finances 0.020250082 8.639145125 22.54840573 24.08265366 21.47339977creditors 2.874256294 3.054981913 2.074884758 2.06930094 0.626246524accruals and other payables 6.091343199 6.848632977 4.119350361 5.868338269

Provision for taxation 0.118692191 0.147149279 0.126049455 0.040755967 0.106274115Dividends 2.741393226 0 0 0 0Total Current Liabilities 16.87225482 19.72748592 34.26464517 33.08435331 24.72774666



Long Term Liabilities Long term loans and finances 4.509860365 2.556343183 14.14101313 17.25368522 4.687054201

Long term Payables 1.370785802 1.139416147 0.719234815 1.035426859 0.198339922Total Long term Liabilities 5.880646167 3.69575933 14.86024794 18.28911208 4.885394123

Capital and ReservesIssued’ subscribed and paid-up

capital6.780270812 6.405485941 3.848922448 3.128803917 11.01917972

capital reserve 0 0 0 0.223124544 0Inappropriate Profit 70.4668282 70.17126881 47.02618444 45.27460615 4.064814203

Total capital and reserves 77.24709901 76.57675475 48.62653462 15.08399392

Total Liabilities and owner's equity

100 100 100 100 100




INCOME STATEMENT


MAHMOOD TEXTILE LIMITED

INCOME STATEMENT2005 2006 2007 2008 2009Rs. Rs. Rs. Rs.

Sales (Net) 3,172,585,332 3,909,712,718 2,878,130,066 3,839,168,820 1,708,153,092Cost of goods soldMaterial 2,213,630,692 3,173,235,325 2,111,626,689 2,730,669,961 1 ,036,163,837Labor 133,297,738 132,789,205 121,751,406 193,020,389 131,332,709Foh 436,781,177 351,691,836 270,811,260 466,581,883 432,691,811

total factory cost 2,783,709,607 3,657,716,366 2,504,189,355 3,390,272,233 564,024,520

Work in process (4,450,373) (6,882,563) 4,936,003 (1,579,836) 21,007,454Finished Goods (2,720,508) 1,735,461 (21,397,559) 46,424,394 92,354,018Cost of goods sold

2,776,538,726 3,652,569,264 2,487,727,799 3,435,116,791 1 ,450,247,795

Gross profit 396,046,606 257,143,454 390,402,267 404,052,029 257,905,297

Less Operating Expenses

Admin expenses 29,651,107 32,247,865 28,621,516 46,198,337 20,909,963Selling expenses 89,978,928 95,151,804 88,692,539 73,696,732 63,697,327other operating expenses

5,879,609 36,433,230 22,201,896 497,111

total operating expenses

119,630,035 133,279,278 153,747,285 142,096,965 135,072,569

Operating Profit 276,416,571 123,864,176 236,654,982 261,955,064 122,832,728

Add Other incomesExport rebate on packing material

3,424,297 1,657,745 697,730 4,321 5,437

Exchange fluctuation gain-net

1,324,990 59,957 153,432 20,419 135,759

Income on bank deposits

1,255,303 438,693 75,546 123,921 321,834

dividend income 7,078,700 4,121,025

others 3,407,400 6,169,977 280,967 38,699,414 4,704,749total other incomes

9,411,990 8,326,372 8,286,375 42,969,100 5,167,779

Less Other Expenses

14,079,928

16,125,114

15,461,706

20,326,630

17,623,607

Profit before Interest and taxes

271,748,633

116,065,434

229,479,651

284,597,534

110,376,900

Less Interest Expense

50,075,475

18,295,800

42,349,306

106,915,868

19,349,547

profit before taxation

221,673,158

97,769,634

187,130,345

177,681,666

91,027,353



Less provision for taxation

28,683,088

41,720,992

36,209,675

67,553,744

15,549,420

Profit after taxation

192,990,070

56,048,642

150,920,670

110,127,922

75,477,933

Add inappropriate profit

883,494,820

Profit available for appropriation

1,076,484,890

Less Appropriation 39,895,956

Inappropriate profit (carried to B/S)

1,036,588,934

-

-

-

-

EPS 19.35 5.62 15.13 11.03 9.56



TREND ANALYSIS

INCOME STATEMENT

2005 2006 2007 2008 2009Rs. Rs. Rs. Rs. Rs.

Sales (Net) 100 3909712718 2878130066 3839168820 1,708,153,092Cost of goods sold

Material 100 3173235325 2111626689 2730669961 1 ,036,163,837Labour 100 132789205 121751406 193020389 131,332,709Foh 100 351691836 270811260 466581883 432,691,811

total factory cost 100 3657716366 2504189355 3390272233 564,024,520

Work in process 100 -6882563 4936003 -1579836 21,007,454Finished Goods 100 1735461 -21397559 46424394 92,354,018Cost of goods sold 100 3652569264 2487727799 3435116791 1 ,450,247,795

Gross profit 100 257143454 390402267 404052029 257,905,297

Less Operating Expenses

Admin expenses 100 32247865 28621516 46198337 20,909,963Selling expenses 100 95151804 88692539 98500306 63,697,327other operating expenses

100 5879609 36433230 22201896 497,111

total operating expenses

100 133279278 153747285 166900539 135,072,569

Operating Profit 100 123864176 236654982 237151490 122832728Add Other incomes 100

Export rebate on packing material

100 1657745 697730 4321 5,437

Exchange fluctuation gain-net

100 59957 153432 20419 135,759

Income on bank deposits

100 438693 75546 123921 321,834

dividend income 100 7078700 4121025others 100 6169977 280967 38699414 4,704,749total other incomes 100 8326372 8286375 42969100 5,167,779

Less Other Expenses

100 34420914 57811012 102438924 17,623,607

Profit before Taxation

100 97769634 187130345 177681666 110376900

Less provision for taxation

100 41720992 36209675 67553744 15,549,420

Profit after taxation

Add unappropriated



profit

Profit available for appropriation

Less AppropriationUnappropriated profit (carried to B/S)

100 56048642 150920670 110127922 263,944,861

EPS 100 5.62 15.13 11.03 9.56




RATIO ANALYSIS

"Working Capital"

346,490,491 388825995 372644995 331083510

1336685015

0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

2005 2006 2007 2008 2009


Liquidity Ratios:

1. Net Working Capital Ratio:

Formula : Current Assets - Current Liabilities

Years 2005 2006 2007 2008 2009Ratio 346,490,491 388825995 372644995 331083510 1336685015

INTERPRETATION:

The working Capital is showing decreasing trend for the last two years because of rapid

increase in account payable and also due to short-term borrowings, hence decreasing its


Current Ratio

2.392.26

1.42 1.31

1.83

0

0.5

1

1.5

2

2.5

3

2005 2006 2007 2008 2009


profitability. In year 2009 there is high increase in liabilities as compare to the current

assets. Working capital is decreased in 2009 as compare to previous years

2. Current Ratio:

Formula : Current Assets / Current Liabilities

Years 2005 2006 2007 2008 2009Ratio 2.39 2.26 1.42 1.31 1.83

Interpretation:


Quick/Acid test ratio

0.89

0.27

0.06 0.07 0.05

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2005 2006 2007 2008 2009


Current Ratio of the company has a decreasing trend. It was quite good in 2005 but then

current liabilities of the company increased in the proceeding years so it went down. Over

all although the current ratio is decreasing yet it is showing the good ability of firm to pay

its current liabilities from current assets.

3. Quick (Acid-test) Ratio:

Formula : Current Assets + marketable securities + A/R / Current Liabilities

Years 2005 2006 2007 2008 2009Ratio 0.89 0.27 0.06 0.07 0.05

INTERPRETATION:


Cash Ratio

0.7

0.0520.01 0.007

0.08

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2005 2006 2007 2008 2009


Quick ratio of the company has a decreasing trend. In 2006 there is a significant decrease

in the quick ratio which shows company has a very large portion of least liquid asset

(inventory) in its current assets. It shows that the most liquid assets of the company are

not in a position to payoff the current liabilities.

4. Cash Ratio:

Formula: Cash+ Cash equivalent+ marketable securities / Current Assets

Years 2005 2006 2007 2008 2009

Ratio 0.7 0.052 0.01 0.007 0.08

INTERPRETATION:



Cash ratio is showing a decreasing trend. A significant decrease can be seen in 2006.

After this there is a continuous decrease which shows firm is using cash up to its best and

maximum advantage.


A/R Turn Over

62.59 64.86

49.29

64.83 64.98

0

10

20

30

40

50

60

70

2005 2006 2007 2008 2009


4. Accounts Receivable Turnover Ratio:

Formula: Net Sales / Average Gross Receivables

Years 2005 2006 2007 2008 2009Ratio 62.59 64.86 49.29 64.83 64.98

INTERPRETATION:

A consistent trend in account receivable ratio can be seen. As this ratio tells that hoe

many times the credit sales are being converted into cash. So, the company is showing a

very good trend which shows the good management of the company.


"Day's sales in A/R"

5.836.52

5.946.8

8.9

012345

6789

10

2005 2006 2007 2008 2009


6. Accounts Receivable Turnover in Days:

Formula :( Average Gross Receivables / Net Sales) x365

Years 2005 2006 2007 2008 2009Ratio 5.83 6.52 5.94 6.8 8.9

INTERPRETATION:

A mix trend can be seen. It is 5.83 days in 2005. Then in 2006 it is increased and became

6.52 days. Then it is again decreased and it became 6.8 days in 2008. The company’s

overall collection period is good as there is a slight difference in figures.


Inventory Turnover Ratio

12.58

9.39

2.913.65

2.89

0

2

4

6

8

10

12

14

2005 2006 2007 2008 2009


7. Inventory Turnover Ratio:

Formula : Cost of Goods Sold / Average Inventory

Years 2005 2006 2007 2008 2009Ratio 12.58 9.39 2.91 3.65 2.89

INTERPRETATION:

Inventory turnover ratio is showing random trend. This ratio has decreased in 2006.

There is a significant decrease in 2007. Then in 2008 a slight increase can be seen. The

reason behind this low turnover is the high fluctuation in cost of sales. The cost of sales

showed a massive fluctuation because of intensive change in total factory cost.


Day’s sales in inventory

29.0138.86

125.36

99.8689.67

0

20

40

60

80

100

120

140

2005 2006 2007 2008 2009


8. Inventory Turnover in days:

Formula: (Average Inventory / Cost of Goods Sold) x365

Years 2005 2006 2007 2008 2009Ratio 29.01 38.86 125.36 99.86 89.67

INTERPRETATION:

A continuous increase can be seen. It is 29.01days in 2005. Then it is increased to 38.86

days in 2006. A significant increase can be seen in 2007 i.e. 125.36 days. Then there is a

slight decrease in 2008 and it became 99.86 days. This shows the firms poor management

to convert its inventory into sales.


Time Interest Earned Ratio

5.43

6.34

5.42

2.66

3.66

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009


Long Term Debt Paying Ability:

1. Time Interest Earned Ratio:

Formula: Earning Before Interest and Tax / Fixed Finance charges

Years 2005 2006 2007 2008 2009Ratio 5.43 6.34 5.42 2.66 3.66

INTERPRETATION:

The times interest earned ratio of the company was good in 2005 and in 2006. After 2006

a decreasing trend is shown in the ratio up to 2008. It is because of the increase in the

interest expenses of the company. But in 2006, instead of massive decrease, company is

still able to generate 2 times the expense of interest from its operations. In 2009 it’s again

increasing.


Debt Ratio

22.75% 23.42%

49.12%51.37% 52.37%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2005 2006 2007 2008 2009


2. Debt Ratio:

Formula: Total Debts / Total Assets

Years 2005 2006 2007 2008 2009

Ratio 22.75% 23.42% 49.12% 51.37% 52.37%

INTERPRETATION:

Debt ratio of the company is increasing in all the years. It reached its highest of 52.37%

in 2009. In 2006 there is a slight increase but in 2007 a significant increase can be seen. It

is all because of a massive increase in the liabilities of the company.


Debt to Equity Ratio

335% 365%

1276%

1642%

1376%

0%

200%

400%

600%

800%

1000%

1200%

1400%

1600%

1800%

2005 2006 2007 2008 2009


3. Debt Equity Ratio:

Formula: Total Debts / (L.T.Liabilities + Equity)

Years 2005 2006 2007 2008 2009

Ratio 335% 365% 1276% 1642% 1376%

INTERPRETATION:

The ratio indicates the proportionate claims of owners and the outsiders against the firm’s

assets. This ratio shows that company is continuously increasing the debt portion in the

business. This shows that the business is risky to make investments in such business.


Gross Profit Margin

12.48%

6.58%

13.56%

10.52%9.54%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

2005 2006 2007 2008 2009


Profitability Ratios:

1. Gross Profit Margin:

Formula :( Gross Profit / Net Sales) x100

Years 2005 2006 2007 2008 2009Ratio 12.48% 6.58% 13.56% 10.52% 9.54%

INTERPRETATION:

An Irregular trend of gross profit can be seen. In 2006 it is decreased to 6.50%. In 2007 it

is increased to 13.56%. This increase is due to decrease in sales and in cost of goods sold.

In 2008 it is again decreased. The reason behind this fluctuation is the change in cost of

goods sold and in sales.


Operating Income Margin

8.71%

3.17%

8.22%

6.82%

5.17%

0.00%1.00%2.00%3.00%4.00%5.00%6.00%7.00%8.00%9.00%

10.00%

2005 2006 2007 2008 2009


2. Operating Income Margin:

Formula : ( Operating Profit / Net Sales) x100

Years 2005 2006 2007 2008 2009Ratio 8.71% 3.17% 8.22% 6.82% 5.17%

INTERPRETATION:

An irregular trend can be seen. In 2005 the operating profit is 8.71%. It is decreased

significantly in 2006 to 3.71%. The reason behind this decrease is the increase in

operating expenses of the company. In 2007 a great increase of 8.22% can be seen.

Although the operating expenses are increasing but low cost of goods sold supported this

increase. And in 2008 there is a slight decrease of 6.82%. and in 2009 its again

decreasing from previous year. The reason behind this decrease is the increased cost of

goods sold.


Net Profit Margin

32.67%

1.43%

5.43%2.87% 3.98%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

2005 2006 2007 2008 2009


.

Net Profit Margin:

Formula :( Net Profit / Net Sales) x100

Years 2005 2006 2007 2008 2009Ratio 32.67% 1.43% 5.43% 2.87% 3.98%

INTERPRETATION:

A great Variation can be seen in net profit ratio. It is 32.67% in 2005. A significant

decrease can be seen in 2006. Then there is a slight increase of 5.43%. Then it is again

reduced to 2.87%. The reason is the great fluctuation in interest and tax expenses of the

company. Another reason of this fluctuation can be that after 2003 there is no

inappropriate profit.


Total Assets Turnover

2.16

2.51

1.11 1.2 1.3

0

0.5

1

1.5

2

2.5

3

2005 2006 2007 2008 2009


4. Total Assets Turnover Ratio:

Formula : Net Sales / Average Total Assets

Years 2005 2006 2007 2008 2009Ratio 2.16 2.51 1.11 1.2 1.3

INTERPRETATION:

An irregular trend can be seen. A good increase in turnover can be seen in 2006 which

shows that the assets are being effectively used to generate sales. The reason of decrease

in turnover in 2007 is that the assets have been increased but company is unable to

increase its sales volume. In 2008 and 2009 there is a little bit improvement in turnover.


"Operating Assets Turnover"

4.48

5.58

3.9

2.31

0.96

0

1

2

3

4

5

6

2005 2006 2007 2008 2009


5. Fixed Assets Turnover Ratio:

Formula : Net Sales / Fixed Assets

Years 2005 2006 2007 2008 2009Ratio 4.48 5.58 3.9 2.31 0.96

INTERPRETATION:

The ratio has shown an increasing trend in 2006 but then it again started to decrease and

it reached to 3.9 in 2007 and then in 2008 and 2009 there is again decrease but its not

significant decrease. It is all because of the greater increase in fixed assets as compared to

the sales of the company. This all shows that company is making productive use of its

fixed assets by generating good volume of sales.


"Return on Assets"

70.50%

3.60% 5.80% 3.40% 3.97%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

2005 2006 2007 2008 2009


6. Return on Assets:

Formula: Net Income / Average Total Assets *100

Years 2005 2006 2007 2008 2009Ratio 70.50% 3.60% 5.80% 3.40% 3.97%

Interpretation:

A random trend can be seen in this ratio. There is significant decrease in return in 2006 of

3.60%. In 2007 a slight increase can be seen. And in 2008 there is again decrease in

return and it is 3.40% and in 2009 it is slightly increased. This fluctuation is due to the

continuous increase in assets and an irregular change in income.


"Degree of Financial Leverage"

3.81

0.483 0.6580.387 0.376

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2005 2006 2007 2008 2009


Investors Analysis:

1. Degree of Financial Leverage:

% change in net income / % change in EBIT

Years 2005 2006 2007 2008 2009Ratio 3.81 0.483 0.658 0.387 0.376

INTERPRETATION:

The degree of financial in the year 2005 is 3.81 which indicate that as EBIT changes Net

income will change y 3.81 times that amount. If EBIT increases the financial leverage ill

be favorable and if EBIT decreases the financial leverage will be unfavorable. But in

2006 financial leverage decreased to 0.483 which shows that company is earning less on

the borrowed funds than it pays to use them. A conservative investor would look for

favorable financial leverage. In next years the degree of financial leverage has slight

changes that are in 2007 it has slightly increased to 0.658 the in 2008 and 2009 again

decreased to 0.387 and 0.376.


"Earnings Per Common Share"

103.93

5.6215.13 11.03 9.56

0

20

40

60

80

100

120

2005 2006 2007 2008 2009


2. Earning per Common Share:

Formula: Net income –Preferred Dividend / Wt. average no. of c/s, o/s

Years 2005 2006 2007 2008 2009Ratio 103.93 5.62 15.13 11.03 9.56

INTERPRETATION:

A mix trend is there. In 2006 the E.P.S. has decreased. The reason is a huge reduction in

net income. As the no. of shares is almost same over the years, the increase in E.P.S. is

due to increase in net income. The income in 2008 is slightly decreased and there is small

increase in number of shares that’s why E.P.S. has decreased.


"Percentage of Retained Earnings"

96%

100% 100% 100% 100%

94%

95%

96%

97%

98%

99%

100%

101%

2005 2006 2007 2008 2009


3. Percentage of Retained Earnings:

Formula: Net Income – All Dividends / Net Income * 100

Years 2005 2006 2007 2008 2009Ratio 96% 100% 100% 100% 100%

INTERPRETATION:

The percentage of retained earnings is almost same in all the years. It is 96% in 2005

because the company has declared the dividend to its share holders. No dividend has been

declared in rest of the years. That’s why a consistent trend can be seen.


"Book Value Per Share"

10 10 10 10 10

0

2

4

6

8

10

12

2005 2006 2007 2008 2009


4. Book Value per Share:

Formula: Total share’s holder equity – p.s. equity / No. of c/c, o/s

Years 2005 2006 2007 2008 2009Ratio 10 10 10 10 10

INTERPRETATION:

There is no change in the company’s book value per share.


"Price/Earning Ratio"

3.1

13.34

6.48

10.99.89

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009


5. Price / Earning Ratio

Market price per shareDiluted EPS

Years 2005 2006 2007 2008 2009Ratio 3.1 13.34 6.48 10.9 9.89

INTERPRETATION:

In the year 2005 the price earning ratio is 3.1. In 2006it has jumped up to 13.4. This

increasing trend is favorable for these investors who are interested in capital gain. But in

2007 there is again decrease of 6.48 which is favorable for those investors who are

interested in dividends. In the year 2008 it has again increased to 10.9 and in 2009 it

decreased to 9.89.




RECOMMENDATIONS


RECOMMENDATIONS

Followings are the suggestions that we recommend to company:

The Company should utilize its resources properly.

The company must consider the long term benefits and should do long term planning for that.

The company should involve the low level management in decision making.

They should hire highly qualified and well trained people.

Training opportunity should be provided to the employees.

Modern methods of production must be used by the company to compete the others.

Inventory should be managed properly.

The company should be self sufficient in gas and water storage.

The company should cut its cost of production.

The company should not only depend on its own input resources rather it should make contacts with outside suppliers to meet any contingency.



CONCLUSION


CONCLUSION


From this report I conclude that company is vertically based on integrated industries and

started business in 1935, by setting up a tanning unit. Since then, the group has grown

immensely in the fields of cotton ginning, spinning and weaving. Cotton is regarded as an

important crop of Pakistan. The Company is engaged in cotton ginning for the last 50

years and is running a number of ginning factories located in various parts of the country

where best quality cotton is produced.

Instead of all this, if we see the profitability of the company it is not satisfactory. A huge

amount is being paid by the company in the form of interest; also the company is

depending more on debts to run the business that’s why we can say the company position

is very risky. The company is not using its debts in a proper manner to make any

expansion in the business that’s why the investors are hesitant to invest in such a risky

business. The company is not using its all assets efficiently that’s why they are not

generating proper return. the company’s operating outflows are much more than their

cash inflows. In short, the overall financial position of the company is not satisfactory.


final project on mahmood textile mills ltd

Documents

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field of textile

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multan road

khan road

areas company doesnt