TEXTILES

INTRODUCTION
The textile industry is generally sub-division in to three sectors, namely spinning, weaving and composites or processing. Lint cotton,

separated from seeds is fed into spinning mills, which produce yarn exclusively. The yarn is supplied to weaving mills, which produce gray cloth exclusively. Finally, gray cloth is supplied to processing mills, which

produced finished cloth.

Alternatively, lint or yarn is supplied directly to composites, which are vertically integrated facilities that produce a variety of product ranging from yarn to printed and finished and dyed products. A fourth sector that has taken off in recent year is that of apparel and knitwear, which produces ready made garments, hosiery, and other made up products. Cotton

processing is a highly polluting industry, utilizing a number of chemicals in designing, mercerizing, bleaching, dyeing, and finishing of cloth.

THE TEXTILE INDUSTRY OF PAKISTAN

Pakistan is the fifth largest producer of cotton in the world, the fourth largest consumer of cotton, the third largest exporter of raw cotton, and the larges exporter of cotton yarn. 1.3 million formers (out of a total of 5 million) cultivate cotton over 3 million hectors, covering 15 percent of the contributed about 10 percent to GDP and 55 percent to the foreign exchange earning of the country. Between 30 and 40 percent of the cotton end up as a domestic consumption of final products if, taken as a whole.

The remaining is exported as raw cotton, yarn, cloth, and garments. Cotton production supports Pakistans largest industrial sector, comprising some 400 textile mills, 7 million spindles, 27000 looms in the mill sector (including 15000 shuttle less looms), over 250000 looms in the non mill sector, 700 knitwear units, 4,000 garment units (with 200,000 sewing machines), 650 dying and finishing units, nearly 1000ginneries,300 oil expellers. It is by any measure Pakistans most important economies sector. Not surprisingly, government policy has generally been used to maintain a stable and often relatively low domestic price of cotton, especially since

1986-87 through the imposition of export duties, in order to support domestic industry. In term of cotton content, the bulk of the exports take place in the form of cotton yarn, of which about 45 percent is destined for other countries

During the 1990s, the decline in cotton yields in some years forced net import of cotton to meet the domestic spinning demand of about 1.4 million tons. Indeed, in 1993-94, although 0.3 million tones of cotton were imported to meet local demand, 150 mills had to close down because of shortage of raw materials. Exports of finished textiles have begun to expand sins 1990. In recent year, the industry has been jolted by some trade restrictions based on environmental considerations. The most important of these pertains to the ban imposed by European countries on products made with azo dyes, which are feared to have carcinogenic properties.

From almost non existence at the time of creation of Pakistan in 1947, the textile industry has grown into the largest and most significant economic sector of Pakistan. The textile industry of Pakistan now

contributes to the national economy by 65 % of total export of Pakistan, 46 % of total manufacturing, 38 % of total employment, Rs 40 billion paid as

wages per annum, Rs 4 billion paid as interest to bank per annum and Rs I billion paid as direct tax per annum.

Textile is the only sector where investment has been substantial and regular during the past three years. The most encouraging aspect of this investment is diversity. The entrepreneurs, who earlier concentrated on spinning and weaving, have now established compact units adding state of the art finishing unit and knitting machines to add value to their product.

The Textile Industry of Pakistan will continue to play an important role in the economy of Pakistan for following reasons:

Pakistan is one of the four largest cotton growers in the world.

Availability of large quantity (around 10 million bales per annum) of reasonable quality is the basis of the development and sustenance of the local Textile Industry.

The textile industry is labor intensive. Pakistan has the advantage of

a large labor force with one of the lowest wages in the world.

Textile production will continue to grow in the developing countries

since the developed countries are giving it up in favor of more

technology oriented and value added economy activities.

With the commencement of WTO world market will be open for free trade without barriers. The textile industry of Pakistan will exposed to intense internationally competition; Textile and clothing products will penetrate the market of the importing countries slowly on the basis of product quality and competitive price. It is also anticipated by economic experts in developing countries that the developed countries having advantage of automation, modern technology and large scale production will success in gaining excessive penetration of the market of the former countries thereby creating a series threat for the indigenous production facilities in these countries. Nevertheless, the new global trade regime presents challenges as well as the opportunities to the textile industry of the Pakistan.

INTRODUCTION OF AHMED FINE TEXTILE MILLS LTD

Ahmed Fine Textile Mills Limited is a part of Fatima Group. It was established in 1993. The company operates a spinning unit of 41 frames with 22,560 spindles in Rahim Yaar Khan, which start production in 1993 And two weaving units, Weaving unit 1 situated near Basti Maloke (35 km from Multan), Weaving unit II situated in Qadir Pur Rawana (20 km from Multan). The office of the company is located in Multan. The company produces yarn and gray cloth of high quality and sale it in local as well as export it. The export sales constitute a major portion of the sale of the company.

VISION AND MISSION STATEMENT VISION

To be a most successful in the term of quality products, services & financial.

MISSION
To provide quality products and services to our customers.

QUALITY POLICY
It is our collective responsibility to provide quality yarn and quality gray cloth to our customers as agreed.

ACCOUNTS DEPARTMENT
The most important department in any organization is Accounts Department. Accounts department in Ahmed Fine Textile Mills Ltd. Consist of qualified and experienced staff. The setup of the department is as under:

7 Director. 8 General Manager 9 Finance Manager 10 Assistant Accountant 11 Computer Operator. 12 Cashier. 13 Telephone Operator

FUNCTION OF THE DEPARTMENT

Main function of the department is to record the transaction, maintain books of accounts and prepare financial statements on quarterly and yearly basis. This process starts from recording the transaction on vouchers. Four types of vouchers are used to record the transaction.

14 Journal Vouchers 15 Bank Vouchers 16 Payment/Cash Voucher 17 Credit Voucher

18 Journal Vouches These vouchers are used to record transactions like sale, purchases. In case of any purchase or sale return, journal voucher are prepared. Usually these type of voucher used for booking of any entry.

2.

Bank Vouchers

Bank vouchers are used to record transactions where bank account is used. Debit or credit advice is sent by bank to the account office. Debit advice shows that the bank has reduced the account and credit advice shows that bank account is increased.

3.

Payment Vouchers

These vouchers are used when payment is made to any person. Transaction like entertainment expenses, traveling expenses are record through these vouchers.

4.

Credit Vouchers

These vouchers are used when any amount is received from a person. After preparation, these vouchers along with supporting documents are sent to accountant. After satisfaction he puts his signature on the vouchers. Then these are sent to Manager Accounts, Internal Auditor,

General Manager and Director.

They put their signature after

investigating the originality of the documents. Then these vouchers along with supporting documents are sent back to the accounts department. Where these transactions are recorded in computerized accounting system and posted in the relevant ledgers. All vouchers and supporting documents are kept in the record. All the transactions are recorded in this way and at the quarter end financial statements are prepared. Accounts department is responsible for recording the transactions relating to:

19 Purchase of store and spares 20 Local sale of yarn 21 Export sale of yarn 22 Salaries and wages

1. Purchase spares

of

store

and

The company has to purchase store and spares, packing material, building material on regular basis. The supporting documents along with invoice like purchase requisition, delivery order, in gate pass are sent to the accounts department by the purchase department. The department prepare journal voucher for the transaction that is accompanied by the above mention supporting documents and then verified by the accountant, Manager Accounts , General Manager, and then by the Director. Then the transaction is recorded in the computerized system to upgrade the ledgers. In case there is any purchase return, debit note is issued to the supplier

along with the item returned. The department by using journal voucher records the transaction to upgrade the record, and keeping in the record the credit note from supplier.

Withholding Tax
The accounts department at the time of payment bank voucher to record the transaction and prepare cheque. Certain amount of tax is

deducted while making payment to the supplier. It is the responsibility of the department to prepare return and paid the amount in the bank on the behalf of the supplier and sends the copy of the Chalan from to the supplier as the evidence of the payment of the tax by the company to the government on the behalf of the supplier.

II. Local sale of yarn and waste

Record keeping of the local sale of yarn and waste is also the responsibility of the department. Sales department sends the invoice to the accounts department. Journal voucher for the transaction is prepared and verified by the accountant and Manager accounts and sends to the customer and one copy is send to the accounts department. By using journal vouchers

the transaction is recorded to upgrade the ledgers. 23 Export Sale of yarn Export department sends export sale invoice to the department. The transaction is recorded and verified by using journal voucher. This procedure is explained with help of the following illustration.

Step 1
The accounts department gets the invoice from the xport department. It states the specification of the goods exported, and the invoice value Suppose 1000 units of product are sold @ $2 per unit and 1$=58.

The entry will be: DR. Bolan Trading Sale of cotton yarn Rs. 116000 Rs. 116000 CR.

Step 2

When payment is received by the bank, the bank send credit invoice to the company. The credit invoice shows the current rate of foreign currency that may be more or less than the rate stated on the invoice and also indicate the deduction made by the bank on the account of foreign bank charges and withholding tax.

Suppose credit invoice is received by the company that shows current rate of dollar i.e. Rs. 59 and Rs. 1000 are deducted by the bank on account of the foreign bank charges and 1.25% as withholding tax. The bank voucher will be prepared in this way: DR. MCB 12246-4 Withholding tax Foreign bank charges Bolan trading Exchange gain 24 Salaries and wages On monthly basis the department records the transactions relating to salaries and wages. The company also has policy to give advance to the Rs. 115525 Rs. 1475 Rs. 1000 RS. 116000 RS. 2000 CR.

employees against their salary. The department records these transactions. The department maintains the record of advances and payment to these employees on monthly basis.

Imprested System
Imprested System also prevails at Ahmed Fine Textile Mill. The

cashier has certain sum of money in the office. Expenses like traveling, entertainment and postage are met through this cash. The department

prepare payment voucher and cash is handed over to the concerning person on the account of these expenses. The cashier maintains the record of such expenses and presents it to the accountant on monthly basis. At the start of new month amount that is equal to the amount spend in the previous month is handed over to the cashier in order to meet the next month expenditure. The expenses up to Rs. 5000 can be met in this way, above this maximum limit the transaction is made through cheque.

Book of Accounts
Following books of accounts are maintain at the account department.

25 Purchase Register This register is maintain to record purchases of store, packing material, stationary items and return if any. This record shows the name of the supplier, date of purchase, quantity, and the amount of sale tax. Separate register are maintain to record purchase of stores, packing and building material as well as record import of any item. Purchase returns are also recorded in this register. Computerized record is also maintain

and report can be obtained for specific date to know the amount payable to supplier and item wise purchase of a particular item.

26 Sales Register The local sale of yarn and waste is recorded in this register. This record also shows the name of customer, date of sale, quantity, returns and the amount of sale tax. Three separate registers are maintained to record local sale of yarn, export sale of yarn and waste sale. Computerized record is also maintained and report can be maintained for specific dates to know the amount receivable and item wise sale of yarn in particular months and sales return if any.

Bank Reconciliation Statement

The record of bank account is maintained by the bank as well as by the company. At the end of the month the bank sends statements to the company showing the activities takes place during the month and the ending balance. There may be different between the ending balance of the bank statement and that in the ledger maintain by the company. The accounts

department with the help of the bank statement and the ledger prepare bank reconciliation statement to confirm that the record maintains by them and the bank is in agreement.

The department record any increase or decrease in the bank account. The bank sends debit advice to the accounts department if there is any decrease in the bank account due to the service charges etc. Credit advice is sent to the department if their is any increase in the account due to receipts, interest earned etc. After issuing cheque or making any deposit the account department updates the record, however there is different between the ledger balance and bank statement due to following reasons. 27 Cheque issued by the company and recorded in the books but these are not presented in the bank for payment. because bank does not reduce the balance. 28 Bank reduces the balance of the company on the account of service charges, and the company does not reduce the account, as debit note is not received. 29 Bank has received payment on the behalf of the company and increase the companys account but company does not do so, as credit note is not received. There is difference

30 The company increases the bank balance as the deposit by the company but the bank does not record it in the statement due to end of banking hours, i.e. deposit in transit.

Following method is adopted to arrive at the balance that is in confirmation with the balance as per bank statement.

Balance as per ledger account

(-) Debited by us not credit by bank (+) Credit by us not debited by bank

(-) Debited by bank not credited by us (+) Credit by bank not debited by us

Balance as per bank statement

Record Keeping for Sale Tax

It is the responsibility of the account department to file sale tax return on monthly basis. For that purpose accounts department maintain sales and purchase registers that show the percentage of sales tax on the transactions. The department has to maintain the record of two type of taxes.

Input Tax
Input tax means, tax levied on the supply of goods received by the company (Purchase/Import).

Output Tax
Output tax means tax levied on supply of goods made by the company export are exempt from sales tax. The procedure adopted to determine the tax liability is as under:

Monthly sale

Rs.500, 000 Sales tax @15%

Dr

Cr

A.B.C & Co.Rs. 575,000 Sales Sales Tax Rs. 500,000 Rs. 75,000

Monthly Purchase = Rs.300, 000 Sales tax @ 15% Dr Purchases Sales Tax X.Y.Z & Co. The entry will be: Dr Sales tax on sale Sales tax payable Sales tax on purchase 75, 000 30, 000 45, 000 Cr 300, 000 45, 000 345, 000 Cr

The amount of 30, 000 will be paid along with return of sales tax. If purchases are grater than sales then refund is claimed by the company. The department has to go through the audit by the government.

Purchase Department
Purchase department is responsible to provide various items in time to the company. It is also the duty of the department to purchase these items at a reasonable term and conditions. The setup of the department is as under:

31 Purchase Manager 32 Purchase officer

33 Purchaser 34 Purchase Clerk

The responsibility of the department is to purchase the following items: 35 Store and spares 36 Packing Material 37 Building Material 38 Printing and Stationery items

Function of the Department

The main function of the department is to purchase the items as and when demand for these items arises. So it starts when the department is informed that there is need of any item for the purchases of which the department is responsible. requisition form. This information is given through purchase

39 Purchase Requisition Form The purchase department gets this form from the mill that shows the demand of a particular item. This form is verified by the store incharge and then by the general manager.

This form states number of units of a particular item required by the mills, there specifications, number of units that company holds, and the quantity of the item last purchased along with the last rate.

40 Purchase manager contacts the supplier and get quotation from at least two suppliers. If the quality of the goods offered by the both supplier are same, then purchase is made from the supplier that offers low price. If there is difference in quality then decision depends on the situation.

41 Purchase manager informs the General Manager who gives approval for the purchase.

42 Order Form

The department then prepares order form that contains the number of units and specifications of product and sends it to the supplier.

43 Goods Received Note When the department received the goods from the supplier it prepares the good received note. This note confirms that the goods have been

received by the department and are of the same specification as ordered

44 Delivery Order Now it is the responsibility of the department to send the goods to the factory. The department prepares three copies of delivery note. Two copies are sent to the factory along with the goods. This just states the quantity and the specification of the goods as required by the factory. However the invoice is not sent to the factory.

45 Ingate pass When are received by at mill, ingate pass is prepared and signed by the store incharge. It confirms that the goods of the same specifications as ordered have been received. Then one copy of ingate pass and delivery order is sent back to the purchase department.

46 Purchase department then sends the following documents to the accounts department: 47 Invoice 48 Purchase Requisition 49 Deliver Order 50 Ingate Pass

The accounts department then passes the entry and attaches these documents with the voucher.

51 In case the goods are no according to the specification, or these are damage goods, then mill authorities send these items along with copies of delivery order to the purchase department

52 Purchase department sent these goods back to the supplier along with debit note. 53 The supplier sent credit note and the accounts department update the record accordingly. 54 The department is also responsible to maintain register that shows the amount of cheque issued to the supplier and the amount of tax deducted by the company.

Export Sales Department

Ahmed fine textile mills also export high quality yarn and cloth. So, there is need of separate department that handles export related matters. The setup of the department is as under:

55 Director 56 Marketing Manager 57 Export Manager

58 Asst. export manager 59 Export officer 60 Export clerk

Function of the Department

Export department has to contact with the importer, banker, and Govt. officials. For the purpose it has to prepare many documents. Preparation and handling of these documents is the main function performs by the department.

61 Export process starts when a party contacts the company.

The

directors settle term and conditions with the party. Then contract form is prepared and signed by the director. specification of the items, rate etc. 62 The buyer opens letter of credit and sends one copy of it to the exporter. It contains the

63 Letter of Credit

An important document involve in the export procedure is L/C. It is

issued by the importers bank. It guarantees payment to the exporter up to specified amount of money provided that term and conditions laid down in the L/C may be irrevocable and revocable. Irrevocable letter of credit is one in which the issuing bank gives a lasting undertaking to accept and in due course to pay bill drawn upon it provided the export fulfills the term and conditions stipulated in the letter. The irrevocable L/C gives a complete protection to exporter as it is guaranteed not by an individual but by a foreign bank. On the other hand revocable L/C is one which can be modified or cancelled by issuing bank at any time without any obligation on its part. As they are subject to cancellation without notification, so they are not usually acceptable by exporters. Contents of L/C received by the export department are as under:

64 The name of issuing bank 65 The name and address of importer 66 The name and address of beneficiary 67 Date and place of expiry 68 The sum of money in foreign currency 69 Detail regarding payment 70 Conditions regarding shipments

71 State from where shipment will start and where it will be received 72 Last date of shipment 73 Detail and specification of goods being imported 74 It also states documents required like: 75 Bill of lading 76 Commercial invoice 77 Packing list 78 Insurance policy 79 Certificate of origin

It also states that other term and conditions like charges in case of discrepancy and that the beneficiary will send through courier sample of the product and certificate of quality for approval of applicant and the copy must be presented at the time of negotiation. 1. After receiving the L/C it is the time of making

arrangements of the supply of the goods and it is the responsibility of the export department to prepare and handle other documents involved in export. 2. Export department prepares delivery note and goods are

delivered from factory to Karachi

3.

Shipping company after shipping the goods sends bill of

lading to the export department.

Bill of Lading
Bill of lading is an important document involves in the whole process. It is issued by the shipping company. B/L serves three purposes:

80 It is receipt for the goods shipped. 81 It is an evidence of contract of carriage. 82 It is a document of title to goods.

The contents of B/L are:

Vessel name on which goods are loaded Port of loading Port of discharge Exporter name and address

When goods are shipped export department prepare and obtains following documents:

83 Commercial Invoice The department prepares commercial invoice. The contents of the invoice are:

84 Buyers name and address 85 Exporters name and address 86 L/C number 87 Description of goods rate and invoice value 88 E form number 89 port of loading 90 Port of destination 91 Gross and net weight 92 Invoice number 93 Vessel name 94 Port of destination 95 Gross and net weight 96 Invoice number 97 Vessel name o Certificate of origin The export department obtain certificate of origin from Multan

Chamber of commerce. The chamber certifies that the goods exported are manufactured in Pakistan.

98

Form E

Another document involve in the export is E form. Government controls foreign exchange through this document. Exporter fills and signs it and the banker signs it. It has four copies. The original and duplicate copy is sent to the custom department for clearance. After verification the custom department sends duplicate to AFTM and the custom department keeps original copy. Third copy is sent to the bank for negotiation and the fourth copy is office copy.

99 Packing List The export department then prepares packing list for the goods being exported. It states description of goods, carton number, container number, description of goods and gross and net weight.

100Certificate of origin The export department obtain certificate of origin from Multan

Chamber of commerce. The chamber certifies that the goods exported are manufactured in Pakistan.

101Bill of exchange The department prepares bill of exchange. Bill of exchange is an unconditional order in writing address by one person to another person, signed by the person giving it, requiring the person to whom it is addressed, to pay on demand or at a fixed or determinable future time, a sum certain in money to or to the other of a certain person or to the bearer.

102After preparation of all these documents the department submits these documents with the negotiating bank. The bank scrutinizes them and confirms that these documents are prepared according to the L/C. After satisfaction the bank at some certain rate makes payment to the exporter.

The negotiating bank sends these documents to the issuing bank. In case sight bill is used payment is made by issuing bank to

exporters bank on the presentation of the documents. In case time bill is issued the payment is made after expiry of the specified period by the issuing

bank.

Internal Audit Department

Internal audit department also works under the supervision of chief internal auditor who is the permanent employee of the company. The department works on continuous basis and critically reviews the activities. The success of account department depends upon proper record keeping according to rules and regulation. The internal auditor supervises these activities. He checks the process of recording of the transaction on the voucher prepared by the accounts department. He checks that transactions are properly recorded and consistent with the supporting document and verified by the concerning authorities. He can ask the accounts department

to present the documents for his examination. He also critically views the proper utilization of the resources. If he found any disturbance in the system he informs the management to make the corrective measures. He also gives necessary suggestion to the management in order to bring efficiency and effectiveness in the system.

Auditors Report to the Members

We have audited the annexed balance sheet of AHMED FINE TEXTILE MILLS LIMITED, as at September 30, 2010 and the related profit and loss account, statement of changes in equity and cash flow statements together with the notes forming part there of, for the year then ended and we state that we have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the purpose of our audit.

It is the responsibility of the companys management to

establish and maintain the system of internal control, and prepare and present the above statements in conformity with the approved accounting standards and the requirement of companies Ordinance, 1984. Our

responsibility is to express an opinion on these statements based on our audit.

We conduct our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit also includes assessing the accounting policies and significant estimates made by the management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that; 103In our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984;

In our opinion;

INTRODUCTION TO SPINNING UNIT

Ahmed Fine Textile Mills has one spinning unit, which is situated at Rahim Yar Khan. The highly automated and modern machinery is installed. The spinning unit consists of the following sectors. 104Blow room section 105Carding section 106Drawing section 107Simplex section

108Ring section 109Auto cone section

These all departments tale to convert bales of raw cotton into form of fine yarn. When cotton is reached at the mill a record is maintained which contain the detail of the station form which cotton is received, the number of the lots received and the concerned persons assign the number to the lots and the bales.

All the lots are weighed bale wise and the record of the consignment is maintained completely.

The detail of production department is as under:

BLOW ROOM
A blow room consists of opening, mixing of raw cotton and useable waste. The final process of blow room is lap making. The blow room performs the function of opening the bales of cotton and clearing the cotton from the impurities. Trash and foreign matter is extracted from the cotton with the least loss of feature. The amount of waste

extracted would depend on the amount of trash in the mixing another important function that is performed by the blow room equipment is mix. Two or more different varieties of cotton are generally mixed to get a proper blend. The loose cotton passed through the blow room machinery and is converted into laps.

CARDIN
Cotton laps received from blow room are processed on the carding engines for the purpose of individualization of fibers, extracting sand, leaf etc., left in the cotton and converting the laps in the form of thin web called silver. Silver is stored in cans. A continuation of the carding process in which all the short length fibers are removed. This operation is performed only when fine counts are required and greater strength and uniformity is desired.

Auto Cone Section

In YTM the fine auto cone machinery of very high quality and modern technology are installed. All the working on these is looked as an

appreciable invention of man. Now this prepared yarn is sent to the packing department where it is packed in cartoons and sold to the customer.

Procedure of Production Control:

First of all cotton is issued to blow room on demand and it is recorded in raw material transaction register. It contains the detail of lost issued to blow room such as:

110Opening balance 111Number of Lots issued 112Weight of lots 113Total balance of cotton in blow room

The production department examines the daily cotton consumption by cotton quantity being worked is process in blow room. There for it

Calculates the consumption of cotton for the day.

It prepares a

production report, which contains the information about the yarn prepared. The soft waste and the hard waste obtained.

The production department prepared daily useable waste report and also daily saleable waste report.

Finally the packing department prepares the daily cone packing report, which contains the following information:

1. Opening balance 2. Cones packed on this day 3. Balance of packed and unpacked yarn

BENEFITS AND FACILITIES

Medical Facilities:
In Ahmed fine textile mills medical facility is provided to all employee. Here is no concept near and dear.

Leaves:
The Ahmed Fine Textile mills Ltd. Allows 32 leaves to his employees under the categories like sick leave, casual leave etc.

Traveling Allowance:
If a worker travels for the benefits of the organization he is provided traveling allowances. No traveling allowance is provided if travels for his own work and no business purpose is involves.

Conveyance Allowance:
The top management is provided with fully maintained cars. Conveyance allowances are provided to employees.

Training and Development:

Training is mean through which a man learn how to do work and how one can increase his efficiency.

Training and Development:

Training is mean through which a man learns how to do work and how one can increase his efficiency. Training facilities are available. In the Ahmed Fine Textile Ltd.

Higher management settles the programs for the training of employees with proper schedules.

Health and Safety:

Health facilities are available in Ahmed Fine Textile Mills Ltd.

M/s Ahmed Fine Textile Mills Limited

BALANCE SHEET
As at 30th September 2010

ASSETS
(Rupees in thousands)

2010

2009

Operating fixed assets Assets subject to financial lease Capital work in process

641,061 397,356 117,484 1,155,901

715,685 206,271 5,386 927,342

Equity investments Long term loan and advances Long term security deposit

338,484 1,412,143 41,864

138,484 1,385,560 22,254

2,948,392

2,473,640

CURRENT ASSETS Store, spare parts and tools Stock in trade Trade debts Advances Other receivable Cash and bank balance 114,971 719,876 832,517 402,076 251,129 74,628 2,395,197 99,279 755,919 937,239 248,426 303,214 49,806 2,393,883

Total assets

5,343,589

4,867,523

EQUITY AND LIABILITIES

(Rupees in thousands)
2010 2009

Share Capital and reserves Authorized share capital 100000000 ordinary share of Rupees 10 each 1,000,000 1,000,000

Issued, subscribed and paid up Capital Reserves Unappropriated profit 406,693 1,484,893 4,683 1,896,269 406,693 1,175,000 10,571 1,592,264

Redeemable capital Long term loan Financial lease liabilities Deferred tax

134,949 --358,050 32,733 525,732

75,804 25,603 151,436 32,733 285,576

Current liabilities Current portion of long term liabs Short term finance Creditors Participation fund Provision for taxation Proposed dividend Unclaimed dividend 174,266 1812,479 647,411 17,727 182,950 81,339 5,416 129,188 1,896,794 698,460 22,969 120,950 113,874 7,448

2,921,588

2,989,683

Total Liabilities

5,343,589

4,867,523

Ratio Analysis

Ratio tells about the mathematical relationship between one quantity and another. This relation is shown in term of percentage, times or rate. I have calculated the ratios of two years data 2009 and 2010.

Current Raito
Current Liabilties Current portion of long term debt In year 2009 the current ratio is 0.84:1 which is not satisfactory and standard ratio is 1:1 in year 2010 the current ratio is 0.87:1 which is also unfavorable.

Debt to Equity Ratio

Trade Debts /Equity A debt to equity ratio in 2009 is 19.4% and in 2010 is 26.5%.

Gross Profit Ratio

Gross profit Sales

G.P ratio should be so that should be sufficient to meet operating expenses and build resources after paying fixed interest charges and dividend. During 2009 co. has GP ratio of 18.88% and has G.P ratio of 16.26% in 2010 which shows decrease trend.

Net Profit Ratio

Gross Profit * 100 Sales This ratio is used to measure the over all profitability and it is very useful to proprietors. In 2009 company has net profit ratio of 5.21% but in 2010 the net profit ratio decreased to 4.21%. It is due to decrease in sales.

Weaknesses

Following are the weaknesses of AFTM.

114Employees are not satisfied with the salary package of AFTM. 115Mostly management practices are nor in favor of employees. 116AFTM has no tax holiday limit. 117Production cost is very high. 118There is high wastage of raw material. 119Non availability of any type of incentive. 120No promotional activities are in AFTM. 121Centralization of authority. organization. 122Late decision, due to which the company has to suffer losses. 123No participation of employee in decisions making. Chief executive is all in all of the

SUGGESTIONS

124As the textile industry is in crises but Ahmed Fine Textile Mills Ltd is performing very well in such difficult economic condition. The avenues are

always open for the further improvement. I hope that the suggestions given by me will not only benefit to the management for getting business but the workers will also efficient in performing their duties. 125There is centralization of authorities. directors take all the decision only. The Even

managers on their behalf cannot take the decision. Because delegation of authority create

responsibility. If the management will delegate some authority then manager would feel

themselves responsible so they would work with zeal, by this director will spend their important time in forming policies and will seek

opportunities for improvement. This will also help in creating confidence among the workers.

126I would like to recommend that the management should develop some policies for the promotion of efficient workers. 127The management should make the policies for the promotion of efficient workers. The will not only increase the productivity of workers but the management will also retain efficient workers with them. 128There is need for refresher courses for the employees. If owner would make arrangements to provide training to the employee then they would work efficiently. increase. 129The cost of goods sold is very high. There should be a separate department for controlling the cost of goods sold, and manufactured. Thus cost By this productivity will also

controlling department is necessary for this purpose. 130There is not any procedure for evaluating the employees and hence there is no extra benefit to

the efficient employees. The owner should start some criteria for the evaluating of employees and there should be some reward for efficient workers.