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    INTERNSHIP REPORT ON

    AHMED HASSAN TEXTILE

    MILLS LTD.

    SUBMITTED BY:MUHAMMAD SAJID IQBAL

    ROLL #

    M.COM

    SESSION 2008-2010

    SUBMITTED TO:

    KHAWAJA GULAM

    SHABBIR

    GOVT COLLAGE OF COMMERCE MULTAN(Qasim purcolony)

    BAHUDDIN ZAKARIYA UNIVERSITY

    MULTAN

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    Practice makes man perfect. A student must be given

    an opportunity to work in the practical environment.

    During the two years of my M. COM (ACCOUNTS), I

    think these eight weeks of training period have

    provided me that knowledge, which perhaps was

    impossible through only reading books and solving the

    questions. I am thankful to my Institute of management

    sciences that gave me a chance to work in the practical

    environment.

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    I dedicate this to my Beloved Parents for all their love & attention

    which has made it possible for me to make it up to this point and as

    well as my Friend Shujat Abbas and Internship Advisor Mr.

    Khawaja Gulam Shabbir, who bestowed me with the courage, the

    commitment and the awareness to follow the best possible route, by

    his unmatchable style and by best possible training.

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    All the praises are for the almighty, Allah who bestowed me with the

    ability and potential to complete this Internship. I also pay my

    gratitude to the Almighty for enabling me to complete this Internship

    Report within due course of time.

    Words are very few to express enormous humble obligations to my

    affectionate Parents for their prayers and strong determination to

    enabling me to achieve this job.

    I take this opportunity to record my deep sense of gratitude and

    appreciation to my Internship Advisor Mr. Khawaja Gulam

    Shabbir, Institute of Management Sciences, Bahauddin Zakaryia

    University Multan for his constant encouragement and inspiring

    guidance with his Wisdom.

    I also appreciate the cordial co-operation from all my concern

    Managers in the different departments of Ahmad Hassan Textile Mills

    Ltd especially Mr. SOHAIL NADEEM (CFO) Mr Mehmood

    (Manager Accounts) for providing me requisite information and

    knowledge for compilation of my complete Internship.

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    The company was incorporated in Pakistan on 03 December, 1989 as

    a Public Limited Company. Its shares are quoted on Stock Exchanges

    in Pakistan. It is principally engaged in manufacturing and sale of

    yarn. The Company also have a Textile Weaving Unit.

    The head office of the company is in Hassan Parwana, Multan. The

    company manufactures and exports the yarn. This is in fact spinning

    mill that buys cotton from outside as well inside from Ahmad Cotton

    Industries and then converts into yarn. The company manufactures

    yarn of export quality.

    The major importers of yarn are America, Hong Kong, and Srilanka.

    Major part of the sale involves exports. Local sales are very small in

    quantity, reason behind this is 15% sales tax that company has to pay

    on local sales, while on exports company has to pay only 1.25% with

    holding tax to government including some bank charges. More over

    some times thereof are chances of exchange gain and loss, which

    results from increase and decrease in foreign exchange rates.

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    BOARD OF DIRECTOR

    Chairman Mian Muhammad Javed Anwar

    Chief Executive Mian Muhammad Parvez

    Director Mr. Muhammad Haris

    Mr. Muhammad Aurangzeb

    Mrs. Salma Javed

    Mrs. Waheeda Parvez

    Mr. Syed Raza Abbas Jaffari(Rep.N.I.T)

    AUDIT COMMITTEE

    Chairman Mr. Muhammad Aurangzeb

    Members Mrs. Salma Javed

    Mrs. Waheeda Parvez

    CHIEF FINANCIAL OFFICER Mr. M. Sohail Nadeem

    HEAD OF INTERNAL AUDIT Ms. Asma YounisCOMPANY SECRETARY Mr. Shamsur Rahman

    AUDITORS M. Yousuf Adil Saleem & Co.,

    Charted Accountants

    Multan.

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    BANKERS

    Habib Bank Limited

    Bank Al- Habib Limited

    Allied Bank of Pakistan Limited

    United Bank Limited

    Bank Al- Falah Limited

    MCB Bank Limited

    Meezan Bank LimitedFaysal Bank Limited

    REGISTERED OFFICE 46- Hassan Parwana Colony,Multan.

    MILLS M.M. Road Chowk SarwarShaheed

    Distt. Muzaffargarh.SHARES REGISTRARS M/s Vision Consulting Limited

    3-C, LDA Flats, Lawrance Road,Lahore

    STATUS

    The Company is limited by shares incorporated in

    Pakistan on December 03, 1989 as public company

    limited by shares under Companies Ordinance 1984. Its

    shares are quoted on all stock Exchanges in Pakistan.

    Authorized Capital of 20,000,000 Ordinary Shares of Rs.

    10/- each i.e.,Rs. 200,000,000/-. The issued, Subcribed

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    and Paid up Capital of the Company is 14,408,248.80

    Ordinary Shares of Rs. 10/- each full paid in cash i.e.,

    Rs. 144,082,488/-

    NATURE OF BUSINESS

    The Principal Business of the Company is Manufacture

    and Sale of Yarn and Cloth.

    Quality:

    To maintain the quality of fabric, natural characteristic of cotton fiber

    i-e Strength, Uniformity, Fiber Fineness and Spinning value.

    ISO 9001: 2000:

    Achievement of ISO 9001:2000 is also pre- requisite of export and

    requirement of international buyers.

    VISION STATEMENT:

    To be a world class and leading organization continuously

    providing high quality textile products.

    MISSION STATEMENT:

    To be a model diversified textile organization exceeding

    expectation of all stakeholders. We will achieve this by utilizing bestblend of state-of-the-art technologies, excellent business processes,

    high performing people, and synergetic organizational culture.

    CORE VALUES:

    Our success will not be a matter of chance, but of

    commitment to the following enduring beliefs and values that are

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    engrained in the way we think and take actions to pursue a climate of

    excellence:

    Objective ofstudying the organization

    My objective of studying the Ahmad Hassan Mills Limited is to know

    about the following things:

    1. How Company manages its revenue & expenditure Applications?

    2. What factors are most important in developing a Finance policy?

    3.To review the accounting transactions recoded in the revenue cycle.

    4. To learn which documents, reports and records are used in the

    revenue cycle.

    5. How accounting transactions are processed by the application

    system in the revenue cycle.

    6. To see how control practices and procedures are applied in the

    revenue cycle.

    MANUFACTURING UNITS

    The Company has two manufacturing units, one is

    spinning unit and another is weaving units.

    Spinning Unit:

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    Spinning unit of Ahmed hassan textile mills is in

    Muzaffargarh.

    Installed Capacity 17,640

    Count range 6/1 to 30/1(knitting

    Weaving CD/CM)

    Brand name MUGHAL

    #Of Shifts per day 03

    Production 6.3(M) Kg/Annum

    # Of Working Days 365

    MACHINE MAKE MODEL

    #OFMACHINE

    BLOW ROOM TRUETZSCHILER

    2 Lines

    Germany

    CARD CROSOL MK-4 20

    DRAWING TOYODA Japan DYH-500-C 09

    TOYODA Japan DT- 110 03

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    RIETER Switzerland RSB D 30

    07

    LAP FORMER TOYODA Japan SK-4 A 01

    COMBER TOYODA Japan CM 10 06

    SIMPLEX TOYODA Japan FL- 16 06

    RING FRAMES

    14400 SPINDLES TOYODA Japan RY-5 30

    2880 SPINDLES TOYODA Japan EJM-128 06

    AUTO CONERS MURATA Japan 7-II

    06

    7-V

    02

    AIR CONDITIONING S.T.L Pakistan

    05

    GAS WAUKESHA USA VHP-7110G

    03

    LABORATORY

    USTER TESTER USTER Switzerland UT4-SX

    01

    RAW COTTON CHINA Y-101

    01

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    WEAVING UNIT:

    Ahmed Hassan textile mills has one weaving units.

    Weaving unit of Ahmed Hassan Textile mills is in

    Muzaffargarh.

    NO. OF LOOMS 130

    WIDTH 190 CM (75") = 80

    210 CM (82") = 18

    340 CM (134") = 32

    Total = 130

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    PRODUCT RANGE

    Percale

    Canvas

    Twill / Drill

    Satin

    Sheeting

    Herringbone

    BFC, RS

    Broken Twill

    Dobby Designs

    &

    Others

    In 100% Cotton & Blended Forms.

    WARPING

    MACHINE

    Make Benninger Swiss

    Creel Size 1080

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    Head Stock 2400 mm

    Speed ( m / min ) 600 to 1200

    Year of Manufacture 2000

    Yarn Type CT, PC, CVC,

    etc.

    SIZING

    MACHINE

    Make Benninger-Zell

    Creel Size 32

    Head Stock 4000mm

    Yarn Count 6 to 100

    Yarn of Manufacture 2000

    Size Boxes 2( with

    prewetting)

    Cylinders 14

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    AIR JET LOOMS TOYODA

    JAPAN

    Make JAT-610 JAT-610 JAT-

    710

    Looms 72 24 12

    Width 190cm 340cm

    340cm

    Speed 800 500

    550

    No. of frames 07 07 10

    Salvage leno or truck-in

    Fabric Construction light & medium weight

    AIR CONDITIONING

    Make Luwa Switzerland

    No. of units 03

    INSPECTION FRAMES

    No. of frames 80

    134

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    12

    04

    ROLLING MACHINE

    Machine

    Max. roll size 400 kg. or mtr diameter

    GENERATORS

    Diesel CATERPILLAR USA.

    L-7052G

    FINANCIAL YEAR

    Financial Year of Company starts on 1st

    July and lasts till30th June.

    PRODUCTS

    Major Products of the Ahmed Hassan textile mills are:

    Spinning division

    Cotton Carded

    Combed Yarn

    Supima / Giza Cotton Yarn

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    Plied Yarn Two for one Twisted

    CVC, T/C Yarn

    Core Spun Yarn with Lycra

    100% Poiyester Yarn

    100% Rayon Yarn

    100% Acryllic Blended Tarn

    Melange Yarn

    Model / Teneel Yarn

    Slub Yarn

    Weaving division

    Twills

    Satin / Stripped Satins

    Sheeting

    Poplin

    Canvas

    Stretch Twill / Poplin

    Ottomans ( Double Pick)

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    RAW MATERIALS

    Ginned Cotton

    Polyester

    Yarn

    WORK FORCE

    Company includes a lot of skilled and unskilled workers.Almost there are 800 skilled and unskilled employees.

    PORTION OF EXPORTS

    The company exports much of the production:

    90 % export

    10 % local

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    ACCOUNTS DEPARTMENT

    Accounting is the art or science of interpreting, measuring, and

    communicating the results of economic activities whether you are

    paying your phone bill, balancing your checkbook, preparing your

    income tax return or managing an international corporation, you are

    working with accounting. Accounts Manager makes the important

    financial decisions with consultation of Director and Chief executive

    of company.

    Record of all departments like import department, Export department,

    Purchase and sale department, are maintained here. Accountant is

    very much busy person who gives instructions to six members of

    finance department and checks their work time-to-time .His ten-year

    experience has made the work easier for him. All types of tax rates,

    recent changes in tax policies, different codes, companies names are

    on his fingertips.

    The accounts department is responsible for the entire accounting

    process of the organization regarding the recording of transactions,

    designing the accounting policies and accounting system, preparing

    financial statements and computer application. If we consider a

    company a cell then we can say that accounts department has role of

    nucleus.

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    Without accounts department there is no possibility of doing business

    even sight weakness on the part of accounts department can badly

    effect the performance of whole organization.

    Functions of the Department

    Very first and an important function of accounting department is

    recording the business transactions on vouchers. This is also called

    process of vouching. This is made for internal record keeping.

    Auditors specifically audit vouchers. Wrong vouching will lead to

    error in the system and ultimately create problems.

    In order to see accounts in condense form ledger is used. From

    daybook all the entries are posted in ledger. Ledger represents DR or

    CR balance of each party. So from ledger we can see amount that is to

    be paid to a party or the amount that is to be received and the balance

    at the end of the month.

    After this all the DR balances and CR balances are automatically

    posted in trial balance through Cranium Software. The trial balance

    must be equal at both sides. Otherwise there is any error in recording

    the transactions.Now trial balance becomes the source of profit and

    loss and balance sheet.

    This department also designs the accounting policies. All the work in

    this department is being take place on accrual basis. Profit and loss

    accounts and balance sheet are prepared at the end of year. The

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    financial year ends on June 30 of each year. The financial statements

    are presented to shareholders.

    The accounting department is mainly divided in to following three

    sections:

    1.Stores section

    2.Salaries and Wages Section

    3.General Accounting

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    The Setup of Department

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    C. F. O

    Manager of Account

    D.C.O Spinning D.C.O Weaving

    Account Officer (Spg)

    Accounts Officer (Weg)

    Head of Internal

    Audit

    Audit Manger Finance Officer

    Finance Officer

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    Accounting System

    Accounting System at here is centralized and on accrual basis.

    Cranium Software is used for recording Accounting Transation.All

    accounts are maintained in Multan head office. The process of

    accounting system starts from the preparation of voucher. The

    following are different types of vouchers prepared at Ahmad Hassan

    Textile Mills:

    Journal Voucher

    Bank Voucher

    Payment Voucher

    Credit Voucher

    Journal Voucher (JV)

    As accounting system is on accrual basis, so accounting entries are

    passed on journal voucher at first step. This is also known adjustment

    voucher. This is prepared for adjusting entry. Vouchers are prepared

    after every transaction. Accounts Manager and Director verify the

    voucher respectively. If they have any question they can ask relevant

    person if there is no enquiry then they will put their signatures on

    voucher. Now it is time to record these vouchers in books of accounts.

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    Bank Voucher (BV)

    Bank voucher is used when any transaction is made with bank .

    Amount may be drawn from bank and can be deposited in bank. You

    can receive DR advice or CR advice from bank

    DR Advice

    When issued by bank, it means bank has deducted some amount from

    your account or when has been made through your account

    CR Advice

    When issued by bank to you, it means some amount has been added

    in your account .It normally takes place when some foreign

    remittances has been received by bank in your account. This is

    usually sent by your customer in foreign country to which exports has

    been made.

    Payment Voucher

    This voucher is prepared at the time of making payments to any party.

    Party name is debited with the amount to which payment has been

    made. Payment vouchers are used for the payment up to Rs.5000.

    Payments more than this are made through bank

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    Credit Voucher

    As name of voucher represents, this voucher is prepared when some

    amount is received from any party. In this case party name is credited

    by the amount that has been received.

    REVENUE CYCLE APPLICATIONS

    Customer request for G/S:

    Confirmation letter

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    Fabric sale contract :

    Sale Order (Letter send to mill)

    Sale order

    Responsibility of Shipping department:

    Check availability

    Delivery

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    When the customer received desired goods then the bill department

    received the delivery notes and make the bill for those goods and

    services or request for the payments so sale transaction is occur.

    It make three copies

    1st is send to sipping department for consumer invoice

    2nd to store as billing records

    3rd is sent to accounts department for collections

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    Revenue cycle transactions and related

    documents

    Credit sale Sales order, shipping notice,

    sales invoice,

    Cash sale sales ticket

    Cash receipt Remittance advice

    Sales return Credit memo

    Sales allowance Credit memo

    Bad debts write-off Memo and aged a/c receivabletrail balance

    REVENUE CYCLE REPORTS

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    Control Reports: control reports may disclose the transactions,

    or they may list changes made during file maintenance.

    Registers: A register is a listing of all transactions of a certain

    type that were processed during a single processing period.

    Special purpose Report: most systems require three special

    purpose accounting reports in the revenue cycle.

    THREE KINDS OF REPORT

    Control Reports: control reports may disclose the transactions, or

    they may list changes made during file.

    Registers: A register is a listing of all transactions of a certain type

    that were processed during a single processing period.

    Its includes

    1. cash receipts register

    2. invoice register

    3. credit memo register

    these are used in internal control , audit review , and six setups of

    accounting cycle

    Special purpose report

    Customer statement: it is a list of all transactions in a

    customers account during a specified time period.

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    Aged a/c receivable trail balance: it is a list of all customers

    and the balances they owe at a specified date. When this trail

    balance is aged, each customer balance is categorized according

    to how long it has existed.

    Remittance list : a remittance list enumerates all currency and

    checks received during one day.

    These above kinds of reposts are used in the sales analysis reports the

    marketing management department used it

    to evaluate the profitability of products

    the performances of sales personal

    the effects of special advertising comparisons

    Revenue Cycle Accounting Records

    Computerized records : Accounting records kept by computerized

    processes are in the form of computer files and databases. In

    traditional data file system, revenue cycle applications use two

    master files and as many as six transactions files.

    Two master files

    1. Customer master files includes (date, customer address, credit

    limits, credit terms, and balances owed).

    2. Inventory master file which contains(perpetual inventory records.

    Records each items kept in inventory warehouse when merchandise is

    shipped from the quantity on hand in the inventory master files.

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    Applications in the revenue cycle routinely update the customer

    master file record. This file has one record for each credit customer.

    Customer number

    Customer name

    Billing-address

    Shipping address

    Credit-limit

    credit-terms

    Statement date

    Statement-balance

    Current-balance

    Order Entry application:

    its purpose is to record a customers request for goods or services.

    Procedure for credit approval usually require the credit department to

    establish a credit limit for each customer.

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    Shipping application

    The purpose of shipping application are to ensure that merchandise is

    shipped prior to the date desired by the customer and that thecustomer is promptly billed for the merchandise.

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    Billing application

    The purpose of billing application are to prepare sales invoices

    for merchandise that has been shipped and to record the sale in

    the appropriate accounts. This application also produces credit

    memos to document sales returns and sales allowances.

    File Maintenance

    A computer application system adds or deletes a master record

    or makes changes to the reference data. In the revenue cycle,

    maintenance is necessary when the organization obtains a new

    customer or loses an old customer, or when the name, address, credit

    limits, or credit terms of an existing customer change.

    Expenditure Cycle Application System

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    FINANCE DEPARTMENT

    Basically financing decisions are made by Chief Financial Officer in

    consultation with directors of the company. Manager finance is also

    involved in decision making to some extent. Manager Finance is

    responsible for managing all the finance activities like loaning

    facilities, markups, dealing with banks and the most important activity

    preparing the Drawing Power.

    DRAWING POWER:

    It is the most important activity that helps Chief Fianancial Officer in

    making financing decisions. Basically drawing power is prepared in

    excel sheet by applying some formulas to see what was the total limit

    of each loaning facility and what limit is utilized and to what extent

    we can utilize credit against pledge, mortgage or lease whatsoever. It

    is the most important tool that helps management in managing the

    finances. Good companies always manage their finances well.

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    CHIEF

    FINANCIAL

    OFFICER

    MANAGER

    FINANCE

    ASST. MANAGER

    FINANCE

    FINANCE

    OFFICER

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    MARKUPS:

    Markup on each loan facility is calculated separately depending upon

    the loan sanction advice by the bank. Markup rate is mentioned on the

    sanction advice. On short term facility markup rate may be 1-month

    KIBOR or 3 month KIBOR + SPREAD. One month KIBOR or three

    month KIBOR rate may be the last working day of previous month.

    Spread is the rate charged by the bank for providing loan facility. On

    long term facility markup rate may be 6-months KIBOR average rate+ SPREAD.

    BANK RECONCILIATION:

    Bank reconciliation is very important to see whether the balance in

    bank match with our book of accounts or not. If there is any

    difference then there must be an error which is corrected by bank

    reconciliation prepared in excel sheet. Wrongly posted vouchers are

    corrected and missing bank advices are posted in the company

    accounting system to match our ledger balance with that of bank

    balance to ensure that all entries have been made correctly without

    any error

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    COMMERCIAL DEPARTMENT

    The commercial department involves two most important departments

    of the company i.e. purchase department and sales department. Mian

    Naveed Ahmed who is director of the company and one of the owners

    of company controls this important department.

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    COMMERCIAL

    DEPARTMENT

    COMMERCIAL

    DEPARTMENT

    PURCHASE

    DEPARTMENT

    PURCHASE

    DEPARTMENT

    SALES

    DEPARTMENT

    SALES

    DEPARTMENT

    PURCHASE

    DEPARTMENT

    PURCHASE

    DEPARTMENT

    COTTON

    PURCHASE

    COTTON

    PURCHASEStore

    Purchase

    PURCHASE

    Store

    Purchase

    PURCHASE

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    PURCHASE DEPARTMENT

    The purchase department is divided into two

    categories, cotton purchase department and store

    purchase department.

    COTTON PURCHASE DEPARTMENT

    Cotton purchase department is most important

    department in textile industry. Quality of yarn depends

    upon cotton that has been purchased. It becomes most

    important when there is business of export. There is no

    question on quality. Because your minor mistake may

    result in huge losses. Moreover you will loss your

    credibility. Form director to cotton selectors all are

    involved in cotton purchase process.

    STORE PURCHASE DEPARTMENT

    Stores incharge heads the store purchase department.

    Purchase department is as under:

    Director

    Purchase Officer

    Assistant Purchase Officer

    Purchase Clerk

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    The store purchase department is responsible for the

    purchase of items like Spare parts of machinery, and

    Packing material spares, electric items, Oil and

    lubricants, Stationery items, Building Material and

    General Store.

    DOCUMENTS

    Demand Requisition

    Invoice of Purchase

    Delivery Order

    In Gate Pass

    SALES DEPARTMENT

    Sales department is one of the important departments in any industry.

    If a unit produces best quality goods but have not competitive staff

    then it would be difficult to sell the products. The structure of sales

    department is as under.

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    DirectorDirector

    Manager Local

    Sales

    Manager Local

    SalesManager

    Export

    Manager

    Export

    Commercial

    Asst

    Commercial

    Asst

    Export AsstExport Asst

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    Ahmad Hassan Textile Mills is selling its product to local as

    well as in international market. Thus the sales department of

    the Ahmad Hassan Textile Mills is divided in to two sections

    Procedure

    The following activities are performed in the local sales

    department.

    The directors receive the order of yarn by Tele phone, fax or e-

    mail.

    Directors evaluate the capability to fulfill the order by

    consulting daily stock repot from mills.

    Directors give the instructions to local sales manager that

    transfer the information on local sale contract slip.

    Before issuing contract slip, sales manager checks the selling

    limits of the particular party and discusses the matter with

    Director if it is selling limit

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    Sales

    Department

    Sales

    Department

    Local sales DepttLocal sales Deptt Export DepttExport Deptt

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    Sales department writes the three copies of delivery order

    signed by director

    One copy is dispatched to the mill for issuing goods . afterreading the particulars of delivery order store in charge in the

    factory will issue the goods .

    One copy of delivery order is send to the accounts department

    and third one is kept for record.

    EXPORT DEPARTMENT

    Ahmad Hassan Textile Mills started sales from local market and now

    major portion of Production is exported outside Pakistan.

    The export department is headed by Mian Javed Anwar who is

    director of the company .The structure of this department is as under:

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    DirectorDirector

    Manager ExportManager Export

    Export AssistantExport Assistant

    TypistTypist

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    Export Process

    The export process starts from bargaining. A buyer contacts the

    company for the purchase of yarn. The contact may directly or

    through middleman.

    When the price and quality of yarn is settled then contact form isfilled. The director of the company settles the terms and conditions.

    After the settlement of terms and conditions the buyer bank opens

    L.C. L.C is of two types. L.C at sight and L.C at usance. L.C at sight

    means the L.C opening bank shall make the payment as soon as the

    shipping documents are presented on its counter by the negotiatingbank. On the other hand L.C at usance has different periods of

    maturity varying from 30 days to 150 days.

    On receiving original L.C from buyer, seller will dispatch the goods

    as per detail given in the L.C. After shipment usually following

    documents are presented to negotiating bank for onward submissionto L.C opening bank counter:

    Indent

    Sales contract

    Letter of Credit

    Custom documents

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    Packing list

    Bill of landing

    Bill of exchange

    Certificate of origin

    Inspection certificate

    Form E

    Form M

    Shipping bill

    IMPORT DEPARTMENT

    AHT has also an import department. The import department is

    responsible to import those items, which are not available in Pakistan.

    The structure of this department is as under:

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    Chief ExecutiveChief Executive

    DirectorDirector

    Senior Manager Import

    Senior Manager Import

    AssistantAssistant

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    PROCEDURE

    Senior Manager is responsible for import of machinery, equipment,

    spare parts, raw material, etc.

    An indent for import of item after the approval of Chief

    Executive is sent to import department.

    The Senior Manager import selects a subcontractor from

    approved suppliers list.

    In reply, a quotation from the subcontractor is received. A copy

    of quotation is sent to concerned department for evaluation and

    checking of specification.

    The received items are sending to the mills where these are

    opened. The items are checked against quotations. In case of any

    damage, the import department is informed immediately. Import

    department do the necessary arrangement for survey of goods

    from insurance agencies.

    IMPORT DOCUMENTS

    There are different document are used when we are going to purchase

    or import we required.

    Performa invoice

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    Open bond manufacturing certificate (OBM)

    Form I

    Importers certificate

    Bill of entry

    Invoice

    Air way bill

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    RATIO ANALYSIS

    An index that relates two accounting numbers and is obtained by

    dividing one number by the other.

    To evaluate a firms financial condition and performance, the

    financial analyst needs to perform checkups on various aspects of

    the firms financial health. A tool frequently used during these

    checkups is a financial ratio, or, index, which relates two pieces of

    financial data by dividing one quantity by the other.

    We calculate ratios because in this way we get comparison that may

    prove more useful than the raw numbers themselves. For example,

    suppose that a firm had a net profit figure this year of $1 million. That

    looks pretty profitable. But what if the firm has $100million invested

    in total assets. Dividing net profit by total assets, we get$1M/$100M=

    .01, the firms return on total assets. The .01 figure means that each

    dollar of assets invested in the firm earned a 1 percent return. A

    saving account provides a better return on investment than this, and

    with less risk. In this example the ratio proved quite informative.

    Expression of Ratios:

    Ratios can be expressed in the following ways:

    Actual ratios are arrived at by dividing one number by another

    e.g. current assets to current liability is 2:1

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    Ratio between two numerical facts usually over a period of

    time e.g. Stock turnover is three times a year.

    Ratio between two numerical may be expressed in percentage.

    Advantages of Ratio Analysis.

    Through ratio analysis we can evaluate the financial health, operation

    efficiency and profitability.

    It gives a chance of inter firm comparison to measure efficiency and

    helps management to resort some remedial measures.

    Trend analysis helpful toward planning and forecasting.

    It provides good help in decision making for investors and to the

    financial institutions.

    Classification of ratios:

    Liquidity Ratios

    Financial Leverage or Debt Ratios

    Activity Ratios

    Profitability Ratios

    1. Liquidity Ratios

    Liquidity ratios are used to measure a firms ability to meet short-term

    obligations. From these ratios, much insight can be obtained into the

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    present cash solvency of the firm and the firms ability to remain

    solvent in the event of adversity.

    30/06/2010 Change%

    Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006

    LiquidityRatios

    Current Ratio 0.8 0.09 14.2% 0.7 2.1 0.9 0.9

    Quick Ratio 0.2 0.04 24.6% 0.1 0.1 0.0 0.0

    Cash Ratio 0.0 0.00 78.7% 0.0 0.0 0.0 0.0

    Days inReceivables 28 2.96 12.0% 25 2 2 4

    Working CapitalRatio 0.8 0.05 6.4% 0.7 0.5 0.9 0.8

    Comments on the Liquidity Ratios:

    The companys liquidity position as measured by the quick ratio has

    improved minorly during the period. A normal Current ratio of 0.8:1

    and only little (0.2:1) from the quick ratio (which excludes inventory).

    The Current ratio seems appropriate as now a days the textile industry

    is in crisis and comparing with of the previous it appears that these are

    in line with them but the Quick ratio which is rather less than what

    one would expect from the quick ratio and is a matter of serious

    concern it appears that the company will be unable to settle itsCurrent liabilities (without stock) if demanded. A consideration of the

    component elements of the current ratio suggests that decreases in the

    inventory holding period and trade payables payment period have

    largely offset each other. There is an increase in the collection period

    for trade receivables (up from 25 days to 28 days) which would have

    actually improve the current ratio. It appears that the company's credit

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    control procedures are not so much active and sales are made to

    customers without applying proper credit rating procedures and

    proper credit approval, and much proportion of the sales being made

    as credit sales, as receivables have significantly increased during the

    year which supports the case. The changes in the above ratios do

    explain the dramatic deterioration in the quick ratio, the real issue is

    the Marketable Securities position, Ahmad Hassan Textile Mills

    Limited has gone from having an inventory balance of 8.4 million in

    2008 to Nil in 2009.

    2. Financial Leverage (Debt) Ratios.

    Ratios that simply show the extent to which firm is financed by debt.

    LeverageRatios 30/06/2010 Change

    %Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006

    Long-TermDebt/Equity 72% 0.10 16.1% 62% 115% 58% 71%

    TotalDebt/Equity 236% -0.08 -3.1% 243% 402% 349% 337%

    Long-TermDebt/TotalAssets 21% 0.03 18.7% 18% 23% 13% 16%

    TotalDebt/TotalAssets 70% -0.01 -0.9% 71% 80% 78% 77%

    Comments on the Leverage Ratios:

    From the Leverage ratios it can be seen that 70% of assets are

    financed by Debentures. This is very high in absolute terms although

    it has decreased minorly from last year. The effect of gearing means

    that all of the profit after finance costs is attributable to the equity

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    even though the equity represents only 30% of the financing of the net

    assets. Whilst this may seem advantageous to the equity shareholders,

    it does not come without risk. The interest cover is only of 0.8 times.

    Low interest cover is a direct consequence of high gearing and it

    makes profits vulnerable to relatively small changes in operating

    activity. Although the interest cover have increased from the previous

    year, any future downturn in the results of the Company would

    expose the equity holders to much lower proportionate returns and

    continued poor liquidity may mean payment of the loan interest could

    present a problem. For example, small reductions in sales, profit

    margins or small increases in operating expenses could result in losses

    and mean that interest charges would not be covered.

    3. Activity Ratios:

    These ratios are also known as efficiency or turnover ratios. Measures

    how effectively a firm is using its assets. It is calculated by dividing

    cost of goods sold by average inventory or by dividing Net sales by

    Inventory.

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    Total Assets turnover:

    The total asset turnover ratio tells us the relative efficiency with

    which a firm utilizes the total assets to generate sales. This is

    calculated by dividing the net sales with total assets.

    Comments on the Activity Ratios:

    Detailed analysis reveals that Companys performance is due to its

    efficiency in the use of its net assets; it achieved a net asset turnover

    of 1.1 times compared to same from last year. Put another way,

    Company makes sales of 1.10 per 1 invested in net assets. The

    decreases in the inventory holding period have increased the operatingeffectiveness of the company. The decrease in the inventory holding

    period can be an indicator of Goods movement in Stocks as this

    should reduce the obsolescence of inventory. The decrease in the

    Payables payment period can be because the company might be

    negotiating early payment terms and this also reflects the increase in

    the working capital cycle (in days) as the Receivables Collection

    period has been increased. The above ratios have contributed in the

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    OperatingRatios 30/06/2010 Change

    %Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006

    AssetTurnover 1.1 -0.02 -2.3% 1.1 1.2 1.2 1.0

    WorkingCapital

    Turnover -9.9 -3.82 62.8% -6.1 6.2 -18.2 -18.2

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    overall increase of the Working Capital Turnover from 6.1 (2008) to

    9.9 (2009) as the working capital cycle have been induced this have

    also increased the required amount of working capital by the company

    to maintain its operations.

    4. Profitability Ratios:

    Profitability Ratios are of two types --- those showing profitability in

    relation to sales and those showing profitability in relation to

    investment. The ratios indicate the firms overall effectiveness of

    operation.

    Profitability in Relation to Sales

    a. Gross profit ratio

    This ratio tells us the profit of the firm relative to sales, after we

    deduct the cost of producing goods. It also shows how much a firm is

    effective in producing and selling goods above cost.

    b. Net Profit Ratio

    The net profit margin is a measure of the firms profitability of sales

    after taking account of all expenses and income taxes. It tells us a

    firms net income per dollar of sales

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    ProfitabilityRatios 30/06/2010 Change

    %Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006

    Gross Margin 10% 0.02 19.8% 8% 9% 10% 11%

    EBIT Margin 8% 0.05 142.0% 3% 6% 7% 8%

    EBITDA Margin 8% 0.05 142.0% 3% 6% 7% 8%

    Pretax Margin -2% 0.02 -60.6% -4% 0% 1% 5%

    Effective Tax

    Rate -26% -0.42 -260.1% 16% -14% 123% 12%

    Posttax Margin -2% 0.01 -40.8% -3% 0% 0% 4%

    Return onEquity -6% 0.11 -66.7% -17% 1% 8% 18%

    Return onAssets 2% 0.01 136.5% 1% 2% 2% 2%

    Return onCommon Equity -6% 0.17 -72.6% -23% 2% 18% 41%

    InterestCoverage Ratio 0.8 0.25 46.8% 0.5 1.0 0.9 2.3

    Interest toLong-Term

    Debt -47% -0.10 28.4% -36% -31% -56% -15%

    OperatingExpense/Sales 2% -0.03 -65.5% 5% 3% 2% 3%

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    Comments on the Profitability Ratios:

    Gross Profit have increased marginally as there is increase of % in

    sales of about 20.6% and in cost of sales of about 18.5% from last

    year and also because of the increase in prices of both raw material

    and in finished goods. EBITDA and EBIT have slightly increased

    because the net increase in the operating income. The effective tax

    rate has increased because of the increased profits in the current year.

    The decrease in the ROE (Return on Equity) from 17% (2008) to 6%

    (2009) as it will not attract more equity investment in future which is

    the cheapest source of finance and is a issue of serious concern.

    Interest Cover have increased from 0.8 to 0.5 as this shows a good

    sign that the company is now able to pay its finance cost almost

    through its profits this can be because of the increase in the selling

    price have increased the profit figure. Interest to Long term Debt %

    have increased from 47% to 36% because the KIBOR rates have beenincreased by the State bank of Pakistan, as the textile sector is in crisis

    the banks have changed their pricing policies. The Operating

    Expenses to sales ratio have decreased from 5%(2008) to 2%(2009)

    as this can be due to the decrease in the Selling and Marketing

    expenses of about 55 million during the year because of the decrease

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    in the Export Development Surcharge and Forwarding Expenses of

    17% and 41% respectively from last year.

    SWOT Analysis

    Strengths:

    ISO 9001-2000:

    Strong Security

    System

    High quality

    product

    Latest

    mechanized

    machinery.

    Tremendous

    market image.

    Highly qualified

    and skilled

    management

    Highly

    Motivated

    Weaknesses:

    They dont have

    gas electric power

    plant due to non-

    availability of gas

    on manufacturing

    site.

    .Bad decission

    making at times.

    . High debt ratio

    Centralizeddecision making

    Weak image in

    the international

    market

    Small

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    Workforce

    Adequate

    financial resources

    Competitive

    advantage

    Equipped withMIS System

    international

    market share

    Less promotional

    activities

    Lack of benefits

    and rewards for

    the employees.

    . High cost of

    production

    Opportunity:

    Organization Can

    expand product

    lines

    Organization Can

    capture new

    market segments

    around the world

    Organization Can

    reduce the cost by

    proper utilization

    of resources

    Organization Can

    hire more well-

    Threats:

    New Entry of

    competitors

    Buyer needs demands

    changes

    Political instability

    Changed of government

    policies

    Globally Economic

    instability

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    educated and

    experiencedperson

    Learning as internee

    It was a tremendous experience that I have availed with devotion and

    commitment. I have an interest in textile industry thats because

    Textile is the back bone of the economy of the country. But one thing

    I want to share its not easy that looks it has a great toughness and

    complications in its process but the overall it was nice and great.

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    Conclusion

    Ahmad Hassan Textile Mills Limited is one of the leading groups in

    Pakistan. The system, the management style, the policies &

    decentralized decision making environment is really remarkable. This

    report is basically an attempt to identify the areas which need to be

    improved.

    In this era of technology, the Information is the key to success in

    the business. This means that the successful businessman will be who

    will have the right information at the right time. This comment leads

    to the conclusion that the Information Sharing Process should really

    be improved.

    The overall analysis is indicating that the companys progress has

    mainly attained through dedication of employees. The effectiveness of

    its management, their willingness to take advantage of opportunities

    and face challenges of changing economic picture, this all contributes

    to the very much improved and sound position of company. This is

    really appreciable for the devotion and hard work of all the employees

    of the company.

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    RecommendationsRecommendations for Improvements are:

    . Company has installed a new spinning unit(unit 3) in 2009 by

    availing many new loaning facilities. Due to this their debt ratio has

    increased to large extent. Markup on loans has increased and

    company is not able to generate sufficient revenue to cover up theseexpenses. So it is better for the company to improve their liquidity

    position by reducing the debts.

    . Company should make arrangements for electric gas power plant to

    compete with other textile firms and also to reduce their cost of

    production and to overcome electricity shortage.

    At present facility of bonus is given only to production staff but such

    incentives should also be given to Head office Staff.

    Special incentives should also be given to Head on Eid and on other

    special days should be given to the workers.

    Medical facilities are given in mill but such facilities should also be

    given to management.

    Different training courses should be arranged for the up lifting and

    improving the quality of work for employees

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    They provide transportation facility to only female employees I think

    male should also be provided with conveyance facility. This will

    create the easiness for workers and reduce the wastage of time.

    There is also a problem of work overload for the employees and it

    should be control properly so that the employees are motivated.

    Employees should be paid extra for the work which they done after

    working hours.

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    REFERENCES AND SOURCES :

    I collect the all information about the Ahmad Hassan Textile MillsLimited (AHTML) for making internship report. The references &Source of information are as fellows:

    Mr. Muhammad Sohail Nadeem (Chief Finance Officer).

    Mr. Muhammad Mehmood Manager Accounts

    Mr. Muhammad Saeed (D.C.A of spg)

    Mrs. Nusrat Account officer

    Mr. Muhammad Asif Manager (Marketing & Sales)

    Mr. Sarfaraz Ahmad Senior cashier

    Source:

    http://www.ahtml.com.pk/