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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
colony) (Qasim pur

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 Chief Executive Director Mian Muhammad Javed Anwar Mian Muhammad Parvez Mr. Muhammad Haris Mr. Muhammad Aurangzeb Mrs. Salma Javed Mrs. Waheeda Parvez Mr. Syed Raza Abbas Jaffari
(Rep.N.I.T)

AUDIT COMMITTEE Chairman Members Mr. Muhammad Aurangzeb Mrs. Salma Javed Mrs. Waheeda Parvez CHIEF FINANCIAL OFFICER HEAD OF INTERNAL AUDIT COMPANY SECRETARY AUDITORS Mr. M. Sohail Nadeem Ms. Asma Younis Mr. Shamsur Rahman 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 Limited Faysal Bank Limited REGISTERED OFFICE
Multan. 46- Hassan Parwana Colony, M.M. Road Chowk Sarwar Distt. Muzaffargarh.

MILLS
Shaheed

SHARES REGISTRARS
Lahore

M/s Vision Consulting Limited 3-C, LDA Flats, Lawrance Road,

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 best blend 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 of studying 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 Count range

17,640 6/1 to 30/1(knitting Weaving CD/CM)

Brand name #Of Shifts per day Production # Of Working Days

MUGHAL 03 6.3(M) Kg/Annum 365

MACHINE #OFMACHINE
BLOW ROOM 2 Lines

MAKE

MODEL

TRUETZSCHILER

Germany CARD DRAWING CROSOL TOYODA Japan TOYODA Japan MK-4 DYH-500-C DT- 110 20 09 03

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RIETER Switzerland 07 LAP FORMER COMBER SIMPLEX RING FRAMES 14400 SPINDLES 2880 SPINDLES AUTO CONERS 06 TOYODA Japan TOYODA Japan MURATA Japan TOYODA Japan TOYODA Japan TOYODA Japan

RSB D 30

SK-4 A CM 10 FL- 16

01 06 06

RY-5 EJM-128 7-II

30 06

7-V 02 AIR CONDITIONING 05 GAS 03 WAUKESHA USA VHP-7110G S.T.L Pakistan

LABORATORY
USTER TESTER
01 RAW COTTON 01 CHINA Y-101 USTER Switzerland UT4-SX

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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 WIDTH

130 190 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 Creel Size Benninger Swiss 1080

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Head Stock Speed ( m / min ) Year of Manufacture Yarn Type etc.

2400 mm 600 to 1200 2000 CT, PC, CVC,

SIZING MACHINE
Make Creel Size Head Stock Yarn Count Yarn of Manufacture Size Boxes prewetting) Cylinders 14 Benninger-Zell 32 4000mm 6 to 100 2000 2( with

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AIR JET LOOMS JAPAN

Make 710 Looms Width 340cm Speed 550 No. of frames Salvage Fabric Construction 07 800 72 190cm JAT-610

TOYODA

JAT-610

JAT-

24 340cm

12

500

07 leno or truck-in

10

light & medium weight

AIR CONDITIONING
Make No. of units
Luwa Switzerland

03

INSPECTION FRAMES
No. of frames 134
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80

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 till 30th 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

C. F. O Manager of Account

D.C.O Spinning

D.C.O Weaving

Accounts Officer (Weg)

Account Officer (Spg) Head of Internal Audit Finance Officer Audit Manger 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 Cash receipt Sales return Sales allowance Bad debts write-off trail

sales ticket Remittance advice Credit memo Credit memo Memo and aged a/c receivable 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 the customer 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
CHIEF FINANCIAL OFFICER MANAGER FINANCE
ASST. MANAGER FINANCE

FINANCE OFFICER

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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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.

COMMERCIAL COMMERCIAL DEPARTMENT DEPARTMENT

PURCHASE PURCHASE DEPARTMENT DEPARTMENT

SALES SALES DEPARTMENT DEPARTMENT

PURCHASE PURCHASE DEPARTMENT DEPARTMENT

COTTON COTTON PURCHASE PURCHASE

Store Store Purchase Purchase

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.

Director
Manager Manager Local Local Sales Sales

Manager Manager Export Export Export Export Asst Asst 42 | P a g e

Commercial Commercial Asst Asst

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 Sales Sales Department Department
Local Local sales sales Deptt Deptt Export Export Deptt Deptt

Procedure
The following activities are performed in the local sales department. The directors receive the order of yarn by Tele phone, fax or email. 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 writes the three copies of delivery order signed by director One copy is dispatched to the mill for issuing goods . after reading 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:

Director Manager Export Export Assistant

Typist Typist
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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 is filled. 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 negotiating bank. 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 submission to 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:

ChiefExecutive Executive Chief

Director Director SeniorManager ManagerImport Import Senior

Assistant Assistant

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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

Liquidity Ratios
Current Ratio Quick Ratio Cash Ratio Days in Receivables Working Capital Ratio 0.8 0.2 0.0 28 0.8 0.09 0.04 0.00 2.96 0.05 14.2% 24.6% 78.7% 12.0% 6.4% 0.7 0.1 0.0 25 0.7 2.1 0.1 0.0 2 0.5 0.9 0.0 0.0 2 0.9 0.9 0.0 0.0 4 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 its Current 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.

Leverage Ratios
Long-Term Debt/Equity Total Debt/Equity Long-Term Debt/Total Assets Total Debt/Total Assets

30/06/2010 72% 236% 21% 70%

Change 0.10 -0.08 0.03 -0.01

% Change 16.1% -3.1% 18.7% -0.9%

30/06/2009 62% 243% 18% 71%

30/06/2008 115% 402% 23% 80%

30/06/2007 58% 349% 13% 78%

30/06/2006 71% 337% 16% 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 operating effectiveness 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
Operating Ratios
Asset Turnover Working Capital Turnover 30/06/2010 Change % Change 30/06/2009 30/06/2008 30/06/2007 30/06/2006

1.1

-0.02

-2.3%

1.1

1.2

1.2

1.0

-9.9

-3.82

62.8%

-6.1

6.2

-18.2

-18.2

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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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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Profitability Ratios
Gross Margin EBIT Margin EBITDA Margin Pretax Margin Effective Tax Rate Posttax Margin Return on Equity Return on Assets Return on Common Equity Interest Coverage Ratio Interest to Long-Term Debt Operating Expense/Sales

30/06/2010 10% 8% 8% -2% -26% -2% -6% 2% -6% 0.8 -47% 2%

Change 0.02 0.05 0.05 0.02 -0.42 0.01 0.11 0.01 0.17 0.25 -0.10 -0.03

% Change 19.8% 142.0% 142.0% -60.6% -260.1% -40.8% -66.7% 136.5% -72.6% 46.8% 28.4% -65.5%

30/06/2009 8% 3% 3% -4% 16% -3% -17% 1% -23% 0.5 -36% 5%

30/06/2008 9% 6% 6% 0% -14% 0% 1% 2% 2% 1.0 -31% 3%

30/06/2007 10% 7% 7% 1% 123% 0% 8% 2% 18% 0.9 -56% 2%

30/06/2006 11% 8% 8% 5% 12% 4% 18% 2% 41% 2.3 -15% 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 been increased 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 nonavailability of gas on manufacturing site. .Bad decission making at times. . High debt ratio Centralized decision making Weak image in the international market Small

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international Workforce Adequate financial resources Competitive advantage Equipped with MIS System 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 wellThreats: New Entry of competitors Buyer needs demands changes Political instability Changed of government policies Globally Economic instability

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educated and experienced person

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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Recommendations
Recommendations 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 these expenses. 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 Mills Limited (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/

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