NISHAT TEXTILE MILLS

Introduction
Nishat textile Mills Limited is the flagship company of Nishat Group. It was established
in 1951. It is one of the most modern, largest vertically integrated textile companies in
Pakistan. Nishat Mills Limited has 198,120 spindles, 655 Toyota air jet looms. The
Company also has the most modern textile dyeing and processing units, 2 stitching
units for home textile, one stitching unit for garments and Power Generation facilities
with a capacity of 89 MW. The Companys total export for the year 2011 was Rs. 36.015
billion (US$ 416 million). (nishat txtile mill, 2013)

VISION
To transform the Company into a modern and dynamic yarn, cloth and processed cloth
and finished product manufacturing Company that is fully equipped to play a meaningful
role on sustainable basis in the economy of Pakistan. To transform the Company into a
modern and dynamic power generating Company that is fully equipped to play a
meaningful role on sustainable basis in the economy of Pakistan. (nishat txtile mill,
2013)

Company description
Nishat is capable of producing approx 9 million meters of processed fabric per month.
The product range includes bedding ensembles, window treatments , kitchen articles
and living room textiles with high and low thread count fabrics. We possess state of the
art technology to meet customer requirements and the fabric produced is testified with
excellence. Further a dynamic research team taking advantage of the vertically
integration keeps on creating new product ideas and fashion collections. Its annual
turnover for the year ----- is over Rs.17 billion (US$ 283 million). NML with the
production facility of 270,000 spindles, 740 looms and dyeing & printing capacity of 7
million meters (7.65 million yards) makes Nishat the largest composite textile set up
in Pakistan.
The dyeing and printing plant has a capacity of 4.0 million yards per month with an
equivalent stitching capacity. These plants are equipped with state of the art machinery
specially designed to cater to high thread count fabric.

During the dyeing, printing, finishing and stitching processes, several measures are
taken to ensure timely delivery of high quality fabric. This includes special care in fabric
handling, full width rail stitching, PVA based size recovery, various devices to avoid
creases and band mark variation, special unwinding devices, efficient squeezers, a
computerized dye dispensing system and an on-line measurement and storage of data
at every machine.
Throughout the world especially in ASIA, Pakistan is said to be the single crop
economy i.e. cotton and textile that claims the lion's share in terms of the contribution in
the national economy of Pakistan .In Pakistan Textile Industry is dominant in
contributing a huge share in the economy regarding National Income or GDP,. Despite
efforts to bring in diversification in country's overall economic get-up the textile sector
continues to be the most important segment of the national economy. Its share in the
economy, in terms of GDP, exports, employment, foreign exchange earnings,
investment and revenue generation altogether placed the textile industry as the single
largest determinant of the economic growth of the country .In contrast to the great
economic crunch throughout the world Nishat mills faced the uncertainty positively and
the company is still growing up .During the year exports were controlled from falling and
significant investment was made in value-added expansion and in BalancingModernization. (nishat txtile mill, 2013)

Top Down approach

OVER ALL VIEW OF COUNTRY
Gross domestic profit GDP in Pakistan is slowed to 3.6% in 2013 from early years which
were 4.4%. This shows the bad position of Pakistan and this shows that Pakistan is
going down.
Here the question is how can we raise our Gross domestic profit GDP? And we can get
a lot of main reasons which is making our GDP down the main reasons are: electricity
crisis, law and order situation, unemployment, political instability, proper taxation and
private sector.
The first and for most we have to work on the main situation which is electricity crisis,
stability of electricity will help in industrial sectors. Industries will perform in proper and
stable way. Due to low electric power most of industries get closed and none of
international industries are willing to work in Pakistan due to electricity crisis and
because of security reasons. Removing electricity crisis and maintaining security will
allow international industries to invest in Pakistan which will raise our GDP.
Proper law and order situation is also must as Pakistan was meant to work with proper
laws and order but there is not proper decisions taken by them. If they pass proper laws

for every department every department will be able to perform in a legal way and will
work with interest and when there is interest in work then the product will be worth of
taking. And it will raise the profile and will increase the exporting process of the country
and it will increase GDP of the country.
Private industries slowed to 4.1% for last 5 years which was 8.7% this is also because
of security, law and order and electric crisis and inflation. And private sector is important
for reducing our inflation and also relaying on other countries. Because more decline of
GDP is due to large industries which is 3.7% in 2013 which slow down from 5.7%
As Pakistan is good in agriculture so they have to increase agriculture system and
because of non proper political stability made it impossible and its going down from 3.5
% t0 3.3%.Upgrading economic of function of private sector is better way.
Proper taxation strategy should be given because a higher taxation can limit our
industries. Boosting investment and trade is one of the main reasons of raising our
GDP. (tirbune, 2013)

Political instability:
Political stability is important for country. Because each working happened in the
country is in the hands of government. And the reasons behind political instability are:

Geographic
Pakistan is geographically in the mid of the powerful sources and most of the powerful
countries dont want the political stability in Pakistan they interfere a lot and that are the
main reasons that they dont want Pakistan to be stable. As if it gets stable the
interference of these countries will get low and they will not get their interest from this
country and getting no interest from this country will lower their state as Pakistan is on
HOT WATER.

Military interventions
As military is powerful of Pakistan and they are not letting politics to be stable and work
on continues way because if they work in continues way then the military will not get
their interest this is the main reasons that they are harming Pak politics. Military never
want politics to work in their own way; they want them to work on their way so that they
can get their benefits.

 Political leaders
Politicians of Pakistan are self-centered they usually perform actions according to their
needs and wants.
Illiteracy is a lot in politicians they are not properly educated according to the post they
have, they usually get it in a illegal way.
They are from elite class and they can never understand the problems of local person
because they never face those problems. They are usually corrupted they take money
by their own instead of investing them on country properly.
At time when politicians were involve in working on behave of country at that time
Pakistan was one of the know nation of world.

Democracy
Now finding a democracy in Pakistan is difficult and just a name given to it finding it is
difficult. They are working by their own they are not giving change to their people so its
important to giving change to growing the nation.

Multi party system

There should b a multi part system because change is must to give it to all because fit
country is working in a same way then there will be no change and then the country
cannot grow up. And its important for every country to get develop each and every day.

Unemployment
Biggest problem of Pakistan is unemployment; person who has ability to do work and
willing to do work are unable to get jobs
Almost 30 to 40 lac persons are unemployed and the ratio is 2.1% (tribune, 2013)
The main reasons of this unemployment are:

1. Higher population
The population of Pakistan is getting higher day by day and our country dont have a lot
of resource to give them jobs and this is the main reason of unemployment

2. Resource of country is limited

Our country doesnt have much resources and dont have job opportunities. Why is it
that so? This is because of decrease in industries. If we have proper system of
industries then they can reduce the unemployment rate.

3. Investment rate low

As our investment rate is so low and we dont have any opportunity to invest and if we
cant invest how can we heir people? So investment is also one of the main reason

4. Education system
Our education system is so low they just allocate 2.3 % in budge which is so low and
the other countries are giving half of their budge to education. And do to the financial
crisis they are give so low to education. (tribune, 2013)

5. Youth choice is unrealistic

Now a days youth dont have such knowledge about choosing the field and they are not
choosing fields as for fun and just to study which are making them unemployed.

6. Financial crisis
Most of the people cant study due to financial crisis they cannot afford so much and
they leave their child not to study which make them illiterate and unemployed.
Therefore education should not be that mush expensive that people cannot take it and
the primary education should b free.

Inflation
The main source of reducing inflation is to self reliant and make things by our self
instead of relying on Importing supply should be according to demand so that it should
be produced limitedly. And the extra paper money which was pumped into the economy
has to be taken out of circulation to reduce inflation. (defence, 2013)

Sector analysis
The crisis originated from European countries and now it is becoming a global
phenomenon. Political instability, bad law and order situation, armys interference,
terrorism, economic policies etc are the factors which are disturbing domestic and
foreign investment. Pakistan investors are taking away their money to Dubai US Saudi
and other countries of the world.
I will like to suggest the stabling of economic planning remove terrorism and having a
proper knowledge. It is not just to improve our education, now a days it I think one of the
main reason is terrorism which are making local and international nation to go down
because of terrorism no one is willing to perform and target market.
Textile plays an important role in economic development of the country. Textile is one of
the major economic objectives in industries and Pakistan was the main source of
exporting clothes and textile to other countries and still textile of Pakistan is know all our
the world. We can say textile sector of Pakistan is the back bone of Pakistan economy.
A textile, no doubt is the largest industrial sector of Pakistan for investment, employment
and export point of view. it approximately account 27%of total industrial output it took
38% of employment as 38% of employees are working in textile industries and
approximately 68% contribution in exporting. However, despite its impressive
contribution at the national level, the share in the world exports of textile and clothing is
low. They are covering approximately 9% of country GDP
If its working so well then government should work on it and give them proper sources
because it is the main source of their income. There are 1,220 ginning units,
567spinning units, and 425 small units which produce textile products. Pakistans textile
industry is based on 60% on spinning sector, 22% on weaving sector, and 18% on the
finishing sector. (merrian)

Exports
As textile is the major source of export in Pakistan and it is the 8 th largest exporting
sector of the world. We earn a lot from this. The major share of our textile exports goes
to U.S.A., E.U., Canada and Japan. U.S.A. is the largest market for our textile products.
Textile sectors are more dominated in Punjab. (textile sector, 2013)
Now knowing the main reasons that what is the reason it is going down?

1. Lack of technology
Our technology is not up to the mark we dont have modernized technology. We are still
working with old methods which are the main reason of going down in textile sector.
Due to old technology, it is taking more time and cost of production is high.

2. High price of raw material

Raw material of Pakistan is getting high day by day due to which it is difficult for
industrialist to buy it and they are working with small sources.
Government is not giving proper attention to textile sector. And due to this reason they
are losing their one of a very important sector.

Demand and supply factor

Pakistan textile was one of the 8th largest textile sectors and it was in a very high
demand sector like it covers almost 9% of GDP of Pakistan and it cover 38% of
employment as well but know lack of electricity and gas higher prices of yarn and raw
material and modernized machinery has made it difficult for them to meet the target.
And their quality is not perfect now which make it difficult for them to compete with other
and this reason their demand is going down and supply is not according to the target. A
proper monitoring policy from government is must on textile sector. (tirbune, 2013)

Comparisons with other countries

Pakistan is in top 10 textile exporters of the world. Textile export of world is about $400
billion and China is on the top list with export of $55 billion, then Hong Kong $38
billion after Hong Kong its Korea $35 billion, Taiwan $16 billion and , India, Bangladesh
and Pakistan $11billion each. Pakistan is in better condition in cotton Pakistan is having
good cotton then Chinese or Indians, which is good in dyeing, shine and uniformity. But
currently Pakistani textile industry is facing serious challenges from China, Bangladesh
and India. These countries are much more competitive in the quality and price than
textile products from Pakistan. All countries accepted that the textile of bed linen and
home furnishing is still preferred. Pakistan also has better printing technology than its
competitors. (observer, 2013)

SWOT Analysis
Strengths
1. Raw material
Pakistan is 4th largest cotton producer. And use of cotton resources has made the
Textile industry of Pakistan move towards the area of industrialization .
2. Labor
They are having cheap labor and it is one of a very good strength for Pakistan and 34%
of employments is in textile sector.

Weakness
1. Low technology
Pakistan is having low technology their technology is not updated which make it difficult
for them to product and time have high low of production.
2. Poor infrastructure
Pakistan is having poor infrastructure they dont have proper supply of water proper
supply of gas and proper supply of electricity.

Opportunity
1. Collaboration with foreign countries
If we export our textile to other countries we will be able to contact them and this will
make us to collaborate with them and knowing all the international happening
2. Reducing the cost of business.
China and India are much cheaper in labor, raw material and utilities as compared with
Pakistan. Rising inflation also increase the cost of production. We have to control these
unnecessary costs if we have to survive in the middle of the two giants of the textile
sector in the world.

 Threats
1. New competitors
As Pakistan is going down in textile because of some reasons and more textile sectors
of different countries are taking place.
2. Fashion cycle
Now a days fashion is changing day by day which is making it difficult for the textile
sector to maintain it.

Company analysis
Nishat is the fourth largest textile company of Pakistan. It is awarded many times for its
better performance. It is serving the world known countries like US Japan Spain and
now working for Europe. nishat specially focus on the quality of their product. They are
working on many things like spinning, weaving and home textile. (mansha, 2013)

Spinning
Nishat textile has a spinning capacity of 150,000 spindles producing 50,000 tons of
grange yarn per annum (nishat txtile mill, 2013)

Weaving
Weaving department consists of 293 air jet looms producing 3 million yards of greige
fabric per month. With a combination of state of the art weaving equipment, technical
know-how and managerial expertise, NCL Weaving has developed a reputation for
quality service and products worldwide. (www.nishat,net, 2013)

Home textile
The weaving department consists of 293 air jet looms producing 3 million yards of
greige fabric per month. With a combination of state of the art weaving equipment,
technical know-how and managerial expertise, NCL Weaving has developed a
reputation for quality service and products worldwide. (www.nishat,net, 2013)

 Costing and expenses of nishat textile mills

That corresponded with an earnings-per-share of Rs16.63, up from Rs10.04 in the
previous year. The cost of sales went to Rs43.38 billion from Rs38.13 billion during the
period, an increase of 13.8 per cent. (mehdi)

Elements of financial report

Authorized share capital

The maximum value of securities that a company can legally issue This number is
specified in the memorandum of association
Authorized share capital may be divided into 2 parts
(1) Issued capital
(2) Paid up capital
(http://www.businessdictionary.com)
o The authorize share capital of NISHAT TEXTILE MILLS for the year 2013 is
25, 000, 000, 00. And in last year it was 1950,000,000.

Paid up share capital

Paid-up capital is money that a company has received from the sale of its shares.
(investopidia)
o The paid up share capital of nishat textile mills for the recent year is
1,819,860,280 And for the last year it was 1,654,418,440.

Reserves
Reserve is the profit achieved by a company where a certain amount of it is put back
into the business which can help the business in their rainy days.
(http://en.wikipedia.org, 2013)
o Reserves of nishat textile mill in recent year is 6200,411,469 and for the last year
it was 4,420.575,587

 Total equity

Total equity is the total of all Ordinary capital, Reserves, Preferences and Minorities.
(http://www.advfn.com, 2013)
o Total equity for 2013 is 8,020,271,449 And for 2012 is 6,074,994,027.

Liabilities
Liabilities are financial obligations or debts. They show negative future cash flows of the
company

Non-current liabilities
Noncurrent liabilities are those which due more than one year.

Trade payable
The amount that customers owes to their suppliers.
(http://www.businessdictionary.com)

o Trade payable of nishat textile mill in 2013 is 1,425,022,011. And for last year are
1,105,047,161.

Accrued mark up

The difference between lower current offering price among dealers and the
higher price that a dealers charges to customers. (investopidia)

o Accrued mark up of nishat textile for 2013 is 164,249,549. And for last year were
144,471,269.

Short term borrowing

A part of a company's balance sheet within the current liabilities section. Short-term
debt is usually due within one year. If a company has more short-term debt
than available cash or investments to cover the debt's payments, the company could be
forced to take on additional debt and could be in poor financial health. (investopidia)

o Short term borrowing for year 2013 is 6,493,965,784 and for last year it was
5,349,510,524.

Total equity
The total amount of preferred stock equity added to the amount of common stock equity.
(investopidia)

o For recent year it is 21,924,848,748 and for last year it was 17,682,954,708.

 Fixed assets
A long-term tangible piece of property that a firm owns and uses in the production of its
income and is not expected to be consumed or converted into cash any sooner than at
least one year's time. (investopidia)

o For nishat fixed assets of 2013 is 7,665,60,369. And for the last year it was
6,076,549,160

Deposits
A deposit held at a financial institution that has a fixed term. These are generally shortterm with maturities ranging anywhere from a month to a few years. When a term
deposit is purchased, the lender (the customer) understands that the money can only be
withdrawn after the term has ended or by giving a predetermined number of days
notice. (investopidia)

Stock in trade
Goods kept in hand by a business for the purpose of its trade.

o Stock in trade of nishta mills in 2013 is 5,639,883,723 and for last year it was
4,000,713,332.

Loans
Sum of money borrowed.
o The recent loan of nishat mill is 782,917,291 and for last year 172,732,886.

Short term prepayment

The satisfaction of a debt or installment payment before its official due date .
(investopidia)

o The recent short term prepayments of nishat mill are 34,213 and last year it was
266,428.

Accrued interest
Accrued interest is the amount of loan interest that has already occurred, but has not
yet been paid to the lender by the borrower.

o Current accrued interest of nishat textile is NIL

Receivables
An asset designation applicable to all debts, unsettled transactions or other monetary
obligations owed to a company by its debtors or customers. (investopidia)

o Current receivable Are 1,158,829,645 and last year was 771,096,062.

Short term investment

This account contains any investments that a company has made that will expire within
one year. For the most part, these accounts contain stocks and bonds that can be
liquidated fairly quickly. (investopidia)

o Current short term investment 82,162,359 and last year was 324, 94,520.

 Bank Balance
Balance standing to the credit of a depositor at a bank.. The balance that a bank has in
the clearing house at a given time (dictionary.reference.com)
o The current balance of nishat mills is 259,237,529 and last year it was 47997011.

Sales
A sale is the act of selling a product or service in return for money or other
compensation.
o Current sales of nishat is 21,213,244,304 and last year it was 18,616,942,561

Cost of sales
Cost of sales measures the cost of goods produced or services provided in a period by
an entity. (ready, 2013)
o

The current cost of sales of nishat mills is 17,617,677,400 and last year it was
16,540,145,218.

Gross profit
A company's revenue minus its cost of goods sold. Gross profit is a company's residual
profit after selling a product or service and deducting the cost associated with its
production and sale. (investopidia)
o Its gross profit is 3, 595, and 66,904 last year 2,076,797,343.

Distribution cost
Distribution costs are usually defined as the costs incurred to deliver the product from
the production unit to the end user. (ready, 2013)
o The current distribution cost is 5, 354, 25,990 and last year was 4, 998, and
34,017.

 Administration expense
The expenses that an organization incurs not directly tied to a specific function such as
manufacturing/production or sales.
(investopidia)
o The recent administration expense of nishat textile mill is 149,342,527 and for
2012 it is 135,99,5989.

Other expenses
A particular payment of money.
o nishat textile mill recent other expense is 137,292,220 and for 2012 it is
50,169,183.

Operational profit
The profit earned from a firm's normal core business operations. This value does not
include any profit earned from the firm's investments and the effects of interest and
taxes. (investopidia)
o The recent operational profit of nishat is 2,530,921,404 and for last year it was
2,247,418,498.

Profit before taxation

A profitability measure that looks at a company's profits before the company has to pay
corporate income tax. This measure deducts all expenses from revenue including
interest expenses and operating expenses, but it leaves out the payment of
tax. (investopidia)
o The recent PBT for 2013 is 2530,921,404 and for 2012 are 893,973,127.

Taxation
Taxation means the levying of taxes.
o The recent taxation for nishat textile mill is 254,760,294 and for 2012 it is
194,642,398.

 Profit after taxation

A financial performance ratio, calculated by dividing net income after taxes by net sales.
(investopidia)
o For 2013 profit after taxation for nishat was 2276,161,110 and for 2012 is
699,330,729.

Earnings per share

The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company's profitability. (investopidia)
o The recent earning per share of nishat textile mill is 2276,161,110 and for 2012 it
was 699,330,729.

Liquidity ratios
A class of financial metrics that is used to determine a company's ability to pay off its
short-terms debts obligations Generally, the higher the value of the ratio, the larger the
margin of safety that the company possesses to cover short-term debts (investopedia)

Current ratio:
The most widely used measure of short-term debt paying ability is the current ratio.
(williams)
The Current Ratio formula is:

Current ratio of nishat textile

2013
1.29

2012
1.27

2011
1.1

2010
1.21

current ration
1.4
1.3

current ration

1.2
1.1
1
2013 2012 2011 2010

INTERPRETATION
In 2013 company is in greater position from last three year as in 2013 nishat textile is
1.29 times greater than its current liability. In 2013 company current ratio is 1.29 which
is in better condition from last 3 years and it is easy for them to pay off its current
liabilities through its current assets. And it is increased from 1.27 to 1.29% this shows
that company is effectively utilizing its resources and is relying on retained profit for
growth expenses.
As in 2011 company increase from 1.1 to 1.27 which is a big increase. And this show
company is working very high on its current assets to pay its liability

Quick ratio
A measure of short-term debt-paying ability is known as quick ratio.
Quick Ration = current assets stocks/current liabilities

Quick ratio of nishat textile

2013
1.8

2012
1.7

2011
1.6

2010
0.8

quick ratios
2
1.5

quick ratios

1
0.5
0
2013 2012 2011 2010

INTERPRETATION
Quick ratio of 1.80 means that a company has 1.50rps of liquid assets available to
cover each of current liabilities and company is in good liquidity position then from last 3
years as they increased current assets. As in 2010 they were below 1 which was not a
good position but in this three year they constantly improving their selves from previous
years. As in 2012 it was 1.7 and in 2011 it was 1.6 and in 2010 they were low. But in
comparison of last 3 years they are performing well this time. order to increase the ratio
company needs to have more cash and it could be achieved by selling inventory and
earning profit so that how cash will increase and inventory will decrease which will result
in higher of the quick ratio.

Cash Ratios
The cash ratio is most commonly used as a measure of company liquidity. It can
therefore determine if, and how quickly, the company can repay its short-term
debt. (investopedia)
Cash ratios = cash/current liabilities

Cash ratio of nishat textile

2013
0.22

2012
0.25

2011
0.28

2010
0.39

cash ratios
0.6
cash ratios

0.4
0.2
0
2013 2012 2011 2010

INTERPRETATION:
In 2013 nishat textile is on 0.22 which show that company is not having enough money
to pay their short term liabilities. It shows that they are not managing proper cash in
hand and they are not having proper cash in hand which because company is going
consecutively down from last 3 years as it was 0.39 in 2010 then it dropped to 0.28 in
2011 and in 2012 it was 0.25 its going down by a large amount each year which will
harm the liquidity position of the company.

Profitability ratios
A class of financial metrics that are used to assess a business's ability to generate
earnings as compared to its expenses and other relevant costs incurred during a
specific period of time. For most of these ratios, having a higher value relative to a
competitor's ratio or the same ratio from a previous period is indicative that the company
is doing well. (investopedia)

Gross Profit Margin

It is used to measure the profitability of the companys products. (williams)
Calculated as:

Gross profit margin of nishat textile

2013
0.16

2012
0.11

2011
0.16

2010
0.2

Gross profit margin

0.25
0.2

Gross profit
margin

0.15
0.1
0.05
0
2013 2012 2011 2010

INTERPRETATION:
In 2013 GP margin indicates better performance. The GP ratio is 16%. It means the
company may reduce the selling price of its products by 16% without incurring any loss.
In 2012 they were low by 5% as it was too from previous year and it was difficult for
them to maintain their expense. In 2011 it was 0.16 which was as much as in 2013.
Profit margin by lowering it cost over heads and manufacturing cost or lowering other
expenses in order to increase this ratio. In 2010 it was 2 which show better performance
of the company as the higher the gross profit the better to perform.

Operating profit margin:

It is used to measure the managements ability to control expenses is known as
operating profit margin (williams)
Calculated as:

Operating margin = OP/SALES

Operating profit margin of nishat
2013
0.17

2012
0.12

2011
0.15

2010
0.16

operating profite margin

0.2
operating
profite
margin

0.15
0.1
0.05
0

INTERPRETAION:
When operation profit ratio is high it indicates better position of the company in 2013
company is in better position from previous years. In 2013 the operating profit of the
company was 0.17 which show that the company is making that much of sales from
operations in 2013. 2013 is in better position than in 2012 which was 0.12 and in 2012
the company operations was not maintain as it was low from 2011 as in 2011 it was 0.15

Net profit margin:

An indicator of managements ability to control costs is known as net profit margin.
(williams)
Calculated As:
Net profit margin=profit after taxation/sales

Net profit of nishat textile

2013
0.1

2012
0.03

2011
0.07

2010
0.07

net profite margin

0.15
net profite
margin

0.1
0.05
0
2013 2012 2011 2010

INTERPRETATION:
2013 shows that its performance and efficiency in earning profit was much higher than
2012 in 2013 in was 0.1 and this indicates a better performance of the company
because in previous year s they were so low and it was difficult for them to maintain its
sale and taxation. In 2012 and in 2010 they were in better position. They can increase
its NP by decreasing cost of production or other expenses or should reduce the price to
increase the sales and in same case Net profit will increase.

Solvency ratio
These ratios are use to check whether the companies can pay off its long term liabilities
or not.

Debt ratio
Percentage of assents financed by creditors indicates relative size of the equity position
is debt ratio. (williams)
Calculated As
Debts ratio=Long term debts /capital

Debt ratio of nishat textile

2013
0.6

2012
0.5

2011
1.7

2010
1.3

debt to equity
2
1.5

debt to equity

1
0.5
0
2013 2012 2011 2010

Interpretation
It is clear that the lower the debts equity ratio of a company the better can operate. In
2013 and in 2012 company is in better debt position and in 2012 the ratio was 0.5 and
in 3013 in was 0.6 and its shown that company was in better position to pay its long
term liability through its current assets. In 2011 company were in very bad position and
the debt equity ratio was so high but they cover it in a very better way and now they are
so better and they are getting better every year. Company is managing its debt to equity
ratio and can pay off its long term liability easily in 2013.

Total debts ratio

It is Indicator of a companys ability to generate the cash necessary to meet its
obligations. (williams)
Calculated as
Total debts equity=total debts/capital

2013
0.52

2012
0.67

2011
0.59

2010
0.61

total depts equity

5
4

total depts
equity

3
2
1
0

Interpretation
It has the same characteristic and features as debt to equity ratio its just it include the
sum of all liabilities (long term + short term) so lower this ratio the better and effectively
is the company performing. In 2013 companys total depts. To equity ratio is 0.52 it is
low from 2012 which is 0.67 that shows that company is in better position from last year.
That shows that they are good in paying their long and short term liability easily.

Interest coverage ratio

Indicator of a companys ability to meet its interest payment obligations (williams)
Calculated as
Operational profit/interest finance

Interest coverage ratio of nishat

2013
3.04

2012
1.6

2011
2.1

2010
2

interest coveragae ration

7
6
5
4
3
2
1
0

interest
coveragae
ration

Interpretation
Interest cover show that how can company cover its interest so for that its must that u
have high interest coverage ratio and in 2013 we have high interest ratio the last years.
In 2012 the interest coverage ratio was so low which idicates that company can not
covber its interest easily. And in 2011 and 2010 it was alomost equal. Intertrest
coverage is good by increasing.its shows we have profit much this time and we have
money on hand.

Activity ratio
Inventory turn over
These ratios are use to check the speed and performance of different activites of the
company.
Indicates how quickly inventory sells. (williams)
Calculated as
Inventory turn over=Cost of sales/average inventory
Days of inventory
Indicates in days how quickly inventory sells. (williams)
Calculated as
Days of inventory=365/inventory turn over

Inventory turn over & days of inventory of nishat

2013
3.6
101

2012
6.3
57

2011
5.2
68

2010
3.8
96

120
100
80
60
40
20

inventory
days
inventory
turn over

Interpretation
This shows that in 2013 company inventory turnover is 3.6 with 101 days which show
that company have 101 day to sell its inventory and in 2012 it was 6.3 with 57 days
which shows that company has less days in 2012 as compare to 2013 this shows that
they have a long time of inventory turnover which is not that much good. To achieve
better inventory turnover ratio by making more sakes in lesser period of times by
reducing the price or by giving promotions than that will for sure increase sales and
increase the inventory turnover ratio.

Debtors turn over

Indicates how quickly receivables are collected.
Calculated As
Debtors turn over=sales/average. Debtors

Days of debtors
Indicates in days how quickly receivable are collected.
Calculated As

Days of debtors=365/Debtors turn over

Debtor turn over & day of nishat
2013
0.61
73

2012
3.2
96

2011
16.3
22

2010
8.7
41

120
100
80
60

debtor turnover
days

40

debtor turnover

20
0
2013 2012 2011 2010

Interpretation
Days of debtor the higher the ratio the more its beneficial for the company as its collect
its sales on credit in a very short span of times and its credit sales are easily converted
into cash in a shorter time. Debt turn over on 2013 was 0.61 with 73 days which is good
from 2012 which was 96 as now they can collect their receivable easily. it was so good
in 2012 there were 22 day. This show now they are having more days and its not
stable.

Competitors of nishat textile mills

1. Gull Ahmed
2. Kohinoor
3. TaTa

Liquidity position of competitors and nishat

nishat
Years
curren
t
Quick
Cash

Gul ahmed

kohinoo
r

2013

2013

2013

tata
201
3

1.29
1.8
0.22

1.05
0.27
0.01

1.3
0.8
0.02

1.1
0.26
0.01

Interpretation
This table shows that nishat is on the top in their competitors as its current ratio, quick
ratio and cash ratio all are high from gulahmed, Kohinoor and Tata. This shows that
nishat textile is in good liquidity position they are good to pay of its liability through its
current assets. This shows that nishat is having high current assets and their
competitors dont have that much. Gul ahmed is not so far away from nishat and it can
compete nishat therefore nishat have to maintain liquidity position. Nishat is having high
ratio of current quick and cash. From Gul ahmed Kohinoor and Tata but gul ahmed is a
bit far from nishat is nishat current ratio is 1.29 and gul ahmed is 1.05 quick ratio is 1.8
of nishat and gul ahmed is 0.27 in quick ratio gul ahmed is far away from nishat which
show that is is difficult for gul ahmed to pay is liabilities through its current assets. Cash
ratio is nishat is 0.22 and gul ahmed is 0.01 and Kohinoor have 0.02 and Tata has 0.01
which show that nishat is having more money on hand or in bank to pay its current
liabilities.

Profitability position of nishat and its competitors

Year
Gross profit
Operating profit
Net profit

201
nishat
3
0.16
0.17
0.1

2013
Gul ahmed
0.15
0.94
0.23

kohi
2013
noor
0.16
0.12
0.11

2013
tata
0.18
0.72
0.73

Interpretation
Gross profit is to identify the profitability of a company product the gross profit of Tata is
higher then nishat which shows that there are getting more from their product which Is
may be because of their pricing and this shows that they have good control on their cost
of sale as compare to nishat Kohinoor is nishat is having same gross profite which is
0.16 this indentify that Kohinoor and nishat is having same cost of sale and Tata cost of
sale is higher than their competitors which is 0.18 which is giving them higher gross
profit.
Now coming towards operating profit in operating profit gul ahmed is on top with 0.94
ratio which shows that they have proper control on their expense and their sales are
high then nishat. For this nishat textile need to increase their sales and control their
selling expenses.
To compete gul ahmed. Net profit of Tata is 0.73 which is more then nishat and gul
ahmed is 0.23 which is also high then nishat. This show that costs of nishat is not
maintained they have to control their costs. Nishat textile need to decrease its cost to
compete their competitors

Solvency ratio of nishat and its competitors

nisha
t

Year

debt to equity
total debt to
equity
interest
coverage

kohino
gulahmed 2013
or
2013

tat
2013a

0.6

0.4

1.9

2013
0.13

0.5

2.03

2.5

0.83

3.04

1.69

1.4

2.84

Interpretation
The lower the ratio the easier it is for the company to pay off its debts. nishat debt to
equity ratio is 0.6 which is better then it competitors but gul ahmed ratio is more lower
then nishat which show they are more easily paying its long term debts. It shows that
company has more capital and lesser value of long term debts.

Total debt to equity of nishat is lower than its all competitors that is 0.5 which shows
that it is easy for them to pay off in long + short term dept easily from its equity as
compare to its competitors. After nishat Tata is showing good total debt to equity ratio
which is 0.83. So its important for nishat to maintain its TDE.
Interest coverage ratio of nishat is high from all its competitors that is 3.04 and after
nishat Tata is on next. That shows that it is easy for nishat to pay its interest from its
profit on time without stretching it

Activity ratio of nishat & its competitors

Year
inventory
turn over
Days
debtor turn
over
Days
creditors
turn over
Days

2013

2013

2013

2013

3.6
101

3.01
121

7.1
42

2.53
144

0.61
73

0.13
28

1.9
192

2.4
132

8.5
42

3.64
100

11.3
32

14.9
24

Interpretation
Inventory turnover is that how a company can sell their inventory and in how much days
so its important for that the company to sell it in less days. Nishat is selling it in 42 days
which is good then gul ahmed as they are having 100 days but not good then Tata and
Kohinoor. As Kohinoor is having lesser days which is 24 days it may be because of their
price. So its important for nishat to decrease its price.
Debtors turnover shows that how quickly a company can pay its debts to the creditors.
Gul ahmed is paying it in very short time than nishat, as nishat is taking 73 days and gul
ahmed is taking 28 days and Kohinoor is taking 192 days. For this purpose its
important for nishat to have that much amount of cash in bank or cash in hand so that
they can pay easily to their debtors.
Creditors turn over show that how ther are giving time to their creditor so the lesser the
days the better a company can recover its payments. Nishat is giving 42 days which are
lesser then gul ahmed which are giving 73 days but higher then Kohinoor which are
giving 32 days and Tata which are giving 24 day. So it will by more easy for Tata to
recover its payments.

Working capital
Working capital is a financial metric which represents operating liquidity available to a
business, organization or other entity, including governmental entity.
Working capital is the amount of current assets minus the amount of current liabilities
as of specific date. These amounts are obtained from your company's balance sheet.
Even with a significant amount of working capital, a company can experience a cash
shortage if its current assets are not turning to cash.
There are several financial ratios that pertain to working capital. They include the
current ratio, quick ratio, accounts receivable turnover ratio ,days sales in accounts
receivable, inventory turnover ratio, and days sales in inventory.

How to manage working capital:

Working Capital Management is as important as pooling together the financial
resources to invest into a particular business. The first rule of thumb is to understand
and practice successfully managing your capital resources to prevent an economic
downturn from completely derailing your business.
Working capital is the money allotted for day to operations and any debt that your
company possesses. This will show you how to manage your money in order to
avoid financial disaster.
Following the steps below will help you monitor your day to day progress, and show you
what you can and cannot afford.

Get paid quickly:

Many businesses invoice at the end of the month and offer a 30 day payment period. If
the sale happens early in the month that nearly doubles your debtor days. Ensure your
business invoices customers when goods or services are sold, on a daily basis if
possible. Debtors often use disputes or excuses to delay payment, so if you only follow
up when payment is due, you wont receive payment on time.

Keep meticulous records:

Salespeople, accountants and administrators need to record every

communication whether by letter, phone or email including dates, times, what was said,
and what was agreed. Technology has made this process much easier, as emails are
normally saved.

Discount with care:

Ensure your salespeople know the limits and impacts of what they can
offer and dont over-negotiate in order to close a sale. A successful sales team could
have a negative effect on working capital if customers are offered discounts or extended
credit terms.

Manage inventory:

Controlling stock effectively has a significant positive impact. If possible, deal

in consignment stock which can be held on your business premises but doesnt need to
be paid for until you sell it on. This lowers your costs while maximizing revenues, as will
properly planning and managing stock levels to accommodate peaks and troughs in
demand.

Secure good credit terms:

Seek payment terms that at least match the terms you extend to your
customers. Its also sensible to consider how you deal with customers who are also
suppliers. Yet ultimately, its your responsibility to ensure that your company has
enough capital to meet its liabilities. You must take and share responsibility for the
business decisions and internal processes that impact working capital.
Comment on a working capital of company for the previous three years:
For calculating working capital of company we use this formula;
Working capital= current asset-current liability
2011:
Current asset=
Current liability=
So, working capital=8068, 112,050 - 7191, 921,930
=7348, 891, 9920
2012:
Current asset=12396, 935,291
Current liability=9,703,454,116
Then, working capital=12396, 935,291 - 9,703,454,116

=26933481, 174.
2013:
Current asset=9,724,895,436
Current liability=7,622,370,726
So, working capital=9,724,895,436 - 7,622,370,726
=2,102,524,710.
o CONCLUSION
From the above calculation we conclude that the working capital of 2011 is more than of
2013 and 2012 because the current asset of 2011 is higher than the current asset of
2012 2013. In this case our financial position is weak in current year.
To manage the working capital of the company the current asset should be higher than
current liability.

COMPARISON BETWEEN THE GIVEN COMPATITORS:

The working capital of Gull Ahmed of current year is given below:
Current asset=14205968
Current liability=13292159
So, working capital= 913809.
Its means our company is going better than Gull Ahmed because of our higher current
assets.
The working capital of TATA of current year is given below:
Current asset=11530.60
Current liability=16488.65
So, working capital=4958.05
It means Tata having poor financial report than our company.
The working capital of Kohinoor of current year is given below:
Current asset=4339574

Current liability=6257996
So, working capital = 4339574 - 6257996
=1918422.
Again Kohinoor is weak in financial position than our company.

Factoring
Definition
A financial arrangement in which a bank or other business (a factor) buys the right to
collect payments that are owes to a manufacturer. The factor pays the debts and then
collects the money, receiving a percentage of the money owed for doing this: They sold
their debts to a bank under a factoring arrangement in order to raise cash. One of the
oldest forms of business financing, factoring is the cash-management tool of choice for
many companies. Factoring is very common in certain industries, such as the clothing
industry, where long receivables are part of the business cycle.
In a typical factoring arrangement, the client (you) makes a sale, delivers the product or
service and generates an invoice. The factor (the funding source) buys the right to
collect on that invoice by agreeing to pay you the invoice's face value less a discount-typically 2 to 6 percent. The factor pays 75 percent to 80 percent of the face value
immediately and forwards the remainder (less the discount) when your customer pays.
Because factors extend credit not to their clients but to their clients' customers, they are
more concerned about the customers' ability to pay than the client's financial status.
That means a company with creditworthy customers may be able to factor even if it
can't qualify for a loan. Once used mostly by large corporations, factoring is becoming
more widespread. Still, plenty of misperceptions about factoring remain. Factoring is not
a loan; it does not create a liability on the balance sheet or encumber assets. It is the
sale of an asset--in this case, the invoice. And while factoring is considered one of the
most expensive forms of financing, that's not always true. Yes, when you compare the
discount rate factors charge against the interest rate banks charge, factoring costs
more. But if you can't qualify for a loan, it doesn't matter what the interest rate is.
Factors also provide services banks do not: They typically take over a significant portion
of the accounting work for their clients, help with credit checks, and generate financial
reports to let you know where you stand. The idea that factoring is a last-ditch effort by
companies about to go under is another misperception. Walt Plant, regional manager
with Altres Financial, a national factoring firm based in Salt Lake City, says the opposite
is true: "Most of the businesses we deal with are very much in an upward cycle, going
through extremely rapid growth." Plant says you may be a candidate for factoring if your

company regularly generates commercial invoices and you could benefit from reducing
the time receivables are outstanding. Factoring may provide the cash you need to fund
growth or to take advantage of early-payment discounts suppliers offer.
Factoring is a short-term solution; most companies factor for two years or less. Plant
says the factor's role is to help clients make the transition to traditional financing.
Factors are listed in the telephone directory and often advertise in industry trade
publications. Your banker may be able to refer you to a factor. Shop around for
someone who understands your industry, can customize a service package for you, and
has the financial resources you need. (fictoring, 2013)

Types of Factoring
The different types of Factoring are as follows:
For International Trade
1. Full Factoring
2. Recourse Factoring
3. Maturity Factoring
4. Advance Factoring
5. Undisclosed Factoring
6. Invoice Discounting
7. Bulk Factoring
8. Agency Factoring
A. Domestic Factoring
Factoring can be both domestic and for exports. In domestic Factoring, the client sells
goods and services to the customer and delivers the invoices, order, etc., to the Factor
and informs the customer of the same. In return, the Factor makes a cash advance and
forwards a statement to the client. The Factor then sends a copy of all the statements of
accounts, remittances, receipts, etc., to the customer. On receiving them the customer
sends the payment to the Factor. (fictoring, 2013)
Different types of Domestic Factoring are as follows:

1. Full Factoring

This is also known as "Without Recourse Factoring ". It is the most comprehensive type
of facility offering all types of services namely finance sales ledger administration,
collection, debt protection and customer information.

2. Recourse Factoring

The Factoring provides all types of facilities except debt protection. This type of service
is offered in India. As discussed earlier, under Recourse Factoring, the client's liability to
Factor is not discharged until the customer pays in full.

3. Maturity Factoring
It is also known as "Collection Factoring ". Under this arrangement, except providing
finance, all other basic characteristics of Factoring are present. The payment is effected
to the client at the end of collection period or the day of collecting accounts whichever is
earlier.

4. Advance Factoring
This could be with or without recourse. Under this arrangement, the Factor provides
advance at an agreed rate of interest to the client on uncollected and non-due
receivables. This is only a pre-payment and not an advance. Under this method, the
customer is not notified about the arrangement between the client and the Factor.
Hence the buyer is unaware of factoring arrangement. Debt collection is organized by
the client who makes payment of each invoice to the Factor, if advance payment had
been received earlier.

5. Invoice Discounting
In this arrangement, the only facility provided by the Factor is finance. In this method the
client is a reputed company who would like to deal with its customers directly, including
collection, and keep this Factoring arrangement confidential.

The client collects payments from customer and hands it over to Factor. The risk
involved in invoice discounting is much higher than in any other methods.
The Factor has liberty to convert the facility by notifying all the clients to protect his
interest. This service is becoming quite popular in Europe and nearly one third of
Factoring business comprises this facility.

6. Bulk Factoring
It is a modified version of Involve discounting wherein notification of assignment of
debts is given to the customers.
However, the client is subject to full recourse and he carries out his own administration
and collection.

7. Agency Factoring
Under this arrangement, the facilities of finance and protection against bad debts are
provided by the Factor whereas the sales ledger administration and collection of debts
are carried out by the client.

B. International Factoring
Traditionally international trade is based on Letters of Credit. When the exporter knows
the importer well with repetitive transactions, he may be willing to export on ' Open
Account ' basis. On open account the exporter ships the goods without letter of credit or
advance payment. Hence, it is credit risky for exporter .if credit is extended (say 90 days
since), the exporter will be quite reluctant as he encounters a credit risk and hence
invariably insists on L/C. In advanced countries bankers do not make much of a
.distinction between fund-based and non-fund based facilities and hence if they have to
open L/C's it may be at the cost of a reduced overdraft or bills limit for the importer. The
system of L/C's operates on the "Doctrine of Strict Compliance which means the Letter
of Credit opening bank will pay money to the exporter only when all the conditions listed
in the Letter of Credit document are satisfied by the Exporter of goods. In many cases,
the documents fail to pass the grade which means the exporter has simply lost the
security available to him under the L/C. Further, now-a-days, goods move very fast and
hence if documents are held up in banks for processing, it causes delay and
inconvenience to the importer. In the light of the above, international trade has slowly
started moving from cash to credit, and from L/C's to open account sales. International

Factoring is a service which helps the exporter and importer to trade on open account
terms. (fictoring, 2013)
Types of International Factoring

The following are the important types of International Factoring. The client can choose
any type of international factoring depending upon exporter - client needs and his price
bearing capacity.

Two Factor Systems

This is the most common system of international factoring and involves four parties i.e.,
Exporter, Importer, Export Factor in exporter's country and Import Factor in Importer's
country.
The functions of the export Factor are:
i. Assessment of the financial strength of the exporter
ii. Prepayment to the exporter
iii. Follow-up with the Import Factor
iv. Sharing of commission with the import Factor
The functions of the Import Factor are:
i. Maintaining the books of the exporter in respect of sales to the debtors in his country
ii. Collection of debts from the importer and remitting the proceeds to the exporter's
Factor
iii. Providing credit protection in case of financial inability on the part of any of the
debtors

1. Single / Direct Factoring System

In this system, a special agreement is signed between two Factoring companies for
single Factoring. Whereas in Two Factor System, credit is provided by import Factor
and pre-payment, book keeping and collection responsibilities remain with export
Factor.

For this system to be effective there should be strong co-ordination and co-operation
between two Factoring companies. Pricing is lower when compared to Two Factor
System.
2. Direct Export Factoring
Here only one Factoring company is involved, i.e., export Factor, which provides all
services including finance to the exporter.
3. Direct Import Factoring
Under this system, the seller chooses to work directly with Factor of the importing
country. The Factoring agreement is executed between the exporter and the import
Factor. The import Factor is responsible for sales ledger administration, collection of
debts and providing bad debt protection up to the agreed level of risk cover.
4. Back to Back Factoring
It is a very specialized form of International Factoring, used when suppliers are selling
large volumes to a few debtors for which it is difficult to cover the credit risk in
International Factoring. In this case, International Factor can sign a domestic Factoring
agreement with the debtor whereby it will be getting the receivables as security for the
credit risk taken in favour of Export Factor

The Cash Conversion Cycle

The cash conversion cycle (CCC) measures the timein daysthat it takes for a
company to convert resource inputs into cash flows. In other words, the cash
conversion cycle reflects the length of time it takes a company to sell inventory, collect
receivables, and pay its bills. As a rule, the lower the number, the better.

Calculating the Cash Conversion Cycle

The cash conversion cycle is actually a collection of three activity ratios related to the
turnover in inventory (accounts receivable), all of which are expressed in days. The
formula for the cash conversion cycle is as follows:
CCC = days inventory outstanding (DIO) + days sales outstanding (DSO) days
payable outstanding (DPO)
Calculation:
0F 2013:

CCC= days of debtors + days of inventories days of creditors

Days of debtors = 73
Days of inventories = 101
Days of creditors = 42
Then,
Cash conversion cycle= 73 +101 42
= 132

0f 2012:

CCC= days of debtors + days of inventories days of creditors

Days of debtors = 96
Days of inventories = 57
Days of creditors= 52
Then,
Cash conversion cycle= 96+57-52
=101

0f 2011:

CCC= days of debtors + days of inventories days of creditors

Days of debtors = 22
Days of inventories = 68
Days of creditors= 45
Then,
Cash conversion cycle=22+68-45
=45

Interpretation:
In the year 2013 the cash conversion cycle shows that the performance of company is
not good as the year 2012 and 2011 have. The year 2011 shows the better progress
than 2012 and 2013. To manage the cash conversion cycle of 2013 the days of
creditors should be less so it would take less time to convert resources into cash.

Cash conversion cycle of Gull Ahmed:

Current year,
Days of debtors=28
Days of inventories=121
Days of creditors=100
Then,
Cash conversion cycle=28+121-100
=49

Cash conversion cycle of Kohinoor:

Current year,
Days of debtors=192
Days of inventories=42
Days of creditors=32
Then,
Cash conversion cycle=192+42-32
= 202

Cash conversion cycle of Tata:

Current year,
Days of debtors=132
Days of inventories=144
Days of creditors=24
Then,
Cash conversion cycle= 132+144-24
= 252
Interpretation of competitors :
Here when we compare our company with other three competitors gul ahmed ,
Kohinoor and Tata , we analyze that the cash conversion cycle of nishat is more than
Gul ahmed . it means the performance of Gul ahmed is better than other companies.