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TERM REPORT
SUBMITTED TO
SUBMITTED BY
SECTION
DATED
LETTER OF ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
TABLE OF CONTENT
1) COMPANY INTRODUCTION
1.1 Vision……………………………………………………….. 5
1.2 Mission……………………………………………………… 6
1.3 Company Information………………….…………………… 7
1.4 Director’s Report…………………………………………… 8
1.5 Company Profile……………………………………………. 9
1.6 Products……………………………………………………...
10
3) RATIO ANALYSIS…………………………………………….
16
5) GROWTH RATE
5.1 Internal Growth Rate 2007………………………………..
24
7) ANALYSIS
7.1 Table of time series and cross sectional analysis……………. 27
7.2 Time Series Analysis…………………………………………
28
7.3 Cross Sectional Analysis (2007……………………………..
31
8) RECOMMENDATION………………………………………….
33
INTRODUCTION
VISION STATEMENT
MISSION STATEMENT
COMPANY INFORMATION
BOARD OF DIRECTORS
CHIEF EXECUTIVE
Mr. S. M. Obaid
DIRECTORS
Mr. S. M. Junaid
Mrs. Surraiya Junaid
Mr. S.M. Obaid
Mr. Tariq Muhammad Khan.
Mr. Shaheer Hussain Siddiqui
Mr. Nasir A. Khan
Mr. Javed Ashfaq
Mr. Mukhtar Ahmed Malik
COMPANY SECRETARY
Mr. Tariq Muhammad Khan
BANKERS
Union Bank Limited
Askari Commercial Bank Limited
Hong Kong & Shanghai Bank Corp.
Soneri Bank Limited
AUDITORS
Mushtaq & Company
Chartered Accountants
407-Commerce Centre,
Hasrat Mohani Road, Karachi.
MUHAMMAD ALI JINNAH UNIVERSITY 9
INTRODUCTION TO BUSINESS FINANCE
SHARE REGISTRAR
Noble Computer Services (Pvt.) Limited
Sohni Centre, BS-5 & 6, Block-4, F.B. Area,
Main Karimabad, Karachi
Tel: 6801880, 6801129
AUDIT COMMITTEE
Mr. Mukhtar Ahmed Malik (Chairman)
Mr. Shaheer Hussain Siddiqui (Member)
Mr. Tariq Mohammad Khan (Member)
INTERNAL AUDIT DEPARTMENT
Mr. Syed Adil Tariq Hameed (Incharge)
Mr. Mohammad Farzan Ijtaba (Secretary)
Mr. Farooq Ahmed Siddiqui (Member)
Mr. Sanaullah Khan (Member)
REGISTERED OFFICE
WSA-30 & 31, Block-1,
Federal "B" Area, Karachi-75950
Web Site: www.towellers.com
E-mail: towellers@cyber.net.pk
MILLS
Plots No. 14, 15/1, 15/2, 15/A, 16/2, 17/2,
Sector 12-D, N.K.I.A., Karachi.
Plot No. J-7, J-8, H.I.T.E. Hub, Balouchistan.
Survey No; 248, 249, 11, 264, 265, 292, 293, 301
Deh Hattul Buth Taluka Thana Bola Khan
District Dadu.
The period under review was a very tough keeping in view the above-
mentioned facts and also keeping in mind that the orders were booked in
June 2005 for the next 12 months and had to be honored at the booked
prices. The textile industry in general also faced tough competition from
other exporting countries like Bangladesh, India and China etc.
(Rupees in thousand)
Sales Net
1,541,141
Cost of goods sold
1,300,173
Gross profit
240,968
Distribution cost
107,605
Administrative cost
84,246
Other operating income 307
Operating profit
49,425
Finance cost
28,436
Other operating expenses 1,049
Profit before taxation
19,939
Taxation
15,442
Profit after Taxation 4,497
Add: un appropriate profit B/F
299,990
Add: Incremental Depriation 1,812
Available for appropriation
306,299
Balance Carried to balance sheet
306,299
FUTURE PLANS:
to upgrade the quality and to house all its manufacturing facilities under one
roof in order to have better controls and to minimize and cut down on its
overhead in order to achieve a better financial result and higher profits. The
project is nearly in the phase of completion and we hope to be in trial
production in june 2006.
On behalf of the board, I would like to thank the workers and staff at all
levels for the hard work put in by them, which enabled the company to
operate efficiently and hope that their efforts will continue during. the coming
years.
STORY OF SUCCESS
With continued successes and expansions, the company entered an entirely
new league in the year 1994 and became a public corporation. Their assets
had exceeded certain limits and it became imperative that they show their
worth to the people.
The company has a very satisfied and devoted customer base of not only
those who have been with the company since its inception, but also those
who have just entered into the industry. For this new generation of textile
buyers, the company has already begun broadening its product base, with
the recent inclusion of a printing mill and a facility to produce quilts and
comforters, with its own garneting unit. In addition to this, the latest
technology in compaction has also been installed in order to give the
products the best possible finish.
The future, as it comes, has a lot more in store for the world, when Towellers
intends to include a spinning facility and much more.
PRODUCTS
Towellers Limited has a wide variety of products. The products are very
distinctly divided between institutional and retail. In the institutional we cater
to the health care, hospital and linen rental. In retail we cater mostly to the
importers and stores.
• TOWELS
• APPAREL
• BLANKETS
• BABY PRODUCTS
MUHAMMAD ALI JINNAH UNIVERSITY 13
INTRODUCTION TO BUSINESS FINANCE
• BED WEAR
• KITCHEN PRODUCTS
These ratios measure a firm’s ability to meet its short-term obligations. These
include:
• Current Ratio
• Quick Ratio
• Cash Ratio
• Working Capital
PROFITABILITY RATIOS:
These measure the overall record of management in producing profit. These
include:
• Return on Assets
• Return on Equities
CURRENT RATIOS
The Current Ratio is one of the best known measures of financial strength. It
is figured as shown below:
The main question this ratio addresses is: "Does your business have enough
current assets to meet the payment schedule of its current debts with a
margin of safety for possible losses in current assets, such as inventory
shrinkage or collectable accounts?" A generally acceptable current ratio is 2
to 1. But whether or not a specific ratio is satisfactory depends on the nature
of the business and the characteristics of its current assets and liabilities.
The minimum acceptable current ratio is obviously 1:1, but that relationship
is usually playing it too close for comfort.
If you feel your business's current ratio is too low, you may be able to raise it
by:
• Paying some debts.
• Increasing your current assets from loans or other borrowings with a
maturity of more than one year.
• Converting non-current assets into current assets.
• Increasing your current assets from new equity contributions.
• Putting profits back into the business.
QUICK RATIOS
The Quick Ratio is sometimes called the "acid-test" ratio and is one of the
best measures of liquidity. It is figured as shown below:
The Quick Ratio is a much more exacting measure than the Current Ratio.
By excluding inventories, it concentrates on the really liquid assets, with
value that is fairly certain. It helps answer the question: "If all sales revenues
should disappear, could my business meet its current obligations with the
readily convertible `quick' funds on hand?"
WORKING CAPITAL
Working Capital is more a measure of cash flow than a ratio. The result of
this calculation must be a positive number. It is calculated as shown below:
LEVERAGE RATIO
Generally, the higher this ratio, the more risky a creditor will perceive its
exposure in your business, making it correspondingly harder to obtain credit.
This ratio is the percentage of sales dollars left after subtracting the cost of
goods sold from net sales. It measures the percentage of sales dollars
remaining (after obtaining or manufacturing the goods sold) available to pay
the overhead expenses of the company.
Comparison of your business ratios to those of similar businesses will reveal
the relative strengths or weaknesses in your business. The Gross Margin
Ratio is calculated as follows:
This ratio is the percentage of sales dollars left after subtracting the Cost of
Goods sold and all expenses, except income taxes. It provides a good
opportunity to compare your company's "return on sales" with the
performance of other companies in your industry. It is calculated before
income tax because tax rates and tax liabilities vary from company to
company for a wide variety of reasons, making comparisons after taxes
much more difficult. The Net Profit Margin Ratio is calculated as follows:
Net Profit Margin Ratio = Net Profit Before Tax / Net Sales
Daily Credit Sales = Net Credit Sales Per Year / 365 (Days)
Accounts Receivable Turnover (in days) = Accounts Receivable /
Daily Credit Sales
This measures how efficiently profits are being generated from the assets
employed in the business when compared with the ratios of firms in a similar
business. A low ratio in comparison with industry averages indicates an
inefficient use of business assets. The Return on Assets Ratio is calculated
as follows:
The ROI is perhaps the most important ratio of all. It is the percentage of
return on funds invested in the business by its owners. In short, this ratio
tells the owner whether or not all the effort put into the business has been
worthwhile. If the ROI is less than the rate of return on an alternative, risk-
free investment such as a bank savings account, the owner may be wiser to
sell the company, put the money in such a savings instrument, and avoid the
daily struggles of small business management. The ROI is calculated as
follows:
Working capital
= 191,064,572
Current ratio
1.26
Quick ratio
= 0.76
Debt ratio
= 0.64
= 0.75
= 2.27 TIMES
= 58 DAYS
= 41 DAYS
Inventory turnover
= 2.82 TIMES
= 1.35 TIMES
MUHAMMAD ALI JINNAH UNIVERSITY 23
INTRODUCTION TO BUSINESS FINANCE
= 3.69 TIMES
PROFITABLITY RATIO
= 0.019
= 0.003
= 0.004
Return on equity
= 0.0025
Working capital
= 136,283,861
Current ratio
= 1.26
Quick ratio
= 0.58
Debt ratio
= 0.75
= 2.98
= 1.96 TIMES
= 94 DAYS
= 44 DAYS
Inventory turnover
= 1.98 TIMES
= 0.65 TIMES
= 1.61 TIMES
PROFITABLITY RATIO
= 0.018
= 0.0021
= 0.0014
Return on equity
= 0.54%
TOWELLERS LIMITED
WORKING CAPITAL
Towellers has 136,283,861 which is lesser than the industry Average 152,640,686,
firm is in worse condition “
CURRENT RATIO
Towellers limited have 1.26 current rations in 2008 which is higher than the
industry Average 0.97 that’s why it’s in better condition.
QUICK RATIO
It provides the better measure of overall liquidity only when firm inventory
cant easily converted into cash.
Towellers Ltd has 0.58 quick ratio in 2008 which is greater than the industry
Average 0.46 that’s why it’s in better condition
INVENTORY TURNOVER
“It reflects the speed with which firms moves its inventory from raw material
& with finished goods till sale to customer. Higher the values of this ratio
preferred because it indicates the quicker turnover of inventory.”
Towellers Ltd has 1.98 Inventory turnovers in 2008 which is less than the
industry Average 4.67 that’s why it’s worse in condition.
Towellers Ltd has 94 days in 2008 shows the account receivable collected as
earlier than the industry Average 40.51 days that’s why firm is worse in
condition.
It measures the efficiency with which firm has been using its fixed earning
assets to generate sale.
Towellers has Fixed Assets Turnover of 1.61 times in 2008 which is less than
the industry average 2.35 times, in 2008 firm Fixed Assets Turnover reflects
the lower efficiency of fixed assets utilization because firm has newer assets
which have higher book value or older assets than industry fixed assets
turnover of firm can be misleading newer assets have lower turn over than
older assets have lower book value
It indicates the efficiency of the firm uses all its assets which generate sales.
Higher the Total Assets Turnover the more efficiency its assets have been
used.
Towellers has Total Assets Turnover of 0.65 times in 2008 which is lesser
than the industry average 0.94, firm is Worse in condition .This firm
measure is because of the lesser interest to management and its indicates
the firm operating have been financially inefficient
DEBT RATIO
It measures the proportion of total assets financed by the firm creditor .The
higher the debt ratio the greater the amount of other people is to generate
profits.
Towellers has Debt Ratio financed 0.75 in 2008 of its assets with debt. Firm
debt is higher than the Industry Debt Ratio 0.71
DEBT EQUITY
It indicates the relationship between the long term funds provided by the
creditor and by the firm owners.
OPERATING PROFIT
It measures the percentage of each sales remain after all cost & expenses
other than the interest & taxes are deducted.
Towellers have 1.80% which shows the company is in Loss position. Industry
operating Profit is 2.5%.
NET PROFIT
It measures the percentage of each sales remaining after all cost and
expenses including interest and taxes have been deducted .The higher the
firms net profit the firm is better in condition.
Towellers have 0.21% net profit in 2008 means company isn’t earning profit
on sale. That’s why firm is in loss.
RETURN ON ASSETS
Towellers has .14% Return on Assets in 2008 which has generated lower
Return on Assets than industry Return on Assets is 0.2239%
RETURN ON EQUITY
It measures the return earned on the owners or both preferred and common
stockholders investment in the firm .generally the higher this return the
better off are the owner
TOWELLERS LIMITED
WORKING CAPITAL
CURRENT RATIO
In 2007 current ratio was 1.26 which is equal to 2006 current ratio. Here this
ratio tells assets remains same.
In 2008 current ratio is again 1.26.
QUICK RATIO
In 2008 company paid current liability through current assets which was 0.58
INVENTORY TURNOVER
DEBT RATIO
OPERATING PROFIT
NET PROFIT
In 2007 Net loss is 0.30 which shows the company is still in loss
In 2008 Towellers has 0.21 net loss Means Company isn’t earning on sale.
That’s why firm get in loss
RECOMMENDATIONS
A company should grow at its par by using all of its factors at full but this
company are lacking in it. This company is not only using it’s equity but also
the assets are misused. A company can prove its worth by improving
through the following factor:
• Applying techniques that can apply all the resources at its par.
• Try to pay off the debts and collect its debt so that company can have
more of the resources in use and reducing the cost on interest.