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 Company’s 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 don’t want the political stability in Pakistan they interfere a lot and that are the main reasons that they don’t 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. 2013) The main reasons of this unemployment are: 1. Democracy Now finding a democracy in Pakistan is difficult and just a name given to it finding it is difficult. 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. they usually get it in a illegal way. 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. They are usually corrupted they take money by their own instead of investing them on country properly. Higher population The population of Pakistan is getting higher day by day and our country don’t have a lot of resource to give them jobs and this is the main reason of unemployment . 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 are from elite class and they can never understand the problems of local person because they never face those problems.1% (tribune. At time when politicians were involve in working on behave of country at that time Pakistan was one of the know nation of world. And it’s important for every country to get develop each and every day. They are working by their own they are not giving change to their people so it’s important to giving change to growing the nation. Unemployment Biggest problem of Pakistan is unemployment. If we have proper system of industries then they can reduce the unemployment rate. 6. And do to the financial crisis they are give so low to education. Investment rate low As our investment rate is so low and we don’t have any opportunity to invest and if we can’t invest how can we heir people? So investment is also one of the main reason 4.2. (defence. Resource of country is limited Our country doesn’t have much resources and don’t have job opportunities. Therefore education should not be that mush expensive that people cannot take it and the primary education should b free. Why is it that so? This is because of decrease in industries. Financial crisis Most of the people can’t study due to financial crisis they cannot afford so much and they leave their child not to study which make them illiterate and unemployed. And the extra paper money which was pumped into the economy has to be taken out of circulation to reduce inflation. (tribune. 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. 2013) 5.3 % in budge which is so low and the other countries are giving half of their budge to education. 3. Youth choice is unrealistic Now a day’s youth don’t 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. 2013) . Education system Our education system is so low they just allocate 2. S. They are covering approximately 9% of country GDP If it’s working so well then government should work on it and give them proper sources because it is the main source of their income. and 425 small units which produce textile products. 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. We earn a lot from this. 22% on weaving sector. Textile plays an important role in economic development of the country. despite its impressive contribution at the national level. is the largest market for our textile products.S. Textile sectors are more dominated in Punjab.220 ginning units.. no doubt is the largest industrial sector of Pakistan for investment. Pakistan investors are taking away their money to Dubai US Saudi and other countries of the world.U. It is not just to improve our education. 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. 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. economic policies etc are the factors which are disturbing domestic and foreign investment. and 18% on the finishing sector. employment and export point of view. We can say textile sector of Pakistan is the back bone of Pakistan economy. E. Pakistan’s textile industry is based on 60% on spinning sector. I will like to suggest the stabling of economic planning remove terrorism and having a proper knowledge. the share in the world exports of textile and clothing is low. (textile sector. 2013) Now knowing the main reasons that what is the reason it is going down? . Canada and Japan. bad law and order situation. (merrian) Exports As textile is the major source of export in Pakistan and it is the 8 th largest exporting sector of the world. Political instability.. 567spinning units. A textile. U.Sector analysis The crisis originated from European countries and now it is becoming a global phenomenon. terrorism.A.A. However. army’s interference. The major share of our textile exports goes to U. There are 1. Lack of technology Our technology is not up to the mark we don’t have modernized technology. Textile export of world is about $400 billion and China is on the top list with export of $55 billion. 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. Taiwan $16 billion and . 2. Pakistan also has better printing technology than its competitors. India. And due to this reason they are losing their one of a very important sector. (tirbune. These countries are much more competitive in the quality and price than textile products from Pakistan. it is taking more time and cost of production is high. Pakistan is in better condition in cotton Pakistan is having good cotton then Chinese or Indians. 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. 2013) Comparisons with other countries Pakistan is in top 10 textile exporters of the world. But currently Pakistani textile industry is facing serious challenges from China. Government is not giving proper attention to textile sector.1. Due to old technology. 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. shine and uniformity. A proper monitoring policy from government is must on textile sector. which is good in dyeing. 2013) . We are still working with old methods which are the main reason of going down in textile sector. Bangladesh and India. (observer. All countries accepted that the textile of bed linen and home furnishing is still preferred. then Hong Kong $38 billion after Hong Kong its Korea $35 billion. Bangladesh and Pakistan $11billion each. 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. Poor infrastructure Pakistan is having poor infrastructure they don’t have proper supply of water proper supply of gas and proper supply of electricity.SWOT Analysis Strengths 1. . China and India are much cheaper in labor. 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. Rising inflation also increase the cost of production. 2. And use of cotton resources has made the Textile industry of Pakistan move towards the area of industrialization . Weakness 1. Raw material Pakistan is 4th largest cotton producer. Opportunity 1. 2. 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. Reducing the cost of business. raw material and utilities as compared with Pakistan. 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. net. With a combination of state of the art weaving equipment.nishat. (www. nishat specially focus on the quality of their product. technical know-how and managerial expertise. technical know-how and managerial expertise. 2013) . They are working on many things like spinning. Threats 1. 2013) Weaving Weaving department consists of 293 air jet looms producing 3 million yards of greige fabric per month. New competitors As Pakistan is going down in textile because of some reasons and more textile sectors of different countries are taking place. Company analysis Nishat is the fourth largest textile company of Pakistan. (www. 2. 2013) Home textile The weaving department consists of 293 air jet looms producing 3 million yards of greige fabric per month. Fashion cycle Now a day’s fashion is changing day by day which is making it difficult for the textile sector to maintain it.000 tons of grange yarn per annum (nishat txtile mill.nishat. weaving and home textile. NCL Weaving has developed a reputation for quality service and products worldwide. It is serving the world known countries like US Japan Spain and now working for Europe. (mansha. NCL Weaving has developed a reputation for quality service and products worldwide. 2013) Spinning Nishat textile has a spinning capacity of 150.net. It is awarded many times for its better performance. With a combination of state of the art weaving equipment.000 spindles producing 50. wikipedia.654. up from Rs10.440.38 billion from Rs38.860.819.000. (http://en. 00. 000. The cost of sales went to Rs43.businessdictionary.575. Paid up share capital Paid-up capital is money that a company has received from the sale of its shares. an increase of 13.469 and for the last year it was 4.org. 2013) o Reserves of nishat textile mill in recent year is 6200.04 in the previous year.420.280 And for the last year it was 1.587 . 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.com) o The authorize share capital of NISHAT TEXTILE MILLS for the year 2013 is 25.418. And in last year it was 1950.000. Costing and expenses of nishat textile mills That corresponded with an earnings-per-share of Rs16. 000. (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.63.411.13 billion during the period. (investopidia) o The paid up share capital of nishat textile mills for the recent year is 1.8 per cent. 271.020.com) o Trade payable of nishat textile mill in 2013 is 1.994.449 And for 2012 is 6.425.074. And for last year are 1.161. (http://www. Preferences and Minorities. Reserves.105. Liabilities Liabilities are financial obligations or debts. Trade payable The amount that customers owes to their suppliers.advfn.022.com.businessdictionary.047. Total equity Total equity is the total of all Ordinary capital. (http://www. Accrued mark up . They show negative future cash flows of the company Non-current liabilities Noncurrent liabilities are those which due more than one year.027.011. 2013) o Total equity for 2013 is 8. 249.924. Total equity The total amount of preferred stock equity added to the amount of common stock equity.The difference between lower current offering price among dealers and the higher price that a dealers charges to customers. (investopidia) o For recent year it is 21.954. And for last year were 144.549.965. (investopidia) o Short term borrowing for year 2013 is 6.524.784 and for last year it was 5. (investopidia) o Accrued mark up of nishat textile for 2013 is 164.848.682.708. the company could be forced to take on additional debt and could be in poor financial health.269.493.748 and for last year it was 17.471. Short term borrowing A part of a company's balance sheet within the current liabilities section.510. . 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.349. 549. And for the last year it was 6.000.917.665.076.160 Deposits A deposit held at a financial institution that has a fixed term.883. 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.369.60.332.886. o The recent loan of nishat mill is 782.291 and for last year 172. Short term prepayment . (investopidia) Stock in trade Goods kept in hand by a business for the purpose of its trade. When a term deposit is purchased.723 and for last year it was 4. 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.639.732. Loans Sum of money borrowed. These are generally shortterm with maturities ranging anywhere from a month to a few years. (investopidia) o For nishat fixed assets of 2013 is 7.713. o Stock in trade of nishta mills in 2013 is 5. (investopidia) o Current short term investment 82. 94. For the most part. o Current accrued interest of nishat textile is NIL Receivables An asset designation applicable to all debts. (investopidia) o The recent short term prepayments of nishat mill are 34.162. Short term investment This account contains any investments that a company has made that will expire within one year. unsettled transactions or other monetary obligations owed to a company by its debtors or customers.062. (investopidia) o Current receivable Are 1.096. Accrued interest Accrued interest is the amount of loan interest that has already occurred.829.158. these accounts contain stocks and bonds that can be liquidated fairly quickly.428.The satisfaction of a debt or installment payment before its official due date .359 and last year was 324.213 and last year it was 266. but has not yet been paid to the lender by the borrower.520.645 and last year was 771. . and 34.237.400 and last year it was 16.076. 354.244.797. (ready.677.942.540.617.145.017.. Distribution cost Distribution costs are usually defined as the costs incurred to deliver the product from the production unit to the end user. Gross profit A company's revenue minus its cost of goods sold. 2013) o The current cost of sales of nishat mills is 17. The balance that a bank has in the clearing house at a given time (dictionary.218.990 and last year was 4.904 last year 2.529 and last year it was 47997011. 25.com) o The current balance of nishat mills is 259.343.213.616. (investopidia) o Its gross profit is 3. Sales A sale is the act of selling a product or service in return for money or other compensation.304 and last year it was 18. Gross profit is a company's residual profit after selling a product or service and deducting the cost associated with its production and sale.reference. . (ready.561 Cost of sales Cost of sales measures the cost of goods produced or services provided in a period by an entity. and 66. o Current sales of nishat is 21. 998. 595. Bank Balance Balance standing to the credit of a depositor at a bank. 2013) o The current distribution cost is 5. 642. Taxation Taxation means the levying of taxes.220 and for 2012 it is 50.530. Profit before taxation A profitability measure that looks at a company's profits before the company has to pay corporate income tax.127.921. .398.404 and for last year it was 2.921. This measure deducts all expenses from revenue including interest expenses and operating expenses. (investopidia) o The recent PBT for 2013 is 2530. Other expenses A particular payment of money. (investopidia) o The recent administration expense of nishat textile mill is 149. Administration expense The expenses that an organization incurs not directly tied to a specific function such as manufacturing/production or sales.760.498. This value does not include any profit earned from the firm's investments and the effects of interest and taxes. o nishat textile mill recent other expense is 137.294 and for 2012 it is 194.404 and for 2012 are 893.5989.973. Operational profit The profit earned from a firm's normal core business operations.247.183. but it leaves out the payment of tax.418.169. (investopidia) o The recent operational profit of nishat is 2.292. o The recent taxation for nishat textile mill is 254.99.342.527 and for 2012 it is 135. 729. (williams) The Current Ratio formula is: Current ratio of nishat textile 2013 1.110 and for 2012 is 699.161. Earnings per share serve as an indicator of a company's profitability.729.330. (investopidia) o The recent earning per share of nishat textile mill is 2276. 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.29 2012 1.330. (investopidia) o For 2013 profit after taxation for nishat was 2276. Profit after taxation A financial performance ratio.161. the higher the value of the ratio.1 2010 1.21 .27 2011 1. 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. calculated by dividing net income after taxes by net sales.110 and for 2012 it was 699. Earnings per share The portion of a company's profit allocated to each outstanding share of common stock. And it is increased from 1.29 times greater than its current liability.current ration 1.8 2012 1. 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.8 .4 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.6 2010 0.2 1. As in 2011 company increase from 1.7 2011 1.27 to 1.27 which is a big increase.29% this shows that company is effectively utilizing its resources and is relying on retained profit for growth expenses. Quick Ration = current assets – stocks/current liabilities Quick ratio of nishat textile 2013 1.1 to 1. In 2013 company current ratio is 1.3 current ration 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. 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.22 2012 0. 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.25 2011 0. Cash Ratios The cash ratio is most commonly used as a measure of company liquidity.7 and in 2011 it was 1.5 0 2013 2012 2011 2010 INTERPRETATION Quick ratio of 1.6 and in 2010 they were low.80 means that a company has 1. But in comparison of last 3 years they are performing well this time.5 quick ratios 1 0. As in 2012 it was 1. (investopedia) Cash ratios = cash/current liabilities Cash ratio of nishat textile 2013 0.quick ratios 2 1.28 2010 0. It can therefore determine if. the company can repay its short-term debt. 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. and how quickly.39 . (williams) Calculated as: .28 in 2011 and in 2012 it was 0.39 in 2010 then it dropped to 0.2 0 2013 2012 2011 2010 INTERPRETATION: In 2013 nishat textile is on 0.25 its going down by a large amount each year which will harm the liquidity position of the company. For most of these ratios. 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 0.6 cash ratios 0.4 0. (investopedia) Gross Profit Margin It is used to measure the profitability of the company’s products.22 which show that company is not having enough money to pay their short term liabilities. 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. 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.cash ratios 0. 11 2011 0.16 2010 0.15 0.Gross profit margin of nishat textile 2013 0. It means the company may reduce the selling price of its products by 16% without incurring any loss. Profit margin by lowering it cost over heads and manufacturing cost or lowering other expenses in order to increase this ratio.2 Gross profit margin 0.16 2012 0. The GP ratio is 16%.05 0 2013 2012 2011 2010 INTERPRETATION: In 2013 GP margin indicates better performance. In 2010 it was 2 which show better performance of the company as the higher the gross profit the better to perform.25 0.1 0.16 which was as much as in 2013. In 2012 they were low by 5% as it was too from previous year and it was difficult for them to maintain their expense. Operating profit margin: It is used to measure the management’s ability to control expenses is known as operating profit margin (williams) Calculated as: . In 2011 it was 0.2 Gross profit margin 0. 15 0.12 and in 2012 the company operations was not maintain as it was low from 2011 as in 2011 it was 0. In 2013 the operating profit of the company was 0.1 2012 0.16 operating profite margin 0. 2013 is in better position than in 2012 which was 0.07 2010 0.03 2011 0.2 operating profite margin 0.17 2012 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.07 .15 Net profit margin: An indicator of management’s ability to control costs is known as net profit margin.1 0.15 2010 0.12 2011 0.17 which show that the company is making that much of sales from operations in 2013. (williams) Calculated As: Net profit margin=profit after taxation/sales Net profit of nishat textile 2013 0.Operating margin = OP/SALES Operating profit margin of nishat 2013 0. Solvency ratio These ratios are use to check whether the companies can pay off its long term liabilities or not. 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. In 2012 and in 2010 they were in better position.15 net profite margin 0.net profite margin 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. Debt ratio Percentage of assents financed by creditors indicates relative size of the equity position is debt ratio.1 0. (williams) Calculated As Debts ratio=Long term debts /capital Debt ratio of nishat textile . 5 0 2013 2012 2011 2010 Interpretation It is clear that the lower the debts equity ratio of a company the better can operate.6 and its shown that company was in better position to pay its long term liability through its current assets. Total debts ratio It is Indicator of a company’s ability to generate the cash necessary to meet its obligations.61 .3 debt to equity 2 1.6 2012 0.2013 0.59 2010 0.52 2012 0.5 2011 1. Company is managing its debt to equity ratio and can pay off its long term liability easily in 2013. In 2013 and in 2012 company is in better debt position and in 2012 the ratio was 0.67 2011 0.5 debt to equity 1 0.5 and in 3013 in was 0.7 2010 1. 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. (williams) Calculated as Total debts equity=total debts/capital 2013 0. In 2013 company’s total depts. That shows that they are good in paying their long and short term liability easily. To equity ratio is 0.67 that shows that company is in better position from last year.1 2010 2 .6 2011 2.52 it is low from 2012 which is 0. Interest coverage ratio Indicator of a company’s ability to meet its interest payment obligations (williams) Calculated as Operational profit/interest finance Interest coverage ratio of nishat 2013 3.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 it’s just it include the sum of all liabilities (long term + short term) so lower this ratio the better and effectively is the company performing.04 2012 1. (williams) Calculated as Days of inventory=365/inventory turn over .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. And in 2011 and 2010 it was alomost equal. Intertrest coverage is good by increasing. Indicates how quickly inventory sells. In 2012 the interest coverage ratio was so low which idicates that company can not covber its interest easily. (williams) Calculated as Inventory turn over=Cost of sales/average inventory Days of inventory Indicates in days how quickly inventory sells.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. 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. Calculated As Debtors turn over=sales/average.8 96 120 100 80 60 40 20 inventory days inventory turn over 0 Interpretation This shows that in 2013 company inventory turnover is 3.6 101 2012 6.2 68 2010 3. Calculated As . Debtors Days of debtors Indicates in days how quickly receivable are collected. Debtors turn over Indicates how quickly receivables are collected.6 with 101 days which show that company have 101 day to sell its inventory and in 2012 it was 6.3 57 2011 5.Inventory turn over & days of inventory of nishat 2013 3. Debt turn over on 2013 was 0. it was so good in 2012 there were 22 day.61 73 2012 3. Competitors of nishat textile mills 1.Days of debtors=365/Debtors turn over Debtor turn over & day of nishat 2013 0. Gull Ahmed 2. This show now they are having more days and it’s not stable.61 with 73 days which is good from 2012 which was 96 as now they can collect their receivable easily.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 it’s 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. TaTa . Kohinoor 3.2 96 2011 16. 72 0.29 and gul ahmed is 1.16 0.3 0.22 1.05 quick ratio is 1.01 which show that nishat is having more money on hand or in bank to pay its current liabilities.17 0. Cash ratio is nishat is 0. This shows that nishat textile is in good liquidity position they are good to pay of its liability through its current assets.11 2013 tata 0.1 2013 Gul ahmed 0.02 and Tata has 0. From Gul ahmed Kohinoor and Tata but gul ahmed is a bit far from nishat is nishat current ratio is 1.27 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. Nishat is having high ratio of current quick and cash.8 of nishat and gul ahmed is 0.94 0.01 1.29 1.1 0.Liquidity position of competitors and nishat nishat Years curren t Quick Cash Gul ahmed kohinoo r 2013 2013 2013 tata 201 3 1. quick ratio and cash ratio all are high from gulahmed. Gul ahmed is not so far away from nishat and it can compete nishat therefore nishat have to maintain liquidity position.01 Interpretation This table shows that nishat is on the top in their competitors as its current ratio.12 0. This shows that nishat is having high current assets and their competitors don’t have that much.8 0.01 and Kohinoor have 0. Kohinoor and Tata.16 0.15 0.02 1.73 .05 0.8 0.26 0.27 0. Profitability position of nishat and its competitors Year Gross profit Operating profit Net profit 201 nishat 3 0.22 and gul ahmed is 0.18 0.23 kohi 2013 noor 0. It shows that company has more capital and lesser value of long term debts. nishat debt to equity ratio is 0.13 0.84 Interpretation The lower the ratio the easier it is for the company to pay off its debts.04 1.5 2.5 0.03 2. For this nishat textile need to increase their sales and control their selling expenses.9 2013 0.83 3.4 1.73 which is more then nishat and gul ahmed 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. To compete gul ahmed.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. Now coming towards operating profit in operating profit gul ahmed is on top with 0. 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 2.94 ratio which shows that they have proper control on their expense and their sales are high then nishat.69 1.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 0.18 which is giving them higher gross profit.23 which is also high then nishat. . Net profit of Tata is 0. This show that costs of nishat is not maintained they have to control their costs. 04 and after nishat Tata is on next. For this purpose it’s 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. As Kohinoor is having lesser days which is 24 days it may be because of their price.9 192 2.6 101 3. So it’s important for nishat to maintain its TDE.64 100 11. 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. Gul ahmed is paying it in very short time than nishat.61 73 0. After nishat Tata is showing good total debt to equity ratio which is 0.1 42 2. So it will by more easy for Tata to recover its payments.3 32 14. So it’s important for nishat to decrease its price.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.4 132 8. 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.13 28 1.9 24 Interpretation Inventory turnover is that how a company can sell their inventory and in how much days so it’s important for that the company to sell it in less days. Debtors’ turnover shows that how quickly a company can pay its debts to the creditors.Total debt to equity of nishat is lower than its all competitors that is 0. Interest coverage ratio of nishat is high from all its competitors that is 3. 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. . as nishat is taking 73 days and gul ahmed is taking 28 days and Kohinoor is taking 192 days.01 121 7. 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 3.53 144 0.5 42 3.83. and what was agreed. including governmental entity. times.days sales in accounts receivable. you won’t receive payment on time. Working capital is the amount of current assets minus the amount of current liabilities as of specific date. 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. accounts receivable turnover ratio . and days sales in inventory. Debtors often use disputes or excuses to delay payment. They include the current ratio. on a daily basis if possible. There are several financial ratios that pertain to working capital. inventory turnover ratio. Keep meticulous records: Salespeople. If the sale happens early in the month that nearly doubles your debtor days. organization or other entity. phone or email including dates. a company can experience a cash shortage if its current assets are not turning to cash. These amounts are obtained from your company's balance sheet. Following the steps below will help you monitor your day to day progress. Ensure your business invoices customers when goods or services are sold. Even with a significant amount of working capital. and show you what you can and cannot afford. This will show you how to manage your money in order to avoid financial disaster. quick ratio.Working capital Working capital is a financial metric which represents operating liquidity available to a business. as emails are normally saved. How to manage working capital: Working Capital Management is as important as pooling together the financial resources to invest into a particular business. accountants and administrators need to record every communication whether by letter. Get paid – quickly: Many businesses invoice at the end of the month and offer a 30 day payment period. what was said. Working capital is the money allotted for day to operations and any debt that your company possesses. . Technology has made this process much easier. so if you only follow up when payment is due. Comment on a working capital of company for the previous three years: For calculating working capital of company we use this formula. it’s your responsibility to ensure that your company has enough capital to meet its liabilities.454.7191. You must take and share responsibility for the business decisions and internal processes that impact working capital. working capital=12396. 935.291 . If possible. 9920 2012: Current asset=12396. working capital=8068.291 Current liability=9. Working capital= current asset-current liability 2011: Current asset= Current liability= So. Manage inventory: Controlling stock effectively has a significant positive impact.9. Yet ultimately.703.050 . This lowers your costs while maximizing revenues. 921.116 . deal in consignment stock which can be held on your business premises but doesn’t need to be paid for until you sell it on. A successful sales team could have a negative effect on working capital if customers are offered discounts or extended credit terms.930 =7348. 112. 935.454.703. 891.116 Then. Secure good credit terms: Seek payment terms that at least match the terms you extend to your customers. as will properly planning and managing stock levels to accommodate peaks and troughs in demand. It’s also sensible to consider how you deal with customers who are also suppliers. Discount with care: Ensure your salespeople know the limits – and impacts – of what they can offer and don’t over-negotiate in order to close a sale. 05 It means Tata having poor financial report than our company. 174.710.60 Current liability=16488. 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. To manage the working capital of the company the current asset should be higher than current liability.436 Current liability=7.726 =2. working capital= 913809. The working capital of Kohinoor of current year is given below: Current asset=4339574 .436 . In this case our financial position is weak in current year. COMPARISON BETWEEN THE GIVEN COMPATITORS: The working capital of Gull Ahmed of current year is given below: Current asset=14205968 Current liability=13292159 So. Its means our company is going better than Gull Ahmed because of our higher current assets.370.65 So.895.102.524.622.724.=26933481.7.726 So.895. working capital=4958.622. working capital=9.370. 2013: Current asset=9.724. The working capital of TATA of current year is given below: Current asset=11530. 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. when you compare the discount rate factors charge against the interest rate banks charge. Walt Plant. The factor pays the debts and then collects the money. factoring is becoming more widespread. The factor pays 75 percent to 80 percent of the face value immediately and forwards the remainder (less the discount) when your customer pays. 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. it doesn't matter what the interest rate is. The idea that factoring is a last-ditch effort by companies about to go under is another misperception. Again Kohinoor is weak in financial position than our company.6257996 =1918422. they are more concerned about the customers' ability to pay than the client's financial status. Still. such as the clothing industry. Factors also provide services banks do not: They typically take over a significant portion of the accounting work for their clients. that's not always true. plenty of misperceptions about factoring remain. help with credit checks. regional manager with Altres Financial. factoring is the cash-management tool of choice for many companies. That means a company with creditworthy customers may be able to factor even if it can't qualify for a loan. going through extremely rapid growth. it does not create a liability on the balance sheet or encumber assets. Because factors extend credit not to their clients but to their clients' customers. And while factoring is considered one of the most expensive forms of financing. working capital = 4339574 . One of the oldest forms of business financing. Yes.Current liability=6257996 So. Factoring is not a loan. the client (you) makes a sale." Plant says you may be a candidate for factoring if your . Factoring is very common in certain industries. where long receivables are part of the business cycle. But if you can't qualify for a loan. It is the sale of an asset--in this case. the invoice. Once used mostly by large corporations. a national factoring firm based in Salt Lake City. delivers the product or service and generates an invoice. factoring costs more. says the opposite is true: "Most of the businesses we deal with are very much in an upward cycle. In a typical factoring arrangement. and generate financial reports to let you know where you stand. 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. In return. In domestic Factoring. Plant says the factor's role is to help clients make the transition to traditional financing. the Factor makes a cash advance and forwards a statement to the client. Maturity Factoring 4. Recourse Factoring 3. and has the financial resources you need. Factoring may provide the cash you need to fund growth or to take advantage of early-payment discounts suppliers offer. Full Factoring 2. Your banker may be able to refer you to a factor. Full Factoring . (fictoring. 2013) Different types of Domestic Factoring are as follows: 1.. Agency Factoring A. etc. the client sells goods and services to the customer and delivers the invoices. to the customer. Undisclosed Factoring 6. Shop around for someone who understands your industry. Factors are listed in the telephone directory and often advertise in industry trade publications. order. Domestic Factoring Factoring can be both domestic and for exports. etc.. can customize a service package for you. most companies factor for two years or less. to the Factor and informs the customer of the same. remittances. Advance Factoring 5. Factoring is a short-term solution. Invoice Discounting 7. Bulk Factoring 8. 2013) Types of Factoring The different types of Factoring are as follows: For International Trade 1. receipts. On receiving them the customer sends the payment to the Factor. The Factor then sends a copy of all the statements of accounts. (fictoring.company regularly generates commercial invoices and you could benefit from reducing the time receivables are outstanding. debt protection and customer information. the Factor provides advance at an agreed rate of interest to the client on uncollected and non-due receivables. Under this method. Debt collection is organized by the client who makes payment of each invoice to the Factor. under Recourse Factoring. all other basic characteristics of Factoring are present. 4. including collection. 3. 5. Under this arrangement.This is also known as "Without Recourse Factoring ". the client's liability to Factor is not discharged until the customer pays in full. Maturity Factoring It is also known as "Collection Factoring ". This type of service is offered in India. the customer is not notified about the arrangement between the client and the Factor. As discussed earlier. if advance payment had been received earlier. . and keep this Factoring arrangement confidential. The payment is effected to the client at the end of collection period or the day of collecting accounts whichever is earlier. 2. Advance Factoring This could be with or without recourse. In this method the client is a reputed company who would like to deal with its customers directly. collection. Recourse Factoring The Factoring provides all types of facilities except debt protection. the only facility provided by the Factor is finance. It is the most comprehensive type of facility offering all types of services namely finance sales ledger administration. Under this arrangement. This is only a pre-payment and not an advance. Hence the buyer is unaware of factoring arrangement. Invoice Discounting In this arrangement. except providing finance. International . Further. The risk involved in invoice discounting is much higher than in any other methods. This service is becoming quite popular in Europe and nearly one third of Factoring business comprises this facility. 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 the light of the above. On open account the exporter ships the goods without letter of credit or advance payment. he may be willing to export on ' Open Account ' basis. However. 7. When the exporter knows the importer well with repetitive transactions. Bulk Factoring It is a modified version of Involve discounting wherein notification of assignment of debts is given to the customers. 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. and from L/C's to open account sales. In many cases. The Factor has liberty to convert the facility by notifying all the clients to protect his interest. the exporter will be quite reluctant as he encounters a credit risk and hence invariably insists on L/C. international trade has slowly started moving from cash to credit. the documents fail to pass the grade which means the exporter has simply lost the security available to him under the L/C.if credit is extended (say 90 days since). Agency Factoring Under this arrangement. goods move very fast and hence if documents are held up in banks for processing. International Factoring Traditionally international trade is based on Letters of Credit. now-a-days.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. 6. In advanced countries bankers do not make much of a . it is credit risky for exporter . B. the client is subject to full recourse and he carries out his own administration and collection. Hence.The client collects payments from customer and hands it over to Factor. it causes delay and inconvenience to the importer. 2013) Types of International Factoring The following are the important types of International Factoring. . Single / Direct Factoring System In this system. (fictoring. Sharing of commission with the import Factor The functions of the Import Factor are: i. Export Factor in exporter's country and Import Factor in Importer's country. Two Factor Systems This is the most common system of international factoring and involves four parties i. The functions of the export Factor are: i. Follow-up with the Import Factor iv.e. Providing credit protection in case of financial inability on the part of any of the debtors 1. Maintaining the books of the exporter in respect of sales to the debtors in his country ii. book keeping and collection responsibilities remain with export Factor. Prepayment to the exporter iii. The client can choose any type of international factoring depending upon exporter .. Exporter. Collection of debts from the importer and remitting the proceeds to the exporter's Factor iii.client needs and his price bearing capacity. Whereas in Two Factor System. credit is provided by import Factor and pre-payment. Importer. Assessment of the financial strength of the exporter ii. a special agreement is signed between two Factoring companies for single Factoring.Factoring is a service which helps the exporter and importer to trade on open account terms. In this case. 2. The Factoring agreement is executed between the exporter and the import Factor.. As a rule. 3. The import Factor is responsible for sales ledger administration. used when suppliers are selling large volumes to a few debtors for which it is difficult to cover the credit risk in International Factoring. the lower the number. In other words. Back to Back Factoring It is a very specialized form of International Factoring. 4.e. Direct Export Factoring Here only one Factoring company is involved. collect receivables. the cash conversion cycle reflects the length of time it takes a company to sell inventory. the seller chooses to work directly with Factor of the importing country. collection of debts and providing bad debt protection up to the agreed level of risk cover. Pricing is lower when compared to Two Factor System. 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 . and pay its bills. all of which are expressed in days. 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).For this system to be effective there should be strong co-ordination and co-operation between two Factoring companies. the better. export Factor. Direct Import Factoring Under this system. 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 time—in days—that it takes for a company to convert resource inputs into cash flows. which provides all services including finance to the exporter. i. 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=22+68-45 =45 .Days of debtors = 73 Days of inventories = 101 Days of creditors = 42 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. Days of debtors=28 Days of inventories=121 Days of creditors=100 Then. 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=28+121-100 =49 Cash conversion cycle of Kohinoor: Current year. Cash conversion cycle=192+42-32 = 202 Cash conversion cycle of Tata: . The year 2011 shows the better progress than 2012 and 2013.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. Cash conversion cycle of Gull Ahmed: Current year. Days of debtors=192 Days of inventories=42 Days of creditors=32 Then. it means the performance of Gul ahmed is better than other companies. Cash conversion cycle= 132+144-24 = 252 Interpretation of competitors : Here when we compare our company with other three competitors gul ahmed . we analyze that the cash conversion cycle of nishat is more than Gul ahmed . Kohinoor and Tata . Days of debtors=132 Days of inventories=144 Days of creditors=24 Then. .Current year.