INTERNSHIP REPORT

ON
KYK & NESS PVT. Ltd.

Submitted To :Submitted by: -

SIR KHALID SAAD MASOOD GILL

M.COM(Finance)

SESSION 2009-2011

DEDICATED TO
The Holy Prophet Mohammad (PBUH) from where all systems and standards for quality can be downloaded directly, which are applicable everywhere; from daily life to the dynamically changing business environment & To My Dear Parents who taught the true meaning of life.

ACKNOWLEDGEMENT

The university of Faisalabad and its Management has played very vital role for the successful conduction of commerce discipline. Thanks to my respectable teachers who are motivating force to promote us and Honorable Mr. Babak Mahmood Head of Commerce department and respectable Teachers and whose kind and encouraging personalities inspired me to devote my time to get maximum practical knowledge within a specific span of time available for me in my study period.

TABLE OF CONTENTS

Sr.#
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. HISTORY Vision And Mission Statement Corporate objective Quality and ISO 9000 Quality control system Departments of the company Financial Management Policies KYK & NESS Products Ratios Analysis Common Size Analysis Index Analysis Pro forma Statement Capital Structure Working Capital Policy SWOT analysis PEST Analysis Out Comes Suggestions Conclusion

TITLE

Page #
5 6 7 7 8 10 25 26 32 38 40 41 44 45 47 50 52 53 54

HISTORY
Kyk & nesss Limited was established in 1984 by Chauhdary Nazir Ahmed which is located 32 km Sheikhupura road Faisalabad with its apparel Division located in center of city producing quality garments. KYK & NESS is the only textile in the Pakistan with latest computerized bar code system, which assures quality in every operation from spinning to packing. Products of each dept carry bar coded stickers which bear all the details and history of the operation of that product. Hence if any problem accurse one can trace back the root of the problem and enables to prevent the root cause of the problems in future. Besides this, Masood is one of the few textile mills of Pakistan which has in house Ginning, Spinning, Knitting, Fabric, Dyeing, Processing, Laundry and Apparel Manufacturing facilities. Masood has also a pride of work with the world best labels. The vertically integrated operations help as in achieving shorter lead times and greater flexibility to cater the demand of the customers. The approximate turn over per annum in us $ 30 Million. KYK & NESS is working yarn for producing from 1995 which 75 sewing machines at start and now has the 2000

sewing machines. In 1996 company management has made the plan to use its own production of value added products because of the slump in international and local yarn market. For implementation this plan company made heavy investment in 1997 for modernization and expansion of production facilities towards value added operations. For this purpose six dyeing machines were installed and further knitting dyeing and finishing machinery was being imported. Building was also constructed to install more stitching machines for producing value added products. The company believes that totality of these factors will make him distinguish qualified to stand as a symbol of elegance and quality and to gain more honor throughout.

VISION STATEMENT
A leading producer of textile products by providing the highest quality of products and services to its customers. To strive for excellence through commitment, integrity, honesty and team work.

MISSION STATEMENT
Our mission is to be a dynamic, profitable and growth oriented company by providing good return on investment to its shareholders and investors, quality products to its customers, a secured and friendly environment place of work to its employees and to project Pakistans image in the international market.

CORPORATE OBJECTIVES
1. Maximization of wealth of shareholders. 2. To increase market share. 3. To achieve customer satisfaction. 4. Making arrangements towards achieving total quail. 5. To get growth through professional management. 6. To reduce the cost of production up to minimum level. 7. To control the atmosphere by installation of latest machines.

QUALITY AND ISO 9000 IN MASOOD TEXTILE

Masood has ISO 9002 certification and the registration # 99086699. We have the logo of three accreditation bodies ANSI RAB USA, UKS UK. DAR/TAG Germany and the audits were conducted by MOODY. What is ISO (International Standards Organization) a world wide body that prepares and issues the standard? What is quality? Performance on the parameter or customer satisfaction is called quality. What is quality assurance? All actions necessary to ensure that a product and services will be satisfy all quality requirements and provide the consistency in the product. What is Total Quality Management (TQM)? A management approach based on the participation in the quality of every member of an organization to delight all customers.

QUALITY CONTROL SYSTEM AT MASOOD

There are quality checks at every stage of manufacturing starting from Raw Cotton , Yarn Fabric , Processing , Cutting , Stitching & Packing. Before the fabric is cut, it is checked whether it conforms to the customers standards of shrinkage, finished g/cm 2 etc. After each lot of fabric is cut, 100% cut parts inspection is conducted to ensure that only good quality pieces move to the stitching units. During the process of sewing, each and every process is inspected by in line inspectors. The inspectors make sure that only good parts move to the next stage. An individual tracking number is sewn inside each garment. After trimming and pressing of the garments, each garment is inspected by highly experienced final inspectors. The Quality assurance team monitors the performance of every individual inspector b picking up the inspected garments and checking the quality of these garments. To ensure that the garments are packed as per the requirements of our valued customers, we can even track & check, which ease the garments, has been packed in. With the help of this, we plan to achieve the Zero Defect Level.

Corrective and Preventative Action

Masood has a very strong corrective and preventative action plan. Masood has centralized the corrective action and controls the non-conformity arising in the system. If necessary the relevant person immediately takes the corrective action. For preventative action, the record is kept by the department head. Electronic records are kept by the Information Technology Department.

ISO & TQM

ISO department provides a management system at Masood, which is free of non-conformance. The department has training system that creates awareness of Total Quality Management System (TQM). All the departments and people at all involved in this program. Masood has a team of qualified and certified auditor who would check, improve and ensure the consistency in the system.

CALIBRATION
Masood has own calibration laboratory. Before using any instructions, they are calibrated as per the international standards.

DEPARTMENTS
9

Departmentalization is the arrangements of individual jobs and activities into groups and these groups are combined to form larger department and units to form the total organization. The Departmentalization in Masood Textile is very clear. These departments are production, marketing, finance, export, purchasing, administration and quality assurance. Except quality assurance, all departments are under the supervision of General Manager.

PRODUCTION DEPARTMENT
Production target is given to the production department by the top management after settling the customer demands and requirements. Then given target is fulfilled under the guidance of the factory manager. Production department is conducted and supervised under the guidance of factory manager production manager planning and production control and assistant quality managers work under the factory manager. Basic raw material for production department is fabric, which is issued by t he store on demand. When material is issued it is sent to the laboratory for testing purpose. When the Lab. Test the material and proves that material is according to the required standard. After Testing, material is sent to the cutting department. In cutting department the trained workers cut fabrics on the machines. While cutting the Fabric, customer orders and needs is kept under considerations. After cutting the Fabric all material is sent to the stitching department, when various workers sew it on heavy machines. It ever level, quality is checked by the Quality controller and finally checked by the quality assurance. If these products are sent to next department where products are packed in accordance with the customer demand. The quality audit instructions are not ignored in this respect.

SPINNING

10

Spinning is the process of combination of all processes which are involved in conversion of fiber into yarn. In textile when we say spinning then we mean to say about the final process in the transformation of fiber into yarn or thread. The object of spinning and of the processes that precede it is to transform the single fibers into a cohesive and workable continuous-length yarn. In spinning process the most important thing is fiber, which is the base of thread/yarn and thread/yarn is end product of spinning department.

"Assem b ly L in e"
Pa c kin g D e p a rtmen t A u to Co n e Rin g D ep a rtmen t Simp le x D ep a rtme n t Dra win g Fin is h e r Dra win g Brea ke r Ca rd in g Blo w Ro o m M ixin g H a ll C a rd e d F lo w C o m b ing F lo w Simp le x D ep a rtmen t D ra w in g Fin is h e r Co mb er La p Fo rma tio n

St a rt

Function & Operation of Spinning Section

11

Mixing Section

Mixing section is basically designed for the purpose of mixing different lots, because these lots are purchased from different regions and areas and contain different colors, shades and brightness ranges due to following factors, Moisture Weather Picking condition (manual or mechanical) Treatment during transportation

Objects of Mixing Hall

Cotton Opening Mixing Removing of foreign particulars like jute, and pieces of cloth etc

Blow Room
The cotton is received in blow room through condensers from the mixing section. In blow room this cotton is stocked for 12 to 16 hours for conditioning according to the temperature of blow room, in the form of layers horizontally and cut vertically which is very old method of mixing the cotton of different regions and characteristics. This process is called Sandwich Process and this way is Conventional way of mixing. All wastage extracted in the blow room is called trash.

Objects of Blow Room

12

 Mixing Opening (tuft to tuft) Cleaning (up to 60%) Lap Formation

Processing Flow of Blow Room

The major object of different processes in blow room revolves around mixing, opening, cleaning (wastage like cottonseed or bigger particles) and lap formation. Blow room consists of following flow of machines.

Bale Breaker

Multi Mixer

Fine Opener VO1

Axi Flow

MS Opener

Step Cleaner HR6

Fine Opener VO2

Distributor Blending Harper Feeder

RVK Opener

Skutcher

Carding Section

13

In carding section laps are converted into sliver. In carding machines laps are feeded and slivers are received as an end product in cans or boxes.

Object of Carding Section

Mixing Opening (fiber to fiber) Cleaning (about 99% of whole spinning process) Sliver Formation Drafting Elimination of Short fibers (about 1%) Sliver formation

14

Drawing Section
Drawing section consists of two sub-sections: i) ii) Breaker Drawing Finisher Drawing.

Drawing is a process in which different slivers are combined together to produce single sliver. Normally 8 slivers are feeded behind one drawing machine and get an end product in form of single sliver in cans or boxes, which has the same weight as of single sliver. The purpose of doing this is that to create uniformity and average out the weight of each sliver. This process is also called 8/8 process

Objects of Drawing (Breaker) Uniformity Parallelization Orientation Dust removal

Combing Section

15

In this process short fibers are removed and wastage of combing is called Comber Noil 20% of lap is extracted or removed in the form of Comber Noil during combing process. Combs are feeded in comber machine to do this process. Lap received from lap former is its input while its end product or its output is sliver, which is called here comber sliver.

Objects of Combing Section

Removal of Short Fiber Doubling Sliver formation

Simplex Section

16

Finisher sliver is input of simplex machine while roving is its end product. Roving is a big bobbin having refined sliver (in the form of package) but thin and slim than sliver. In this process, twisting is done on roving. Here the twist per inch (TPI) is approximately 1.004. Roving is further used in Ring Department for making of small bobbins after that making of cones. One package normally contains 3,000 meters roving.

Objects of Simplex Machine

Drafting Twisting Package formation (conversion in roving from sliver)

17

Ring Section
In ring section, final spinning process starts. Here in this section roving from simplex section is turned into fine & sophisticated yarn of different counts. Pulling effect makes counts. Spindle is a smaller tapering rod; the rotation of which gives the twist and around which the thread is wound as it is twisted. (There are 14,400 spindles in KYK & NESS) These bobbins are further sent to the Auto Winder or Auto Cones department, where cones are made from them.

Objects of Ring Section

Drafting Twisting Package formation (conversion in bobbins from roving)

Packing Section
Finally cones are sent to packing section where these cones are thoroughly examined under ultra violet lights. Contamination is checked after that cones are kept in the temperature of packing hall for 24 hours for conditioning. Then these cones are packed in cartoons, after wrapping in pollythane bags. 24 cones are packed in one cartoon.

18

KNITTING
Knitting is a process of making fabric by interlacing of the loops, instead of two sets of yarns crossing each other in weaving. The single knitting yarn is looped through itself to make a chain of stitches. These chains or rows are connected side by side to produce knitted fabric Knitting is derived from the knot and in the process of knitting we knot the yarn in a specific way that fabric is made. Complex fabric forming technique in which, a continuous yarn is interloped to form a cloth. Needles are used to create each loop and drawn it through a previously formed loop. Thus developing a cloth from a series of inter linked chainlike stitches. The knit stitches that occur in vertical columns are called Wales, and those in horizontal rows are called courses.

Types of Knitting:
Basically knitting is of two types. 1- Circular Knitting 2- Flat Knitting In circular knitting developed fabric is in tubular form and has no open width in both sides, while in flat knitting fabric is in flat form rather than tubular form. In flat knitting developed fabric has particular open width. Both types of knitting have further two more types. 1- Single Knit 2- Double Knit

19

Knitting Faults
Knitting faults are those faults that occurred during knitting process of fabric and these are mentioned under, Oil Spots Jersey Trim (Heavy yarn) Jersey Trim (Thin yarn) Cut & Holes (Due to bad needle) Lint Hole Jersey 100% Cotton knot hole Jersey rundown broken needle Press off end out Barriness Fluff knit Lycra short Yarn short Feeder tight (Tension problem/direct yarn feeding)

20

DYEING
Dyeing is a process in which textile raw material is completely immersed in dye liquor. In simple words dye is a process in which colors are shifted into textile raw material. Printing is a process in which pigments or dyes are fixed on the fabric with the help of suitable binders. In printing dyes are fixed on the fabric but in dyeing, fabric is immersed or dip in liquor dyes. In KYK & NESS for completion of dyeing certain sections are performing different functions these are from lot making of fabric to getting finished fabric. Some major functions are, Lot Section Dyeing Section Finishing Section Quality, Final Inspection & Packing Section Laboratory (Lab. Section)

Types of Dyeing
There are basically three types of dyeing, Reactive Dyeing Sulfur Dyeing Disperse Dyeing Two other processes are also done separately with dyeing process, these process are, Optical White 21

 Washing

FINANCE DEPARTMENT
Finance department has major hold in Kyk & nesss. This department plays an important role in any project investment, product analysis and its budgeting. This department also performs investment decisions and asset management decision functions. How the working capital managed. How debt is used in asset management. How and when the liabilities are to be paid. What are the achievements of the organization by implementing decisions? Past financial decisions are reviewed and imposed with new trends and requirements. The function performed by the finance department is to collect and raise funds with the varying demands of KYK & NESS. Funds are created through loans or by issuing share of the organization. This department also makes financial analysis; cash flow and profit and loss account finance department is headed by director finance manager is marked. Under there personnel, many subordinates are worked like account officers and assistant account officers.

22

MARKETING DEPARTMENT
Marketing managers who directly report to the general manager control the marketing department. The major responsibility of this department is to access the customers needs and wants and set the products according to the customers satisfaction. Products distribution and promotion are also the part of this department. This department plans for future market and maintain strategies for existing markets. This department remains always in struggle for attracting new customers. The merchandising department works in the following manner. Receive development sheet from production planning and control department. Pricing from concerned department. Development of new inquires. Proto/pattern development. Fabric development Lab dips development Salesman sample if required Size set in original fabric & color Pre production approval Imported accessories follow up Complete follow up & monitoring of purchase order start from yarn to shipment.

23

PURCHASE DEPARTMENT
The basic function of this department is to procure raw material for the organization. The marketing department sends the demand and requirement. But in this department assistant manager of quality assurance role cannot be neglected. Because quality required for the quality assurance personnel set out manufacturing and production department, purchasing department is liable to procure raw material according to given specification. This department is headed by the assistant management procurement. There are some junior positions that work under the assistant manager.

ADMINISTRATION DEPARTMENT
The admin manager is the head of this department. This department is helpful in creating the coordination among the personnel. It also integrates the activities running in the organization. If persons are required in any departments the admin department fulfills it.

QUALITY ASSURANCE DEPARTMENT

Quality assurance is controlled by A.M. quality assurance. This manages directly controlled reports to the CEO. That is the reason company is performing its activities in accordance with international standards for the satisfaction of the customers. In this regard company has got ISO- 9002 certificate on 30 September 1999 for apparel division of the company.

24

FIANCIAL MANAGEMENT POLICIES FINANCIAL INSTRUMENT & RISK MANAGEMENT POLICIES

The company issues financial instruments mainly to finance its operations. In additions financial instruments such as trade debts and trade creditors arise from the companys operations. The company finances its operations primarily by a mixture of issue share capital, retained profit, sponsor loans and long and short-term loans and liabilities. Company borrows funds is usually at fixed rate of interest. Overall risk rising from the companys financial instruments is limited.

INTEREST RATE RISK

Since the company borrows funds usually at fixed interest rates, the risk arising is minimal.

FOREIGN EXCHANGE RISK MANAGEMENT

Foreign currency risk on financial instruments, receivable or payables in foreign currency is also not material as trend of devaluation of Pak rupees on export based industry is positive.

CREDIT RISK
The company deals with most of regular and permanent customers who pay the instruments on due dates. Company considers the credit risk on normal.

FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The carrying values of all financial assets and liabilities reflected in the financial statements approximate at their fair value.

25

KYK & NESS PRODUCTS

Masoods Collection has a wide selection of quality garments including T-shirt, Polo shirts, Jogging suit, Henley shirt, Raglan shirt, and Tank top, Bikini, Shorts, Pants and Sleep wear. The products can be categorized in following formats:

YARN
Masood textile produces highest quality yarn to be bothered the core values of customers.

26

FABRICS
To pursue the highest quality in their vision Masood textile produces following types of fabric to be used in the production of garments.

Single Jersey Bird eye Jersey

Pop_corn_Pique Mesh Pique

Single Pique / pique Locast Rib Honey Combed pique Interlock

GARMENTS

27

Athletic
Our pro-cotton, blended and polar fabrics when stitched by our skilled hand, become a rich source of ease, flexibility and vigor

Sports Wear
Sports were never so entertaining. Our yarn dyed polos fashioned crew necks and pants have added more delight to the worlds of sports.

Active Wear
28

One can fine enough energy and more drive while wearing Masoods active wears.

Sleep Wear
Masoods defines sleep as pleasure, charm and fantasy and our products do reflect more than that

29

KYK & NESS CUSTOMERS

KYK & NESS strives to achieve rapid introduction of new and improved products by adopting a disciplined and customer focused approach to product development. We recognize the importance of keeping abreast of new concepts and technologies within our chosen product ranges and therefore, we are keen to work with customers who continually bring forward innovative and existing new concepts

Champion

Chaps Speedo

Tommy Hilfiger DockersTailor Tom Calvin Klein

Vantage

www.championusa www.polo.com .com GAP Hanes

www.cklien.com

www.dockers.com

JC penny

Levis

www.gap.com

www.hanes.com

www.jcpenny.co m

www.levis.com

Nautical

Polo

Polo R.L

Russell

www.nautica.com

www.polo.com

www.polo.com

www.russellcorp.c om

30

31

www.speedo.com

www.tomy.com

www.tomtailor.co m

www.vantageappare l.com

Sears

Jockey

Guess

Foot Locker

www.sears.com

www.jockey.com

www.guess.com

www.footlocker.co m

FINANCIAL ANALYSIS

32

Equity and Liabilties: Authorized Share Capital 30000000 ordinary share of Rs.10 each Issued,Subscribed and paid up capital 20000000 ordinary share of Rs. 10 each Fully Paid In Cash Revenue Reserve General Accumulated Profit/(Loss) Surplus on revaluation of operating Fixed Assets Deffered Income On Sale & Lease Back Of Operating F. Assets Non-Current Liabilities: Sponsor's Loan Interest free Redeemable Capital Lond Term Loan Liabilities Against Assets Subject to Finance Lease Deffered Liability For Gratuity

MASOOD TEXTILE MILLS LTD. BALANCE SHEET As At 30, September 2006, 2007, 2008 Rupees In Thousands 2006 2007 300,000 200,000 14,500 4,332 218,832 304,231 1,049 200,000 200,000 19,500 (85,988) 133,512 304,262 1,312

2008 200,000 160,000 19,500 (178,867) 633 307,952 -

105,332 240,750 67,529 22,266 435,877 59,789 511,449 259,025 5,616 32,172 4,692 459 873,202 1,833,191

131,903 240,750 15,728 15,813 404,194 34,089 422,773 256,149 5,975 34,237 4,692 315 758,230 1,601,510

30,000 158,500 240,750 3,541 12,530 445,321 42,828 446,081 153,906 4,529 18,565 315 666,224 1,420,130

Current Liabilities: Current Portion Of Long Term Liabilities Short Term Finances Creditors,Accrued And Other Liabilities Worker's Participation Fund Provision For Taxation Proposed Dividend To Minority shareholders Unclaimed Dividend Contingencies & Commitments

33

Assets: Non-Current Assets: Tangible Fixed Assets Operating Fixed Assets Assets subject to Finance Lease Capital work In Progress

MASOOD TEXTILE MILLS LTD. BALANCE SHEET As At 30, September 2006,2007,2008 Rupees In Thousands 2006 2007

2008

704,027 95,840 18,906 818,773 77,709 87,080 306,578 228,575 293,751 20,725 936,709 1,833,191

760,808 22,018 2,387 785,213 76,312 62,820 141,405 290,881 229,884 14,995 739,985 1,601,510

702,679 4,031 20,327 727,037 66,772 54,534 100,434 285,823 168,810 16,720 626,321 1,420,130

Long Term Advances , Deposits & Deffered Cost Current Assets: Stores & Spare Parts Stock-in-trade Trade Debts Advances,deposits,pre-payments & Other recievables Cash |& Bank Balance Total Assets

MASOOD TEXTILE MILLS LTD. PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED ON 30 SEPTEMBER 2006,2007,2008 Rupees In Thousands 2006 2007 Sales 1,248,409 1,737,435 Cost Of Goods Sold 973,520 1,344,972 Gross Profit 274,889 392,463 Administrative, Selling & General Expenses 135,191 199,955 Operating Profit 139,698 192,508 Other Income 2,429 2,724 EBIT 142,127 195,232 Financial Charges 51,555 76,014 Worker's Participation Fund 4,529 5,975 56,084 81,989 Profit Before Taxation 86,043 113,243 Provision For Taxation 16,564 15,672 Profit After Taxation 69,479 97,571 Previous Year's Loss Brought Forward (248,346) (178,867) Profit (Loss) Available For Appropriations (178,867) (81,296) Appropriations: Transferred From Revenue General Proposed Dividend To Minority (4,692) Shareholders (4,692) Accumulated Profit / (Loss) Carried TO Balance Sheet (178,867) (85,988) Earning Per Share 4.34 4.88

2008 1,642,469 1,237,458 405,011 212,639 192,372 1,820 194,192 82,064 5,616 87,680 106,512 16,500 90,012 (85,988) 4,024 5,000 (4,692) 308 4,332 4.50

34

R A T IO A N A L Y S IS L IQ U I D I T Y R A T I O S (I N T I M E S ) C u r r e n t R a t io : C u r r e n t A s s e t / C u r r e n t L ia b iliti e s 2006 0 .9 4 CO M M EN TS: C u r r e n t ra tio s h o w s th a t a s s e ts o f th e c o m p a n y a r e n o t i n a p o s i tio n to f u lf ill th e f in a n c ia l o b lig a t io n s it in c r e a s e d in th e n e x t y e a r b u t b e lo w th e s ta n d a r d in 2 0 0 8 it f u r th e r in c r e a s e d to 1 .0 7 w h ic h s h o w s th a t fir m 's a s s e ts c a n f u lf i ll th e f i n a n c ia l o b lig a t io n s o f th e b u s in e s s . C a s h r a tio : C a s h In H a n d / C u r r e n t L i a b ilitie s 2006 0 .0 2 4 CO M M EN TS: C a s h r a tio s h o w s th e m o s t re a d ily a v a ila b le f u n d s a v a ila b le to m e e t f in a n c i a l o b lig a ti o n s o f th e c o m p a n y . T h is r a tio is b e lo w th e s ta n d a r d s in th r e e y e a rs w h ic h is n o t a g o o d s ig n f o r t h e c o m p a n y . A c id T e s t R a tio : C u r r e n t A s s e ts -s to c k In T r a d e / C u r r e n t L ia b ilit ie s 2006 0 .6 2 CO M M EN TS: A c id te s ty r a ti o s h o w s t h e m o r e l iq u id p o s i tio n o f th e c o m p a n y . It is n o t m e e tin g th e r e q u ire m e n t o f th e c o m p a n y b u t in s a t is f a c to r y p o s it io n . L e v e r a g e R a t io s ( in t im e s ) : D e b t t o A s s e t R a t io : F ix e d A s s e ts / S h a r e h o ld e rs F u n d s 2006 0 .6 0 CO M M EN TS: D e b t to a s s e t r a ti o m e a n s th a t h o w m u c h a s s e ts a r e fin a n c e d b y th e b o r r o w in g in 2 0 0 7 1 :0 .6 4 th a t is v e r y h ig h p ro p o r tio n a s c o m p a r e to t o t a l a s s e t it m e a n 0 .6 4 tim e th e d e b t i s fi n a n c e d b y th e to ta l a s s e t o f th e c o m p a n y . T h is ra tio h a s in c r e a s in g t r e n d i n th e n e x t y e a r . D e b t t o e q u it y R a t io : T o ta l L o n g T e rm D e b t s / S h a r e h o ld e r s F u n d s 2006 5 .0 5 CO M M EN TS: D e b t to e q u it y ra tio s h o w s th a t h o w m u c h p r o p o r tio n o f d e b t in th e e q u ity o f th e c o m p a n y i n 2 0 0 6 it w a s 1 :5 .0 5 th e n r e d u c e in 2 0 0 7 to 4 .5 5 a n d th e n in c r e a s i n 2 0 0 8 u p to 1 : 5 .1 9 w h i c h s h o w s th a t t h e d e b t is g r e a te r th a n e q u ity w h i c h m a d e im p r o v e m e n t i n th e b u s in e s s a n d c a p i ta l s tr u c tu r e b e a c a u s e 6 0 :4 0 is d e s ir a b le in b u s in e s s m e a n t h a t 6 0 R s . F r o m b o r r o w i n g a n d 4 0 fr o m th e e q u ity o f th e o w n e r . 2007 4 .5 5 2008 5 .1 9 2007 0 .6 4 2008 0 .6 6 2007 0 .7 1 2008 0 .7 1 2007 0 .0 2 2008 0 .0 2 5 2007 0 .9 8 2008 1 .0 7

35

Coverage Ratio (in times): Interest Coverage Ratio: Net Profit Before Interest & Tax/ Fixed Interest Charges 2006 2007 2.00 COMMENTS: Interest coverge ratio is 1:2 in 2006 increased in 2007 and remain same in 2008. It means EBIT is fulfilling financial charges of the company 2 times in 2006 and 3 times in 2007 & 2008 which shows better position of the company. Cash coverage of interest ratio: 2006 3.00 COMMENTS: The cash coverage of interest ratio how many times the EBIT + Depreciation meet the financial charges of the company. This ratio trend is as 3:1 in 2006 next year remain same & in 2008 it increased upto which means the company can meet the financial charges 4 times in a period. Activity Ratio: Activity ratio shows that what are the firm's activities during the year means that how the firm used the asset in the operation of the business A/R turnover ratio (in times): Net Credit Sales / Av. Trade Debtors 2006 4.37 COMMENTS: In 2006 4.37 times the A/R are generated but this ratio increased in 2007 upto 5.97 and further increased in 2008 upto 7.19.It means the A/R in 2006 are converted into cash in 50.07 days that is very better for the company to collect from its customers. 2007 5.97 2008 7.19 2007 3.00 2008 4.00 3.00

2008 3.00

36

Inventory turnover (in times): Net Sales / Av. Inventory At Cost 2006 3.14 COMMENTS: The inventory turnover ratio show the ratio as in 2006 3.14.It increase in 2007 but decrease in 2008. That is a bad position for the company it means the inventory is 3.14 times converted into C.G.S after 114.6 days A/R turnover ratio (in days): No. Of Working Days/ Debtor's Turnover Ratio 2006 50.10 Inventory turnover (in days): Net sales / Av. Inventory At Selling Price 2006 114.60 Total asset turnover (in times): Net Sales / T.assets 2006 0.88 COMMENTS: Total asset turnover ratio is also improve in 2007 from 0.88 to 1.08 and reduced in 2008 to 0.90 as compare to 2007. It shows that how many times the sales are generated due to total assets.It shows the capacity of total assets and utilization of total assets. Profitability Ratio (in % age): Gross Profit Ratio: Gross Profit / Net Sales * 100 2006 22.02 COMMENTS: There is a increasing trend in the profitability of the firm as compare to previous years .G.P margin is 22.02 in 2006 increased in 2007 to 22.59 and in 2008 it increased to 24.66 which is high as compare to other years. 2007 22.59 2008 24.66 2007 1.08 2008 0.90 2007 54.63 2008 57.30 2007 6.59 2008 6.28

2007 60.27

2008 82.42

37

Net Profit Ratio: Net Profit After Tax / Net sales * 100 2006 5.48 COMMENTS: There is a little bit increase in this ratio from 2006 to 2008.The raeson for this may be the increase in sales with decreasing trend.As compare to previous year the operating expenses also increase and increase the financial charges that directly effect the net profit. 2007 5.62 2008 5.57

Return on investment (assets): Net Profit / Shareholders Fund * 100 2006 4.90 COMMENTS: Return on investment measures overall effectiveness in generating profit , assets , earning power of invested capital , this ratio increase in 2007 but decrease in 2008 from 6.09 to 4.9. the reason is simply that due to other investment reduce effective utilization of total assets. Return on equity: Net Profit After Tax - Preffered Dividend / Equity Share Capital * 100 2006 2007 38.71 COMMENTS: Return on equity also has increasing trend which shows that in 2006 it was 38.71 and increased in next years upto 41.13 which is a good sign for the company. 44.23 2008 41.13 2007 6.09 2008 4.90

38

Masood Textile Mills Limited Common Size Analysis Balance Sheet 2006 % Equity and Liabilities: Issued , Subscribed And Paid Up Capital Revenue Reserve Accumulated Profit/Loss Surplus On Revaluation On Fixed Assets Deferred Income In Sale Non Current Liabilities: Sponsor Loan Interest Free Redeemable Capital Long Term Loan Liabilities Against Assets F. Lease Deferred Liabilities For Gratuity Current Liabilities: Current Portion Of Long Term Liabilities Short Term Finances Creditors, Accrued And Other Liabilities Workers Participation Fund Provision For Taxation Proposed Dividend To Shareholder Unclaimed Dividend Total Assets: Non-Current Assets: Tangible Assets: Operating Fixed assets Assets Subject To Finance Lease Capital work in process Long term advances, deposits & deferred cost 11.00 1.37 12.60 21.68 -

2007 % 12.49 1.22 5.37 18.10 0.08

2008 % 16.36 0.79 0.24 16.60 0.06

2.11 11.00 17.00 0.25 0.88

8.00 17.00 0.98 0.99

6.00 17.00 3.68 1.21

3.02 31.41 10.84 0.32 1.31 0.02 100.00

2.13 26.39 15.99 0.37 2.14 0.29 0.02 100.00

3.26 27.89 44.13 0.31 1.75 0.25 0.02 100.00

49.48 0.28 1.43 4.70

47.50 1.37 0.15 4.76

38.40 5.23 1.03 4.24

Current Assets: Store & Spare Parts 3.84 Stock In Trade 7.07 Trade Debts 20.13 Advances , Deposits , Pre-payments & Other Recievables 11.89 Cash & Bank 1.18 Total Assets 100.00

3.92 8.83 18.16 14.35 0.94 100.00

4.75 16.72 12.47 16.02 1.13 100.00

39

MASOOD TEXTILE MILLS LIMITED PROFIT AND LOSS A/C COMMON SIZE ANALYSIS 2006 % Sales 100.00 Cost of good sold 75.34 Gross profit 24.66 Operating expenses 12.95 Operating profit 11.71 Other income 0.11 EBIT 11.82 Financial charges 5.00 Workers participation fund 0.34 Profit /Loss before taxation 6.48 Provision for taxation 1.00 Profit /Loss after taxation 5.48

2007 % 100.00 77.41 22.59 11.51 11.08 0.16 11.24 4.38 0.34 6.52 0.90 5.62

2008 % 100.00 77.98 22.02 10.83 11.19 0.19 11.38 4.13 0.36 6.89 1.33 5.57

40

MASOOD TEXTILE MILLS LIMITED INDEX ANALYSIS BALANCE SHEET 2006 % Equity and Liabilities: Issued subscribed and paid up capital Revenue reserve Accumulated Profit/Loss Surplus on revaluation on fixed assets Deferred income in sale Non Current Liabilities: Sponsor Loan Interest Free Redeemable capital Long term loan Liabilities against assets F. lease Deferred liabilities for gratuity Current Liabilities: Current portion of long term liabilities Short term finances Creditors, accrued and other liabilities Workers participation fund Provision for taxation Proposed dividend to share holder Unclaimed dividend Assets: Non-Current Assets: Tangible Assets: Operating fixed assets Assets subject to finance lease Capital work in process Long term advances, deposits & deferred cost Current Assets: Store and spare parts Stock in trade Trade debts Advances, deposits, prepayments & Other Recievables Cash and bank balance 125.00 74.36 (2.42) 98.79 -

2007 % 125.00 100.00 48.07 98.80 -

2008 % 100.00 100.00 100.00 100.00 -

66.46 100.00 1,907.06 177.70

98.80 114.29 444.17 126.20

100.00 100.00 100.00 100.00 100.00

139.60 114.65 168.30 124.00 173.29 145.71

79.60 94.77 166.43 131.93 184.42 100.00

100.00 100.00 100.00 100.00 100.00 100.00

100.19 2,377.57 93.01 116.38

108.27 546.22 11.74 114.29

100.00 100.00 100.00 100.00

159.68 305.25 79.97 174.01 123.95

115.19 140.79 101.77 136.18 89.68

100.00 100.00 100.00 100.00 100.00

41

MASOOD TEXTILE MILLS LIMITED PROFIT AND LOSS A/C INDEX ANALYSIS 2006 % Sales 131.56 Cost of Good Sold 127.11 Gross Profit 147.34 Operating Expenses 157.29 Operating Profit 137.71 Other Income 74.93 EBIT 136.63 Financial Charges 159.18 Workers Participation Fund 124.00 Profit /Loss Before Taxation 123.79 Provision For Taxation 99.61 Profit /Loss after Taxation 129.55

2007 % 139.17 138.16 142.77 147.91 137.80 112.14 137.36 147.44 131.93 131.61 94.61 140.43

2008 % 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00

MASOOD TEXTILE MILLS LIMITED PROJECTED STATEMENT OF PROFIT AND LOSS A/C Sales Cost Of Good Sold Gross Profit Operating Expenses Operating Profit Other Income EBIT Financial Charges Profit / Loss Before Taxation Provision For Taxation Profit / Loss After Taxation 2006 1,642,369 1,237,358 404,911 212,539 212,539 192,272 1,720 194,092 81,964 5,516 87,580

42

MASOOD TEXTILE MILLS LIMITED PROJECTED BALANCE SHEET AS AT SEPTEMBER 30, 2008 2006 Equity And Liabilities: Authorized Share Capital 30,000,000 Ordinary Shares Of Rupees 10 each Issued, Subscribed And Paid Up Capital 20,000,000 Ordinary Share Of Rs.10 each Fully Paid in Cash Revenue Reserve-General Accumulated Profit / (Loss) Surplus On Revaluation Of Operating Fixed Assets Deferred Income On Sale & Lease Back Of Operating F. Asstes Non current Liabilities: Sponsor's Loan Interest Free Redeemable Capital Long Term Loan Liabilities Against Assets Subject To Finance Lease Deferred Liability For Gratuity Current Liabilities: Current Portion Of Long Term Liabilities Short Term Finances Creditors, Accrued and Other Liabilities Worker's Participation Fund Provisison For Taxation Proposed Dividend To Minority Shareholders Unclaimed Dividend Contigencies & Commitments

4,50,000 2,00,000 10,782 4,550 2,15,332 3,04,200 839

84,113 240,750 489,935 31,353 8,4 6,151 204,864 618,,700 361,,926 5,278 30,232 4,692 669 1,126,361 2,592,883

43

MASOOD TEXTILE MILLS LIMITED PROJECTED BALANCE SHEET AS AT SEPTEMBER 30, 2003 2005 ASSETS: Non Current Assets: Tangible Fixed Assets: Operating fixed assets Assets subject to finance lease Capital work-in-progress Long Term Advances, Deposits and deferred cost CURRENT ASSETS: Stores and spare parts Stock-in-trade Trade debts Advances, deposits, prepayments and other receivables Cash & bank balance Total Assets NOTE: Projected Statement On The Basis Of Growth Formula As Given Below: FORMULA: Ending - Beginning / Beginning * 100 It shows how much change would be in next year

6,51,506 4,71,172 1,49,743 1,272,421 79,131 120,710 308,433 408,189 375,355 28,644 1,291,011 2,592,883

44

MASOOD TEXTILE MILLS LIMITED CAPITAL STRUCTURE AS AT SEPTEMBER 30, 2005 Rupees in Thousands 2007

EQUITY CAPITAL: Issued , Subscribed , And Paid Up Capital 20000000 Ordinary Shares Of Rs. 10 each fully paid up in cash Revenue reserve general Accumulated Profit / ( Loss) Total DEBT CAPITAL: Long Term Loan Liability Against Assets Subject To Finance Lease Defferred Liability For Gratuity Total Total Capital = Equity Capital + Debt Capital

200,000 14,500 4,332 218,832

240,750 67,529 22,266 330,545

The capital evaluation shows that the firm is using a mixed structure comprising of both the equity and debt. The proportion of debt is more than the equity its mean the firm focus on debt financing as compare to equity. The use of debt financing can increase the leverage of the business earning and the use of common stock has the least cost of financing.

45

WORKING CAPITAL POLICY

Important components of any firms structure include level of investment in current assets and the extent of current liability financing. The goal of short term financing management is to manage each of the firms current assets and current liabilities, to achieve a balance between profitability and risk that contribute to the firms value. Balance Sheet of Kyk & nesss limited. Shows that its current liabilities are less than current assets which shows that positive working in this case net working capital is the portion of firms fixed asset financed with current liabilities, current liabilities shows short term financing. A positive working capital shows that a business is using a Aggressive strategy to finance its both short and long term projects with the short term borrowing and short term financing this no doubt makes the operations of the business very riskily.

We see it with the help of ratios: CURRENT ASSETS TO TOTAL ASSETS RATIO
Years Current assets to total assets (in times) 2006 0.44 2007 0.46 2008 0.51

Comments:
In all three years ratios there is increasing trend which shows decrease in the profitability.

46

CURRENT LIABILITY TO TOTAL ASSETS

Years
Current liabilities to total assets (in times) 2006 4.70 2007 4.70 2008 4.80

Comments:
The ratio of current liability to total assets shows the percentage of total assets that has been financed with the total assets. The current liabilities to total assets use for the level of firms current liabilities effect on profitability. So this ratio is same as compare to three years. So there is no effect of profitability.

47

SWOT ANALYSIS
Managers of KYK & NESS always review the mission and goals and then they scan the internal and external environment to identify elements that influence the organization performance. determine such elements SWOT analysis is conducted. SWOT is a method that helps managers identify the organizational Strengths (S) Weakness (W) Opportunities (O) Threats (T). To

STRENGTHS
Latest machinery

The mill has latest machinery, which they have imported from foreign country to meet the international quality standards. ISO 9002 Certificate The company has got ISO 9002 certificate which insure the quality standards. High Financial Resources The company has high financial resources. Strong market image The company has strong market image in foreign market. The buyer can purchase same product from the competitor at low price but due to strong marker image they purchase from KYK & NESS.

48

Proven management KYK & NESS has proven management. All management is very competent. They know how to satisfy their customers. Products innovation abilities The management has product innovation abilities.

WEAKNESSES
Centralized management The management at KYK & NESS is centralized. All type of decisions is made at top level. Due to centralized delegation of power only managers have no authority to make decision. High cost of production The cost of production increased, such as material labor quota charges and other production accessories. Small international market share The KYK & NESS has small market share at international level. No motivated staff The staff is not properly motivated due to lake of incentives and less wages offered by the company. Less promotional activities The company has very less promotional activities in local an international media.

49

OPPORTUNITIES
Potential in market Entering new markets Addition new product line Faster market growth Potential in market

THREATS
Political instability in country Economic instability Though competition Adverse government policies Easy access of buyers in world markets New competitors inter in the market

50

PEST ANALYSIS
Every nation has unique features that must be understood. A nations readiness for different products and services depends on its Situation/PEST analysis. PEST analysis is a method that helps the manager to identify the nations: Political (P) Economic (E) Social (S) Technological (T)

POLITICAL
The political risk is a major factor, which effect the over all business performance. The political condition of our country is not satisfactory. Every government has its own policies. Every government deletes the policies of previous Government also is trying to implement new tax policies and other regulation to encourage the economy. When the political environment is not satisfactory, the foreign investors would not like to come and make investment due to which foreign investment would go down. So govt. should implement policies, which are benefited for local as well as foreign investors.

ECONOMIC
KYK & NESS is operating its business in present economy. The economic condition of this country is not up to mark. Heavy loans and increasing inflation rate make the business environment strict. Increasing inflation rate cause of production due to which our countries products well out at a high prices with low margin. But KYK & NESS is exporting its products in a very food way. Its sale is increasing year by year the company has overcome any difficulty which arises through economic hindrances by are some economic obstacles e.g. balances community in the country. 51

SOCIAL
In this environment, many processes can effect the organization like attitudes, values behavior and beliefs of people living in different areas. KYK & NESS is producing its products according to the varying demands and charging life style. So KYK & NESS examine the consumers indifferent countries think about and use certain products before planning making good efforts in producing those products. This matches the customer liking and buyers demand.

TECHNOLOGICAL
Technical achievement is very important tool to produce quality product KYK & NESS has imported machinery and equipment that is sufficient for meeting the customer changing demands. The development and application of advanced technology help this organization to compete in the global market place.The``1 KYK & NESS has injected funds to enhance the value added operations and also to modernize the existing production facilities to compete in the international market.

52

OUTCOMES AND SUGGESTIONS

OUTCOMES
1. There is not 100% stability in the organization relating to the order meeting. 2. The use of information technology is not proper. 3. There is somewhere influence of other departments to the IT department. 4. The marketing strategies are not so much satisfied. 5. There is a fluctuation in the working of the factory. 6. The IT department is doing some other jobs relating to the other departments. 7. The internal customers (employee) are not satisfied about their job 8. High turnover of employees (not retention).

53

SUGGESTIONS

1. The KYK & NESS should apply IT in the whole organization that interlock between the departments should be quickened. 2. The production units are not using computers. So that the IT department is responsible for the barcode tickets responsibility of unit in charges. 3. The organization including garment division, textile unit and head office should interlock through wide area network. 4. The organization should expand the span of production to meet the orders in time. 5. The company has to ensure the employees for their existence is the organization. 6. The entire department should be interlinked but independent for their working operations. 7. The promotion of the products may be taken place through web page or other electronic media. 8. The employees should be assigned jobs according to their qualification. 9. Control on the turnover of employees 10. Continuous improvement the total quality system. 11. To improve the policies of retention of employees.

54

CONCLUSIONS
Its a period of Globalization, any organization or institute who ignore the element of globalization automatically kick out from the market. Only those can be survived who compete this global market perfectly. There is a Survival of the fittest. So the Kyk & nesss has the opportunity to survive the global market because it has the better good will and positive earning per share it can capture all the global market. Kyk & nesss is also faces a tenor in which there is both opportunities and threats for it to be able and survive and growth. But many of the challenges that shall occur will be outside of the control of the Mills. However, this does not absolve the government of Pakistan and the local Textile industry from its responsibility to best deal with the climate both locally and internationally and prepare itself for even greater challenges Now there is need that the Govt. and industry realize that a sincere and positive approach has to be made to meet the challenges of the present day competition environment. In this regard adequate finance for capital investment, working capital and development of comprehensive longterm strategies and the stable government is needed.

55