Term Paper of Reliance Weaving Ltd
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Transcript of Term Paper of Reliance Weaving Ltd
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COMPANY NAME:
RELIANCE WEAVING MILLS LTD
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CONTENTS OF TERM PAPER:
PURPOSE OF TERM PAPER
HISTORICAL BACK GROUND
COMPANY INFORMATION
NATURE OF BUSINESS
DEPARTMENTS IN RELIANCE MILLS LTD
VISION STATEMENT
MISSION STATEMENT
FINANCIAL STATEMENTS
PROFIT AND LOSS STATEMENTS
CALCULATION OF RATIOS WITH GRAPHICALLY REPRESENTATION
CONCLUSION ON THE BASIS OF RATIO ANALYSIS
COMMENTS AND SUGGESSIONS
PURPOSE:
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The purpose of making term paper is to check and ratio analysis of companys financial statements .The
purpose of financial statement analysis is to make a quick assessment about a
firms financial situation .It is also used to identify the major strengths and
weaknesses of a business enterprise.
HISTORICAL BACK GROUND:
Reliance weaving Mills Ltd. (RWML) is part of the Fatima Group. Fatima Group established
RWML on April 17, 1990 as a public limited company and obtained certificate for
commencement of business on May 14, 1990.
Following are the companies included in the FATIMAGROUP:
Sr. # Company Name FATIMA SUGAR MILLS
LTD.
1. RELIANCE WEAVING MILLS LTD.
2. RELIANCE COTTON PVT. LTD.
3. RELIANCE COMMODITIES PVT. LTD.
4. RELIANCE EXPORT LTD.
5. RELIANCE FIBRES LTD.
6. FATIMA FERTILIZER COMPANY LTD.
7. FAZAL CLOTH MILLS LTD.
8. AHMED FINE TEXTILE MILLS LTD9. FATIMA SUGAR MILLS LTD
COMPANY INFORMATION:
The reliance mills ltd is situated in Multan .Authorized capital of RWML at the time of
incorporation was Rs.250 million and presently RWML has authorized and paid up capital of
Rs.700million which has gradually increased and at present subscribed share capital of company
stands at Rs.308109370, listed at Karachi and Lahore Stock Exchanges and also inducted into
Central Depository Company (C.D.C). The company has issued 1st tranche of Term FinanceCertificate (TFCs) of Rs. million in February 2002, which has been fully subscribed.
These TFCs are listed at Karachi Stock Exchange and has also been declared as eligible
security in C.D.C.
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NATURE OF BUSINESS:
The principal business of the Company is manufacture and sale of cotton yarn and grey
woven fabric. RWML production capacity consists of two main segments, Weaving and
Spinning; both are ISO-9002 Certified for its quality. Today Reliance weaving Mills
Limited is the 3rd largest weaving mill in Pakistan with modern and technologically
advanced grieve weaving plant. The weaving units are situated at Multan and the
Spinning unit at Rawalpindi.
. DEPARTMENT S IN RELIANCE MILLS LTD:
Administration Department
Accounts Department
Production department
VISION STATEMENT:
The company is interested to install complete textile finishing plant including bleaching, dyeing,
mercerizing, calendaring, folding, printing plant in the existing weaving units at Multan to make
it a complete composite unit, which can explore local and international market of high value
products. The company would keep its emp0hasis on product and market diversification, values
addition and cost effectiveness. We want to fully equip the company to play a meaningful role
on the sustainable basis in the economic development of the country.
MISSION STATEMENT:
The mission of the company is to operate state of the art textile plants capable of
producing yarn and fabrics.
CALCULATION OF
RATIOS
LIQUIDITY RATIOS:
The firm ability to satisfy its short term obligation as they come due.
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CURRENT RATIO :A measure of liquidity calculated by firms current assets by its current liabilities. Its formula is
given below:
Current ratio = Current assetsCurrent liabilities
Years 2005 2006 2007 2008
Current ratio 0.92 0.94 0.82 0.84
Conclusion :
The above ratios show that the current ratio is increasing from 2005 to 2006 and after 2006 it isdecreasing. In 2007 it is increasing as compared to 2006 which shows that the firm is in betterliquidity position in 2007 as compared to previous year .the good current ratio is 1 0r greaterthan 1.
ACID TEST RATIO :
A measure of liquidity calculated by firms current assets minus inventories by its current
liabilities. Its formula is given below:
Acid test ratio = Current assets - Inventories
Current liabilities
years 2005 2006 2007 2008
Acid test ratio 0.37 0.35 0.31 0.30
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It provides an assessment of how investors view the firms performance. Its formula is givenbelow
Market/ book ratio = Market price per share of common stock
Book price per share of common stock
years 2005 2006 2007 2008
Market/ book ratio 0.9 0.76 0.71 0.50
Conclusion :
The higher the market /book ratio the greater the investor confidence so market /book ratio
ratio is declining from 2005 to 2008 .
PROFITABILITY RATIOS:
The efficiency of the firm can be analyzed through its profits.
GROSS PROFIT RATIO (%) :
It measures the percentage of each sales dollar remaining after the firm has paid for its goods. Its
formula is given below:
Gross profit margin= sales- cost of good sold = Gross profit Sales
years 2005 2006 2007 2008
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Gross profit ratio
(%)
12.51 13.53 10.19 9.11
Conclusion:
The firms gross profit margin is increasing 2005 to 2006 which indicates that the firm is
growing. But in 2007 and 2008 it shows decreasing trend so it may be loss in future
NET PROFIT RATIO (%):
It measures the percentage of each sales dollar remaining after the cost and expenses, includinginterest and preferred stock dividend its formula is given below:
Net profit margin= = Earning available for common stock holder
Sales
years 2005 2006 2007 2008
Net profit ratio
(%)
4.66 3.96 0.94 (2.90)
Conclusion:
The firms net profit margin is good 2005 and after 2006 it indicates that the firm is decreasingso in 2008 there is loss
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EARNING PER SHARE :The firm earning per share is generally of interest to present or prospective share holders andmanagement. It formula is
Earning per share = Earning available for common stock holder
Number of shares of common stock outstanding
years 2005 2006 2007 2008
Earning per share 3.89 5.01 1.04 (3.26)
Conclusion:
The firms EPS from 2005 to 2007 is not very high but still positive but in2008 EPS is very negative because net income decreasing very rapidly. Si itgives an alarm of companys bad condition
ACTIVITY RATIOS:It measures the speed with which various accounts are converted into sales or cash inflows orout flows.
INVENTORY TURNOVER RATIO :It measures the activity or liquidity, of a firms inventory .It is calculated by dividing sales byinventory
Inventory turnover ratio = salesInventory
years 2005 2006 2007 2008
Inventory 2.85 3.72 4.02 2.98
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turnover(Times)
Conclusion:
The inventory turnover ratio is low in 2005 as compare to next years but in 2008 it is less ascompared to 2006 and 2007 so it shows company less inventory turn over ratio in 2008
FIXED ASSET TURNOVER RATIO :
It is calculated by dividing sales by fixed assets
Fixed asset turnover ratio = salesTotal fixed assets
years 2005 2006 2007 2008
fixed asset turnover 1.80 1.98 1.83 1.87
Conclusion:
This ratio shows how the firm is using fixed assets to generate sales. The firm fixed assets ratiois increasing 2005 t0 2006 which indicates the firm is using its fixed assets efficiently. But in2007 it is declining as compared to 2006 and in 2008 it shows increasing trend .
TOTAL ASSET TURNOVER :
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It indicates the efficiency with which the firm uses its asset to generate sales. It is calculated bydividing sales by total assets.
Total asset turnover ratio = salesTotal assets
years 2005 2006 2007 2008
Net profit ratio
(%)
4.66 3.96 0.94 (2.90)
Conclusion:
This ratio shows how the firm is using total assets to generate sales. The firm fixed assets ratio
is good in 2005 after 2006 which indicates the firm is using its total assets not efficiently
CONCLUSION OF ALL RATIOS :
The firm liquidity ratios in all years less than 1. But still it is positive and there no consistency incurrent ratio and acid test ratio but from last year I conclude that firm liquidity ratio isdecreasing so it is not good for investors and firm.
The firm market ratios is positive in 2005 to 2007 but in 2008 it is going to negative so this isnot competing in market so it is not better signal for firm to achieve their target
The firm profitability ratio is also declining from 2005 to 2007 but in 2008 it is totally negative
so this thing shows that firms operating cost and cost is very high as compare to its sales.
The firm activity ratio is also declining from previous years so it shows that firm do not use itassets efficiently thats why firm bearing loss which is shown in 2008 income statements
COMMENTS AND SUGGESSIONS :
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