Internship Report

(2015)

Internship Report
Bachelor of Business Administration Program

Syed Danial Shah Hashmi

11-ARID-1228
Finance
0324-5182999
Danialhashmi123@outlook.com
Universtity Institute of Management Sciences
University of Arid Agriculture Rawalpindi

Company Name: Koh-i-Noor Spinning Mill( Chakwal Group of Industries)

0543-644281
Aminabad Chakwal

Start date for internship: 04-08-2014

End date for internship: 13-09-2014

Report Date: 13-02-2015

Syed Danial Hashmi; 2015

Evaluation

Syed Danial Hashmi

Completed internship at

Kohinoor Spinning Mill (Chakwal group of Industries)

Internship report submitted for the Final Evaluation in

Partial Fulfillment of the requirements for the degree of

Bachelors in Business Administration

It is certified that, the Internship report and the work contained in it conforms to all the
standards set by the institute for the evaluation of any such work

1.

2.

3.

University Institute of Management Sciences

University of Arid Agriculture, Rawalpindi
(2015)
Internship Report on KSM

Dedication

Dedicated to the ray of Hope

which died without brighting the heart…..

3
Syed Danial Hashmi; 2015
Acknowledgments

First of all, I am thankful to the GOD who blessed me with life and send me to this earth. I
would take this page as an opportunity to thank many people and give them acknowledgement in
my life. I would thank my parents who brought me to this world. I am Thankful to my mom who
made me what I am today. I would say Thank you Mom.

I must acknowledge my class teacher of Nursery class Ms. Khair un Nissa (Late) who taught me
how to write A, B, C so that I am able to write this report today. I would like to say Thank you
Ma’am, May her soul rest in Peace.

I must say thank to all the teachers of UIMS. They are all very helpful to students especially I
would thank (irrespective of whatever grade I get) Sir Ali Bajwa and Sir Ammar Asghar who
helped me a lot during this internship and guided me. I must also say thank to Sir Osman who
has always been kind to me and always guided me. All these three persons motivated me and
guided me during my stay at university. I say to all of you Thank you Sirs’.

I am thankful to my Uncle Mr. Khalid Awan who used his public name to be my referral for
internship at Kohinoor Mill. Thank you UNCLE. I would thank all the staff of Kohinoor
especially the G.M. Taimoor Sultan I.T department incharge Mr. Nayyer.

How can I forget my friends in Chakwal who supported me during my stay at Chakwal. I would
also thank all my friends in university. Thank you Guys for the love.

I pray that everyone attached to me lives happily and also pray that may I get success in my
future life.
Internship Report on KSM
Table of Content

Executive Summary ........................................................................................................................ 6

Part-1 Introduction......................................................................................................................... 7
1.1 Breif History…………………………………………………………………………………………………………………………8
1.2 Vision and Mission……………………………………………………………………………………………………………..10
1.3 Quality policy……………………………………………………………………………………………………………………..10
1.4 Company Information ............................................................................................................. 11
Part-2 Business Operations
2.1 organizational structure……………………………………………………………………………………………………..13
2.2 business process………………………………………………………………………………………………………………..14
2.3 PEST Analysis……………………………………………………………………………………………………………………..15

2.4 Comparative Balance Sheet and Income Statement for year 2012 &2013………………………….16

2.5 Common size Analysis………………………………………………………………………………………………………..20

2.6 Ratio Analysis…………………………………………………………………………………………………………………….23

2.7Industry Analysis…………………………………………………………………………………………………………………31

2.8. SWOT Analysis ....................................................................................................................... 33

Part-3 Work Description ...................................................................................................... 35
Part-4 Analysis…………………………………………………………………………………………………………………….40
Part-5 Conclusion…………………………………………………………………………………………………………………42
APPENDIX-A ...................................................................................................................................46

Executive Summary

5
Syed Danial Hashmi; 2015
As per Degree requirement to complete BBA(Fin.) Program at “ Arid Agriculture University
Rawalpindi”, I completed my Internship Program at “Kohinoor Spinning Mills Limited”. The
internship was of six regular weeks. The knowledge I gained from this internship will surely help
me in my practical life.

I worked in different departments of the mill (Stores, Accounts, Payroll, and Exercise) and
learned many things. My basic concern while working in the organization was to see whether the
concepts I was taught in the last 3 years match the reality or not? Whether the tools and
techniques I had studied in my degree the same in organization or was there a gap? I tried to
analyze these things in this report.

I learnt a lot from this time taking effort. This was first experience to interact with different types
of people in a work setting, to see emotions and feelings of the laborers and to manage all this.
How processes are actually done in the industry.

As per requirement, at the end of internship, I was required to submit a report at university. I
made this report with all my efforts by using what I learnt from this experience and in my
courses.

This report covers a series of areas that I took in an analytical way. Major portion of this report
has been devoted to work description and analysis of business processes especially in financial
perspective. Efforts were to explore the gap between literature and actual work practices in
industry. Analysis is done to see the performance of the company.
Internship Report on KSM

PART-1

INTRODUCTION

1.1 Breif History of the organization

1.2 Mission and Vision
1.3 Quality Policy
1.4 Company Information

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Syed Danial Hashmi; 2015
Name of company: Kohinoor Mills (Pvt) Ltd. (Chakwal Group of Industries)

Number of Employees: 2600

Company Website URL: http://www.Chakwalgroup.com

Year Established: 1974

Business Type: Manufacturer

Product/Services: Thread

Chakwal group of industries came to existence in 1965 with a trading house. It established its
first spinning mill in Chakwal and the production was started in 1974. Further expansion in yarn
spinning leads the firm to be the one of largest yarn producers in Pakistan. Expansions kept on
going with in the value addition through establishment of weaving division, Followed by knit
fabric projects. Chakwal group worked on the diversification strategy and ventured into cement,
PSF and a commercial bank1.

The philosophy of chakwal group is that success lies in specialization, diversification and
satisfaction of costumers. Customer satisfaction is the focus of the company.

The textile operations of Chakwal group started with the establishment of Kohinoor Spinning
Mill unit 1 in 1974. After which Chakwal group expanded its operations in the textile
manufacturing and had entered other sectors too. Chakwal group currently has 6 spinning mills
that is comprised of 160,000 spindles. It also has one weaving unit with 160 wide and narrow
width looms.

The most of the manufacturing technology and innovative ideas come from Europe, USA, China
and Japan. The firm’s focus is on the principal crop of the region i.e. cotton. The mill purchase
cotton locally and supplement its products by providing its customers with imported fiber from
the world best crops.

The group works with specialized fibers by bringing the newest innovations from major fiber and
chemical producers, and the manufacturing from yarn to finished fabric is done in the mills in
Pakistan. The group has formed synergy with offshore garment manufacturing companies.

1
Platinum Bank
Internship Report on KSM
On the other hand, the group has also entered the farming fields by investing in live stock and
agriculture. At present the group has housed 20000 chicks for poultry. The supply is being
produced under clean and European standard environment. The group has established Yousaf
dairies which are involved in producing organic milk and organic dairy products from 600
animals.

On the side of Agriculture, about 15000 acres of land is devoted for the production of wheat,
oranges, peanuts, olives and firm is also experimenting in growing cotton in the Chakwal area.
From the very beginning, Chakwal group is producing low cost good quality PVC shoes 2 for the
general public. Recently the Group has invested in making EVA raison. By the name KMJ, the
group is also producing EVA shoes by using its own raw material.

Kohinoor spinning mill:

Kohinoor was the first company established by Chakwal group in 1974. It currently has 3 units.
Unit 1 & 2 are located at Aminabad and unit 3 at Bhoun road. The group has currently around
160,000 spindles, Kohinoor spinning mill is a flagship company of the group comprising of
80,000 spindles, distributed into three separate units that are tailored to make specialized yarn.
Every unit has has its own in house doubling and is capable of producing 75 tons of cotton and
blended yarn per day.

The technique of ring spinning is used for yarn production as it is suitable for both knitting and
weaving. The company also uses long stapled American, Egyptian and US Pima cotton for fine
counts. The mill possess an in house state of art cotton and yarn testing labortaries this shows
the company’s strong belief in product development and innovation. In order to control
contamination in spinning, devices like Vision Shield/ Loptex at blow room stage.

2
Naveed Industry

9
Syed Danial Hashmi; 2015
Mission and Vision of Chakwal Group:

The mission and vision of CGI is to build flexible manufacturing units and to cater with growing
global demands, maintaining a lead position in its businesses. At the same time, to keep their
values based on good business ethics. The firm aspires to serve the country and helps in building
a bright future for millions of Pakistanis. The organization strives to achieve the premier
benchmarks of excellence and quality in the services the company provides to the costumers and
to improve constantly its operations and services. To become competitive and costumer focused
organization with continuing commitment to excellence and standards. Doing all this but not at
the cost of forgetting the society but to meet social and cultural obligations, being patriotic and
conscientious corporate citizen.

Quality Policy:

All the companies of Chakwal group of Industries are ISO certified for export quality yarn. The
group has been one of the biggest yarn exporters of the country for the past forty years. In the
local market, the company sells its yarn to well-reputed companies like Nishat and Sapphire. To
maintain the quality the company has established world class laboratories at its factories, where
daily testing of yarn and other raw materials take place. The group believes in correcting the
mistakes before the product is delivered to the costumer. As customer satisfaction from quality is
what the group strives for.
Internship Report on KSM
Company Information:

Board of Directors:

1. Mr. Mohammad Naveed

2. Khawaja Mohammad Jawed
3. Khawaja Mohammad Jahangir
4. Khawaja Mohammad Tanveer
5. Khawaja Mohammad Kaleem
6. Khawaja Mohammad Nadeem
7. Mr. Mohammad Hamza Yousaf

Internal Audit Committee:

 Khawaja Mohammad Jahangir (Chairman)

 Khawaja Mohammad Kaleem (Member)
 Khawaja Mohammad Nadeem (Member)

HR & REMUNERATION COMMITTEE

 Khawaja Mohammad Kaleem (Chairman)

 Khawaja Mohammad Nadeem (Member)
 Mr. Mohammad Naveed (Member)

CEO:

 Mr. Muhammad Naveed

Corporate Secretray:

 Mr. Muhammad Jahangir Khan

CHIEF FINANCIAL OFFICER

 Mr. Muhammad Saeed Zafar

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Syed Danial Hashmi; 2015
BANKERS

 Habib Metro Bank Limited

 MCB Bank Limited
 National Bank of Pakistan
 Standard Chartered Bank (Pakistan)Limited
 Allied Bank of Pakistan
 Meezan Bank Limited
 Askari Bank Limited

AUDITOR
Aslam Malik & Co.
Chartered Accountants
Suite # 18-19,Ist Floor,
Central Plaza, Civic Centre,
New Garden Town, Lahore. Pakistan

CORPORATE & REGISTERED OFFICE

7/1-E-3 Main Boulevard Gulberg III, Lahore
Tel : (042) 35717510
Fax : (042) 35755760

SHARE REGISTRARS
Corp link (Pvt) Limited
Wings Arcade, 1-K, Commercial,
Model Town, Lahore
Tel : (042) 35839182
Fax : (042) 35869037

MILLS
Unit I &II
Aminabad, Chakwal
Tel : (0543) 644254 - 644281
Unit III
Yousaf Nagar, Bhoun Road,
Chakwal.
Tel: (0543)452070-7
Internship Report on KSM

PART-2

Business Operations

2.1. Organizational structure

2.2. Business Process

2.3. PEST Analysis

2.4. Porter Five Forces Analysis

2.5. Comparative Balance Sheet and Income Statement for year 2012 &2013

2.6. Common size Analysis

2.6. Ratio Analysis

2.7. Industry Analysis

2.8. SWOT Analysis

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Syed Danial Hashmi; 2015

2.1. Organizational Structure:

Board of Directors

CFO Corporate
Secratery
CEO

Internal Audit HR Commitee

Committee
GM’S

GM unit 1 &2 GM unit 3

Manager
Admin&HR

MANAGE
R IT

Manager Accounts

Manager
Payroll

Manager Stores
and Spares
Internship Report on KSM
2.2. Business Process:

The mill is involved in spinning. Spinninig is the process by which yarn is produced. Here, at
Kohinoor, the ring spinning is used which follows the following process:

Plucking

Removal of unwanted trash from

fiber mix

Carding

Straitening and cleaning of cotton fiber

Drawing

Silver is bended, reduce thickness

of silver by drafting

Comber

Removal of short length

fiber

Simplex

Reduce thickness of spinning

Ring Cones

Insertion of twist into parallel fibers Transfer yarn from multi ring to
by means of rotating spindles one cone of standardized weight

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Syed Danial Hashmi; 2015
2.3. PEST Analysis:

PEST analysis checks the external environment in which the company operates. There are 4
main components of it, they are:

Political Environment:

Political environment has a strong pressure on the business of Kohinoor. Pakistan is a country
where there is no political stability. The government and the laws& regulations changes so
quickly. The presence of terrorism is another major factor that can easily effect the costumer’s
interest to invest or purchase from Pakistan because there is always a political risk involved in
transacting with Pakistan. That is why a large customer base of west has shifted its demand to
other countries like in the region i.e. India and Bangladesh.

Economical Environment:

Pakistan is suffering inflationary trends. Inflation has a direct relation with the sales of the
products. Although the conditions have got a bit stability but that too is uncertain. This
environment obviously influences the mill. The increasing inflation rate can cause an increase in
per unit cost of production. Low cost is a major signal in purchase behavior. This can easily
enable costumer to shift their demand to other countries as they are able to produce same quality
good at low cost. Fluctuations in exchange rate are another important factor. As the firm is
exchanged in foreign trade, the unexpected dollar movements are a major threat for the firm.

Socio-Culture Environment:

Social culture keeps on changing. The perception of people of the other countries about the
people of Pakistan e.g. that we can adopt the health and quality standards creates a negative
impact on Pakistani products abroad.

Technological Environment:

In the modern world, technology is an important thing for every organization to be competitive.
As a sign of good gesture, Kohinoor is using the advanced technology. New machinery is
available in mills as soon as deemed necessary. Effective Information System is also being used
by the company.
Internship Report on KSM

2.5.1 Comparative Balance Sheet for 2012& 20133

Liabilities and Owner Equity 2012 2013

SHARE CAPITAL AND

RESERVES
Authorised Capital 650000000 650000000
130,000,000 (2012 - 130,000,000) ordinary shares
of Rupees 5/- each (2012 Rupees 5/- each)
Issued, subscribed and paid up capital 650000000 650000000
130,000,000 (2012 - 130,000,000) ordinary shares
of Rupees 5/- each (2012 Rupees 5/- each)
Accumulated Profit 395401268 130639714
1045401268 780639714

Sub-ordinated loan from directors 397000000 397000000

NON-CURRENT LIABILITIES
Long term loan 7142852 57142852
Liabilities against assets subject to 27885024 21135672
finance lease
Supplier's credit 73897607 138855120
Deferred liabilities 65202009 61913471
Total non current liabilities 174127492 279047115
CURRENT LIABILITIES
Trade and other payables 410536348 226764714
Accrued Interest on loans and 47972996 46227892
borrowings
Short-term borrowings 1503481637 1104340002
Current portion of non current liabilities 135920068 121843886
Provision for taxation 4696724 3563648
CONTINGENCIES AND . .
COMMITMENTS
Total current liabilities 2102607773 1502740142

Total Liabilities 2276735265 1781787257

Total Shareholder equity and 3719136533 2959426971

Liabilities

3
Data from Annual report of the company, re compiled by using MS Excel

17
Syed Danial Hashmi; 2015

2013 2012
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 1566318684 1,538,351,388
Long term loans 14129464 6964494
Long term deposits 10561342 10561342
Long term investment 1081079 795009

CURRENT ASSETS
Stores and spares 96834992 51646753
Stock-in-trade 1581737100 1105978071
Trade debts 321608182 147622898
Loans and advances 55202829 49972399
Trade deposits and other 62078097 41104835
receivable
Cash and bank balances 9584765 6429782
total current assets 2127045965 1402754738

total assets 3719136534 2,959,426,971

Internship Report on KSM
2.5.2. Statement of Comprehensive Income for the year 2012 & 20134:

2013 2012

Sales - net 6230120498 5627854703

Cost of sales 5371749035 5064140290
GROSS PROFIT 858371463 563714413
OPERATING EXPENSES
Distribution Cost 135385672 88668159
Administrative 149249715 91811304
284635387 180479463
OPERATING PROFIT 573736076 383234950

Finance cost 238489249 227552849

Other operating expenses 28422803 8906780
Other operating income 2870017 9153498
264042035 227306131
PROFIT BEFORE 309694041 155928819
TAXATION
TAXATION 44170086 49525355
PROFIT AFTER 265523955 106403464
TAXATION
EARNINGS PER SHARE - BASIC & 2.04 0.82
DILUTED

4
Data from Annual report of the company, re compiled by using MS Excel

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Syed Danial Hashmi; 2015
2.6.1. Common sized balance sheet

Liabilities and Owner

Equity

SHARE CAPITAL AND RESERVES

Authorised Capital 21.96371
130,000,000 (2012 - 130,000,000) ordinary shares
of Rupees 5/- each (2012 Rupees 5/- each)
Issued, subscribed and paid up capital 17.47717 21.96371
130,000,000 (2012 - 130,000,000) ordinary shares
of Rupees 5/- each (2012 Rupees 5/- each)
Accumulated 10.63153 4.414358
Profit
20.98981 26.37807

Sub-ordinated loan from directors 13.41476

NON-CURRENT
LIABILITIES
Long term loan 0.192057 1.930876
Liabilities against assets subject to 0.749771 0.714181
finance lease
Supplier's credit 1.986956 4.69196
Deferred liabilities 1.753149 2.092076
Total non current liabilities 4.681933 9.429093
CURRENT LIABILITIES
Trade and other payables 11.03849 7.662453
Accrued Interest on loans and borrowings 1.289896 1.562056
Short-term borrowings 40.42556 50.80313
Current portion of non current liabilities 3.654614 4.117145
Provision for taxation 0.126285 0.120417
CONTINGENCIES AND
COMMITMENTS
Total current liabilities 56.53484 50.77808

Total Liabilities 61.21677 60.20717

Total Shareholder equity and Liabilities 100 100

Internship Report on KSM

2013 2012
ASSETS
NON CURRENT ASSETS
Property, plant and equipment 42.11512 51.98139
Long term loans 0.379912 0.235333
Long term deposits 0.283973 0.356871
Long term investment 0.029068 0.026864

CURRENT ASSETS
Stores and spares 2.603696 1.745161
Stock-in-trade 42.52969 37.37136
Trade debts 8.647388 4.988226
Loans and advances 1.484292 1.688584
Trade deposits and other 1.669153 1.388946
receivable
Cash and bank balances 0.257715 0.217264
total current assets 57.19193 47.39954

total assets 100 100

Above is Common sized Balance Sheet that is summarizing all the particulars relative to the total
assets. Current assets are almost 57% as compared to Total assets, so as current liabilities 56%,
this can be seen too in the ratio analysis.

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Syed Danial Hashmi; 2015

2.6.2. COMMON SIZED INCOME STATEMENT

2013 2012

Sales - net 100 100

Cost of sales 86.22223 89.98349
GROSS PROFIT 13.77777 10.01651
OPERATING EXPENSES
Distribution Cost 2.173083 1.575523
Administrative 2.395615 1.631373
4.568698 3.206896
OPERATING 9.209069 6.80961
PROFIT

Finance cost 3.828004 4.043332

Other operating expenses 0.456216 0.158262
Other operating income 0.046067 0.162646
4.238153 4.038948
PROFIT BEFORE 4.970916 2.770662
TAXATION
TAXATION 0.708976 0.880004
PROFIT AFTER 4.261939 1.890658
TAXATION
EARNINGS PER SHARE - BASIC &
DILUTED

Above is common sized income statement that sees every particular of the statement relative to
the net sales. CGS is the highest in this case too. Above 80% as compared to the net sales.
Internship Report on KSM
2.7. Ratio Analysis5
2.7.1. Internal Liquidity Analysis:

Current ratio:

Current ratio measures the relationship between current assets and current liabilities. Current
ratio of company is calculated below:

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑠𝑡𝑠
Current Ratio = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2013: =1.011623

2012: =0.9334646

The ratio shows that company has PKR 1.011 of current assets to meet its short term liability of
worth rupee 1. Although, the ratio has shown improved from 2012 but still this is not good in
terms of results and will further be analyzed and seen in perspective of industry averages.

Quick ratio:

This ratio relates firm’s ability to meet its short term liabilities w2ith highly liquid assets that are
free from a heavy bulk of inventory.
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑠𝑡𝑠−𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
Quick Ratio= 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2013: 0.2132941

2012: 0.163122

Quick ratio is very bad. It is showing that the company has only 0.2 PKR of highly liquid assets
to meet a short term liability of PKR.1. It also indicates that company has a large inventory and
major portion of current assets is of inventory.

5
All of the calculations were done in MS Excel

23
Syed Danial Hashmi; 2015
Cash Ratio:

It is most conservative liquidity ratio. It relates firm’s cash and marketable securities to current
liabilities. It is calculated below:
𝐶𝑎𝑠ℎ+𝑀𝑎𝑟𝑘𝑒𝑡𝑎𝑏𝑙𝑒 𝑠𝑒𝑐𝑢𝑟𝑖𝑡𝑖𝑒𝑠
Cash Ratio= 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

2013: 0.0340828

2012: 0.031632

This ratio is indicating a poor performance of company, clearly showing that company has a
minimal of cash to offset its current liabilities. On the other hand, if comparison is made, it has
also shown progress from 2012.

Receivables turnover ratio:

In addition to examine total liquid assets, it is also useful to analyze the liquidity of accounts
receivables by checking how many times the receivables are turned over (realized)
𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
Receivable Turnover=𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑟𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒𝑠6

2013: =120.75874 times

2012: =136.9147 times

It is a very good figure indicating that receivables are turned over almost 121 times of Sales.
However, the figure was much more attractive in 2012.

Recieveable turnover in days:

We can also see the number of days it takes a firm to realize its receivables.

365
RTD= 𝑅𝑇

2013 =3.0225555 days

2012: =2.6658941 days

This indicates that receivables are realized after 3 days in 2013 but as compared to 2012 it has
decreased by a day.

6
Average rather than ending balance of recievables: 62078097+41104835/2
Internship Report on KSM
Inventory Turnover:

Inventory turnover measures the how many times inventory has been turned over or sold out. It
is a measure to check liquidity of inventory.
𝐶𝐺𝑆
Inventory Turnover7= 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

2013: =3.78799441 times

2012: =4.57887948 times

it shows that inventory is sold out almost 4 times a year. This is not a good figure and shows that
firm has to maintain inventory for a long period which will eventually also result in increased
holding cost. On comparison, this ratio has decreased from previous year.

Inventory turnover days:

Measures in how many days the inventory is sold.

365
ITD= 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟

2013: =96.3570587 days

2012: =79.7138256 days

Company has to wait almost 96 days for its inventory to be sold out. This is not a good number
at all. KSM has to find some measures to reduce this.

Payable turnover Ratio:

It measures in how many days the firm pays back its payables.

𝐶𝐺𝑆
Payable Turnover Ratio= 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠

2013 =16.857807 times

2012: =22.3321354times

In a year company is able to pay its payables almost 17 times but this was much better in 2012.
From a lender’s perspective this can be a serious question.

7
Average amount of Inventory:

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Syed Danial Hashmi; 2015
Payables turnover (days):

365
Payable turnover (days)= 𝑃𝑎𝑦𝑎𝑏𝑙𝑒𝑠 𝑅𝑎𝑡𝑖𝑜

2013: =21.65169 days

2012: =16.3441603days

It took almost 22 days for firm to pay back its debts. This ratio is increased from 2012 and can be
a serious concern from lenders perspective.

Cash Conversion Cycle:

Cash Conversion Cycle is a useful measure of internal liquidity. It uses information from
receivables, inventory and payables.

𝐶. 𝐶. 𝐶 = 𝑅𝑒𝑐𝑖𝑒𝑣𝑎𝑏𝑙𝑒 𝑐𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑜𝑛 𝑑𝑎𝑦 + 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑝𝑟𝑜𝑐𝑒𝑠𝑠𝑖𝑛𝑔 𝐷𝑎𝑦𝑠

− 𝑝𝑎𝑦𝑎𝑏𝑙𝑒𝑠 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑

C.C.C= 3+96-22=77days

Although, receivables and payables have good figures, but because of inventory period the Cash
Conversion is greater in days.

Operating Performance Analysis:

Operating performance ratios can be divided into two sub categories:

 Operating efficiency ratios

 Operating profitability ratios

Operating Efficiency Analysis:

It examines how management uses its assets and capital, measured by dollars of sales generated
by various assets or capital categories.

Total Asset Turnover:

It measures relative efficiency of total assets to generate sales.

𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
TATO= 𝐴𝑣𝑔.𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
Internship Report on KSM
2013: =1.86570675 times

2012: = 1.90167041 times

This ratio must be compared with the whole industry as it varies from industry to industry. And
this is done latterly in industry analysis section.

Net Fixed Assets Turnover:

It reflects firm’s utilization of fixed assets. It is computed as:

𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
Fixed Asset Turnover= 𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑁𝑒𝑡 𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
2013: =3.913169652

2012: =3.615311293

Operating Profitability:

The two main facets of profitability are:

 Profit margin
 Return on capital employed

Gross profit margin:

Gross profit is calculated by subtracting the CGS from sales and it is computed as:

𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
Gross profit margin = 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

2013: =13.777767%
2012: =10.0165%

This indicates an increase in gross profit margin in 2013 as compared with 2012. However, it
would be useful to compare this ratio with the average industry.

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Syed Danial Hashmi; 2015
Operating Profit Margin:

This ratio relates EBIT to Sales and is computed as:

𝐸𝐵𝐼𝑇
Operating Profit Margin=
𝑆𝐴𝐿𝐸𝑆

2013: =9.2091%
2012: =6.8096%

An increase in Operating profit is evident from this ratio. This ratio must also be seen in
comparison of the industry

Net Profit Margin:

This ratio relates the net profit/ net income (income after taxes) to the net credit sales. This can
be computed as:

𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
Net Profit Margin= 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠

2013: =4.2619%

2012: =1.8907%

It is good to know that firm has managed well here too in 2013 And the net profit as a percentage
of sales although just 4% but has been increased if compared with 2012.

Return on total capital Invested:

This ratio relates firm’s earnings to all the invested capital involved in the company. It can be
calculated as:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒+𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒
ROCE= 𝐴𝑣𝑔.𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
2013: =0.482124

2012: =0.427798

Firm has earned almost 4.8% of all investments been made by the shareholders.
Internship Report on KSM

Return On Equity:

This ratio is of extreme importance for the share holders as it indicates the rate of return
management has gained by investing the capital provided by the share holders. It can be
calculated as:
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
ROE= 𝑆𝐻𝐸

2013: =0.25399238

2012: =0.13630291

Return on equity remained close to 2.5%. it has shown an increase over time evident from 2012’s
figure i.e. 1.36%. This ratio will also be seen when comparison will be made with industry.

Return on Assets:

This ratio measures the return on the total assets. It can be calculated by the formula:
𝑛𝐸𝑇 𝐼𝑛𝑐𝑜𝑚𝑒
ROA= 𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠

2013: =7.1394%

2012: =3.5954%

A good increase in ROA can be seen from the figures. There is almost an increase of 3.5% in
ROA as compared with last year. However, for further elaboration, it will be seen with industry
averages.

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Syed Danial Hashmi; 2015

Leverage Analysis:

Debt Leverage:

This ratio indicates the extent to which debt financing is used relative to equity financing. This
can be measured as:
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑏𝑡
Debt Leverage= 𝑆𝐻𝐸

2013: =1.6047514

2012: =1.7721198

Interest Coverage:

This ratio tells how many times interest is earned. It can be calculated by:

𝐸𝐵𝐼𝑇
Interest Coverage=𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐸𝑥𝑝𝑒𝑛𝑠𝑒

2013: =2.40571044 times

2012: =1.684158 times

This shows that company is able to earn interest 2.4 times. This ratio is also showing an increase
from 2012.
Internship Report on KSM

Industry Analysis:
Some of major ratios are selected here and are compared and analyzed with the whole industry
average.

Mean Industry Company

Financial Ratios 8Averages 2013 2013 2012
1.011623
Current Ratio 0.98 0.9334646
Days to Sell Inventory 55.18 96.3570587 79.7138256
Collection Period 71.81 3.0225555 2.6658941
Asset Turnover 0.41 1.86570675 1.90167041
Debt Leverage 1.27 1.6047514 1.7721198
Gearing 0.86 0.74 0.67
Gross Margin (%) 7.14 13.777767 10.0165
Operating Profit Margin (%) 5.33 9.2091 6.8096
Net Profit Margin (%) 1.96 4.2619 1.8907
Return on Assets (%) 2.06 7.1394 3.5954
Return on Equity (%) 17.91 2.5399238 1.3630291
Earnings per Share (Rs.) 3.49 2.04 0.82

Now let’s analyze these figures. If we see current ratio, it wasn’t looking good independently but
if seen in context of the whole industry, the firm has done better as the ratio is more than the
industry average.

As identified earlier, the firm is performing poorly in its inventory turnover and can be seen that
it is much more than the average. This is weakness of the organization.

The firm is performing well in case of collection of receivables and assets turnover. The margin
of firm is also high than industry indicating a good profitability of firm.

8
Source: VISTA Plus Database by Vital Information Services ) as identified by JCR-VIS
SECTOR UPDATE Textile Industry

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Syed Danial Hashmi; 2015
2.4. Porter five forces Analysis (Competitive Analysis) :

Michel porter identified five different kinds of forces. These forces are analyzed for Kohinoor
mill as under:

Threat of new entrants:

There is always a threat that new entrants can come with new technology. There is minimal
number of financial barriers to the entry in the industry. However, shortfall of gas and electricity
now-a-days is a challenge to entry in this industry. On the other hand, a large number of existing
firms do make it difficult for others to enter.

Threats of substitutes:

There is no threat of substitute for the firm because other spinning mills are offering the same
products. Even, in the near future, nothing can replace the cotton or yarn.

Bargaining power of buyers:

As there are so many industries in the sector that are offering the same kind of product, So, the
bargaining power of costumers is very high. Because if costumer feels that he can get the same
quality good at low price he will shift his buying function to that producer.

Bargaining power of suppliers:

As in the case of buyers, here too, because of presence of too many suppliers of raw materials,
bargaining power lies in hands of the firms and for supplier this power is very low.

Existing Rivalry:

As stated earlier, there are too many firms operating in this (textile) sector. Because of this fact,
there exists a fierce competition among these firms.
Internship Report on KSM
SWOT Analysis:
Strengths:

Kohinoor is one of the oldest industries in the area. The major strength is its name in the market.
Some strength is summarized below:

 Highly skilled and trained labor which know what to do and how to do it.
 Biometric system of attendance (entry and exit)
 Workers benefit programs
 Availability of excellent and new machinery. The mill is equip[ped with modernized
machines and machines are upgraded as soon as new model came.
 Iso certifications. Especially ISO9001 quality certified
 Working in the market where cheap labor is available
 Already Engaged in foreign trade and export goods to counties like USA, Canada, Korea
 An effiecient information system
 Presence of centralized system that connects all mills to the head office of chakwal group
of industries
 An increasing profit despite of the bad market conditions.
 An increasing EPS and DPS.
 A high current ratio and good liquidity
 High profit margin.
 Excellent treatment of scrap
 Excellent receivable ratio, showing that receivables are converted back into cash within
almost 4 days
 The firm is performing well in case of profitability margins and turnovers if compared
with the industry
 Independence from load shedding of gas

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Syed Danial Hashmi; 2015
Weakness:

As analysis of statements showed that CGS is about 80% of the net Sales, which means that
despite of the fact that sales are high, a large number of amount from sales shows cost of
manufacturing these goods.

Inventory turnover is very high and is of 96 days meaning company has to wait 96 days for its
inventory to be sold out. The consequence of this can be seen in cash cycle. Where inventory
turnover is clearly enlarging the time period.

One general manager is controlling too many departments that can cause lower productivity.

Opportunities and Threats

Lowering prices of Petrol has created an opportunity for to firm to perform well as it doesn’t
manufacture by consuming Gas but is working on electricity and the power shut down can be
reduced as the cost of using generators has been decreased. The falling prices of US Dollar have
also created an opportunity for Kohinoor to expand its existing international trade. At the same
time this hap hazardous movement of USD against PKR can be a threat for the mill. It is
important that a great care must be given while making any new forward or future contract.
Obviously the mill has threat from international market especially the mills of India, Bangladesh
and Sri Lanka. These industries have edge of low cost labor and material. Governmental controls
would remain to be a treat for the company. In a very similar pattern, the imposition of quotas on
import of cotton from Pakistan by international community would also be a threat.
Internship Report on KSM

PART-3

Work Description

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Syed Danial Hashmi; 2015

It was so Kind of the General Manager Mr. Sultan who helped me out and assigned I.T
department in charge Mr. Nayyer to check me out and send me to different departments. The
different departments in which I worked were:

 Stores & Spares

 Inventory (Excise)
 Payroll

For convinence of report writing, the work will be divided according to the work performed in
different departments instead of weeks.

A company wide information system developed in Oracle is used. All the units and mills are
connected to the head office in Lahore and are connected with head office via that system. Every
department updates the information and sends it to head quarter on daily basis.

Stores Department:

Store department deals with issuance of materials and also deals with the handling of spare parts.
Here in this department my job was to sit there and check the process that how demand orders
are made etc, in the last days I also made demand order to headquarter via software.

Here, as soon as the demand is generated by the department, the clerk of that department sends a
written departmental demand order to the store office, store office in turn, creates a demand by
using software and sends that demand request to head office. Head office generates a purchase
order, by this purchase order a goods receipt note is generated. This note is then issued and
requisition is made, after which it’s up to the department to accept or reject that item. Items are
rejected if not found proper, up to the demand.

Although, the process looks so simple, but it is complex indeed. The presence of the software
helps a lot in making the process simple. The department also deals with the spare parts of the
machinery. As soon as department makes demand for machinery or spare part of that machinery
the stores and spares department deals with the situation. The department is also connected with
all other departments and machinery lab and to the I.T office via network server.
Internship Report on KSM

I found this department to be the busiest department of all departments in the mill off course
after production department. The workforce seems too stressful and it is recommended to give
them breaks and motivate them. I see a lack of motivation in the work force, a strong top-down
hirerical management style which is not a good sign for the quality aspect of the organization.
Lack of employee motivation and employee involvement are also not a good sign. Stress
obviously can lead to job dissatisfaction and which in turn as indicated by literature will lead to
the turnover.

To my knowledge, the work done is according to what we studied in our course of “Cost
Accounting”. I felt happy seeing that theory is applicable in the practical work. The process is
almost same what we studied in the “Demand requisition” portion of the subject.

Excise:

Excise department deals with raw material demand of the spinning section. As it is a spinning
mill, the raw material required is cotton and the finished product is thread. Excise department
deals with this inventory. There are three kinds of inventory in the mill; the raw material
inventory, the processing inventory and the finished goods inventory.

As soon as the raw material demand is made by the department to the excise office, the office
issues the material required by the production department. This demand is made on daily basis
and raw material also comes on daily basis. The department also forecasts the demand of daily
requirements and checks the error after production reports come. The production report is also
made on daily basis by the production department.

Excise department also makes reports on daily basis to check how much was there in raw
material, how much is used and how many bales are left. It also deals with finished goods
inventory. As soon as the goods are finished it is told to the head quarter.

Although the people there were unfamiliar from the name but the department is using the
Japanese approach of “Just in Time” and orders for raw material as soon as it is required. A
minimal stock is maintained in the mill. By this mill is trying to avoid its storage cost.

The department is also dealing with the scrap. Every morning the proceeds of no use are loaded
in trucks and are send for disposal to the safe places. For the rest, the same accounting
procedures are used as learnt in the course. Sometimes, if seen feasible rework is done and if not
seen feasible scrap is sold at the time when it would be profitable, let say a week or a month. A
proper bidding process is used for this treatment.

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Syed Danial Hashmi; 2015
Again to my utmost happiest feelings the work done in the department was the same as learnt in
the course. I must appreciate the people of the department who as compared to the work force of
other departments are collaborative and involved in their jobs. I tried to produce production
report sample but due to company’s secrecy I can’t disclose that.

Payroll Department:

Payroll department maintains the payroll of the employees. There are workers who are at daily
wages and then there are also employees working on fixed salary. The department maintains a
complete database of the employees’ data by using the same software and updates the data on
daily basis. In fact, the data about the employee’s salary is automatically updated by the
attendance system.

When an employee (whatever rank he/she has) enters the organization, he has to show his
identity card in front of a reader, that reader after identifying the employee asks the employee for
finger impressions after which the entry time of that employee is saved automatically. The very
same procedure is adopted at the time of exit of employee from the firm.

There are 2600 employees working in the mill. The minimum wage is 10,000 PKR. An
employee is allowed 10 paid leaves during a year. All the employees of the mill are getting social
security benefit and Rs. 80 is deducted from the salary of every individual.
Internship Report on KSM

PART-4

ANALYSIS

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Syed Danial Hashmi; 2015
In this section, I will discuss what I have learnt from this experience and how work is done in the
industry and the gap between actual work done and the theory.

These 6 weeks have proven on me a hectic time but helped me a lot in my understanding of
different concepts of theory and their practical implications. Let me first discuss the bitter reality
I have learnt and that it is hard to do anything without reference in industry.

I had to go back to Chakwal my native city for this internship. In the meanwhile, I also had to
come back to Rawalpindi as my family is living here. This made my routine very hectic and I
realized many un explainable things. Once during the internship, I had experienced a local bus
drive of 2 hours on the seat behind driver seat ( in fact not a seat but a bench) and the drive was
on the broken roads that caused me pain in my backbone and I had to consult physician. I
experienced how difficult it is to work at any other place and especially for the people with no
transport of their own.

I have seen poverty very closely during this internship. I met different people and know their
lives. Many of them are living a miserable life. Obviously, in an inflationary economy where
even basic needs are getting out of one’s pocket whatever you are getting as income seems less.
This was also a major concern of many employees that they are being payed less because
obviously every person is also seeing his expenses and income.

I got how to work with workers. They were reluctant while talking to me or telling me anything.
Initially, I felt like an alien there but adjusted with time. The old workers used to tell stories of
their times and I was there all the time to listen to them anxiously. It was too hot inside the
production area and too noisy too that I was unable to hear voices of many. Obviously these are
the things I could never have learnt in my 4 year stay at university.

Now I will discuss the technical aspects. I am sure what I have learnt during these 6 weeks will
prove excellent in my future practical life. I am amazed to know that theory is being applied in
practical/ actual industry too. The presence of accounting terminologies and methodologies
helped me a lot in doing the work. During my stay at the organization I also saw the IT
infrastructure of the organization. Definitely, there exists a good information system but there are
some loops too.
Internship Report on KSM
The concepts of cost and managerial accounting helped me a lot. As, mill is an entity where
accounts play an important role. When I went in main process/ production department, I realized
the importance of the subject “Production and Operations Management” and “Project
Management”.

However, I must say that to some extent the organization is lacking to be a “Total Quality
Organization”. ISO certification is just a step towards Total Quality Organization. Although, the
company focuses on Customer satisfaction and to some extent on continuous improvement but
these alone can’t lead to be a Quality organization.

I have seen a lack of employee motivation and employee morale, an increased job stress. It is
recommended that techniques like job rotation and job enlargement must be considered. There is
no role of employees’ even managers in decision making process. This can lead to “Agency
problem”. Firm in fact the parent (Chakwal group) should do things to minimize this problem.

I have also seen how the firm is engaged in trade and the helpfulness of the derivative securities
in hedging the imports and exports of the company. The practical application of options and
contracts (Forwards and Futures) is same as illustrated in theory.

I think my three strengths during the internship were:

 Ability to do assigned work at time.

 Theoretical Knowledge of the techniques being used in the firm.
 Ability to understand others.

I would definitely like to improve my HR skills. I think I am a bit rude type of person in work
setting which I need to change. Overall, it was a very good experience that gave me an
opportunity to learn a lot.

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Syed Danial Hashmi; 2015

PART-5

Conclusion
Internship Report on KSM

These six weeks were an excellent experience for me. I learnt many things (both technical and
non-technical). I hope this experience will help me in my future life when I will go to industry
after degree. Kohinoor is working well in industry as indicated by the industry analysis but it is
still recommended that company shall improve its HR department as lack of motivation is very
much evident. Presence of accounting software and company wide information system is also a
good thing.

I must say that these kinds of work experiences provide excellent exposure to students like me. I
was lucky that was able to see the work and do it practically unlike many other internees. I learnt
many things and will keep them in mind for future. I hope that this work will prove helpful to me
Insha’Allah.

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Syed Danial Hashmi; 2015

Appendix-A

(Internship Certificate)