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INTRODUCTION TO BUSINESS FINANCE

MUHAMMAD ALI JINNAH UNIVERSITY 1

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LETTER OF ACKNOWLEDGEMENT

July 9th, 2009

First of all I would like to thanks toAL MIGHTY ALLAH

who give me enough strength to complete this report. This

task was assigned to me by my course instructor MR. ASIF

SAEED NAJI who also helped me out through out this

project.

This report shows the financial positionofTowellers

Limitedwhich is prepared as a part of the course

requirement forIntroduction to Business Finance. The

material compiled and presented in this report is a result of

exhaustive work.

This report has proved to be a great experience. For this, I

would like to thank our course instructorMr. ASIF

NAJIfor providing us with the opportunity, as well as his

guidance in the light of his vast experience.


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EXECUTIVE SUMMARY

This project is prepared on a Annual Report of TowellersLtd, which gives us a knowledge of the Financeterminologies that are used in the financial report. In thisreport I worked on the Common size Balance sheet,common size income statement, Ratio Analysis, GrowthRates, Time Series Analysis, Cross sectional Analysis. Theprimary objective of this report is to identify the financialfunctions and analysis of Towellers Ltd. My purpose ofwriting this report is a step to learn the differenttechniques used in Financial Management.


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TABLE OF CONTENT

1) COMPANY INTRODUCTION1.1 Vision.. 51.2 Mission 6

1.3 Company Information. 7

1.4 Directors Report 8

1.5 Company Profile. 9

1.6 Products...

10

2) INTRODUCTION TO FINANCIAL RATIOS2.1 Ratios..

11

3) RATIO ANALYSIS.16

4)

COMMON SIZE

STATEMENT....

22

5) GROWTH RATE5.1 Internal Growth Rate 2007..

24


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5.2 Sustainable Growth Rate 2007

24

6) PROFORMA STATEMENT .25

7) ANALYSIS7.1 Table of time series and cross sectional analysis. 27

7.2 Time Series Analysis

28

7.3 Cross Sectional Analysis (2007..

31

8) RECOMMENDATION.33

INTRODUCTION

Towellers was established as a private limited company in theyear 1973, initially having operations limited to manufacturingterry towels only. The year 1979 brought a new phase in the lifeof Towellers. This year the company achieved, not only the topmost position in the country, as a manufacturer of terry towelsand made-ups, but at the same time walked into other fields, i.e.bed wear, garments (both knitted & woven), home textiles and

several other textile made-ups.

VISION STATEMENT


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To be a Dynamic, Profitable and Growth Oriented Company.


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MISSION STATEMENT

To be a foremost company receptive to the needs of ourcustomers acknowledged for consistently providing fine qualityproduct and services by understanding the behavior andpreparing fully to meet the challenges of global markets and tomaximize profit by making best efforts in production planning,quality of products and marketing strategies and so giveconsistent financial return to the Shareholders on theirinvestment.


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COMPANY INFORMATION

BOARD OF DIRECTORS

CHIEF EXECUTIVE

Mr. S. M. Obaid

DIRECTORS

Mr. S. M. JunaidMrs. Surraiya JunaidMr. S.M. ObaidMr. Tariq Muhammad Khan.Mr. Shaheer Hussain SiddiquiMr. Nasir A. KhanMr. Javed AshfaqMr. Mukhtar Ahmed Malik

COMPANY SECRETARYMr. Tariq Muhammad Khan

CHIEF FINANCIAL OFFICER

Mr. Muhammad Noman Jalil

BANKERS

Union Bank Limited

Askari Commercial Bank LimitedHong Kong & Shanghai Bank Corp.Soneri Bank Limited

AUDITORS

Mushtaq & CompanyChartered Accountants407-Commerce Centre,Hasrat Mohani Road, Karachi.


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SHARE REGISTRAR

Noble Computer Services (Pvt.) LimitedSohni Centre, BS-5 & 6, Block-4, F.B. Area,Main Karimabad, KarachiTel: 6801880, 6801129

AUDIT COMMITTEE

Mr. Mukhtar Ahmed Malik (Chairman)Mr. Shaheer Hussain Siddiqui (Member)Mr. Tariq Mohammad Khan (Member)

INTERNAL AUDIT DEPARTMENT

Mr. Syed Adil Tariq Hameed (Incharge)Mr. Mohammad Farzan Ijtaba (Secretary)Mr. Farooq Ahmed Siddiqui (Member)Mr. Sanaullah Khan (Member)

REGISTERED OFFICE

WSA-30 & 31, Block-1,Federal "B" Area, Karachi-75950Web Site: www.towellers.comE-mail: [email protected]

MILLS

Plots No. 14, 15/1, 15/2, 15/A, 16/2, 17/2,Sector 12-D, N.K.I.A., Karachi.

Plot No. J-7, J-8, H.I.T.E. Hub, Balouchistan.Survey No; 248, 249, 11, 264, 265, 292, 293, 301Deh Hattul Buth Taluka Thana Bola KhanDistrict Dadu.

DIRECTOR REPORT TO THE MEMBERS

The Directors have the pleasure in submitting their report to the membersalongwith (unaudited) accounts for the 3rd quarter ended March 31, 2007.

OPERATING RESULTS

By the grace of God the company managed to make a profit of Rs. 4,497million after meeting all operational, administrative, financial and otherexpenses even though the:

1 . Cotton Yarn prices in the period went updrastically.2. The shipping companies increased their freight rates for this periodby over 20%.3. The fuel, gas and electricity charges also went up.

mailto:[email protected]:[email protected]

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4. The prices of dyes & chemicals increased.

The period under review was a very tough keeping in view the above-mentioned facts and also keeping in mind that the orders were booked inJune 2005 for the next 12 months and had to be honored at the bookedprices. The textile industry in general also faced tough competition fromother exporting countries like Bangladesh, India and China etc.

The Financial Result of the company are reproduced as under:

(Rupees in thousand)

Sales Net1,541,141Cost of goods sold1,300,173Gross profit240,968Distribution cost107,605Administrative cost84,246Other operating income 307Operating profit49,425Finance cost28,436Other operating expenses 1,049Profit before taxation19,939Taxation15,442Profit after Taxation 4,497Add: un appropriate profit B/F299,990Add: Incremental Depriation 1,812Available for appropriation306,299Balance Carried to balance sheet

306,299

FUTURE PLANS:

The management as advised earlier had launched an expansion programme


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to upgrade the quality and to house all its manufacturing facilities under oneroof in order to have better controls and to minimize and cut down on itsoverhead in order to achieve a better financial result and higher profits. Theproject is nearly in the phase of completion and we hope to be in trialproduction in june 2006.

STAFF. & LABOUR RELATIONS:

The management is always seeking a close relationship with the staffmembers, whose satisfaction remains a key priority for the company.

On behalf of the board, I would like to thank the workers and staff at alllevels for the hard work put in by them, which enabled the company tooperate efficiently and hope that their efforts will continue during. the comingyears.

STORY OF SUCCESS

With continued successes and expansions, the company entered an entirelynew league in the year 1994 and became a public corporation. Their assetshad exceeded certain limits and it became imperative that they show theirworth to the people.

AWARDS AND ACHIEVEMENTS


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In appreciation of its contributions towards the development of the country'sexports, the company has the honor of having received Pakistan's mostprestigious and coveted Export Performance Awards and in addition to thisthey, for their high quality products, services and performance standards,received international applause by being presented with the InternationalAsia Award, the Gold Mercury International Award and the Asian

Productivity Organization's Gold Medal. Besides these, the company haswon numerous awards and recognitions, from various local and internationalorganizations.

INTERNATIONAL QUALITY STANDARD

The success story of Towellers must be attributed to the unfailing dedicationof its people, professionals in their respective fields, towards their customersas all standards and guidelines given by them are followed and executed tothe core. To prove this to the world in 1998, the company strived andsuccessfully managed to obtain the international quality standard of ISO

9002, for their exports.The company has a very satisfied and devoted customer base of not onlythose who have been with the company since its inception, but also thosewho have just entered into the industry. For this new generation of textilebuyers, the company has already begun broadening its product base, withthe recent inclusion of a printing mill and a facility to produce quilts andcomforters, with its own garneting unit. In addition to this, the latesttechnology in compaction has also been installed in order to give theproducts the best possible finish.

The future, as it comes, has a lot more in store for the world, when Towellersintends to include a spinning facility and much more.

PRODUCTS

Towellers Limited has a wide variety of products. The products are verydistinctly divided between institutional and retail. In the institutional we caterto the health care, hospital and linen rental. In retail we cater mostly to the

importers and stores.

TOWELS

APPAREL

BLANKETS

BABY PRODUCTS


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BED WEAR

KITCHEN PRODUCTS

INTRODUCTION TO FINANCIAL RATIOS

Financial ratios are useful indicators of a firms performance and financialsituation. Most ratios can be calculated from information provided by thefinancial statements. Financial ratios can be used to analyze trends (Timeseries ratio analysis) and to compare the firms financials to those of otherfirms (Cross sectional ratio analysis). In some cases, ratio analysis canpredict future bankruptcy.

Financial ratios can be classified according to the

information they provide. The following type of ratios arefrequently used:

SHORT-TERM SOLVENCY RATIOS:


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These ratios measure a firms ability to meet its short-term obligations. Theseinclude:

Current Ratio

Quick Ratio

Cash Ratio

Working Capital

LONG-TERM SOLVENCY RATIOS:

These ratios measure a firms ability to meet its long-term obligations. Theseinclude:

Debt ratio

Debt to Equity ratio

Times Interest earned

ASSETS UTILIZATION RATIOS:

These indicate how efficiently management utilizes its Assets in generatingRevenue by relating or comparing Sales to different types of Assets. Theseinclude:

Account Receivable Turnover

Average Collection Period

Inventory Turnover

Fixed Assets Turnover

Total Assets Turnover

PROFITABILITY RATIOS:These measure the overall record of management in producing profit. These

include:

Gross profit margin

Operating profit margin

Net profit margin


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Return on Assets

Return on Equities

DIVIDEND POLICY RATIOS:

These provide insight into the dividend policy of the firm and the prospects forfuture growth. Following are the commonly used ratios:

Dividend per share

Dividend payout ratio

Retention ratio

Earning per share

CURRENT RATIOS

The Current Ratio is one of the best known measures of financial strength. Itis figured as shown below:

Current Ratio = Total Current Assets / Total Current Liabilities

The main question this ratio addresses is: "Does your business have enough

current assets to meet the payment schedule of its current debts with amargin of safety for possible losses in current assets, such as inventoryshrinkage or collectable accounts?" A generally acceptable current ratio is 2to 1. But whether or not a specific ratio is satisfactory depends on the natureof the business and the characteristics of its current assets and liabilities.The minimum acceptable current ratio is obviously 1:1, but that relationshipis usually playing it too close for comfort.


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If you feel your business's current ratio is too low, you may be able to raise itby:

Paying some debts.

Increasing your current assets from loans or other borrowings with amaturity of more than one year.

Converting non-current assets into current assets.

Increasing your current assets from new equity contributions.

Putting profits back into the business.

QUICK RATIOS

The Quick Ratio is sometimes called the "acid-test" ratio and is one of thebest measures of liquidity. It is figured as shown below:

Quick Ratio = Cash + Government Securities + Receivables / TotalCurrent Liabilities

The Quick Ratio is a much more exacting measure than the Current Ratio.By excluding inventories, it concentrates on the really liquid assets, withvalue that is fairly certain. It helps answer the question: "If all sales revenuesshould disappear, could my business meet its current obligations with thereadily convertible `quick' funds on hand?"


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An acid-test of 1:1 is considered satisfactory unless the majority of your"quick assets" are in accounts receivable, and the pattern of accountsreceivable collection lags behind the schedule for paying current liabilities.

WORKING CAPITAL

Working Capital is more a measure of cash flow than a ratio. The result ofthis calculation must be a positive number. It is calculated as shown below:

Working Capital = Total Current Assets - Total Current Liabilities

Bankers look at Net Working Capital over time to determine a company's

ability to weather financial crises. Loans are often tied to minimum workingcapital requirements.

A general observation about these three Liquidity Ratios is that the higherthey are the better, especially if you are relying to any significant extent oncreditor money to finance assets.

LEVERAGE RATIO

This Debt/Worth or Leverage Ratio indicates the extent to which thebusiness is reliant on debt financing (creditor money versus owner's equity):

Debt/Worth Ratio = Total Liabilities / Net Worth

Generally, the higher this ratio, the more risky a creditor will perceive itsexposure in your business, making it correspondingly harder to obtain credit.


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GROSS MARGIN RATIO

This ratio is the percentage of sales dollars left after subtracting the cost of

goods sold from net sales. It measures the percentage of sales dollarsremaining (after obtaining or manufacturing the goods sold) available to paythe overhead expenses of the company.

Comparison of your business ratios to those of similar businesses will revealthe relative strengths or weaknesses in your business. The Gross MarginRatio is calculated as follows:

Gross Margin Ratio = Gross Profit / Net Sales

NET PROFIT MARGIN RATIO

This ratio is the percentage of sales dollars left after subtracting the Cost ofGoods sold and all expenses, except income taxes. It provides a goodopportunity to compare your company's "return on sales" with theperformance of other companies in your industry. It is calculated beforeincome tax because tax rates and tax liabilities vary from company tocompany for a wide variety of reasons, making comparisons after taxesmuch more difficult. The Net Profit Margin Ratio is calculated as follows:

Net Profit Margin Ratio = Net Profit Before Tax / Net Sales

INVENTORY TURNOVER RATIO


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This ratio reveals how well inventory is being managed. It is importantbecause the more times inventory can be turned in a given operating cycle,the greater the profit. The Inventory Turnover Ratio is calculated as follows:

Inventory Turnover Ratio = Net Sales / Average Inventory at Cost

ACCOUNTS RECEIVABLE TURNOVER RATIO

This ratio indicates how well accounts receivable are being collected. Ifreceivables are not collected reasonably in accordance with their terms,management should rethink its collection policy. If receivables areexcessively slow in being converted to cash, liquidity could be severelyimpaired. Getting the Accounts Receivable Turnover Ratio is a two stepprocess and is is calculated as follows:

Daily Credit Sales = Net Credit Sales Per Year / 365 (Days)

Accounts Receivable Turnover (in days) = Accounts Receivable /Daily Credit Sales

RETURN ON ASSETS RATIO

This measures how efficiently profits are being generated from the assetsemployed in the business when compared with the ratios of firms in a similarbusiness. A low ratio in comparison with industry averages indicates aninefficient use of business assets. The Return on Assets Ratio is calculatedas follows:

Return on Assets = Net Profit Before Tax / Total Assets

RETURN ON INVESTMENT (ROI) RATIO


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The ROI is perhaps the most important ratio of all. It is the percentage ofreturn on funds invested in the business by its owners. In short, this ratiotells the owner whether or not all the effort put into the business has beenworthwhile. If the ROI is less than the rate of return on an alternative, risk-

free investment such as a bank savings account, the owner may be wiser tosell the company, put the money in such a savings instrument, and avoid thedaily struggles of small business management. The ROI is calculated asfollows:

Return on Investment = Net Profit before Tax / Net Worth

These Liquidity, Leverage, Profitability, and Management Ratios allow thebusiness owner to identify trends in a business and to compare its progresswith the performance of others through data published by various sources.

The owner may thus determine the business's relative strengths andweaknesses.


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RATIO ANALYSIS (2007)

LONG TERM SOLVENCY RATIO

Debt ratio

= TOTAL LIABILITIES / TOTAL ASSETS

MUHAMMAD ALI JINNAH UNIVERSITY

SHORT TERM SOLVENCY

Working capital

= CURRENT ASSETS CURRENT LIABILTIES

= 191,064,572

Current ratio

= CURRENT ASSETS / CURRENT LIABILTIES

1.26

Quick ratio

(CURRENT ASSETS - STOCK PREPAID)/CURRENTLIABILITIES

= 0.76

22

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= 0.64

Debt to equity ratio

= TOTAL DEBT / TOTAL EQUITY

= 0.75

Time Interest Earned

= EARNING BEFORE INTEREST AND TAXES / INTEREST

EXPENSE

= 2.27 TIMES

ASSETS UTILIZATION/ACTIVITY RATIO

Average collection period

= ACCOUNT RECEIVABLE / (NET SALES / 365)

= 58 DAYS

Average payment period

= ACCOUNT PAYABLE / (NET PURCHASES / 365)

= 41 DAYS

Inventory turnover

= COST OF GOOD SOLD / AVERAGE INVENTORY

= 2.82 TIMES

Total Assets turnover

= NET SALES / TOTAL ASSETS

= 1.35 TIMES


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Fixed Assets turnover

= NET SALES / FIXED ASSETS

= 3.69 TIMES

PROFITABLITY RATIO


= OPERATING PROFIT / NET SALES

= 0.019

Net profit margin

= NET PROFIT / NET SALES

= 0.003

Book return on assets

= NET PROFIT / TOTAL ASSETS

= 0.004

Return on equity

= NET PROFIT / SHARE HOLDERS EQUITY

= 0.0025

RATIO ANALYSIS (2008)

SHORT TERM SOLVENCY


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Working capital

= CURRENT ASSETS CURRENT LIABILTIES

= 136,283,861

Current ratio

= CURRENT ASSETS / CURRENT LIABILTIES

= 1.26

Quick ratio

= (CURRENT ASSETS STOCK PREPAID)

= 0.58

LONG TERM SOLVENCY RATIO

Debt ratio

= TOTAL LIABILITIES / TOTAL ASSETS

= 0.75

Debt to equity ratio

= TOTAL DEBT / TOTAL EQUITY

= 2.98

Time Interest Earned

= EARNING BEFORE INTEREST AND TAXES / INTEREST

EXPENSE

= 1.96 TIMES

ASSETS UTILIZATION/ACTIVITY RATIO


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Average collection period

= ACCOUNT RECEIVABLE / (NET SALES / 365)

= 94 DAYS

Average payment period

= ACCOUNT PAYABLE / (NET PURCHASES / 365)

= 44 DAYS

Inventory turnover

= COST OF GOOD SOLD / AVERAGE INVENTORY

= 1.98 TIMES

Total Assets turnover

= NET SALES / TOTAL ASSETS

= 0.65 TIMES

Fixed Assets turnover

= NET SALES / FIXED ASSETS

= 1.61 TIMES

PROFITABLITY RATIO


= OPERATING PROFIT / NET SALES


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= 0.018

Net profit margin

= NET PROFIT / NET SALES

= 0.0021

Book return on assets

= NET PROFIT / TOTAL ASSETS

= 0.0014

Return on equity

= NET PROFIT / SHARE HOLDERS EQUITY

= 0.54%

TIME SERIES AND CROSS SECTIONAL

ANALYSIS


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RATIOS 2007 2008 INDUSTRY

WORKING CAPITAL

191,064,5

72

136,283,8

61 152,640,686

CURRENT RATIO 1.26 1.26 0.97

QUICK RATIO 0.76 0.58 0.46

DEBT RATIO 0.64 0.75 0.71

DEBT TO EQUITY RATIO 0.75 2.98 3.89

TIME INTEREST EARNED 2.27 1.96 3 TIMES

AVERAGE COLLECTION PERIOD 58 94 40.51

AVERAGE PAYMENT PERIOD 41 44 40.5

INVENTORY TURNOVER 2.82 1.98 4.67

TOTAL ASSETS TURNOVER 1.35 0.65 0.94

FIXED ASSETS TURNOVER 3.69 1.61 2.35

OPERATING PROFIT MARGIN 1.90% 1.80% 2.50%

NET PROFIT MARGIN 0.30% 0.21% 1.20%

BOOK RETURN ON ASSETS 0.40% 0.14% 0.2239%

RETURN ON EQUITIES 0.24% 0.54% 0.56%


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TOWELLERS LIMITED

CROSS SECTIONAL ANALYSIS (2008)

WORKING CAPITAL

It is commonly used to measure a firms overall liquidity

Towellers has 136,283,861 which is lesser than the industry Average 152,640,686,firm is in worse condition

CURRENT RATIO

It measures the firms ability to meet its short term obligations.

Towellers limited have 1.26 current rations in 2008 which is higher than theindustry Average 0.97 thats why its in better condition.

QUICK RATIO

It provides the better measure of overall liquidity only when firm inventorycant easily converted into cash.

Towellers Ltd has 0.58 quick ratio in 2008 which is greater than the industryAverage 0.46 thats why its in better condition


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INVENTORY TURNOVER

It reflects the speed with which firms moves its inventory from raw material

& with finished goods till sale to customer. Higher the values of this ratiopreferred because it indicates the quicker turnover of inventory.

Towellers Ltd has 1.98 Inventory turnovers in 2008 which is less than theindustry Average 4.67 thats why its worse in condition.

AVERAGE COLLECTION PERIOD

It is useful in evaluating credit and condition polices. The average amount oftime needed to collect account receivables.

Towellers Ltd has 94 days in 2008 shows the account receivable collected asearlier than the industry Average 40.51 days thats why firm is worse incondition.

FIXED ASSETS TURNOVER

It measures the efficiency with which firm has been using its fixed earningassets to generate sale.

Towellers has Fixed Assets Turnover of1.61 times in 2008 which is less thanthe industry average 2.35 times, in 2008 firm Fixed Assets Turnover reflectsthe lower efficiency of fixed assets utilization because firm has newer assetswhich have higher book value or older assets than industry fixed assetsturnover of firm can be misleading newer assets have lower turn over thanolder assets have lower book value


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TOTAL ASSETS TURNOVER

It indicates the efficiency of the firm uses all its assets which generate sales.Higher the Total Assets Turnover the more efficiency its assets have beenused.

Towellers has Total Assets Turnover of 0.65 times in 2008 which is lesserthan the industry average 0.94, firm is Worse in condition .This firmmeasure is because of the lesser interest to management and its indicatesthe firm operating have been financially inefficient

DEBT RATIO

It measures the proportion of total assets financed by the firm creditor .Thehigher the debt ratio the greater the amount of other people is to generateprofits.

Towellers has Debt Ratio financed 0.75 in 2008 of its assets with debt. Firmdebt is higher than the Industry Debt Ratio 0.71

DEBT EQUITY

It indicates the relationship between the long term funds provided by thecreditor and by the firm owners.

Towellers has debt equity ratio of 2.98% or times as large as stockholdersequity .Firm with large amount of fixed assets cash flows or both have highdebt equity ratio . 3.89

OPERATING PROFIT


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It measures the percentage of each sales remain after all cost & expensesother than the interest & taxes are deducted.Towellers have 1.80% which shows the company is in Loss position. Industryoperating Profit is 2.5%.

NET PROFIT

It measures the percentage of each sales remaining after all cost andexpenses including interest and taxes have been deducted .The higher thefirms net profit the firm is better in condition.

Towellers have 0.21% net profit in 2008 means company isnt earning profit

on sale. Thats why firm is in loss.

RETURN ON ASSETS

It measure the overall effectiveness of management is generating profits andits available assets.

Towellers has .14% Return on Assets in 2008 which has generated lowerReturn onAssets than industry Return on Assets is 0.2239%

RETURN ON EQUITY

It measures the return earned on the owners or both preferred and commonstockholders investment in the firm .generally the higher this return the

better off are the owner

Towellers haveReturn on Equity 0.54% in 2008 which is generating lowerReturn onAssets than industry Return on Assets is 0.56.


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TOWELLERS LIMITED

TIME SERIES ANALYSIS (2008)

WORKING CAPITAL

In 2008 working capital were 136,283,861 thousand which shows the

company still not maintains its liquidity position than 2004.

CURRENT RATIO

In 2007 current ratio was 1.26 which is equal to 2006 current ratio. Here this

ratio tells assets remains same.

In 2008 current ratio is again 1.26.

QUICK RATIO

In 2008 company paid current liability through current assets which was 0.58


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INVENTORY TURNOVER

In 2007 graph of this inventory goes down by 2.82 times

In 2008 graph of Inventory goes down more by 1.98.

AVERAGE COLLECTION PERIOD

In 2007 company again has account receivable collection in 58 days.

In 2008 the collection period is much greater than 2005 which is in 94 days.

FIXED ASSETS TURNOVER

In 2007 this fixed assets turnover is same by 3.69 times

In 2008 fixed assets turnover goes down by 1.61.Effecieny of fixed assets

utilization and level of efficiency is not achieved.

TOTAL ASSETS TURNOVER

In 2007 Total assets turnover is same by 1.35 times

In 2008 Total assets turnover goes down by 0.65 efficiency of Total assets

utilization and level of efficiency is not achieved. This firm measure is

because of the lesser interest to management and its indicates the firmoperating have been financially inefficient

DEBT RATIO


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In 2007company Debt Ratio is same by .64

In 2008 company has .76 debts which are higher than 2006 and 2007.

DEBT EQUITY RATIO

In 2007 Debt Equity Ratio was .75 which is same as 2006.

In 2008Debt Equity Ratio is 2.98 times as large as stockholders equity .Firmwith large amount of fixed assets cash flows or both have high debt equity

ratio.

OPERATING PROFIT

In 2007 operating profit is 1.9% which is same.

In 2008 Towellers has 1.80% which shows the company is Loss position.

NET PROFIT

In 2007 Net loss is 0.30 which shows the company is still in loss

In 2008 Towellers has 0.21 net loss Means Company isnt earning on sale.

Thats why firm get in loss


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RECOMMENDATIONS

A company should grow at its par by using all of its factors at full but thiscompany are lacking in it. This company is not only using its equity but alsothe assets are misused. A company can prove its worth by improvingthrough the following factor:

Buying factors of production at low cost or reducing its cost byremoving its unnecessary cost.

Applying techniques that can apply all the resources at its par.

Try to pay off the debts and collect its debt so that company can havemore of the resources in use and reducing the cost on interest.

Paying of the loan taken from the bank.

Collecting the accounts receivable and get more money involved inthe business.

omer IBF 2332323

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