Internship Report

On Service Industries Limited G.T road, Gujrat

Submitted To PROF. DR. LIAQAT ALI Submitted By Nasir Nadeem Roll No. 257

Master in Commerce (B) Session Date: 2008-2011 10-09-2011

LETTER OF TRANSMITTAL

To Prof. Dr. Liaqat Ali (Principal) Hailey College of Commerce, University Of The Punjab, Lahore. Dear Sir, Most respectfully sir, I feel happiness on informing you that as per college requirements of internship for obtaining degree of M.Com. I have completed my internship in Service Industries Limited Gujrat. And make Report of training which I am submitting on 10th September 2011. I do hardworking in making of Report. And got lot of practical things from training. I shall be very thankful to you. Nasir Nadeem M.Com. Afternoon (B) Roll No. 257

AREAS COVERED BY REPORT In Material Management Able to Receive material from vendor Prepare inspection report of Material Comparing Quality of Material with sample Deliver Material to stores Issuance of material to production against Indent In Accounts Department Able to Record purchase and sale Invoices Payment to vendor Discounting of bill of exchange

ACKNOWLEDGEMENT

I dedicate my work & efforts first of all to Almighty Allah and His beloved Prophet (P.B.U.H) and my Parents with dedication, love and gratitude without whom caring support it would not have been possible

By the Grace of Almighty Allah, I am able to bring out Training report on "Service Industries Ltd. G.T Road, Gujrat" I hope that It will assist everybody who wants to know about Service Industries Ltd. G.T Road, Gujratat its best level. This report is the result of help, which I received from the respected staff of Service, who appreciated my efforts and informed me about my weaknesses. I worked in this leading organization and this training report enabled me to draw a line of distinction between theory and practical. I learned that the procedure in theory and practical is same but we cannot learn theory without practice and practice without theory.

Content Title Page Training Completion Certificate Letter address to Teacher Areas covered by Report Acknowledgement Table of contents Executive Summary Introduction and History of Service industry Vision and Mission Statement Organizational structure Work done by me Ratio Analysis and Interpretations Conclusion Recommendation Skills Acquired Letter of Authorization Scan copies of Financial Statements

Page Numbers 01 after page 01 02 03 03 04 05 06 14 15 32 39 50 50 51 after page 51 52

EXECUTIVE SUMMARY Service is public limited Company in Pakistan. Service is registered Company name and Servis is brand name. Service is engaged in manufacturing footwear and rubber products. There are two production setups of the Service group, one is situated in Muridkey while other in Gujrat. My focus is on Gujrat factory only. The Gujrat factory is producing the famous brands in tyres and shoes, these may include Long life, Cheetah, Ravo, Supper Trail, Turbo Karachi Express, Lahore Express, and Gold Star in tyres while Calza, Cheetah, Doncarlos, Breezer, in shoes. The departments which I have visited for my internship are main departments of this setup. This report covers their structure, working, functions, strategies and liaison with other departments for the completion of their day to day activities. As it mentioned above that Gujrat factory producing tyres and shoe but my focus remains to shoes as its generate huge revenue for the industry. I include in report the global footwear demand trends, potential and role of Pakistan in this sector. The organization has strengthened market share not in local but also emerging in the Europe market. Their Slogan is seen on different documents as The largest exporter of footwear in Pakistan. It is right to claim that because they have captured the most of the European countries some of them may include England, Germany and Italy. It is to be note that they are exporting the shoe with the name of their clients. They are not exporting their own brands to the European markets. Recently they have started to open their outlets in Dubai and Saudi Arabia.

The most important factor in report is analysis of business financial statements techniques have been used to analyze financial statements are financial ratio, Horizontal Analysis, Vertical and Trend analysis. I analyzed all financial ratio including suggestions and recommendations.

The sale analysis in under head volume of business is showing that sale of footwear and tyres &tubes is increasing, but the cost of goods sold is also increasing that is the main problem organization facing. I analyze the following things in organization, 6

In accounts department dabble entry system is followed importance functions and procedures that are verification of bills and payments to suppliers A/P, and all the receipts in term of sales A/R. moreover allocation of expenses with their relevant heads posting of vouchers, ledger and trial balance.

In costing department importance functions procedure how the store requisitions is prepared by cost department for production department, how the wages are calculated, how the material sheet is prepared and monitoring, how they calculate the prices of their product and calculation of V.C and F.C and their allocation.

The main challenges faced by the Servis are high prices due to high taxes; increase the no of products, energy crisis. I have also analyzed the external and internal conditions of the organizations through SWOT analysis with the help of which I came to know about the strengths, weaknesses, opportunities and threats.

In my report I have mentioned the Hierarchy of management, different departments and also mentioned its competitors. I have also discussed the problems faced by the organization and I have recommended them the solutions of these problems

In system analysis of service industry Gujrat drawback of system, repetition of work, isolation and integration of system, repetition of work and isolation of system, integration of system, reason of this anomaly (isolation),

The good advantage they are going to avail in near future is implementation of the Enterprise Resource Planning (ERP) application. This system is implemented in account, procurement now the 3rd module discrete manufacturing is being implementing. This application is very fast which will make them more competitive. The current database in use is oracle based ver 6.0 named as SMARTERM, which is good software for coordination of different activities throughout the organization.

Introduction and History of Service Industries limited, Gujrat

The Service Industries is a Public Limited Company Incorporated as a private limited company on 20th March 1957 in Pakistan under the Companies Act 1913 (Now Companies Ordinance, 1984) and converted in to public limited company on 23rd September 1959, having its registered office located at Lahore. The word, SERVIS is the Brand name and SERVICE is the registered name of the Company. It is a public limited company listed in Karachi and Lahore stock exchanges. It is a part of Servis Group. Its annual revenue of PKR. 7.68 billion. It is merely engaged in the manufacturing and sale of footwear, tyre tube and technical rubber products and has been the largest exporter of footwear from Pakistan for a decade.

The company employs more than 9,000 people in its facilities located in Gujrat and Muridke. Besides capturing local market the companys products are also exported primarily to Germany, Italy, France and United Kingdom.

Service Industries Limited is the largest shoe manufacturing enterprise in the country. The govt. appreciated the efforts of the company, for the first time in 1968 when it awarded the PRESIDENTs EXPORT TROPHY CLASS I. Since then, the company is the lancets Exporter of manufactured articles; Leather, canvas shoes. The company was again awarded the PRIDE OF

PERFORMANCE TROPHY by the PCCI in 1977. In the subsequent years, the company has been awarded numerous trophies of awards as an acknowledgement of its sheer hard work of dedicated efforts. At present the company has the shoe manufacturing factories at GUJRAT and MURIDKE. There are four factories operating at Gujrat employing - 5083 employees. These are:-

Leather Shoe Factory (LSF). Cycle Tyre & Tube Factory (CTT). 8

Motorcycle Tyre & Tube Factory (MCTT). RAG Division.

The factory has highly sophisticated test laboratory managed by qualified and trained personnel. Other than the MCTT & RAG Div own well-equipped laboratories. It is here that the further products are developed & tested thus ensuring the success of the company.

Leather Shoe Factory and MCTT are ISO 9001 certified where as other companies are under process.

Each factory comprises of about five hundred to thousand workers depending upon the workloads. The factorys peak season starts from September to April. During this period, the factory hires extra workers and lays them off after the period once the production is normal. SILs Head Office is located at Lahore. The entire organizational authority is represented with the help of Organizational Chart, which is headed by CEO.

Actually, Service is a group of companies with its two major production units located in Gujrat and Muridke. The Gujrat complex consists of four manufacturing units whereas the Muridke complex hosts three production units. The wide range of products manufactured includes Leather footwear, Cycle, Motorcycle tyres/tubes.

The Leather Shoe Factory comprises of about 2,500 employees. LSF production capacity per day is about 32,500 pairs in which 20% sports shoes, of export and domestic articles. Now the management decided to install a new machine keeping in view the perspective increased demand of its products. In return it will enhance its production by approximately 1,500 per day. To improve its products quality standard and well-controlled rejection limit allowed is 2.5-3.0 % moreover 95 % of its total exports are meant for European customers. It have no hesitation in claiming that Service makes the most complicated and diversified range of footwear for its export customers 9

including the tough & rugged Motorcycle Boots for its United Kingdoms customer the whole year round. In domestic market Service offers its unique range of polyurethane shoes, which no competitor has equaled or excelled. Service sports shoes are the most popular brand in the market which has achieved the Brand Award 2008. The factory follows the motto customer satisfaction at priority and that is the reason it is thriving for the last many years. Tyre Division is one of the group of Service Industries comprises of two leading units Motor Cycle and Cycle Tyre & Tube Factories located at G. T. Road, Gujrat. It also holds market share of 45% and 55% in Motorcycle and Bicycle tyre and tube respectively. Tyre Division has been supplying tyres & tubes to all major original equipment manufacturers (OEM) with high share like 50% to Atlas Honda Limited (AHL), 50% to Dawood Yamaha and 100% to Sohrab Bicycle Manufacturing Company, Lahore. Tyre division sales network comprises of 12 major distributors in which 5 distributors are for bicycle tyre & tube and 7 for motorcycle tyre & tube sales. The company employees all in all 5,083 at present but tyre division comprise about 900 employees. The production capacity per day of bicycle tyre & tube is 18,200 and 22,000 in number with rejection 2.5% and 1% respectively. Similarly production capacity per day of Motorcycle tyre & tube is 11,365 and 30,815 respectively.

History of the Organization

In the year 1941, three young friends like CH. Nazar Mohammad, CH. Mohammed Hussain from Gujrat district and Mr. Mohammad Saeed from District Gujranwala, fresh college graduates started business at a small scale at Lahore. It started its functions at Servicepura, a town 20 km. from Lahore, as an independent Co., Governed by its Board of Directors (Ch. Nazar Muhammad, Ch. Muhammad Hussain, Ch. Muhammad Saeed) and operated by its own management.

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Within years, their business flourished and they were making supplies of their products in every corner of undivided India. Although the company suffered huge losses, at the time of partition, due to outstanding payments for supplies made on the other side of the border. The company had to take a new start and search for new markets. The Directors of the company were not discouraged and continued their honest efforts and worked hard. Once the business expanded, they had to look for new sites for the installation of factories. GUJRAT, being the home district, they decided to install the new factories here. As a first step, Hilal Tanneries was built in Gujrat which started functioning in 1954. Ten years later, in 1964, the shoe factory followed by a textile mill was also set up in Gujrat. This was in addition to a shoe factory. Their organization was then built up in a most organized and scientific manner. The company had opened its own WHOLE SALE and RETAIL SHOPS all over the country, enlacing the consumers to buy shoes at fixed prices which were a new trend at that time. This was much appreciated by the consumers. The company then took another step and entered into the EXPORT market realizing that the country was in dine head of foreign exchange. The exports were made on INTERNATIONAL STANDARD and RIGHT TIME delivery became the basis and the hall mark of SERVIS and the same trend continue.

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Executive Positions

Board of Directors

Mr. Arif Saeed Mr. Shahid Hussain Mr. M Ijaz Butt Mr. Mohammad Akram Mr. Hassan Javed Mr. Shahid H. Kardar Mr. Riaz Ahmed Mr. Anis Wahab Zuberi Mr. Manzoor Ahmed

(Chairman) (Chief Executive)

(Rep. Of NIT) (Rep. Of NIT)

Advisor

Ch. Ahmed Saeed

Company Secterary

Mr. Sultan Anwar

Audit Committee

Mr. Shahid H. Kardar Mr. M Ijaz Butt Mr. Anis Wahab Zuberi Mr. Riaz Ahmed

(Chairman) (Member) (Member) (Member)

Bankers

Habib Bank Limited United Bank Limited Muslim Commercial Bank Limited Faysal Bank Limited Royal Bank of Scotland Limited Allied Bank Limited HSBC Bank Middle East Limited SAMBA Bank Limited 12

Barclays PLC, Pakistan

Auditors

S.M Masood & Company Charted Accountants

Legal Advisor

Bokhari, Aziz & karim 2-A Block-G, Gulberg-||, Lahore

Share Registrar

Hameed Majeed Associates (Pvt.) Ltd IST Floor, H.M House.7- Bank Square The Mall, Lahore

Registered Office

Servis House, 2-main Gulberg, Lahore-54662 Phone: 042-35751990-96 Fax: 042-35710593, 35712109, and 35711827

Factories

G.T Road, Gujrat. Muridke-Sheikupura Road, Muridke

Product Line

1. Rubber Products

Tyre Division is supplying tires & tubes to all major original equipment manufacturers (OEM).

o Atlas Honda Limited (AHL) o Dawood Yamaha o Sohrab Bicycle Manufacturing Company, Lahore.

Tyre division sales network comprises of 12 major distributors in which 5 distributors are for bicycle tyre & tube and 7 for motorcycle Tyre & tube sales. Followings are major Brands; Long life 13

Cheetah Admiral Ranger Karachi Express Lahore Express

Company has registered brands for their products Tyre & tube as well as in footwear segment. 2. Footwear Products

Locally the shoes are marketed through their associated concern. Service Sales Corporation. Company also selling their products through key Account that are involved Army, Wapda and industrial shoes. Main brands of it are as follow,

o Calza

Calza is chapel shoe and mostly used in summer. It is available in wide variety with respect to colors and designs. The calza was added to portfolio in early 90s. It gained reorganization soon after its introduction. Following are the brands for this product is now in the market.

Calza Smart Calza Soft Calza Classic Calza Comfort Calza Shock Point Calza Step to Life

o Don Carlos

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The Doncarlos is well known brand and includes casual and dress shoes along with sandals. Doncarlos family has long range of styles.

Cheetah

Cheetah is jogger shoe and has a good name in market for its durability and comfort. This brand is in service portfolio since long mostly used by consumer for sports product line further split as below. Cheetah is made in Gujrat factory with imported Cow leather. Cheetah has won the brand winning award in 2008.

The major clients of footwear are as follow,

o U. K. o Germany o Denmark o France o Italy.

3.Other products Defense and Technical Rubbers.

Rag department is manufacturing rubber, plastic and defense related products. These products are following,

o Gas Mask o Auto Parts

(Defense) (Auto) (Defense)

o Hand Grenade Body o Mine Body o Tank Track Pad

(Defense) (Defense) 15

o Bogh wheel

(Defense)

Competitors

The main competitor of SERVIS is BATA.

The potential competitors are following,

o Borjan o Starlet o English Shoes o Hush Puppies o Milli Shoes o Hang Tan o Slazenger o Metro Shoes o Stylo Shoes

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VISION STATEMENT

To be a market leader providing quality footwear, tyre & tube and allied products. To strive for excellence and global recognition by continuous improvement, innovation, dedication and growth.

MISSION STATEMENT

To be result oriented and profitable company by consistently improving market share, quality diversity, presentation, reliability and customer acceptance.

To emerge as a growth oriented concern ensuring optimum return and value addition to its shareholders.

To ensure cost consciousness in decision making and operation without compromising the commitment to quality.

To create an efficient resource management and conducive business environment. Evolving an effective leadership by creating a highly professional and motivated management team fully equipped to meet any challenge.

To keep abreast with modern technology and designs to optimize production and enhance brand image to attain international recognition for the companys products.

To set up highly ethical business standards and be a good corporate citizen, contributing toward the development of the national economy and assisting charitable causes.

To adopt appropriate safety rules and environment friendly policies. 17

Organizational Structure
General Manager
Ghulam Muhammad

Manage r Account

Manage r Costing

Manage r I.T Support

Manager Procurem ent

Manage r HR

Chief Security & Canteen

Chief Technical Manager

Chief Engineering Support

Manager Industrial Engineering

Manager Industrial Relation

Manager Warehouse Tyre

Manager Warehouse Footwear

Factory Manager Tyre & Tube Div

Factory Manager Rag Division

Factory Manager Footwear Div

M.C.T. T

C.T.T

LSF

P.U

Plannin g Manag

Manager Tch. Supp

Productio n Manager

er
Productio n Manager Productio n Manager Productio n Manager

Plannin g Manag er Productio n Manager

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Introduction of Departments

Following is the list of departments working at Service Gujrat.

COMMON DEPARTMENTS:-

Human Resource Accounts I.T Supporting Industrial Relation Security Canteen Costing o Costing Footwear o Costing Tyre Division

Material Management o Procurement o Raw Material Stores o Material Receiving Store

Industrial Engineering o Footwear o Tyre & Tubes

Finished Goods Warehouses o Warehouse Tyre Division o Warehouse Footwear Division

Engineering Supporting o Maintenance T.D o Maintains F.W o Electrical & Electronics 19

o Compressor o Boiler o Power House o Molding (Tyre, Tubes and F.W) o Carpentry Technical Department o Main Laboratory o Raw Rubber Processing Plant o P.V.C Molding Quality Assurance o Tyre Div o Receiving Goods Inspection o Production Inspection o Return Goods & Claim

. PRODUCTION DEPARTMENT:-

Leather Shoe Factory o Planning o Upper Cutting o Upper Closing o Assembly o Lasting o P.U o Sole Making

Tyre & Tube Department o Planning o Motorcycle Tyre Making o Bicycle Tyre Making o Motorcycle Tube Making o Bicycle Tube Making 20

Rag Section o Production Hall

Account & Finance At S.I.L Gujrat one manger along with the deputy manger and assistant manger is leading the accounts department. Double entry book keeping system is being used by the company. There are about twelve employees working in this department each person perform specific and separate task. Old database software is gradually wiped out due to implementation of E.R.P system which is running smoothly and more efficient than legacy. This department is divided in to two sections. One section is purely accounts in nature while other is dealing with wages and salaries issues. The account section has delegated two persons for cash handling and disbursement. This department dealt with wages, salaries, provident fund, budgets, bill verification, payments A/P, receipts A/R, pensions, loans day-today expenses and accounts management. The wages to the workers are paid fortnightly while salaries are paid monthly.

The salaries to the workers are made and distributed after every 15 days, while salaries to the staff if are below 10,000 are distributed monthly at the factory. If the amount is more then the 10,000 then it is credited to the employees account. The pay to the workers is also being made twice a month. The persons are performing their work at department are very experienced.

Observation: I have observed with the implementation of E.R.P system the work load has increased on the employees due to which company need to hire more people that also carrying cost. Repetition of work is increase a like posting in legacy as well as in E.R.P. This is happening because the system is not interlinked with material management modle. It is in process so that the invoices are being posted in the accounts department instead of procurement.

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Suggestion to improve My suggestion is that the material management module should be interlinked with financial module so that accounts payable invoices are posted at their end and due to this legacy also eliminate. Resultantly the workload on the accounts department will reduce as well as repetition of work also decreases and efficiency of their staff will improve.

MATERIAL MANAGEMNTMaterial management perform vital role in the organization this department made of all type of purchases includes domestic and foreign the responsibility of this department. Department is divided in two segment local and foreign purchases separately. Local department further divided in to 6 sections that include Leather, Packing, Chemical, Synthetic, Grindries and Technical equipments. Moreover working on inventory management and arrange the material timely is the key responsibility of this department. Manager of material management is responsible to ensure the delivery in time and manage the raw material inventory level stable. Whole production is depending on it for example if the material is not received in time or any quality discrepancy in the material the production will ultimately suffer. There are fourteen employees working in this department. Manager of material management is responsible to controlling various sub departments which are reporting to him that are:

Procurement of Material Raw Material Stores Material Inspection Store (Receiving Room)

QUALITY OBJECTIVES Service Industries limited objectives are as follows Rejection should not exceed 3 % 22

Material wastage not exceed 1 % Ensure that delivery should be 95 % on time The employees importance is as meaning full as customers. Team work and cooperation is necessary for prosperity Always strive to improve quality. Customer satisfaction by incorporating their requirement by quality management system.

Service Industries limited acting upon the following steps to attain the states above purpose. To improve the current quality systems and machinery. To build strong relation with internal & external suppliers so that quality & quantity of products can be assured timely.

Employees Benefits Provident fund Bonus on yearly bases Profit on yearly bases Loan Price concession on products Canteen at very economical rates Financial help

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WORK DONE AS AN INTERNEE

PROCESS OF DATA COLLECTION Human Resource department of Service Industries Limited organized and route my training program in such a way that it is list down in scheduled form and indicating the day and date in all the departments, factories which has been approved by GM. I have used the following methods of data collection during training;

Discussions and conversations with departments heads and their Assistant Managers and also discussion with subordinates Study the hierarchy chart of organization Study of website of service. Observations and meeting with workers and lower staff on the factory floor study of official documents and daily reports.

PLAN OF MY INTERNSHIP PROGRAM

STARING & ENDING DATES OF INTERNSHIP Starting date: 11-07-2011 Ending date: 21-08-2011 Duration: The tenure which I have spent in industry is 6 weeks.

DEPARTMENT & DURATION OF TRANING I have got the training in 2 departments schedule of my training program is as under:

1. Accounts Department (3 week) 2. Material Management (3 week) 24

ACCOUNTS

Being as M.Com. (Finance) specialization student initially I was sent to Accounts and Finance department where I worked for 3 weeks and have a very profound idea about following documents and practiced as well, these are;

Salient Features:

Record transaction according to single entry system which convert into double entry system by application All procedure to maintain the accounts is now computerized. Oracle ERP System has been implemented.

The competitive priority of Accounts & Finance Deptt. is to implement the Oracle ERP System with an investment of Rs. 50 million. Its functional module is fully implemented and achieving targets whereas payroll and supply chain module is in pipeline. The accounting procedures employed in a company reveal the overall condition of the company management. Accounting in the simple words is the counting of incomings and outgoings of an organization. For this purpose all the companies hold record of every transaction in their books through the accounts. The books employed for this purpose are called ledgers. Service Industries Ltd has installed modern accounting procedures. The head office receives vouchers regarding the happenings at their factories daily. Service Industries Ltd maintains the following statements or vouchers in its accounting procedures at the factory.

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Voucher System

A piece of paper that serve as evidence of transaction For an unqualified audit report the essential document is Voucher. Every transaction is recorded through Vouchers. There are several kinds of Vouchers for example cash payment voucher, journal voucher, bank receipt voucher and bank payment voucher. 1. Cash payment voucher: A voucher is made when any cash transaction taken place. For example we purchase any supply and made payment through cash then we record it by cash payment voucher. e.g.

Office Stationary Cash paid

Debit Credit

2. Journal voucher: Journal voucher is to record every transaction made either purchase or sale of any goods. It has fixed heads of account e.g.

Raw material Accounts Payable Credit

Debit

3. Bank receipt voucher: A bank receipt voucher is made when any payment received by cheque/bank. For example we sold out any inventory we record it by bank receipt voucher. e.g.;

Bank Sales

Debit Credit

4. Bank payment voucher:

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A bank payment voucher is made when any payment paid by cheque/bank. For example we purchased any material we record it by bank receipt voucher. e.g.

Purchases Bank

Debit Credit

Also I have learnt how to record the purchase and sale invoices, discounting of bill.

Sources of receipts:

The following are the sources of receipts in SIL Gujrat; 1. Recovery from C.T.T & MC TT. 2. Recovery from sales of shoes/Tyre tubes through fair price shop. 3. Recovery from SSC on account of shoes sold on direct basis. 4. Sales proceeds of left over raw material. 5. Retail stores sales of shoes.

Payments:

The following are the payments in SIL Gujrat; 1. Wages to workers. 2. Salaries to staff. 3. Fringe benefits. 4. Utilities expenses are made on reimbursement basis. 5. Government Dues.

The following payments are made to Government; 1. Custom Dues 2. Sales tax. 27

3. Electricity, Sui gases and telephones expenses. 4. Employees old age benefits subscriptions 5% per individual. 5. Employees social security fund subscription 7% per individual.

The following payments are made to Suppliers; 1. The suppliers are paid on credit/cash basis 2. Venders are paid on cash basis. 3. Foreign suppliers are paid up to a limited level.

Authorized Signatories:

These are the persons on whose signature bearing documents/ cheques are considered valid with reference to making payments are drawing cash from accounts office. These are:

Group A Mr. Ghulam Muhammad Group B Mr. Mushtaq Baig Mirza Mr. Habib-ul-Rehman Manger Accounts Manager Costing G.M. SIL, GRT.

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Structure of Finance and Accounting Department

FINANCE & ACCOUNTING OPERATION:-

Main functions of Finance department are follows. Finance department consolidate the accounts of SIL Groups based on the financial reports provided by each portfolio. Finalize the annual accounts that are P& L accounts, Balance sheet on that date, Shareholders Equity and Cash flow statements and publish the annual reports for stake holders. Moreover prepare the financial statements monthly and quarterly for the board of directors.

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It is involves planning, analyzing and acquiring capital assets like Plant and Machinery or Land or Building. Arrange the Investment if needed for the projects or to indicate whether the business plan is economically feasible. Manage the short term and long term loans. Capital budgeting technique used that is pay back period. Investing in securities and manage the profit on securities Borrowing from banks or other financial institutions Issues shares with the consent of board of directors. Presents the financial figures of the industries in the meetings of board of directors. Capitalize the fix assets at historical cost. Managing and incorporated head office expenses in their respective heads Debit the A/P through checkups. Management of Taxation. Monitor the Master and functional budgets. Dealing and settles the matters with SECP.

Accounting System Company is using double entry or commercial accounting system which is based on accrual. The benefits of this system are every transaction has equal Debit and Credit; hence the total of all Debit accounts will be equal to the total of all Credit accounts at any given time. This serves as a quick test of mathematical accuracy of book keeping. Since all aspects of transactions are recorded, therefore, the books are more informative.

In the company thousands of accounting transactions have taken place. It is not possible to manage the record of each this transaction manually. So the service industry using oracle based application software all the transactions are managed and processed efficiently and effectively in this Oracle Financial suit automatically. 30

General Ledger and trial balance are prepared in this automation system.

Enterprise Resource planning System that is using by the organizations is very old version and need to improvement it is also not integrated and interlinked. Keep in view this problems management is adopting new technology and implemented online ERP system latest version of Oracle. Financial module has been implemented and now in working condition this system is interconnected and interlinked. All that reports were sending from accounts department of factory premises now can be prepared at head office any time.

Source of funds Following are the source of funding of the organization.

Long Term Loan form Banking Companies

United Bank Ltd. Royal Bank of Scotland Ltd. Habib Bank Ltd.

Short Term Loan form financial institutions Shareholders equity funds Reserves Funds.

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ANALYSIS
Following are main analysis which In have completed. Ratio Analysis Horizontal analysis Vertical Analysis

Ratio Analysis
Ratio analysis is the most common form of financial analysis. It is a performance indicator of the business financial position. It provides relative measures of the firm's conditions and performance. Financial Ratios are like financial temperatures, which give the state of the health of a business. This analysis technique is most widely used. In these inter-linkages of Income Statement and Balance Sheet items are established and inferences are drawn there from. Ratio Analysis of Service industries Ltd for last three years is given below.

Liquidity Ratios
Liquidity Ratios are used to measure a firms ability to meet short-term obligations. They compare short-term obligations to short-term (or current) resources available to meet these obligations. These ratios are calculated below.

Current Ratio: Year

Current Assets ('000) Current Liabilities ('000) Current Ratio

Current Assets/Current Liabilities 2010 3,103,365 2,374,987 1.31 2009 2,617,148 1,797,360 1.46 2008 2,427,082 1,896,571 1.28

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Workings
Current Ratio = Current assets / current liabilities 2010 = 3,103,365 / 2,374,987
2009 = 2008 = 2,617,148 / 1,797,360 = 1.31 = 1.46 = 1.28

2,427,082 / 1,896,571

Current Ratio 1.5 1.4 1.3 1.2 1.1 2010 2009 2008 years

Ratio%

Series1

Interpretation:
It shows a firms ability to cover its current liabilities with its current assets. Higher the current Ratio, the greater the ability of the firm to pay its bills normal ratio is to 2:1 that two time assets and one time liability. Hence the ratio trend shows that the firm is in better position to pay back its current obligation. Current ratio is for last three year is stable and improves in 2009 due to increase in A/R and cash.

Acid Test Ratio Year

Liquid Assets ('000) Current Liabilities ('000) Quick Ratio

Current Assets-(Inventory+ Prepayments)/Current Liabilities 2010 1,370,755 2,375,987 0.58 2009 1,142,165 1,797,360 0.64 2008 1,022,858 1,896,571 0.54

Workings
Quick Assets = Current assets Inventory -Prepayment Inventory includes = Stores , spares and loose tools

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Quick Ratio 0.65 0.6

Ratio

0.55 0.5 0.45 Year 2010 Years 2009

Quick Ratio

Interpretation
This is also called acid-test ratio. In this, inventories and pre-paid expenses are excluded from current assets. Only cash, marketable securities and receivables (called Quick Assets) are considered. Normal ratio is 1:1 that quick assets are equal to current liabilities. In this company the ratio is stable and can pay back its obligations through liquid assets. Liquid assets are improved in term of A/R and Cash and Bank. Lower the ratio is better and shows improvement.

Working Capital Year

Current Assets ('000) Current Liabilities ('000) Working Capital

Current Assets-Current Liabilities 2010 3,103,365 2,375,987 727,378 2009 2,617,148 1,797,360 819,788 2008 2,427,082 1,896,571 530,511

Workings: Working capital = Current assets Current liabilities Interpretation

Difference of Current assets and current liability is known as working capital. Working capital is improved by the company due to stock increase and increase in cash and bank. Working capital is improving resultantly current ratio is stable. That is in favors of business.

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Leverage Ratios
Interest of long-term creditors is to see the long-term solvency of the business and rate of return on their loans. Solvency is the ability to meet outside liabilities from total assets. Indicators of solvency are the Long-term Solvency, which are as follows:It means operating a business with borrowed money.

Time Interest Earned Ratio Year

Operation Income ('000) Annual Interest Expenses ('000) Ratio Normal (3:5)

EBIT/Annual Interest Expenses 2010 643,198 155,266 4.14 2009 1,074,779 138,791 7.74 2008 628,618 150,415 4.17

Workings for EBIT and Annual interest earned: EBIT = G.P Operating expenses The items in between the braces are the parts of finance cost. Interest earned = the remaining items of the finance cost.

Times Interest Earned

10 8

Ratios

6 4 2 0 2010 2009 Years 2008 Series1

Interpretation
This ratio serves as one measure of the firms ability to meet its interest payments and thus avoid bankruptcy. The higher the ratio is greater the likelihood that the company could cover its interest payments without difficulty. It also sheds some light on the

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firms capacity to take on new debt. Normal ratios is 3:5 this company is strong position to cover its debts. Ratio is improving continuance basis. High ratio in 2010.

Debt Ratio Year

Total Outside Liabilities (Total Debt) ('000) Total Assets ('000) Ratio

Total Debt(Total Out Side Liabilities)/Total Assets 2010 2,843,074 4,542,859 62% 2009 2,129,284 3,651,368 58% 2008 2,300,184 3,341,874 69%

Workings: Total debt or outstanding liabilities / Total assets The amounts are shown in the balance sheet attached at the end.
Debt Ratio
70%

Percentages

65% 60% 55% 50% 2010 2009 Years 2008 Series1

Interpretation:
Very important ratio for creditors point of view, the lower the debt ratio, the better it is because it means that shareholders have contributed the bulk of funds and margin of protection to creditors is high. In this company 2007 and 2008 ratio is high due to increase in short term borrowing and increase in A/P. in 2009 is decrease due to decrease companies liabilities.
4

Debt to Equity Ratio Year

Total Outside Liabilities (Total Debt) ('000) Total Equity ('000) Ratio

Total Outside Liabilities/Equity OR Debt Ratio/Debt Equity

2010 2,843,074 1,699,826 1.67

2009 2,129,284 1,522,084 1.40

2008 2,300,184 1,041,690 2.21

Workings: Total Outside Liabilities/Equity OR Debt Ratio/Debt Equity

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The amounts are shown in the balance sheet attached at the end.

Debt to Equity Ratio

2.5 2

Ratios

1.5 Series1 1 0.5 0 2010 2009 Years 2008

Interpretation:
Borrowed capital to Shareholders funds is called Debt Equity Ratio. Creditors like this ratio to be low. The lower the ratio, the higher the level of firms that is being provided by shareholders and the larger the creditor cushion in the event of shrinking asset values or outright losses. Companys ratio shows high in 2008 due to high gearing and low liquidity funds. Company had improved it position in 2009 and also in 2010.

Total Capitalization Ratio Year

Long Term Debt ('000) Owner Equity + Long Term Debt ('000) Ratio

Long Term Debt/Owners Equity +Long Term Debt 2010 467,046 2,166,872 0.22 2009 331,924 1,854,008 0.18 2008 403,613 1,445,303 0.28

Workings: Long Term Debt/Owners Equity +Long Term Debt

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Total Capitalization Ratio

0.3 0.25 0.2 0.15 0.1 0.05 0 2010 2009 Years 2008 Series1

Interpretation:
It deals with only the long-term capitalization of the firm. This tells us the relative importance of long term debt to the capital structure (long-term financing) of the firm. In 2008 due to high in fix debts and low in total capitalization the ratio is high. Low ratio is considered favorable. In 2009 it fall and favorable in 2010 due to decrease in percentage of long term debt and increase in owner equity.

Profitability Ratios
1

Ratios

Net Profit Margin Year

Net Profit ('000) Net Sale ('000) Ratio %

Net Proft/SaleX100 2010 328,105 9,421,408 3.48 2009 660,826 7,680,237 8.60 2008 340,680 6,393,323 5.33

Workings: Net Proft/SaleX100

All figures are shown in the table .

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Net Profit Margin

10 8

Ratios

6 Series1 4 2 0 2010 2009 Years 2008

Interpretation:
A net profit ratio is determining the operation of the business that how efficient it operates. High profit margin is determining good health of business. Companys profit is increasing as compare to preceding year due to increase in sale. In 2008 it is low and it increase in 2009 but decreased in 2010 its determine good insight of the company.

Return on Assets Year

EBIT (Operating Income) ('000) Total Assets ('000) Ratio %

EBIT/Total Assetsx100 2010 643,198 9,421,408 14 2009 1,074,779 3,651,368 29.4 2008 628,618 3,341,874 18.81

Workings for EBIT: EBIT = G.P Operating expenses

All figures are shown in the table.

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Return on Assets
40%

Ratios

30% 20% 10% 0% 2010 2009 Years 2008 Series1

Interpretation:
A measure of how effectively a company uses its assets. It Measures overall effectiveness in generating profits with available assets. Las two year companies purchases are increase due to ROA is low and it control its capital expenses in 2009 that increase the percentage and in 2010 in decreased.
4

Operating Profit Margin Year

Operating Profit ('000) Net Sale ('000) Ratio %

Operating Profit/SaleX100 2010 643,198 9,421,408 6.83 2009 1,074,779 7,680,237 14 2008 628,618 6,393,323 9.83

Workings: Operating Profit/SaleX100

All figures are shown in the table above.

Operating Profit Margin

15

Ratios

10 Series1 5 0 2010 2009 Years 2008

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Interpretation:
The higher the Operating Profit Margin, the better. This is because a higher Operating Profit Margin shows the company can keep its costs under control (successful cost accounting). A higher Operating Profit Margin can also mean sales are increasing faster than costs, and the firm is in a relatively liquid position. Above calculated ratio is illustrated the company makes high profit and sale is increasing.

Return on Operating Assets Year

EBIT(Operating Income) ('000) Operating Assets ('000) Ratio %

EBIT/Operating Assets 2010 643,198 1,320,304 4.87 2009 1,074,779 920,720 1.17 2008 628,618 880,220 0.71

Workings: EBIT/Operating Assets Workings for EBIT: EBIT = G.P Distribution cost Adminstration expenses (workers profit participation fund Band commission, fees and charges) The items inbetween the breces are the parts of finance cost.
All figures are shown in the table .

Return on Operating Assets

6 5 4 3 2 1 0 2010 2009 Years 2008

Ratios

Series1

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Interpretation:
The company return on operating assets is fluctuating as compare to preceding year. In 2007 due to low net income and high in A/R ratio is low and it is increase due to decrease in current portion of financial lease and in 2010 its make huge profit correspondingly ratio is increase.

Gross Profit Margin Year

Gross Profit ('000) Net Sale ('000) Ratio %

Gross Profit/Net SaleX100 2010 1,293,436 9,421,408 13.73 2009 1,577,919 7,680,237 20.55 2008 1,038,153 6,393,323 16

Workings: Gross Profit/Net SaleX100

All figures are shown in the table .

Gross Profit Margin

25 20

Percentages

15 Series1 10 5 0 2010 2009 Years 2008

Interpretation
Firms are high gross profit margin are high liquid thus they have more cash flows to spend on other activities. It illustrate that how management efficiently using its labor and raw material in its operations. Company gross profit margin increases as compare to preceding years it is not good percentage in 2010.

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Activities Ratio
1

Total Assets Turnover Year

Net Sales Total Assets Times

Net sales / total assets 2010 9,421,408 4,542,859 2.07 2009 7,680,237 3,651,268 2.10 2008 6,393,323 3,341,874 1.91

Workings: Net sales / total assets

All figures are shown in the table .

Total Assets Turnover

2.15 2.1 2.05 2 1.95 1.9 1.85 1.8 2010 2009 Years 2008

Times

Series1

Interpretation:
The ratio computes how much the sales against the total assets. And the turnover is almost stable.

Fixed Assets Turnover Year

Net Sale ('000) Fixed Assets ('000) Time

Net Sales/Fixed Assets 2010 9,421,408 1,425,169 6.61 2009 7,680,237 1,023,725 7.50 2008 6,393,323 887,382 7.20

Workings: Net Sales/Fixed Assets

All figures are shown in the table.

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Total Assets Turnover

8 7.5

Times

7 6.5 6 2010 2009 Years 2008

Series1

Interpretation
Company turnover of fixed assets is stable of last three years.

Market Ratios:
1

Dividend Per Share Year

Total Dividend Issued Issued Subscribe Shares in Numbers Dividend Per Share

2009 90,216,000 12,028,789 7.50

Dividend Issued/Total Shares 2010 2008 54,130,000 12,028,789 4.50 210579000 12028789 17.50

Interpretation
In investors point of view it is very important ratio. Dividend ratio is not stable it is changed over the periods. It depends on the meeting of board of director to announce interim or final dividend. In 2007 it is 3 and increase in 2008 and dividend per share for 2009 is 7.5 continuance improvements in dividend per share and too much high paid in 2010.

Earning Per Share(EPS) Year

Net Profit Available for Equity Share Holder Number of Equity Shares Earning Per Share

2009 660,826,000 12,028,789 54.94

Net Profit Available for EquityShares/Number of Equity Shares 2010 2008 340,680,000 12,028,789 28.32 328105000 12028789 27.28

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Interpretation
Financial analysts are interested in EPS of the company decline in EPS is generally decline in market value of per share. This company EPS is growing with the period of time. It is low in 2007 due to low in demand in market and profit it is high in 2009 due to increase profit.93% of preceding year.

Price Earning Ratio Year

Market Price Per Share Earning Per Share Earning Per Share

Market Price Per Share/Earning Per Share 2009 265.99 54.94 4.84 2008 60.80 28.32 2.15

Interpretation
It tells the investors that what market is willing to pay for the companys earning. Higher the earning more the market willing to pay. Price earning ratio of the company describes that in 2008 it becomes low due to slump in market and share become low. And it is increase in 2009. Investors willing to pay the growth level of the price earning ratio of the company.

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Horizontal Analysis
Profit and Loss account Year Item Sales Cost of Sales Gross Profit Distribution cost Other expenses Finance cost Other income Total net expenses Net Profit before tax Taxation Net Profit after tax 2010 22.67 33.54 18.84 50.31 12.42 10.79 7.73 22.48 47.87 41.92 50.35 2009 20.13 13.66 53.51 19.63 30.89 2.89 52.85 17.45 95.73 100.08 93.97

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Balance Sheet Year 2010 2009 11.67 40.71 32.19 24.42 39.19 18.58 24.42 46.12 -17.76 -5.23 9.26 13.06 7.83 9.26

Item Equity & Liabilities Share Capital & Reserves Non-current Liabilities Current Liabilities Total Assets Non-current Assets Current Assets Total

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Vertical Analysis
Profit and Loss account Year Item Sales Cost of Sales Gross Profit Distribution cost Other expenses Finance cost Other income Total net expenses Net Profit before tax Taxation Net Profit after tax 2010 100 86.27 13.73 2.86 4.01 1.89 0.21 8.55 5.18 1.7 3.48 2009 100 79.25 20.75 2.33 4.38 2.09 0.24 8.56 12.19 3.58 8.60

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Balance Sheet Item Equity & Liabilities Share Capital & Reserves Non-current Liabilities Current Liabilities Total Assets Non-current Assets Current Assets Total Year 2010 2009 37.42 10.28 52.30 100 31.69 68.31 100 41.69 9.09 49.22 100 28.32 71.68 100

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Conclusion
Service industries (LTD). is in a great position as a leader in the market to earn profits. But ignoring the aspect that china has entered in the market and fastly capturing the market as it has captured the word market. So local footwear industry needs to be aware and conscious about the technologies the china is using. Another fact that I have observed by studying the annual reports of SIL that their profit are increasing due to increase in prices not by increase in the units sold, it is alarming situation because it would not be possible in the future as when china will have made leading position in the market in next 10 years. They are also doing business in the tyre tube industry. Its good because this sector has a great potential and they can make great profits. At the end I would suggest that they should adopt cost effective measures and try to increase their unit sales because of competition.

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RECOMENDATIONS
The management is ignoring the Middle East market it has the chance to become multinational due to shift in politics in Middle East. Expanding the companys product line to meet a broader range of customers needs the management is ignoring the segment that is design and extra quality conscious like not introducing leather shoe in the local market. Using the internet and E-commerce technology to drastically cut costs the management is reluctant to consider roll of information technology factor in reducing cost. Bata and there are many others emerging footwear stores in local market the management should use acquisition and merger to run its plants with full swing to gain economy of scale. Alliance or joint ventures that expand the firms market coverage or boost its competitive capability. The management should use these tools to gain exposure and experience.

SKILLS ACQUIRED
In Material Management Able to Receive material from vendor Prepare inspection report of Material 51

Comparing Quality of Material with sample Deliver Material to stores Issuance of material to production against Indent In Accounts Department Able to Record purchase and sale Invoices Payment to vendor Discounting of bill of exchange

Sources I use following source during preparing internship report.

For definitions I use following search engines. www.google.com www.service.com www.wikipedia.com

For the purpose of different important concepts and terms, I use the following books as references: Accounting by Sohail Afzal , M.Arif Principle of Accounting by Hadim Hussain Fundamental of Financial Management by James C. Van Horns

I concert the following further material: Annual Financial Report of Service industries Ltd. 2010 2009 2008

ANNEXES Followings are some attachments of balance sheet P& L account , Cash flow statement and Share Holders Equity Statement: For Year 2008, 2009 and 2010 52

Balance Sheet Profit & Loss Statement Cash Flow Statement Change in Equity Service Industries Limited Statement of Financial Position AS at December 31,2010 Year 2010 (Rs. In 000) Property Plant & Equipment Long Term Loan Long Term Deposits Total

Assets Non-current Assets

2009

1,425,169 1,450 12,875 1,439,494

1,023,725 2,270 8,225 1,034,220

Current Assets Stores Spares & Loose tools Stock in trade Trade debts Loans & Advances Trade deposits & prepayments Other receivables Cash & Bank balances Total 50,972 1,358,128 897,675 317,585 6,105 224,949 247,951 3,103,365 27826 1253241 793032 189053 4863 140688 208445 2,617,148

Total Assets

4,542,859

3,651,368

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Service Industries Limited Statement of Financial Position AS at December 31,2010 Equity & Liabilities Share capital & Reserves Share capital Reserves Total Non-current Liabilities Long term Financing Liabilities against leased assets Long term Deposits Deferred liabilities Total Current Liabilities Trade & other payables Interest & markup accrued Short term borrowing Current portion of long term financing Current portion of lease payments Provision for taxation Total Total Equity & Liabilities 54 1,033,217 40,362 1,119,143 78,762 10,070 94,433 2,375,987 787,250 15,703 703,174 60,000 8,962 222,271 1,797,360 214,263 26,262 880 225,641 467,046 142,073 36,344 740 152,767 331,924 120,288 1,579,538 1,699,826 120,288 1,401,796 1,522,084 Year 2010 (Rs. In 000) 2009

4,542,859

3,651,368

Service Industries Limited Profit and Loss Account For the Year ended December 31, 2010 Year 2010 (Rs. In 000) Sales Cost of sales Gross Profit Distribution cost Administrative expenses Other operating expenses Finance cost Other operating income Profit before taxation Taxation Profit after taxation 9,421,408 8,127,972 1,293,436 269,522 329,829 48,074 177,727 (19,648) 487,932 159,827 328,105

2009

7,680,237 6,086,613 1,593,624 179,308 270,830 65,312 160,425 (18,239) 935,988 275,162 660,826

Service Industries Limited Statement of Comprehensive Income For the Year ended December 31, 2010 Year 2010 2009 (Rs. In 000) Profit for the year Other comprehensive income Total 328,105 328,105 660,826 660,826

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Service Industries Limited Cash Flow Statement For the Year ended December 31, 2010 Year 2010 2009 (Rs. In 000) Cash flow from operating activities Cash generated Finance cost paid Income tax paid Contribution to gratuity fund WPPF & WWF paid Net cash from operating activities Cash flow from investing activities Capital expenditure Proceeds from the sale of assets security deposits Net cash from operating activities Cash flow from financing activities Lease rentals paid Short term borrowing Long term financing Dividend paid Net cash from financing activities Net cash in cash & cash equivalents cash & cash equivalents at the beginning cash & cash equivalents at the end (8,974) 415,969 90952 (150,550) 347,397 39,506 (162,794) (95,137) (27,927) (177,428) (463,286) 201,431 (533,972) 2,536 (4,650) (536,086) (243,873) 5,686 15,435 (222,752) 794,497 (153,068) (339,475) (5,100) (68,659) 228,195 1,237,033 (186,638) (133,532) (3,710) (25,684) 887,469

208,445 247,951

7014 208,445

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Service Industries Limited Statement of Changes in Equity For the Year ended December 31, 2010
(Rs. In 000) Total

Share capital Balance as at 31-12-2008 120,288

Capital reserves Capital Share gain premium

Revenue reserves General Unappropriated reserves profit

102,730

21,217

448,208

349,247

1,041,690

Final dividend

(90,216)

(90,216)

Transfer Interim dividend Net profit Balance as at 31-12-2009 120,288 102,730 21,217

250,000

(250,000)

(90,216) 660,826

(90,216) 660,826

698,208

579,641

1,522,084

Final dividend

(150,363)

(150,363)

Transfer Net profit Balance as at 31-12-2010 120,288 102,730 21,217

425,000

(425,000) 328,105 328,105

1,123,208

332,383

1,699,826

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