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Published financial statements are the only public documents available to stakeholders, prepared and provided by the companies (a mandatory requirement for listed companies) which is to great extent is the major source of inside formal information upon which financial/investment decisions are been taken. Correct analyses of such information leads to successful decision making.
I perceive analyzing financial statements using financial ratio analysis and related business models as my strength. The chosen topic is also closely linked to where I see myself in future working as a performance management analyst. Such an applied research has with an opportunity to further my depth of knowledge I hold regarding the ratios.
Prominently, while living in UK I have chosen a Pakistani textile company for the research purpose. The reason that why I have done this is three folded. First one being that I have lived all of my life in Pakistan and it's been a year only I am in UK for my further studies. Second reason being as I have lived there, I have got better knowledge and understanding of businesses in Pakistan. Third reason being, I had started working on my RAP in the mid of 2009 but was not able to complete it due to some other commitments. So, my previous efforts do not go wasted, I have decided to continue working on it.
The textile industry is one of the most important sectors of Pakistan. It contributes significantly to the country's GDP, exports as well as employment. It is, in fact, the backbone of the Pakistani economy. The textile industry of Pakistan has a total established spinning capacity of 1,550million kilograms of yarn, weaving capacity of 4,368million square meters of fabric and finishing capacity of 4,000million square meters. The industry has a production capacity of 670million units of garments, 400million units of knitwear and 53million kilograms of towels. (Fibre2Fashion.com)
Artistic Denim Mills Ltd (ADML) is a Premium Denim Producer in Pakistan. The company is public listed and started production in 1993. Current capacity is three Million yards of Fabric and one million pairs of jeans per month. It is presently producing Rope Dyed, Semi Mercerized (warp yarn mercerized), 100% Cotton Indigo/Black Denim which is Singed, Skewed, Pre-Shrunk in different Qualities. They are also looking to making new weaves in Denim. (exportbureau.com)
The main project objectives that I decided for my project were to analyze the:
- Trend of the profitability of the company and identifiy the factors which have an impact on the profitability of the company. Profitability of operations combined with effective use of assets that generate sales are key drivers that management should use to raise return on owner's equity.(Helfert, 2001)
- The trend of the activity ratios of the company and analyze the factors which have an impact on the receivable, inventory and payable days of the company. These can give you an insight on how well a company is managing its operating and sales activities. The primary goal of these activities is to produce income through effective use of its resources. (Carlberg, 2002)
- Trend of the liquidity of the company and analyze the ability of the company to pay off its liabilities as those become due. (BPP F7)
- Trend of the solvency of the company, Solvency ratios measure the relationship between debts and owners equity and examine the proportion of debt the company is using. (FreeWorldAcadamy.com)
- Impact of internal strengths and weaknesses and external opportunities and threats of the company on the business performance with the help of SWOT analysis. (BPP P3)
- Impact of different environmental factor on the business with the help of PEST analysis. (QuickMBA.com)
Overall Approach for Preparation of RAP:
Analyzing the published financial statements by applying the ratios (see appendix) will comprise the major part of my research framework. Although wider company and industry trends/knowledge will be extracted from researching the newspapers.
Research will start with the comments on the ratios which will try to explain the identified trends and their impact on future performance of the company. To further the depth of the comments active media, newspaper and trade journal research would also be a part of my overall framework. The ratios would then be compared with one of the competitor of the subject matter company to get the insight knowledge on how well/bad they had performed in relation to its competitor.
In this process I also analyzed the impact of different environmental factors on the business performance of the company. The business and financial performance of the company was concluded on the basis of research and analysis performed. As I knew that the conclusion formed a very important part of my work. (Shane Johnson)
SWOT and PEST analysis would then be performed to know the success/failure of the company at micro/industry and macro level respectively.
Ultimately, the research will be concluded by commenting on the overall success/failure of the company policies. All research will be based on the information extracted for the year ended 2007, 2008 and 2009. A final recommendation paragraph will be provided to end the research.
INFORMATION GATHERING AND ACCOUNTING / BUSINESS TECHNIQUES:
Primary sources of information allow the learner to access original and unedited information. A primary source requires the learner to interact with the source and extract information. While secondary information represents someone else's thinking (Graphic.org). I gathered information from both sources of information, but the information gathered from secondary sources of information was more in quantum. However information from primary sources was more authentic.
Information gathered from Primary Sources:
The best way to gather primary information was to conduct interviews of key personnel of ADML. These turned to be very helpful in analyzing the business and financial performance of the company/industry. I requested the Chief Financial Officer (CFO) and Company's Secretary to have an interview session with me and prepared a questionnaire containing questions that I had to ask them.
During the interview session with the CFO he told me about the company operations and the importance of textile sector in Pakistan's economy. He also told me the specific reasons of trends in the profitability of the company. I also learnt a few points regarding environmental factors.
In the interview session with the Company's Secretary I did not use any questionnaire as I wanted to have a general discussion with him about the business and financial performance of the company. In this session he gave me an insight to the textile industry of Pakistan and ADML. I also got to know of the future prospects of the industry and the main strengths of the company.
Information gathered from Secondary Sources:
The most relevant information I had gathered under the secondary caption was the publicly available financial statements for the year ended 2007, 2008 and 2009. These provided me with enough information for the calculation of ratios and analyzing them in an appropriate manner. Dewan's financial statement was also obtained for the comparison purposes.
To remain informed of latest economic developments and the industry performance, I read different local newspapers and journals namely DAWN, THE NEWS and THE NATION, which I knew would help me in developing an understanding of trends in the performance of the company. I had to visit the archives of a few newspapers such as BUSINESS RECORDER to get the information relating to the period under analysis. It was also important to keep an eye open to the different business channels such as BUSINESS PLUS so as to assess the trends in the economy.
I also went through the research reports of different analysts to judge my own findings in light of an expert and to gain better understanding of emerging trends.
Considerable amount of help was taken from the prevailing ACCA curriculum. Paper such as F7, P2, P3 and P5 helped the most.
Articles from student accountant magazine helped me to improve my interpretation and presentation skills.
METHODS OF COLLECTION OF INFORMATION:
Almost all of the information was collected from the internet. Financial statements for both companies easily available on company's websites and were downloaded. Business articles, local newspaper and their archives were also approached via the internet which proved to be time saving and hassle free. The most renowned and reliable searching engine GOOGLE was frequently used.
ACCA study material for F7, P2, P3 and P5 was used for extracting the formulae for the ratio analysis as well as the correct interpretation of them. Student accountant magazine proved to be an additional support provider for the designated purpose.
Limitations of information gathering:
When conducting interviews with the company personnel I realized that the time available for the interview sessions with the executive management of the company was very limited. If I had been provided with a little more time I would have been able to gain more from the meeting sessions.
Extracting the correct and relevant information from the internet could be hassling as so much information is available. Authenticity of the information is also questionable some times.
Information obtained from the books/magazines are sometimes limited and restricted to the context under which they have been written. To overcome this issue and to remain unbiased, wider reading was undertaken.
Ethical issues faced while gathering information:
Being an accountancy student I had to ensure that I upheld professional conduct and kept the concepts of confidentiality, integrity, objectivity, professional behavior and professional competence as I gathered information for the project. (FTC, 2008)
I had to make sure that the information I got from different unpublished sources was not disclosed to anyone and was only used for the purpose of the project. To uphold the principles of professional integrity and independence I tried my best to come up with a neutral opinion upon the performance of the company and have considered all the factors that could have an impact on it.
Accounting and/ or business techniques used
I analyzed the financial performance of the company with the help of financial ratios of the company. Financial ratios are comparisons in which certain financial statement items are divided by one another to reveal their logical interrelationships. Some financial ratios (such as net income to net sales ratio) are called 'primary' because they indicate the fundamental causes underlying a firm's strengths and weaknesses. (businessdictionary.com) Following are types of financial ratios:
- Profitability ratios measure the company's ability to generate a return on its resources. These include gross profit margin, net profit margin and Return on Capital Employed.
- Liquidity measures a company's capacity to pay its debts as they become due. There are two ratios for evaluating liquidity; current and quick.
- Solvency ratios are an indication of the company's ability to satisfy its debt obligations and its capacity to take on additional debt without impairing its survival.
- Activity Ratios evaluate how well the company manages its assets. Besides determining the value of the company's assets. (missouribusiness.net)
The SWOT analysis is an extremely useful tool for understanding and decision-making for all sorts of situations in business and organizations. SWOT is an acronym for Strengths, Weaknesses, Opportunities, Threats. SWOT analysis works well in brainstorming meetings. Uses of SWOT analysis include business planning, strategic planning, competitor evaluation, marketing, business and product development and research reports. (businessballs.com)
I also used PEST analysis to analyze the impact of different environmental factors on the performance of the company. When analyzing the macro-environment, it was important to identify the factors which would affect the company in more than one way so that its supply and demand levels and its costs get influenced (Johnson et al, 2001). The "radical and ongoing changes occurring in society create an uncertain environment and have an impact on the function of the whole organization" (Tsiakkiros, 2002).
Comparisons with the company's immediate competitor (DTML) have been carried out where relevant.
Discussion of limitations of Accounting and business tools
The following are the limitations of ratio analysis and these had to be kept in mind when using the tool.
- Ratio analysis has to be done on a ‘like with like' basis, which means valid analysis, can only be made between companies in the same industry. /
- Ratios are based on published financial accounts so therefore depend on the quality of these statements. Window dressing could distort results.
- Balance sheet is a snap shot of a business at the end of a financial year; it might not be representative of the business's circumstances throughout the year.
- Ratios only use quantitative information so qualitative data is ignored. (Hall, 2004)
Whilst a SWOT analysis is useful for managing a large number of situational factors and determining the ones which are more important but its limitations are as follows
- It can cause companies to view situations as being very simple, and hence ignore some critical strategic interactions which may occur.
- Classifying factors as strengths, weaknesses, opportunities or threats can be a quite arbitrary method given the high degree of uncertainty in the market. Such as a new technology, can be both a threat and an opportunity. Whilst it could be exploited by a firm, this could cannibalize existing brands and encourage new entrants.
- As such, it is important not to get too embroiled in which factors represent an opportunity and which represent a threat, and instead focus on identifying and being aware of the most important factors (Academic Answers Ltd, 2003)
There are some limitations of PEST model which should be taken into account:
- The pace of change makes it increasingly difficult to anticipate developments that may affect an organization in the future.
- The risk of capturing too much data is that it may make it difficult to see the wood for the trees and lead to ‘paralysis by analysis'.
- The data used in the analysis may be based on assumptions that subsequently prove to be unfounded (good and bad). (cipd.co)
RESULTS, ANALYSIS, CONCLUSIONS AND RECOMMENDATIONS
ADML is a Premium Denim Producer. The company is public listed and started production in 1993. Current capacity is three Million yards of Fabric and one million pairs of jeans per month. ADML is a complete vertical unit converting Cotton to Finished Garments. Its principal activities are to sell rope dyed denim fabric and yarn. Weaving is done on machines from Switzerland and Italy.
Pakistan's Textile sector:
Pakistan's effort in the industrial sector in the past 50 years had been at best, haphazard and sporadic. Individual mills may or may not have adopted universal standards and operating practices. Textiles being Pakistan's largest industrial sector generate the country's highest export earnings of about 67%, providing the bulk of employment (39%) to a largely under utilized work force. The high levels of unemployment and under-employment are mainly on account of the low skill levels, low literacy and poor managerial efficiencies of the job market. (Wikipedia)
Sales trend Analysis
During FY2008 there was a slight decline of 2% in the sales revenues of the company and the sales revenues of the company decreased from PKR2.488Billion to PKR2.436Billion. During this period of time in spite of uncertain political and law and order situation which resulted in loss of production and shipments the company was able to remain almost consistent in its sales revenues. Electricity crisis in the country was also a reason of loss of production and shipments the company during this period.
During FY2009 there was an increase of 28% in the sales revenues of the company and the sales revenues of the company increased from PKR2.43Billion to PKR3.125Billion. During this period the company commissioned new garment, washing and weaving machines to increase the production. In this time span there was also a sharp increase in the exports of the company. Company was not able to increase its prices materially but there was a material increase in the sales volume.
Sales revenues of ADML, Dewan Textile Mills Limited (DTML) one of the competitor of the company, have been quite close to each other over the period. But the growth in the sales revenues of ADML has been higher over the period as compared to DTML.
During FY2008 there was a decline of 12% in the gross margins of the company and the gross profits of the company declined from PKR742Million to PKR638Million depicting a decline of 14%. One of the reasons of decline in the gross margins of the company was a decline in the sales revenues of the company which lowered the ability of the company to cover fixed production costs. During this period there was also a record increase in the cotton prices which led to an increase in the costs of production. High inflation also resulted in increased labor costs.
During FY2009 there was a decline of 15% in the gross margins of the company but the gross profits of the company increased from PKR638Million to PKR697Million depicting an increase of 9% over the period of time. During this period of time there was further increase in cotton prices and increase in inflation which led to an increase in the costs of production. But because of intense competition company has been unable to transfer the impact of increased prices to its customers. The reason of increase in the gross profits was an increase in the sales revenues of the company which was a result of increase in the sales volume of the company.
As compared to ADML, the gross margins of DTML have been much lower over the period and were negative in FY2009. The reason of lower gross margins of DTML over the period of time has been complete inability of the company to transfer the impact of increased costs to its costumers due to low brand image.
During FY2008 there was a decline of 10% in the operating margins of the company and the operating profits of the company decreased from PKR610Million to PKR538.9Million. During this period there was 14% increase in the selling and distribution costs, 2% decline in the administrative costs and 22.5% decline in the other operating expenses of the company. During this period there was also increase of PKR32.4Million in the other operating income of the company. The reason of decline in the operating margins of the company has been a decline in the gross margins of the company.
During FY2009 there was a decline of 14% in the operating margins of the company but the operating profits of the company increased from PKR538.9Million to PKR596Million. One of the reasons of decline in the operating margins was a decline in the gross margins of the company. During this period there was 22% increase in the selling and distribution costs, 15% increase in the administrative costs and 26% increase in the other operating expenses of the company. The reason of increase in the other operating expenses of the company was an increase in the unrealized losses on short term investments of the company.
As compared to ADML, the operating margins of DTML have been much lower over the period. The reason of much lower and negative operating margins of DTML has been lower gross margins and poor management of operating costs over the period of time.
During FY2008 there was a decline of 12% in the net margins of the company and net profits of the company decreased from PKR406Million to PKR349.6Million. One of the reasons has been a decline in the operating margins of the company. During this period of time there was a decline of 4% in the finance costs of the company.
During FY2009 there was a decline of 16% in the net margins of the company and net profits of the company increased from PKR349.6Million to PKR376.4Million. The reason of increase in the net profits was an increase in the operating profits of the company. Decline in the operating profit margins of the company was also a reason of decline in the net margins of the company.
During FY2008 there was decline of 22% in the Return on Capital Employed (ROCE) of the company though there was 14% decline in the returns of the company. During this period the employed capital of the company increased from PKR3.02Billion to PKR3.33Billion. During FY2009 there was an increase of 13% in the ROCE of the company but increase in the returns of the company was lesser and the reason of this was 5% decrease in the employed capital of the company.
As compared to ADML, the net margins of DTML have been much lower and negative over the period of time. One of the reasons of negative net margins of DTML has been negative operating margins. Finance costs of DTML have also been much higher over the period.
The business should not only provide information on its profitability, but also to provide information that indicates whether or not the business will be able to pay its creditors, expenses, loans falling due at correct times. A company may be profitable but if it fails to generate enough cash to settle its liability is said to be insolvent. The liquidity of the company is low and the management of the company should take steps to increase it liquidity which is lower than industry average at present. (cbdd.wsu)
During FY2008 there was an increase of 15% in the current ratio of the company. During this period of time the was an increase of 40% in the stock in trade, 13% decline in trade debts, 31% increase in loans and 5.8 times increase in the cash, receivables and on overall basis there was an increase of 21% in the total current assets of the company. During this period there was 13% decline in trade payables, 4% decline in short term borrowing and 90% increase in current portion of long term modarba, on brad basis there was an increase 5.5% in the current liabilities of the company.
During FY2009 there was a decrease of 22% in the current ratio of the company. During this period of time the was an decrease of 18% in the stock in trade, 13% increase in trade debts, 51% increase in loans and receivables and 89% times decrease in the cash, on overall basis there was an decrease of 7% in the total current assets of the company. During this period there was 47% increase in trade payables, 36% increase in short term borrowing and 43% decrease in current portion of long term modarba, on brad basis there was an increase 18% in the current liabilities of the company.
During FY2008 there was a 5% decline in the quick ratio of the company and there was a decline of 8% in the quick ratio of the company during FY2009. This depicts that over the period of time there also been a decline in the ability of a company to use its near cash or quick assets to immediately extinguish or retire its current liabilities.
By comparing the trend of the liquidity of DTML with ADML I identified that the liquidity of both companies have been close to each other over the period. Liquidity of both the companies has been much low and companies should take appropriate actions to be able to payoff their obligation as those become due.
During FY2008 there was 12.5% increase in the receivable turnover of the company and receivable days decreased from 61 to 55 days. During this period there was a decline of 13% in the trade receivables of the company. The reason of decline in the receivable days of the company was a tighter credit policy implemented by the company to manage its liquidity.
During FY2008 there was 13.5% increase in the receivable turnover of the company and receivable days decreased from 55 to 48 days. During this period there was an increase of 13% in the trade receivables of the company in spite of 28% increase in the sales revenues of the company. The reason of decline in the receivable days of the company was again a tighter credit policy implemented by the company to manage its liquidity.
As compared to ADML, the receivable turnover of DTML has been much lower over the period as DTML has relaxed credit policy to sustain its market share.
During FY2008 there was a 27% decrease in the inventory turnover of the company and likewise there was an increase in the inventory turnover days. During this period of time there was 40% increase in the amount of inventory held by the company. In this time span the production was higher than the volume sold which led to a decline in the inventory turnover of the company. During FY2009 there was 64% increase in the inventory turnover of the company which led to 40% decrease in the inventory days of the company. During this period there was 18% decline in the inventory held by the company despite of increased sales this year.
As compared to ADML, the inventory turnover of DTML has been much lower over the period which also raises concerns of obsolete stock.
During FY2008 there was an increase of 18% in the payable turnover of the company. During FY2009 there was a decrease of 8.5% in the payable turnover of the company. Over the period there has been 28% increase in the trade creditors of the company and 39% increase in the purchases of the company which overall depicts that the company has reduced its reliance on trade creditors as a source of finance.
As compared to its competitor the payable turnover of ADML has been much higher because of its lesser reliance in trade payables as a source of finance.
During FY2008 there was a decline of 10% in the total debt to equity ratio of the company. During this period there was 16% increase in the equity, 2% decrease in long term financing and 4% decrease in short term financing of the company.
During FY2009 there was a decline of 17% in the total debt to equity ratio of the company. During this period there was 8% increase in the equity, 39% decrease in long term financing and 37% increase in short term financing of the company.
Over the period of time there has also been a slight decline in the ability of the company by cover its finance costs i.e. 10%. The reason of this decrease has been 2% decline in the operating profits and 8% increase in the finance costs of the company mainly because of increased markups on short term borrowings.
As compared to its competitor the leverage of the company is much lower and leverage of DTML seems to be alarmingly high as it has a negative leverage.
Over the period of time there has been a slight decrease in the Earnings Per Share (EPS) of the company which is in congruence with the decline in the net profits of the company by 7.5%. During FY2008 there was an increase of 20% in the issued share capital of the company and during this period of time issued share capital of the company increased from PKR700Million to PKR840Million. EPS figure has been adjusted for increase in the issued share capital of the company and only depicts the changes in the profitability of the company over the period of time. During FY2007 and FY2008 no cash dividend was paid to the shareholders of the company. Company gave bonus dividend of 400% and 20% of the issued share capital of the company during FY2007 and FY2008 respectively. Management of the company also gave a cash dividend of PKR2 per share during FY2009. As compared to ADML, DTML has losses per share as the company is in losses and has not paid any dividend during this period of time.
One of the most notable strengths of the company is that the quality of Denim produced by the company is of very high quality and the company has a very strong brand image in international market. (PTJ)
Highly skilled labor.
Availability of high quality raw material i.e. cotton and cheap labor in Pakistan is also one of the notable strengths of the company.
Professionalism in the employees
Highly skilled labor and talented marketing managers are also very notable strengths of the company.
Innovative products are also very notable strengths of the company.
Management is committed towards better quality.
ADML is an export-oriented organization due to finishing of quota system in 2005, there has been a considerable increase in the exports of the company.
ADML is highly dependent on exports which are major portion of the sales revenues of the company which may increase the variability in the sales revenues of the company.
Because Pakistani cotton made products got popularity in international market but the growth of Pakistani, cotton decreased year by year. (pakissan.com)
Lack of diversification is also one of the major weaknesses of the company as the company only produces Denim.
Research and development budget of the company is also very low.
Availability of cheap labor and domestic raw material are of the notable opportunities for the company to increase its market share in international market. (Jang 2009)
Brand owners are increasing their investments in measures intended to contribute to strengthening their brands.
The branding industry both in Europe and Asia are developing fast due to general economic development, changing fashion trends and customer needs. This adds new dimensions of innovation and prospect for ADML. (CNBC)
Growth in GDP and private consumption over the period are also provides an opportunity for the sector to grow.
The International competitors pose a threat in a sense that they have more EU retailers and brands sourcing from China and Bangladesh, as their customers for their competitive price, large production base and knowledge of the Indian market trends and perspectives. (sourcejuice.com)
There are threats from the raw material suppliers too for increasing the direct and indirect material costs and also irregular and inappropriate logistics of material supply and its quality.
Political risks or threats in Pakistan are industry-specific. Certain external developments may pose to affect adversely the commercial viability of Pakistan's future investments and business plans. Some of them are as follows:
- Slow government decisions, adverse changes or unpredictability on foreign investment, import, ownership, pricing or tax issues are prevalent.
- Cultural problems, delays or legal disputes
- Political and law and order uncertainty (DAWN)
During last three years there has been a sharp increase in the inflation in the country. During last two years there has also been a decline in GDP growth in Pakistan which remained 2.1%. (pakboi.gov.pk)
To cope with ever increasing inflation the State Bank of Pakistan has increased interest rates.
Pakistan's economy has begun to recover from a financial crisis but slow electricity reform is dragging drag on growth while inflation has picked up. (apakistannews.com)
During this period of time there has also been a deterioration in Pak Rupee.
Health consciousness among the people of Pakistan has been increasing day by day so, industrialists should also focus on preserving environment.
Due to media proliferation and exposure to the western culture the younger generations in Pakistan is becoming more and more westernized. This change in the society has worked in favor of fashion brands like Artistic Denim.
People are becoming more and more brand conscious.
Over the period of time there has been a dramatic development in the technology in textile industry.
Textile industry of Pakistan is equipped with up to date technology with the help of which industry has been able to compete internationally.
The Spinning Unit of ADML is most important part of denim production. State of the art latest machinery has been installed to provide complete backup support.
The unit ADML is equipped with 15000 spindles producing 1 million kg of yarn per month. A variety of yarns from 5.5 single to 16 single are produced in open end, ring, slub and stretch.
ADM Denim is a Premium Denim Producer. The company is public listed and started production in 1993. Current capacity is three Million yards of Fabric and one million pairs of jeans per month. ADM is a complete vertical unit converting Cotton to Finished Garments. On the fabric side, our product range includes weights from 8 oz up to 14 oz using multi-count/multi-twist ring/open-end yarns using AMSLER technology.
With the completion of the analysis, it can be said with considerable confidence that ADML seems to be a reliable company in five aspects of profitability, liquidity, solvency and investment.
Although the profitability ratios have varied over the three years but it could be concluded that ADML has performed quite stably especially considering the unfavorable macro environment (most prominent factors include political unrest in Pakistan, severe electricity breakdown , dynamic inflation and exchange rates etc.) within which it exists.
Comparison of ADML's performance with DTML has revealed convincing evidence of better performance than its competitor.
ADML has been able to increase its sales revenue in absolute terms over the three years in consideration with the fact in place that the whole world was going through an economic recession. This shows that ADML has got the right ticks in place as their strengths (see SWOT analysis) which had been exploited in an effective manner. A big slice of ADML's total sales comes from export contracts which are a threat to company's long-term growth prospects. New suppliers of fabric like China and Bangladesh have entered in to the market which are cheaper have got large production base and have got better market knowledge/understanding. To overcome this threat ADML should seek to diversify its operation.
Study of changes in social trends in domestic/international fashion markets could bring more prosperity and long-term growth to company's margins. Over the years ADML has spent very minimal on such regard (R & D).
Other macro level factors (as discussed earlier) which are outside company's influence could bring good to the company, industry and the economy as a whole if get improved or at least less dynamic to foster better planning.
At present there is political uncertainty in Pakistan. Law and order situation in Pakistan is also uncertain. Slow government decisions, adverse changes or unpredictability on foreign investment, import, ownership, pricing or tax issues are prevalent. During last three years there has been a sharp increase in the inflation in the country. During last two years there has also been a decline in GDP growth in Pakistan which remained 2.1%. Due to media proliferation and exposure to the western culture the younger generations in Pakistan is becoming more and more westernized. This change in the society has worked in favor of fashion brands like Artistic Denim.
I would recommend that the company should diversify its operation by producing different kinds of textile products. Company should also reduce its reliance on foreign customers. It is also suggested the company should increase its research and development expenditure.