financial accounting presentation by hammad

7/30/2019 Financial Accounting Presentation by Hammad.

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www.aiou.edu.pk M. HAMMAD MANZOOR, MBA HRM - IRoll No. 508195394, Karachi Campus

Department of Admin Sciences,

Allama Iqbal Open University, Islamabad

Presented By: M. Hammad Manzoor

(MBA HRM I)

Roll No. 508195394

Supervised By: Mr. Attique Rehman

(November, 2011)


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WELCOME

TO THE PARTICIPANTS


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Agenda Items for Presentation

Introduction about Author and Project Introduction to the Topic

Practical Study Cere-e-Noor Ceramics

Data Collection Method / Analysis

SWOT analysis

Conclusions

Recommendations

Q & A Session


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Introduction about Author and ProjectMy Self

Introduction about ProjectSelection Criteria and Uses of an appropriate

Inventory System

Philosophy of the project is,

How to understand the problem and find out a patent

solution

Introduction about Author and Project


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INTRODUCTION


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Allama Iqbal Open University, IslamabadINTRODUCTION

INVENTORY

General Types of InventoryInventory

Management


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Allama Iqbal Open University, IslamabadWHAT IS AN INVENTORY

Inventory means

List Record

Account

Register

Catalog

Supply

Stock

Range

Inventory means a list compiled for some formal purpose, such as the details ofan estate going to probate, or the contents of a house let furnished.

The term inventory is a designation for goods that are held for sale in the normal

course of business, as well as for goods that are in production or are to be placed

in production.


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How Inventory Management

fits the Operations Management Philosophy

Operations As aCompetitive WeaponOperations StrategyProject Management

Process StrategyProcess Analysis

Process Performance & QualityConstraint ManagementProcess LayoutLean Systems

Supply Chain Strategy

LocationInventory Management

ForecastingSales and Operations Planning

Resource PlanningScheduling


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Inventory management is the planning and controlling of

inventories in order to meet the competitive priorities of theorganization.

Effective inventory management is essential for realizing the

full potential of any value chain.

Inventory management requires information about expected

demands, amounts on hand and amounts on order for every

item stocked at all locations.

The appropriate timing and size of the reorder quantities

must also be determined.

Inventory Management


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Allama Iqbal Open University, IslamabadINVENTORY MANAGEMENT


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Allama Iqbal Open University, IslamabadClasses of Inventory

Classes of Inventory

MerchandiseInventory

ManufacturingInventory

RawMaterial

FinishedGoods

Good Inprocess

Direct

MaterialDirect Labor


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Allama Iqbal Open University, IslamabadInventory Control Methods

Inventory Controls Methods

Real Time Inventory Physical Inventory


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Allama Iqbal Open University, IslamabadInventory Methods

Inventory Methods

PeriodicInventory

System

PerpetualInventory

System

Comparisonbetween Periodic &

Perpetual System


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Perpetual Inventory System

Periodic Inventory System

Large company with professional

management.

Small company, run by owner.

Management and employees want

information about items in inventory and

the quantities in which specific products

are selling.

Accounting records of inventories and

specific products sales are not needed in

daily operations. Such information is

developed primarily for use in annual

income tax returns.

Items in inventory have a high per unit

cost.

Inventory consists of many different kinds

of low cost items.

Low volume of sales transactions or acomputerized accounting system

High volume of sales transactions and amanual accounting system lock of full time

accounting personnel.

Merchandise stored in multiple locations

or in warehouses separate from the sales

sites.

All merchandise stored at the sale site.


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Allama Iqbal Open University, IslamabadImportant Terms used in Inventory Methods

Special terms used in dealing with inventory:

Stock Keeping Unit (SKU) is a unique combination of all the components that areassembled into the purchasable item. Therefore, any change in the packaging orproduct is a new SKU. This level of detailed specification assists in managinginventory.

Stockout means running out of the inventory of an SKU.

"New old stock" (sometimes abbreviated NOS) is a term used in business to referto merchandise being offered for sale that was manufactured long ago but thathas never been used. Such merchandise may not be produced anymore, and thenew old stock may represent the only market source of a particular item at the

present time.


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Allama Iqbal Open University, IslamabadImportant Terms used in Inventory Methods

Business Inventory:

The reasons for keeping stockThere are three basic reasons for keeping an inventory:

1.Time - The time lags present in the supply chain, from supplier to userat every stage, requires that you maintain certain amounts of inventory

to use in this "lead time." However, in practice, inventory is to bemaintained for consumption during 'variations in lead time'. Lead timeitself can be addressed by ordering that many days in advance.

2.Uncertainty - Inventories are maintained as buffers to meetuncertainties in demand, supply and movements of goods.

3.Economies of scale - Ideal condition of "one unit at a time at a placewhere a user needs it, when he needs it" principle tends to incur lots ofcosts in terms of logistics. So bulk buying, movement and storing brings ineconomies of scale, thus inventory.


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Allama Iqbal Open University, IslamabadItems to be added in Inventory Methods

Items to be added in

Inventory Methods

Goods in TransitSegregated

GoodsGoods on

Consignment

Conditional andInstallment Sales


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Allama Iqbal Open University, IslamabadInventory As Money

Accounting forInventories

Raw MaterialWork in Progress

(WIP)Finished Goods


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Allama Iqbal Open University, IslamabadHow Inventory is Valued?

How inventory isValued?

First In, FirstOut (FIFO)

Last In, FirstOut (LIFO)

AverageCost

Specific Cost

(Actual Cost)

Standard

Cost Method


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Allama Iqbal Open University, IslamabadInventory on Balance Sheet

Assets = Liabilities + Equity.

Assets represent a companys resources. Assets can be in

the form of cash or other items that have monetary valueincluding

inventory. Assets are made up of (a) current assets (assets that are in the

form of cash or that are easily convertible to

cash within one year such as accounts receivable, securities, andinventory), (b) longer-term assets such as investments and fixed

assets (property/plant/equipment), or (c) intangible assets (patents,

copyrights, and goodwill).

Liabilities represent amounts owed to creditors (debt, accountspayable, and lease-term obligations).

Equity represents ownership or rights to the assets of the

company (common stock, additional paid-in capital, and retained

earnings).


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Inventory on Income Statement


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Allama Iqbal Open University, IslamabadFIFO Inventory


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Allama Iqbal Open University, IslamabadLIFO Inventory


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Allama Iqbal Open University, IslamabadAverage Cost Inventory


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Practical Study of

www.cera-a-noor.com


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Cera-e-Noor plant located in the industrial area of city ofHub in Lasbela, Balochistan province of Pakistan

It was acquired by the Hashoo Group in the year 2000.

It is a state-of-the-art facility for the manufacture ofcrockery (tableware).

The plant was designed and commissioned with thecollaboration of French ceramic giant, Bernardaud Liamogesand technical/engineering expertise from other majorplayers in the French ceramic industry such as Ceric and

Cerlim.


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Turn Over Targets To achieve a target of PKR 222 million (2 million pieces) within the 1st year To achieve a target of PKR 400 million (4 million pieces) within the 2nd year To achieve a target of PKR 1 billion (8 million pieces) within the 3rd year

Profit Oriented Targets To achieve profit at the rate of 2% within the 1st year 2007-08 To achieve profit at the rate of 4% within the 2nd year of 2008-9 To achieve profit at the rate of 8 % within the 3rd Year of 2008-09

Sales Targets To achieve a target net sales of Rs. 222 million within the1st year of 2007-08

Expand the number of dealers by 10 % To achieve a target net sales of Rs. 400 million within the 2nd year of 2008-09 Expand the number of dealers by 30 % To achieve a target net sales of Rs. 1billion within the 3rd year of 2009-10 Expand the number of dealers by 50 %


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Inventory control Methodology

Used by Cere e Noor


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Inventory methods Used by Cere e Noor:

Inventory Methods used by Cere e Noor are as follows;

Periodic Inventory Method Used by Cere e Noor:Periodic Inventory method is used by Cere e Noor. They generally carry outthe periodic inventory byphysical inventory at the end of each month. Inperiodic Inventory methodology of the Cere e Noor, the store department isresponsible for maintain all the records for the material received and issued by theStore Department.

FIFO (First In & First Out) Method Used by Cere e Noor:Another method used by Cere e Noor is the First In & First Out (FIFO)method). This method is worked out for the items that are to utilize at theearliest as we can. In the FIFO technique, the sensitive material holds by

the store department is to utilized first.The utilization of the different colors for the ceramics preparation,generally few color brands are very sensitive for utilization, due totemperature and light exposure. FIFO technique is sometime applied insuch cases.


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Merits & Strengths:Premier local manufacturer of porcelain tableware.

Part of the elite Hashoo group -the owners and operators of two leadingchains of hotels namely Marriott and Pearl Continental

Ability (knowledge, skills and facility) to manufacture hard porcelain.

Demerits and Deficiencies:Inventory management system is not equipped with the advance technologies,

like modern instruments to maintain the sensitive material (paints).No modern alarming system has yet been installed with Hashoo group; the oldalarming system in use generally generates the request which is not required bythe purchaser.Plant is geared towards small volumes and labor intensive manufacturing resultinghigh. Cost of manufacturing

Quality is acceptable but consistency needs to be ensured. Further improvementin quality is necessary to compete with top International brands.Lack of Decal Development Facility.Lack of original designsLack of brand awareness in relevant marketsLack of planning strategy for Inventory Management.


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Opportunities: Huge growing domestic market Growing purchasing power of people within the economy More and more consumers are becoming brand conscious Modern lifestyles markets are growing.

Threats: Growing Manufacturing Power of China (they can do

reasonable quality at low cost) Increasing energy costs.(Oil & Electricity) Increasing prices of raw material Political stability is at a decline.


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Recommendations:Enhance the planning strategy for inventory management.

Better alarming system should be installed.Receiving management should be improved enough, so that no illegal storekeeping could be made at arriving place (main gate)Enhance the manufacturing plant capacity to get the maximum numberEnhance the brand designEnhance HRD to meet the appropriate professional needs for onward

competitionAdministration department needs to address for of hiring experiencedprofessionals of the relevant trade.The emphasis of the company emphasized is work progress, nor on thepersonality grooming of an individual, which could be helpful for companyoperation smooth conduction and helping out for better prospectivity in the

form of his personal growth and motivation to company. Sophisticated inventory plan should be prepared to meet the order in amore proficient way.


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i d k M HAMMAD MANZOOR MBA HRM I



Thanks for your patience ,,,,,,

Q & A Session

financial accounting presentation by hammad

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