INTRODUCTION OF INVENTORY

We have acquired basis knowledge about to concepts, Objectives, advantages,

Methods and elements of cost. We shall now study each elements of cost Separately,

The first elements of cost is “direct material cost” materials constitute a very

significant proportion of total cost of finished product. A proper recording and

control over the Material costs are very essential.

THE IMPORTANCE OF THE SAME ARE FOLLOWING

Dependence of the Quality of finished goods

The exact quality of materials required should be determined according to the

required quality of the finished product. If too superior quality of material is

purchased, it would mean higher cost due to high prices. If the quality of materials

purchased is too low, the product will be of inferior quality.

Price of the product

The Price paid should be the minimum possible otherwise the higher cost of the

finished products would make the product uncompetitive in the market.

Continuity in production

There should not be any interruption In the production process for want of

material and stores. Including small inexpensive items like lubricating oil for a

machine. Sometime their out of stock situation may lead to stoppage of machines.

Cost of holding material

There should be no over stocking of materials because that would result in loss of

interest charges, higher warehouse charges, deterioration in quality and losses due to

obsolescence.

WASTAGE

Wastages and losses while the materials are in the store and during the process

of manufacture should be avoided as far as possible.

REGULAR INFORMATION ABOUT RESOURCES

It may also be added that information about availability of materials and stores

should be continuously available so that production may be planned properly and the

required material purchased in time.

MATERIAL CONTROL

The publication of the Institute of cost and management Accountants on

Budgetary Control defines it as.

The function of ensuring that sufficient goods are retained in stock to meet all

requirements without carrying unnecessarily large stocks.

When the function of indexing buying, receiving, inspection, storing and

paying of the goods are separated it is essential that these should be properly Co-

0rdinated so as to achivieve the advantages of specialization.

OBJECTIVES OF SYSTEM OF MATERIAL CONTROL

THE OBJECTIVES OF A SYSTEM OF MATERIAL CONTROL ARE THE FOLLOWING

MINIMIZING INTERRUPTION IN PRODUCTION PROCESS

Ensuring that no activity, particularly production, suffers from interruption for

want of material s and stores. It should be noted that this requires constant availability

of every item that may be needed howsoever small its cost may be.

COST OF MATERIAL

Seeing to it that all the material and stores are acquired at the lowest possible

price considering the quality that is required and other relevant factors like reliability

respect of delivery, etc Holding cost should also be tried to be minimized.

REDUCTION IN WASTAGE

Avoidance of unnecessary losses and wastages that may arise from deterioration

in quality due to defective or long storage or from obsolescence It may be noted that

losses and wastages in the process of manufacture. concern the production

department.

ADEQUATE INFORMATION

Maintenance of proper records to ensure t hat reliable information is available

for all items of materials and stores that not only helps in detecting losses and

pilferages but also facilitates proper production planning.

COMPLETION OF ORDER TIME

Proper material management is very necessary for fulfilling orders of the

firm. This adds to the good will of the firm.

REQUIREMENTS OF MATERIAL CONTROL

MATERIAL CONTROL REQUIREMENTS CAN BE SUMMARISED AS FOLLOWS

Proper co-ordination of all departments involved VIZ,, finance, purchasing, receiving, inspection, storage, accounting and payment.

Determining purchase procedure to see that purchases are made , ofter making suitable enquiries, at the most favorable terms to the firm.

Use of standard forms for placing the order, noting receipt of goods. Authorizing issue of the material etc.

Preparation of budgets concerning materials, supplies and equipment to ensure economy in purchasing and use of materials.

Operation of a system of internal check so that all transaction involving materials supplies and equipment purchases are properly approved and automatically checked.

Storage of all materials and supplies in a well designated location with proper safeguards.

Operation of a system of perpetual inventory together with continuous stock checking so that it is possible to determined at any time the amount and value of each kid of material in stock.

Operation of a system of stores control and issue so that there will be delivery of materials upon requisition to deportment in the right amount at the time they are needed.

Development of system of controlling accounts and subsidiary records which exhibit summary and detailed material costs at the stage of material receipt and consumption.

Regular reports of materials purchased, issue from stock, inventory balances,

obsolete stock, goods returned to vendors and spoiled or defective units.

INDUSTRY PROFILE

The power electronics is the application of electronic circuit to energy

conversion that is it encompasses the use of electronic components, the application of

circuit theory and design techniques and the development of analytical tools toward

efficiency electronic conversion, control and conditioning of electronic power . The

power electronics market comprises of uninterrupted power supplies (UPS), AC/DC

power supplies, battery charges and inventors. In 2003 the total worldwide power

electronics market was $ 6351 millions, which is expected to grow at a compound

annual growth rate of 6.1% to reach $ 7203 millions by 2006. Power electronics is

used in computers, automobiles military, medical applications, telecommunications

systems and satellites, motors, lighting and alternative energy (like solar and wind).

The major manufacturers in the power electronics industry (India) are:

Exide industries

Hyderabad batteries limited

Amara raja power systems private limited

Standard batteries

Power supply is a buffer circuit that provides power with the

characteristics required by the load forms a primary power source with characteristics

incompatible with the load. It makes the load compartible with its power source.

A power supply is sometimes called a power converter and the process

is called power conversion. It is also sometimes called a power condition and a

process is called power conditioning.

A switching mode power supply is a power supply that provides the

power supply function through low loss components such as capacitors, inductors and

transformers-and the use of the switches that are in one of two states, on or off. The

advantage is that the switch dissipates very little power either of these two states and

power conversion can be accomplished with minimal power loss, which equates to

high efficiency. The term switch mode was widely used for these type of power

supply until Motorola, inc., who used the trade mark SWITCH MODE TM for

products aimed at the switching- mode power supply market , started to enforce their

trademark. Others used the term switching power supply which seems to be the

popular term. PSMA does not define either switching mode power supply or

switching power supply, but does define switching regulation.

Because of its emphasis on efficiency, switching mode power supply design

minimize the use of loss components such as resistors and uses components that are

ideally lossless such as switches, capacitors, inductors and transformers. The primary

design problem is how to interconnect these components and control the switches so

the desired results are obtained. The secondary design problem is to select, design, or

overcome the performance characteristics of less than the ideal components.

Protection techniques and parts de-rating are used circumvent the fact that real parts

tend to fail when over stressed.

POWER CONVERTION CIRCUITS ARE OFTEN CLASSIFIED

IN FOUR CATEGORIES:

Ac, Ac converts (example- Frequently changes, Cyclo converts).

Ac, Dc coverts (example-Rectifiers, Offline converts).

Dc, Ac converts (also called converts).

Dc, Dc converts (also called converts).

The term converter or power converter is called for all these categories are for

dc, dc converts only. The meanings are usually clear from the context. All of these

converts may be open loop circuits or use feedback to provide regulation.

The scope for this study is dc, dc converts and a special type of ac,dc converts

called an offline converter of offline power supply. In offline converters the ac

voltage is rectified to dc directly off the ac power line and filtered with no isolation

transformers and then processed with a dc, dc converter that provide isolation at the

switching frequency. Since the switching frequency is much higher than the line

frequency isolation transformer and output filter or greatly reduced in size and weight.

The switching frequency in usually 20 Khz.Or higher to place any audio noise

from the switching beyond the range of human hearing. Regulation of output voltage,

Current or power is assumed because that’s where the fun begins. Also the

rectification process may or may not include power factor correction or harmonic

current suppression technique.

Electric generating capacity in the Americas in 1997 was held primarily by

two countries, the USA and Canada combined those two countries alone accounted

for 82% of total power generation capacity in the Hemisphere. Brazil, México,

Argentina and Venezuela also have significant amounts of power generation capacity.

Canada and Paraguay and by far the largest power exporters in the Americas. In 1997

Canada exported 46 THz. mainly to Brazil about 57% of power in the Americas is

generated by thermal (Coal, Oil Natural Gas) plants. The reminder is generated by

Hydro power (35%), Nuclear (16%), Geothermal and other renewable (2%).

South America is one of the fastest growing world regions for electricity

demand. Hydro Electricity accounts for the larger share or energy consumption in

South America that in any other major world region. On May 11, 1999 Spain Endesa

purchased a 30% share in Chile’s Endesa, Latin America’s largest non stage

generator, for$ 1.85 billion. Spain’s Endesa also controls Chile’s power holding

company Enersis Argentina and Paraguay jointly own the $8 billon, Hydro complex

on the Parana River at Corpus.

Eco Electrical will be on the most environmental friendly /least polluting

power plants in the world. A $ 100 million power plant is being built in Trinidad and

Tobago by U.S based income. Mexico’s power system is controlled by two vertically,

state owned companies CFE and LFC. Mexico’s 700 megawatt Gas fired salamayuca

second power plant, the first in the country to be financed by a mix of public and

private funds, was due to be completed in late 1998.

Brazil’s power sector is in the midst of a redical change from state to private

control. Five Brazilian power distributors are scheduled to be privatized during 1999,

according to the Brazlian Development Bank. Brazil’s privatization of its electric

power sector in breaking large integrated utility companies line CESP and Electro

bras in to smelled units and selling off the generation and distribution pieces.

Argentina has been attempting to boost productivity in the power sector by

transferring assets, including provincial power companies, from the state to the

private sector. In April 1997 the argentine Senate passed a bill privatization of

Argentina Authca 1, Embalse Rio Tercero, and (uncompleted) Autcha second nuclear

plants.

Privatization of Venezuela’s power section kicked off in 1998 with the sale of

Sistema Elecrico de Nueva Esparta (Seneca). In late March 1999, Venezules’s

president Chavez announced his intention to privatize state, owned power companies,

in May 1999, the Government confirmed that it intended to press ahead with

privatization or regional power companies. Currently, state owned companies

accounct for around 80 of Venezula’s installed power capacity.

Growing demand for electricity through our the Americas especially in

countries such as Mexico and Brazil, has helped to foster they interconnection of the

regions various electricity sector, the easing of restrictions to international

investments and the development of cleaner more efficient power plants.

APPROACH:

As explained in the introduction, a power supply in a buffer circuit that is place

between an incompitable source and load in order to make them compatible.In this

section we explore some simple circuits that can be placed between a 12V dc battery

and a 5V dc load them compatible.The buffer circuits are simple in that we will

restrict the parts to one each to one each or less of the following parts.

COMPANY PROFILE

An Amara Raja power system is a member company in Amara raja group of

companies, which has become a leading business.

Sri Ramachandra N Galla, aged about 70 years has a basic Engineering

degree from Anantapur Engineering College and M.Tech. From the University of

Roorkee in servo Mechanisms, followed by M.S. in control systems from the

Michigan state university, USA. He is the pioneer in through M/S. Amara Raja

Batteries Ltd., for which currently he is chairman. He is having three decades of

experience in managing the industrial activities.

Smt. Aruna Kumari Galla, aged about 56 years, a graduate from Lake View

University USA and a diploma holder in computer programming and in accountancy,

has considerable experience in managing the industrial activities.

Sri Jayadev Galla, aged about 39 years has a B.S. degree in political sciences

with business cognate university of Illinois at Urbana-Champaign, USA. He worked

as international sales executive in GNB Battery technologies, USA. Presently he is

managing director of M/S. Amara raja batteries Ltd.

CORPORATE GOAL:

“The corporate goal of the company is to achieve customer satisfaction

through the collective commitment of their employees in design, manufacture and

marketing of reliable power systems, batteries, allied products and services”.

CORPORATE POLICY:

“The corporate policy of the company is to transform its spheres of influence

and to enrich the quality of life by building instructions that provide better access to

better opportunity, goods and services to more people all the time.”

STRENGTHS:

We have the skilled manpower to meet the challengers and have the products

that the market/customer demands for.

WEAKNESSES:

Since products are of custom built, the lead time for manufacturing the

product is higher.

MISSION:

"To deliver reliable and clean power to its customers. Technology and trust are

key value additions that are delivered with every product and endorsed by its satisfied

clientele across the globe.”

VISION:

“To be the largest provider of reliable and clean power to our customers in

businesses that deliver high social impact, by building preferred brands and

leveraging talent and technology”

FUTURE OUTLOOK OF THE COMPANY:

Amara raja power systems private limited is witness is witnessing strong

demands for its products. To keep with the demand, the capacity bottle necks are

being addressed. In the medium term the company is targeting aggressive growth

rates and is putting in place strategies and planes to support such growth. Key drives

for growth in the industrial power Electronics business would be the continued

demand from the telecom sector and maintain its leading position in the industry.

OPERATIONS AND OUTLOOKS:

The power and industry sector has experienced growth with a number of small

and medium power plants installed by both govt. and private sector. In this sector

ARPSL supplies power electronics products and the allied equipment like AC and DC

distribution and panel structures.

Notable supplies have been made to NTPC and power grid stations. Chukka

Hydro power stations, state electricity boards transmission and distribution, APRDP

projects etc. Supplies to govt. undertaking have been routed through approved EPC’S

like BHEL. Vijay electronics, Shyama power, Jyothi structures etc., special focus of

OE’S of generation and transmission equipment like BHEL, Triveni and siemens

yielded good business.

The railways business witnessed a growth aided by increased market share in the

business of IPS systems despite the prizes being very competitive .another milestone

during the F.Y.2005-06 has been supply of rectifiers to the prestigious Delhi metro

railway corporation. The significant milestone has been expanded the reach by

introducing service channel partners.

The Indian telecom industry continued its robust growth with Teledensity and

gross subscribers. The growth primarily has been in the mobile subscriber base while

fixed line grew marginally. Demand for SMPS rectifiers kept pace with the growth

witnessed in the sector from both public and private sectors telecom companies as

well as switch manufacturers and network aggregators .Prices for SMPS rectifiers

have seen a steep reduction caused by the Indian vendors like Emerson, Eaton, Delta

and Valere though their imports from china. ARPSL in developing the SMPS

rectifiers in a cost effective and competitive manner to address the future needs in this

segment.

ORGANIZATION NETWORK IS SPREAD ALL OVER THE

INDIA:

Its corporate operation office is situated at Chennai. Other marketing offices

and customer support Centers at New Delhi, Chandigarh, Ghaziabad, Luck now,

Jaipure,Mumbai,ahamadabad,Pune,Nagapur,Chennai,Bangalore,Hyderabad,Cochin,C

oimbatore Vijayavada,Kolkata,Bhuvaneswar,Gauhati,Patna,Ranchi.

AMARA RAJA GROUP OF COMPANIES:

AMARA RAJA BATTERIES LIMITED (ARBL), KARKAMBADI,

TIRUPATHI.

AMARA RAJA POWER SYSTEMS PVT., LIMITED (ARPSL),

KARKAMBADI, TIRUPATHI.

HARSHA ELECTRONICS PVT., LIMITED (HEPL), KARKAMBADI,

TIRUPATHI.

MANGAL PRECISION PRODUCTS PVT., LIMITED. (MPPPL1),

KARKAMBADI, TIRUPATHI

MANGAL PRECISION PRODUCTS PVT., LIMITED. (MPPPL2),

PETAMITTA, CHITTOOR

AMARA RAJA ELECTRONICS PVT., LIMITED (APREPL),

DIGHAMGHAM, CHITTOOR.

GALLA FOODS PVT LTD. (GFPL), PUTHALAPATTU, CHITTOOR

AMARA RAJA BATTERIES LIMITED-THE FLAGSHIP

COMPANY:

Amara raja batteries private Limited ( ARBL) company is incorporated under

the company’s act ,1956 in 13th February 1985, and converted into public limited

company on 6th September 1990.

ARBL is the first company in India to manufacture VRLA (value regulated

lead acid) Batteries. The main objective of the company is manufacturing of good

quality of SEALED MANITENANCE FREE acid batteries (SMF).

INNOVATION BY COLLABORATION:

Amara raja batteries limited is in collaboration with Johnson controls inc. this

is the up between Amara raja, the largest manufacturer of VRLA in Indian ocean

Rim, and Johnson controls is also a leading global manufacturer of automotive

batteries. Both have pioneered innovative batteries in several crucial sectors. Through

this tie up it is now possible for offering power solutions in the automotive sector as

well as the industrial sector from one source.

QUALITY PRODUCTS:

Amara raja has always offered time tested world class technology and process

developed on international standards. High integrity VRLA systems like power stack

and power plus and the recently launched high performance UPS battery-KOMBAT

and AMARON hi-life automotive battery AMARON exemplify this. They are

products of the collaborative battery efforts of engineering at Johnson controls Inc.

and Amara raja.

NEW SENSATION:

With AMARON launched in January 2000, Amara raja pioneered the

introduction of hi-cube automotive batteries in India. This zero maintenance product

uses the revolutionary patented silver X technology developed by Johnson controls

for high environments and incorporates many superior features that make it the most

advantage battery on rods anywhere in the world.

MARKETING FOCUS:

The company has clear-cut policy of direct selling without any intermediate.

so they have setup six branches, operated by corporate operations office located in

Chennai. The company has virtual monopoly higher A.H (AMP Hour) rating market

for its product VRLA. It is also having the facility for industrial and automotive

batteries.

EXPANSION:

The company is setting up to rs.1920 lacks in acres in Karkambadi village,

Renigunta Mandal. The project site is notified under “B” category.

AMARA RAJA’S CORE VALUE:

Work with integrity

Customer Satisfaction

Effective employee Selection, employee development, .motivation and

recognition.

AMARA RAJA CORE PURPOSE:

To transform the spheres of influence and to enrich the quality of life by

building institutions better access to better opportunities. Goods that provides.

AMARA RAJA’S STRENGTHS:

Proven technology from Gould National Battery CO., Ltd (GNB) and being a

pioneer.

Strong and Well Organized. Customer base.

Full-organized infrastructure perceived in place.

Manufacturing facilities perceived as benchmark in India.

Complete range of VRLA batteries.

Proven field performance in all user segments.

Approved vendor status in major user segments.

AMARA RAJA POWER SYSTEM:

Amara raja power system pvt., Ltd., (ARPSL) was incorporated in the year

1984 and was co-promoted by Andhra Pradesh electronic development corporation

(APEDC) with a vision to provide “complete and integrated DC solutions” to

customer requirement. The company is situated in 200 acre Amara Raja complex,

Renigunta. And 7kilometers from Tirupathi, India with a manufacturing facility with

a capital outlay of Rs.71 cores, machinery and testing with Rs.53 cores. By virtues of

APEDC’S equity participation, APRSL has became a deemed public limited company

as per section 43 (A) of the companies Act, ARPSL is engaged in the manufacture of

Uninterruptable Power systems (UPS) Battery Charges (BC) and inventors. Total

employee strength of APRSL is around 265.

GROWTH:

Amara raja power systems began s its operations with first commercial

production of uninterrupted power supply s in 1987 in technical collaboration M/S.

HDR power systems Inc, USA in the 1989 Thyristor based battery charger where

added to product line and ever since, it is the leading manufacturer of custom build

battery charger in India catering all the applications and services. Designs and

products of ARPSL are tested and well accepted by leading consultants Viz. Macon,

EIL, PGCIL, TCE etc.

To cater to a wide range of applications and customer needs, Amara Raja has

developed custom build investors in 1990 for Indian railways used in the AC coaches.

Also they are regular suppliers of chargers as per research design and standard

organization (RDSO) specifications for Traction and signal and telecommunications

for Indian Railways.

With change in technology and opening up of telecom sector, they are quick to

adapt to the fast changing scenario. As a result in 1999, Amara raja has started

manufacturing switch mode rectifiers (SMR) in technical collaboration with M/S.

rectifier technologies, Australia for telecom applications with expended, modernized

and integrated plant facilities. The company also received the ISO-9001 certification

in the year 1999.

ARPSL implemented an ERP program in the march 2000 for enhanced

operational efficiencies and tighter integration for expanding operations and spreading

of business. The company has crossed 30 crores turnover in 2003.

CUSTOMERS AND SOLUTIONS:

Today ARPSL is the largest supplier of switch mode power supply(SMPS)

systems to core India utilities such as BSNL ,Indian Railways, power generating

stations, MTNL,BEL,PUNCOM and HTL. Major MNC’s like Siemens, Fujitsu,

Motorola and Tata Liberty are among ARPSL clientele.

With their rich experience and available technology they were closely

involved with Indian railways in developing SMPS based integrated power supply

systems for signaling and telecommunication application. ARPSL obtained RDSO

approval in 2000 for its SMPS based integrated power supply (IPS) system and seems

then they are preferred supplier of IPS.

Today they provide complete and integrated DC solutions with having

manufacturing facility for MF-VRLA Battery, Thyristor based Battery Charger,

Switch.

Mode Power supply systems, DC/AC Distribution board, Bus Ducts and

associated accessories in single complex with an experience of more than 15 years in

these products catering to power and process telecom and Railway sector.

ORGANISATION STRUCTURE

CHAIRMAN

Managing Director

Directors

Executives

Vice- Presidents

D.G.M

General Managers

Managers

Marketing

Engg. And R&D

HRD

F & A

Operations

Supply Chain

QMD

Quality assurance

Sr. Executives

AWARDS:

The awards received by the company are:

“Best Industry All Round Performance” award in 1998 by Federation of

Andhra Pradesh Chamber of Commerce and Industry (FAPCCI).

“Entrepreneur of the year” awarded to Mr. Ramachandra N. Galla,

Chairman and managing director in 1998 by Hyderabad management

Association.

“Business excellence Award” in 1999 by the Industrial economists, Chennai.

“Udyog rattan Award” in 1999 by the Institute of Economic Studies, New

Delhi.

“Excellence in Environmental Management” for the year 2001-02 from the

Andhra Pradesh State Pollution control board.

“World Excellence Award” for the year 2003 by Ford Motor Company.

“Best Telecom equipment Manufacturer Award” for the year 2009 by

BSNL.

“Quality Excellence Award” for the year 2009 by INDUS Towers

. “Best Telecom equipment Manufacturer Award” for the year 2009 by

BSNL.

“Quality Excellence Award” for the year 2009 by INDUS Towers.

SOCIAL CONCERNS:

The company has high social concern and it is implementing several programs

for clear environment and social uplift.

ENVIRONMENTAL PROGRAMS:

Advancement for ISO-14001 Certification.

Health monitoring and awareness program.

Both personal and industrial safety program.

Start-up of Environmental Management System (EMS) implementation

programs.

Nil discharge and lowest emission awareness and implementation program.

Waste reduction scheme.

Energy conservation program.

Continuous and massive greenbelt development program.

Ground water level improvement program.

Central wastage collection, treatment, storage and safe disposal program.

Personal health safe guarding program.

SOCIAL PROGRAMS:

Housing colony to the employees is in process.

Total plan-500 families over five years.108 already commissioned.

Plan to provide community hall, open auditorium. Recreation Club parks and

plays ground.

Training center for employees.

Bachelor’s hostel, Co- operative Stores and Bank in operation.

Roads, Water supply, Street lights, Greenery, Education and Cultural

activities, enhancement in the neighboring villages.

Award and reward to the younger generation for improvement of education.

Modernization of public parks full-fledged recreation of children.

Public awareness program ( in Mumbai) on environmental protection, through

street theatre “whose Mumbai is it any way” on the occasion of Earth Day,

April 22nd, 2001.

Enhancement in neighboring villages.

PRODUCT PROFILE

1. Conventional battery charges:

Applications:

Power process industries

Power generating stations

Power transmission

Oil & natural gas plants

Sub-stations

2. Switch mode rectifiers (SMR):

Applications:

ERBX

Telecom Exchanges

3. Integrated power supply systems (IPS)

Application (s):

Signaling

Telecom

Traction

4. DC/AC Distribution Boards.

5. Charge/ Discharge Units for Battery Information.

CUSTOMERS:

BSNL

BHEL

SIEMENS SPCN

RELIANCE AND

L.G. etc.

RESEARCH METHODOLOGY

1. DEFINITION OF THE PROBLEM:

Inventory, the firms store current assets as inventory and it comprises of raw

materials, work-in-process maintainers materials consumable stores, components

parts, tools and packing materials and finished goods. Each business unit has to

maintain a considerable volume of inventory in response to the conditions in which

the business operates.

The raw materials inventory contains items that are purchased by

the firm from suppliers and are converted into finished goods through the

manufacturing process. they are an important input of the final product .the work-in-

progress inventory consists o item currently being used in the production process.

They are normally partially or semi-finished in the goods that are at varies

stages of production in a multi-stage production process. Finished goods represent

finance the required volume of inventory. As a matter of fact inventoried are very

important to the management of an enterprise as they have direct impact on the firms

profit .The financial manger has the responsibility to ensure that the inventories are

properly monitored and effectively controlled

2. REVIEW OF THE LITERATURE:

It is proposed to survey the literature that exits in the field of

financial management regarding to ‘Inventory management’. The relevance studies

having impact on the present work have been bifurcated for the purpose of this review

in two parts.

Conceptual studies

Research Studies

Conceptual Studies:

Studies of this sort provide strong theoretical and conceptual foundation

for the financial management. It includes books and writing which deal with

the concepts and problem of Inventory management as a part of financial

management. The text book belongs to this category are authored by the

written like I.M Panedy Professor of fiancé, D.Chandra Bose, G.Sudarhan

Reddy, P.Periasamy etc

Research studies:

1. Magee, j.f.”Guides of inventory policy”

2. Van Horne, j.c., financial management and policy, prentice Hall of India

3. Synder, Arthur, principles of inventory management.

4. Richmond, Herbert, J., effective Inventory management.

NEED FOR THE STUDY

In today’s competitive scenario especially in the manufacturing sector, the

management of inventory is given the highest importance. Organizations are in the

process of implementing various techniques in order to maintain inventory at an

optimum level. The choice of area of the study for the project work was given after

initial study of company's operations and the system of working. Hence this study is

undertaken to look into various aspects of inventory management of Amara Raja

power system pvt limited

OBJECTIVES OF THE STUDY

To know and understand the inventory management at Amara raja power

system pvt ltd.

To analyze the inventory management techniques such as ABC analysis and

RATIOS adopted by the Amara raja power systems Pvt limited.

To provide necessary suggestions if any.

SCOPE OF THE STUDY:

The scope of the study is limited to collecting the financial data published in

the annual reports of the company with reference to the objectives stated

above and an analysis of the data with a view to suggest favorable solutions to

the various problems related to inventory management.

The study is conducted to evaluate the performance of the company

with reference to inventory control management. The project is aimed at

studying by means of developing effective inventory control management.

4. RESEARCH PLAN:

RESEARCH DESIGN:

The frightening problem that fallows the task of defining the research problem

is the preparation of the design of the research project, popularly known as “Research

Design”. A research design is the arrangement of the conditions for collection and

analysis of the data in a manner that aims to combine relevance to the research

purpose with economy in procedure. In this study depend on ‘Analytical Method’.

DATA SOURCES:

The data that was obtained for the study can be classified into the following types.

1. PRIMARY DATA

2. SECONDARY DATA

SECONDARY DATA

The second hand information was collected from annual reports, text books,

and company website (www.amararaja.com)

STATISTICAL TOOLS

ABC Analysis.

Ratio Analysis.

Comparative balance sheets.

OPERATIONAL DEFINITONS

“JOHN J.HAMPTION” defined inventory as “the goods for eventual resale

by the firm”.

“Good inventory management is good financial management” by

S.C.KUCHAL

INVENTORY TURNOVER RATIO:

This ratio also called stock velocity ratio. It is calculated to ascertain the

efficiency of inventory management in terms of capital investment. It shows

the relationship between the cost of goods sold and the amount of average

inventory. Stock turnover ratio is obtained by dividing the cost of sales by

average stock

Inventory turnover ratio= cost of goods sold

Average inventory

INVENTORY HOLDING PERIOD:

This is otherwise called as stock turnover or stock velocity.

It is related to time. The ratio can be expressed in terms of days or months.

Inventory holding period = No of days in a year

Inventory turnover ratio

RAW MATERIAL TURNOVER RATIO

It shows the relationship between the raw material consumed and the average

raw material.

Raw material turnover ratio = Raw material consumed

Average raw material

RAW MATERIAL HOLDING PERIOD:

This is otherwise called as raw material…It is related to time. The

ratio can be expressed in terms of days or months.

Raw material holding period= No of days in a year

Raw material turnover ratio

FINISHED GOODS TURNOVER RATIO:

It shows the relationship between the finished cost of

goods sold and average finished goods.

Finished goods turnover ratio= Cost of goods sold

Average finished goods

FINISHED GOODS HOLDING PERIOD:

This is otherwise called as finished. It relate to

time. The ratio can be expressed in terms of days or months.

Finished goods holding period: No of days in a year

Finished goods turnover ratio

WORK IN PROCESS TURNOVER RATIO

The ratio is helps the efficiency with which the firm convert work-in –process

in to finished goods. That it is helps to know the level of working process inventory

held by the firm on an average. The work-in process inventory should be related to

cost of production.

Work in process turnover ratio = cost of production

Average finished goods stock

LIMITATION OF THE STUDY

Only important materials would take into the consideration because of there is

no time for getting the full fledged materials list while in the limited period.

For present study only two techniques are used for inventory analysis.

The findings and conclusions if any.

INVENTORY MANAGEMENT

Inventory comprises stock of raw materials, work I n process, finished

products stores and components. ”John HAMPTION” treats inventories as locked up

capital. Inventory is the major element of working capital of many businesses

undertaking in India.

Inventory management means safeguarding the company’s property in the form

of inventories and maintaining it at optimum level, considering the operating

requirements and financial resources of the business. Inventory management

emphasizes control over purchases, storage, consumption of materials and

determining the optimum level for each item of inventory.

MEANING OF INVENTORY MANAGEMENT

Inventories are essential to provide flexibility in operating a system. The

inventory can be classified into

Raw materials :

Raw materials from a major input in to the organization. The quantity of raw

materials required will be determined by the rate of consumption and the time

required for replenishing the supplies.

Work-in-process:

The raw materials enter the process of manufacture but they are yet to attain a

final shape of finished goods .The quantum of work –in process depends upon the

time taken in the manufacturing process.

Finished Goods:

The stock of finished goods provides a buffer between production and market.

The purpose of maintaining inventory is to ensure proper supply of goods to

customers.

Efficient inventory management reduces levels of inventories to a

considerable degree without effect on production and control techniques. An

understanding neglecting the management of inventories will be long run profitability

and survival. The purpose of inventory management is to keep the stocks in such a

neither way that neither there is over-stocking nor under-stocking.

DEFINITION OF INVENTORY:

“John J.Hamption” defined inventory as “the goods for eventual resale by the

firm”.

Inventory, measured by rupee value constitute the major element in the

working capital of many business undertakings. Inventory is the value of raw

materials, consumables, and spares, work-in process; finished goods are called as lock

up capital. The major determinants of investment inventory are:

a) Level of sales.

b) Length and technical nature of the production process.

Inventory involves two types of costs. The first is “direct cost” which is to

connected to buying and holding of goods and the second is “indirect cost “of

financial cost. The direct cost includes ordering costs. These costs include cost of

placing order, shipping, handling and quality discounts etc. and another one carrying

cost are the costs which are incurred for storing the goods. These costs include the

space insurance, spoilage and damages or thefts. The indirect costs include interest

paid on the capital tied up in the inventory and the inadequacy of materials involves

the cost.

“Good inventory management is good financial management”

- by S.C.KUCHAL

THE MAIN FUNCTIONS OF INVENTORY ARE SUMMARISED

BELOW

Smoothing out irregularities in supply.

Minimizing the production cost.

Allowing organizations to cope with perishable materials.

NEED TO HOLD INVENTORIES

Maintaining inventories involves trying up of the company’s funds and

incurrence of storage and handling costs. It if is expensive to maintain inventories,

why do companies hold inventories.

THERE ARE THREE GENERAL MOTIVES FOR HOLDING

INVENTORIES:

Transaction Motive – emphasis the need to maintain inventories to facilitate

smooth production and sales operations.

Precautionary Motive – necessitates holding of inventories to guard against

the risk of up predictable changes in demand and supply forces and other

factors.

Speculative Motive-Influences the decision to increase or reduce inventory

levels to take advantage of price fluctuations.

RISK AND COST OF HOLDING INVENTORIES:

The holding of inventories involves blocking of firms funds and

incurrence of capital and other costs. It also exposes the firm to certain risks. The

various costs and risks involved in holding inventories are

Capital cost:

The firm’s has, therefore, to arrange for additional funds to meet the cost of

inventories. The funds may be arranged from own resource or from outsiders. the firm

has to pay interest to the outsiders.

Storage and Holding costs:

Holding of inventories also involves costs on storage as well as holding of

materials. The storage costs include the rental of the go down, insurance charges etc.

Risk of price decline:

There is always a risk of reduction in the prices of inventories by the suppliers

in holding inventories.

OBJECTIVES OF INVENTORY MANAGEMENT

The main objectives of inventory management are operational and

financial .The operational objectives mean that the materials and spares should be

available in sufficient so that work is not disrupted for want of inventory. The

financial objective means that investments in inventories should not remain idle and.

Minimum working capital should be locked in it.

The following purpose should be kept in mind in developing and maintaining

a system of inventory Management.

Effective use of financial resources available to business i.e., to maintain the

investment in inventory at the lowest consistent with operating requirements.

Avoidance of the “out-of-stock” danger i.e., to provide a supply of required

materials without any delay for efficient and uninterrupted operations.

Reduction to a minimum of the risk through obsolescence.

To maintain a minimum investment in inventories to maximize profitability.

To avoid both over-stocking and under-stocking of inventory.

To minimize the carrying cost and time, and control investment in inventories

and keep it an optimum level.

Storage of inventory with a minimum of handling time and cost and to protect

them from losses by theft, fire and damage.

Services to customers i.e., maintaining sufficient stocks of finished products to

meet reasonable expectations of customers for prompt delivery of their orders.

MAJOR ACTIVITIES OF INVENTORY MANAGEMENT

Planning the inventories.

Procurement of inventories.

Receiving and inspection of inventories.

Storing and issuing the inventories.

Recording the receipts and issue of inventories.

Physical verification of inventories.

Follow up function.

Material standardization and substitution.

BENEFITS OF INVENTORY MANAGEMENT

Inventory ensures an adequate supply of materials and stores, minimizes stock

outs and shortages and avoids costly interruptions in operations

It keeps down investment in inventories, inventory. Carrying costs and

obsolescence losses to the minimum.

It facilitates purchasing economies through the measurement of requirements

on the basis of recorded experience.

It permits a better utilization of available stocks by facilitating inter

department transfers within a company.

It provides a check against the loss of materials through carelessness or

pilferage.

ESSENTIAL REQUIREMENTS OF INVENTORY

MANAGEMENT

Purchasing should be centralized under the control of a competent manager.

There should be proper planning of materials requirements.

There should be proper classification of materials with codes, material

satisfactory control procedures.

There should be proper planned storage control and issue so that there will be

delivery of materials upon requisition to departments in the right quantity at

the time they are needed.

There should be proper co –ordination between various concerned, viz.,

purchasing, receiving inspections storage issues and cost departments.

Appropriate records should be maintained to control issues and utilization of

stores in production.

Maximum, minimum and re order levels of stock should be fixed.

There should be system of regular reporting to management regarding

materials purchase, storage and utilization.

There should be an efficient system of internal audit and internal checks.

Helps in maintaining enough safety for “c” category of items.

SUCCESSFUL INVENTORY MANAGEMENT

Successful inventory management involves balancing the costs of inventory

with the benefits of inventory. Many small business owners fail to appreciate fully the

true costs of carrying inventory, which include not only direct costs of storage,

insurance and taxes, but also the cost of money tied up in inventory. This fine line

between keeping too much inventory and not enough is not the manager’s only

concern. Others include:

Maintaining a wide assortment of stock but not spreading the rapidly moving

ones too thin;

Increasing inventory turnover but not sacrificing the service level;

Keeping stock low but not sacrificing service or performance.

Obtaining lower prices by making volume purchases but not ending up with

slow-moving inventory; and

The degree of success in addressing this concern is easier to gauge for some

than for others .For example, computing the inventory turnover ratio is a simple

measure of managerial performance. This value gives a rough guideline by which

managers can set goals and evaluate performance, but it must be realized that the

turnover rate varies with the function of inventory, the type of business and how the

ratio is calculated (whether on sales or cost of goods sold). Average inventory

turnover ratios for individual industries can be obtained from trade associations.

CONTROLLING INVENTORY

To maintain an in-stock position of wanted items and to dispose of unwanted

items, it is necessary to establish adequate controls over inventory on order and

inventory in stock. There are several proven methods for inventory

management .They are listed below, from simplest to most complex.

Visual control

Enables the manager to examine the inventory visually to determine if

additional inventory is required. In very small businesses where this method is used,

records may not be needed at all or only for slow moving or expensive items.

Tickler control

Enables the two physically count a small portion of the inventory each day so that

each segment of the inventory is counted every so many days on a regular basis.

Click sheet control

Enables the manager to record the item as it is used on a sheet of a paper such

information is then used for the recorder purposes.

Stub control

Enables the manager to retain a portion of the price ticket in the item is sold.

The manager can then use the stub to record the item that was sold.

Point- of -sale terminals

Relay information on each item used or sold. The manager receives

information printouts at regular intervals for review and action.

Off- line point –of- sale

Terminals relay information directly to the supplier’s computer who uses the

information to ship additional items automatically to the buyer/inventory manager.

The final method for Inventory Management is done by an outside

agency. A manufacturer’s representative visits the larger retailer on a scheduled basis,

takes the stock count and writes the reorder. Unwanted merchandise is removed from

stock and returned to the manufacturer through a predetermined, authorized

procedure.

DEVELOPMENTS IN INVENTORY MANAGEMENT

In recent years, two approaches have had a major impact on inventory

management. Material Requirements planning (MRP) and Just –In-Time (JIT and

Kanban). Their application is primarily within manufacturing but suppliers might find

new requirements placed on them and sometimes buyers of manufactured items will

experience a difference in delivery.

A material requirement planning is basically an information system in which

sales are converted directly in to loads on the facility by sub unit and time period.

Materials are scheduled more closely, thereby reducing inventories, and delivery

times become shorter and more predictable. Its primary use is with products

Composed of many components.MRP systems are practical for smaller firms.

The computer system is only one part of the total project which is usually long term,

taking one to three years to develop.

OTHER FACTORS INVOLVED IN INVENTORY ANALYSIS

DEMAND:

Demand is the number of units required per period and may be either known

exactly or known in terms of probabilities or be completely unknown. Further if the

demand is known, it may be either fixed or variable per unit time. Problems in which

demand is known and fixed are called deterministic problems whereas those problems

in which demand is assumed to be random variables are called stochastic or

probabilistic problems

LEAD TIME:

The time gap between placing of an order and its actual arrival in the inventory of

an item demands upon the length of its lead time. The longer the lead time the higher

is the average inventory. Lead time has two components namely, Administrative-lead

time, Delivery-lead time.

ORDER CYCLE:

The time period between placements of two successive orders is referred to an

order cycle. They may be placed on the basis of the following two types of inventory

review systems.

STOCK LEVELS:

For efficient material control and to avoid over-stocking and under-stocking of

materials. an important requirement is to decide upon various levels of materials,

these levels are maximum level, minimum level and reorder level. By making action

on the basis of these levels, each item of material will automatically be held within

appropriate limits of control. These levels are not permanent but need revision

according to the changes in the factors which determine these levels.

FACTORS: -

The following factors help in the fixation of these levels.

Rate of consumption of materials.

Lead the time, i.e., time lag.

Storage capacity.

Availability of funds investment in inventories.

Cost of storage.

Risk of loss due to deterioration theft fire etc.

Seasonal factors certain materials are cheaply available during certain seasons.

Fluctuations in market prices.

Insurance costs. maximum level

The maximum stock level is that quantity of materials above which the stock of

any item should not generally be allowed to go up. This maximum level may be

exceeding in certain special cases.

Danger Level:

It is that level below which stock not allowed to expect under emergency

conditions .When stock reaches this level urgent action for purchases is initiated.

Danger level =Average consumption *Maximum re-order period for emergency

purchases

Danger level is below the minimum level .But some firms prefer to fix the danger

level above the minimum level and below the re-order level.

Maximum Level:

The formula for computing maximum level is follows:

Maximum level=Re order level + Re order quantity-(Minimum

consumption*Minimum re order period)

Minimum Level:

The minimum level is that level of stock below it should be normally be

allowed to fall. This is essentially a safety stock and will not normally be touched. In

case of any item falling below this level, there is danger of stoppage in production

and, therefore, management should give top priority to the acquisition of new

supplies. This level is fixed after the consideration if the following factors.

Rate of consumption, and

The time required under top priority to acquire enough supplies to avoid a

stoppage in production.

Minimum Level =Re order level-(Normal consumption * Normal reorder period).

Reorder Level:

This is that level of materials at which a new order for materials is to be

placed. In other words this is the level at which a purchase requisition is made out.

This level will be fixed somewhere between maximum and minimum levels.

Rate of consumption.

Minimum level

Delivery time.

Variation in delivery time.

Re order Level= (Maximum consumption* Maximum re order period).

Average stock level=Minimum level+ (1/2 of Re order quantity) or

Average stock level= (1/2)*(Minimum level+ Maximum level ).

TYPES OF INVENTORY

Inventories can be classified into five basic types on the basis of their

production. These various types of inventories cannot be identified and segregated

within the organization. These five types are

MANAGEMENT INVENTORY

They are needed because of the time required to move stocks from one place to

another place.

LOT SIZE INVENTORIES

These are as a result of buying materials in quantities larger than the immediate

requirement, with a view to minimizing cost of transportation, buying, receipt and

handling and to obtaining quantity discount.

FLUCTUATION INVENTORIES

These are carried to ensure ready suppliers to consumer even when these are irregular

and unpredictable fluctuations in their demand.

Anticipation Inventories

These are usually maintained to meet a predictable but changing pattern of future

demand.

Cycle Inventories

These result from managements attempt to minimize the total cost of carrying and

ordering inventory. They arise from ordering in batches or lots, rather from needed

basis. Inventories can be further classified into production inventories, maintenance

repair and operation inventories, in-process inventories and finished goods

inventories.

Production inventory consists of raw materials parts and components which

are used in the production process forming parts of the final product.

Maintenance, repair and operation supplies which are used in the production

of goods or services but do not become part of the product.

In-process inventories are semi-finished materials, parts and assemblies found

at various stages in the production operation.

METHODS OF MATERIALS ISSUE:

FIRST IN FIRST OUT (FIFO):

The materials which are received first and they issued and therefore there flow

of cost of materials should also be in the same order. Issues are priced at the same

basis until the first batch received is used up after which the price of the next batch

received becomes the issue price. In Amara Raja power system they apply FIRST IN

FIRST OUT method for issuing of raw materials from stores to the production unit.

LAST IN FIRST OUT (LIFO):

The latest receipts of materials are issued first for production and the earlier

receipts are issued last .It uses the price of the last batch received for all the issues

until all units from this batch have been issued after which the price of the previous

batch received becomes the issues price.

HIGHEST IN FIRST OUT (HIFO):

In this method, issues are always valued at the highest price of the receipt, this

rate continues either until the material at that high price is exhausted, after which the

next highest price is used until a new batch of materials is received at a rate which is

higher than the previous high rate. Closing stock under this method airwaves remains

at the minimum cost. This method has not been widely adopted.

BASE STOCK METHOD:

A minimum quality stock under this method is all ways

held at fixed price as reserve in the stock, to meet a state of emergency, if it

arises. This minimum stock is known as based stock and valued at the price at

which the first lot of materials is received and remains and effected by sub

sequent price fluctuations. Thus, this a more method of valuing inventory than

a method of valuing issues because, with the base of stock valued at the

original cost some other method of valuing issues should be adopted. The

quantity excess of base stock may be valued either on FIFO or LIFO basis.

SIMPLE AVARAGE PRICE METHOD:

Under this method, materials issued are

valued at average price. Which is calculated by dividing the total of all units

rate by the number of unit rate.

MATERIAL ISSEUD PRICE= total of unit prices of each purchase

Total number of purchases

WEIGHTED AVARAGE PRICE METHOD:

This method gives due weights to quantity purchases And the purchases price. While,

determining the issue price. The average issue price here is calculated by dividing the

total cost of materials in the stock by total quantity of materials prior to each issue.

MEANING OF INVENTORY CONTROL:

Inventory control is a system, which ensures the provisions of the required

quality of inventories of required quality at the required time with the minimum an

investment.

NEED TO HOLD INVENTORY CONTROL:

Demand inventories have a tendency to grow beyond economic limits, tie-up

funds and increase the cost of maintenance or carrying cost.

Non-availability of inventory involves cost of stock outs, reordering costs and

additional transit cost.

Central core idea for material management is inventory control.

To minimize the locking of funds or working capital commitments.

To determine the working capital operating cycle is essential.

Demanding upon the operating cycle the company requirements for locked up

funds will follow. The length of operating cycle depends upon the nature of

business, production, policies, manufacturing process, terms of purchase and

conditions of sales and demand.

PURPOSE OF INVENTORY CONTROL:

The need of controlling inventory is expressed as below.

To improve customer services.

Permits purchase and transaction economics.

Transportation economics.

Hedge against price fluctuations.

Production economics.

Hedge against demand uncertainties’.

Protects against demand and lead time uncertainties.

INVENTORY MANAGEMENT TECHNIQUES:

1. ABC ANALYSIS

2. ECONOMIC ORDER QUANTITY(EOQ)

3. INVENTORY STOCK LEVELS

4. INVENTORY TURN OVER RATIOS

5. VITAL, ESSENTIAL AND DESIRABLE (VED) CLASSIFICATION

6. HML

7. SCARCE, DIFFICULT AND EASY TO OBTAIN(SDE)

8. FAST MOVING, SLOW MOVING AND NON MOVING (FSN)

9. TWO-BIN

ABC ANALYSIS:

ABC analysis is a basic analytical management tool which enables top

management to place the efforts where the results will be greatest. ABC analysis is a

technique which is used to classify the items in store based on the demand of the

stock.

The ABC system is widely used technique to identity various items of

inventory for purpose of Inventory Management. This technique is based on the

assumption that a firm should not exercise the same degree of control on all items of

inventories. It should rather keep a more rigorous control on items.

CATEGORIES OF ABC ANALYSIS;

In ABC analysis the items are classified in three main categories based on their

respective consumption value.

Category ‘A’ items:

The items, which are most costly and valuable, are classified as ‘A’ nearly 10%

of the total number of items stored will account for 70% of the total value of all items

stocked.

Category ‘B’ items:

The items having average consumption value are classified as ‘B’ nearly 20%

of total number of items will account for 20% of the total value statistical sampling is

general useful to control them.

Category ‘C’ items:

The items having low consumption value are put in category ‘C’ nearly 70%

of the number of items will account for 10% total value. Generally these items are

slow and non-moving items in the stores, which are frequently used for production

process but with more quantity.

ADVANTAGES OF ABC ANALYSIS:

This analysis has helped in reducing the clerical cost and resulted in to better

planning and improved inventory turnover.

By this method materials manager is able to control inventories and show

‘visible’ results in a short span of time.

It becomes possible to concentrate all efforts in areas, which needed genuine

efforts.

It is the most effective and economical method as it is based on selective

approach.

It helps in placing orders, deciding the quantity of purchase, safety stock etc.,

this saving the enterprise from unnecessary stock outs or surplus and their

resultant consequences.

ECONOMIC ORDER QUANTITY (EOQ):

ORDERING COST:

It consists of the cost of paper work for placing an order like use of paper,

typing, posting, filling etc., the cost of the staff involved in this work, the costs

incidental to order like follow-up, receiving, inspection etc.,

Ordering cost is ascertained as under:Ordering cost= Annual Requirement(R) * cost

per order Order size

CARRYING COST:

Costs incurred for maintaining a given level of inventory are called Carrying

Cost. They include the cost of store keeping (stationery, salaries, rent, material

handling cost etc.,) interest on capital locked up in stores, the incidence of insurance

cost, risk of obsolescence, determined and wastage of materials, evaporation etc.,

When the inventories are stored it involves following types of cost:

Total carrying cost is ascertained as under:

Total Carrying Cost= Average inventory *per unit Carrying Cost

ECONOMIC ORDER QUANTITY IS ASERTAINED AS UNDER:

The inventory problems in which demand is assumed to be fixed and

completed predetermined is usually referred to as the EOQ or lot size problems. By

the order quantity we mean the quantity produced or produced during one production

cycle. This is also termed as reorder quantity. When the size of order increases the

ordering cost will decrease whereas the inventory carrying costs will increase.

TC = DC+ [(D0Q)*S] +[(Q/2) *H]

Where TC=Total cost

D=Annual demand

C=purchase cost per unit

Q=Quantity to be ordered

S=cost of placing an order

H=Holding cost per unit of average inventory per annum.

INVENTORY STOCK CONTROL-LEVELS

This method of material control utilizing the principles of planning the

demand for and supply of each item of materials.

Minimum stock level:

This is the minimum quantity of material to be maintained in the stores throughout the

year the fallowing factors are essential for fixing minimum stock levels

Re-order level.

Normal consumption of material.

Time required obtaining material from the time of issuing purchasing order to

the time of physical receipt of material.

Nature of material.

Maximum stock level:

It is that quantity above which the stock of any item should not be allowed to

exceed. Fixation of this quantity depends on several factors as given below.

Rate of consumption required for production

Availability of storage space

Cost of storage

Availability of finance

Extent of price fluctuations.

Reorder level and time required to obtain delivery of supplies.

Availability of quality raw material.

Economic ordering quantity.

Risk of obsolescence, evaporation and natural waste.

Cost of insurance.

Danger level:

This is the stock level below the minimum level. When stock reach this level

action for immediate purchase is necessary. Issues are controlled by stopping normal

issues and issuing only on special instructions.

Reorder level:

It is between maximum and minimum stock levels. Once the stock level

reaches the reorder level, the storekeeper initiates purchase requisition to obtain fresh

stocks. Reorder level depends on economic ordering quantity, lead time and rate of

consumption.

INVENTORY TURNOVER RATIO:

This ratio also called stock velocity ratio. It is calculated to ascertain the

efficiency of inventory management in terms of capital investment. It shows the

relationship between the cost of goods sold and the amount of average inventory.

Stock turnover ratio is obtained by dividing the cost of sales by average stock. The

relationship behind establishing the relationship between cost of sales and average

stock in that stock is at the cost price. This ratio is helpful in evaluating the review of

inventory policy. It indicates the number of times the inventory is turned over during

a particular accounting period. There are different ways of calculating stock turnover

ratio as mentioned below.

Inventory turnover ratio= cost of goods sold

Average inventory

NOTE:

Average inventory = (OPANING STOCK + CLOSING STOCK)/2

INVENTORY HOLDING PERIOD:

This is otherwise called as stock turnover or stock velocity. It is related to

time. The ratio can be expressed in terms of days or months.

Inventory holding period= No of days in a year

Inventory turnover ratio

RAW MATERIAL TURNOVER RATIO

It shows the relationship between the raw material consumed and the average raw

material.

Raw material turnover ratio= Raw material consumed

Average raw material

RAW MATERIAL HOLDING PERIOD:

This is otherwise called as raw material…It is related to time. The ratio can be

expressed in terms of days or months.

Raw material holding period= No of days in a year

Raw material turnover ratio

FINISHED GOODS TURNOVER RATIO:

It shows the relationship between the finished cost of goods sold and average

finished goods.

Finished goods turnover ratio = Cost of goods sold

Average finished goods

FINISHED GOODS HOLDING PERIOD:

This is otherwise called as finished. It relate to time. The ratio can be expressed in

terms of days or months.

Finished goods holding period= No of days in a year

Finished goods turnover ratio

WORK IN PROCESS TURNOVER RATIO:

The ratio is helps the efficiency with which the firm convert work-in –process

in to finished goods. That it is helps to know the level of working process inventory

held by the firm on an average. The work-in process inventory should be related to

cost of production.

Work in process turnover ratio = cost of production

Average finished goods stock

VED CLASSIFICATION

V-E-D Analysis:

The VED analysis is used generally for spare parts. The requirements and urgently of

spare parts is different from that of materials. ABC analysis may not be properly used

for spare parts. The demand for spare depends up on the performance of the plant and

machinery. Spare parts are classified as Vital, Essential and Desirables. The vital

spares are a must for running the concern smoothly and these must be stored

adequately. The non availability of vital spares will cause problems in the concern.

The non availability of vital spares is also necessary but their stocks may be kept at

low figures. The stocking of D type of spares may be avoided at items. If the lead

time of these spare parts less, then stocking of these spares can be avoided. The

classification of spares under three categories is an important decision.

This analysis is based on criticality of inventories. It is used to

determine the criticality of an item and its effect on production and other services. It

is specially used for classification of spare parts. If a part is vital, it is given ‘V’

classification, if it is essential, the part is given ‘D’ then it is given ‘E’ classification

and if it is not essential, the part is given ‘D’ classification. For ‘V’ items, a and large

stock of inventory is generally maintained, these items have immediate effect on

production and more attention paid for these items.

HML CLASSIFICATION

The High Medium and low (HML) classification follows the same

procedure as is adopted in ABC classification. Only difference is that in HML, the

classification unit value is the criterion and not the annual consumption value. The

items of inventory should be listed in the descending order of unit value and it is up

on the management to fix limits for three categories.

SDE CLASSIFICATION

The SDE analysis is based upon the availability of items and is

very useful in the context of scarcity of supply. In this analysis ‘S’ refers to the ‘scare’

items, generally imported, and those which are in short supply. ’D’ refers to difficult

items not place are available indigenously but are difficult items to procure. Items

which have to come from distant places or for which reliable suppliers are difficult to

come by fall into ‘D’ category. ‘E’ refers to items which are easy to acquire and

which are available in the local markets.

The SDE classification, based on problems faced in procurement, is vital to the lead

time analysis and in deciding on purchasing strategies.

FSN ANALYSIS

FSN analysis stands for fast moving, slow moving and non- moving. Here,

classification is based on the pattern of issue from and is useful in controlling

obsolescence.

To carry out an FSN analysis, the date of receipt or the last date of issue, whichever is

later, is taken to determine the number of months, which have lapsed since the last

transaction. The items are usually grouped in periods of 12 months.

FSN analysis is helpful in identifying active items which need to be received regularly

and surplus items which have to be examined further. Non-moving items may be

examined further and their disposal can be considered.

TWO-BIN SYSTEM

One of the oldest systems of inventory control is the bin system which is mainly

adapted to control ’C’ group inventories. In the two-bin system, stock of each order is

pl item is separated in two bins. One-bin contains stock, just enough to last from the

date a new order is placed until it is received in inventory. The other bin contains a

quantity of stock, enough to satisfy probable demand during the period of

replenishment. To start with, the stock is issued from the first bin. When the first bin

is empty, an order for replenishment is placed, and the stock in the second bin is

utilized until the ordered material is received.

DATA ANALYSIS

TABLE SHOWING ABC ANALYSIS FOR THE YEAR 2006-07

TABLE 4.1

(Rs in crores)

CLASS NO OF ITEMS % OF ITEMS CONSUMPTION VALUE % OF VALUE

A 250 4.49 40.69 67.68

B 1380 24.8 16.31 27.08

C 3934 70.7 3.21 5.32

TOTAL 5564 100 60.21 100

GRAPH SHOWING ABC ANALYSIS FOR THE YEAR 2006-07

GRAPH 4.1

INTERPRETATION:

From the above graph, we can see that the percentage of value of ‘A’ class

items is 67.68%, where it is less than the target percent of value .i.e., (70%), the

percent of the value of ‘B’ class items is 27.08%, where it is greater than the target

percent of value .i.e., (25%), the percent of value of ‘C’ class items 5.32%, where it is

greater than the percent of value .i.e., (5%).

TABLE SHOWING ABC ANALYSIS FOR THE YEAR 2007-08

TABLE 4.2

(Rs in

crores)

CLASS NO.OF.ITEMS%OF

ITEMS

CONSUMPTION

VALUE%OF VALUE

A 440 7.22 35.66 79.98

B 1136 18.63 6.69 15.01

C 4521 74.15 2.23 5.01

TOTAL 6097 100 44.58 100

GRAPH SHOWING ABC ANALYSIS FOR THE YEAR 2007-08

GRAPH 4.2

INTERPRETATION:

From the above graph, we can see that the percentage of value of ‘A’ class

items is 79.98%, where it is greater than the target percent of value .i.e., (70%), the

percent of the value of ‘B’ class items is 15.01%, where it is less than the target

percent of value .i.e., (25%), the percent of value of ‘C’ class items 5.1%, where it is

approximately equal to the percent of value .i.e., (5%).

TABLE SHOWING ABC ANALYSIS FOR THE YEAR 2008-09

TABLE 4.3

(Rs in crores)

CLASS NO.OF.ITEMS %OF ITEMSCONSUMPTION

VALUE%OF VALUE

A 327 5.02 47.09 79.96

B 1038 15.93 8.87 15.04

C 5153 79.05 2.94 5.00

TOTAL 6158 100 58.90 100

GRAPH SHOWING ABC ANALYSIS FOR THE YEAR 2008-09

GRAPH 4.3

INTERPRETATION:

From the above graph, we can see that the percentage of value of ‘A’ class

items is 79.96%, where it is greater than the target percent of value .i.e., (70%), the

percent of the value of ‘B’ class items is 15.04%, where it is less than the target

percent of value .i.e., (25%), the percent of value of ‘C’ class items 5%, where it is

equal to the percent of value .i.e., (5%).

TABLE SHOWING ABC ANALYSIS FOR THE YEAR 2009-10

TABLE4.4

(Rs in crores)

CLASS NO.OF.ITEMS%OF

ITEMS

CONSUMPTION

VALUE%OF VALUE

A 209 3.6 20.06 67.0

B 929 16.2 7.33 24.5

C 4606 80.2 16.2 8.5

TOTAL 5746 100 29.95 100

GRAPH SHOWING ABC ANALYSIS FOR THE YEAR 2009-10

GRAPH 4.4

INTERPRETATION:

From the above graph, we can see that the percentage of value of ‘A’ class

items is 67%, where it is less than the target percent of value .i.e., (70%), the percent

of the value of ‘B’ class items is 24.50%, where it is less than the target percent of

value .i.e., (25%), the percent of value of ‘C’ class items 8.50%, where it is greater

than the percent of value .i.e., (5%).

TABLE SHOWING ABC ANALYSIS FOR THE YEAR 2010-11

TABLE4.5

(Rs in crores)

CLASS NO OF ITEMS % OF ITEMS CONSUMPTION VALUE % OF VALUE

A 250 3.81 45.69 70

B 1380 21.03 16.31 24.99

C 4934 75.16 3.21 5.01

TOTAL 6564 100 65.27 100

GRAPH SHOWING ABC ANALYSIS FOR THE YEAR 2010-11

GRAPH 4.5

INTERPRETATION:

From the above graph, we can see that the percentage of value of ‘A’ class

items is 70%, where it is equal the target percent of value .i.e., (70%), the percent of

the value of ‘B’ class items is 24.99%, where it is less than the target percent of

value .i.e., (25%), the percent of value of ‘C’ class items 5.01%, where it is greater

than the percent of value .i.e., (5%).

TABLE SHOWING THE % OF ITEMS OCCUPIED BY VARIOUS CATEGORIES AS PER ABC ANALYSIS 2006-07 to 2010-11

TABLE 4.6 YEAR

  YEAR YEAR YEAR YEAR YEAR

ITEMS 2006-07 2007-08 2008-09 2009-10 2010-11

A 4.49 7.22 5.02 3.6 3.81

B 24.8 18.63 15.93 16.2 21.03

C 70.7 74.15 79.05 80.2 75.16

TOTAL 100 100 100 100 100

GRAPH SHOWING COMPARISON OF % OF ITEMS ON ABC

ANALYSIS FROM 2006-07 to 2010-11

GRAPH.NO 4.6

INTERPRETATION:

The above graph shows the comparison percentage value of items on ABC

analysis from the year 2006-07 to 2010-11. The value of ‘A’ class is 7 which is

increased to 7.22 and decreased to 3.6 and increased to 3.81. The value of ‘B’ class is

17.83 which is increased to 18.63 and then decreased to 15.93, and then increased to

21.03. The value of ‘c’ class is 75.17 which is decreased to 74.15 and then increased

to 80.2, and then decreased to 75.16.

RAW MATERIAL TURNOVER RATIO

The ratio is helps the efficiency with which the firm convert raw materials into

work-in-process. That is it helps to know the level of raw materials inventory held by

the firm on an average. The raw material inventory should be related to material

consumed.

TABLE 4.7

(Rs .in crores)

YEARS

MATERIAL CONSUMED

AVG.RAW MATERIAL

TURNOVER RATIO

Raw materials Material Consumed

Turnover ratio = ---------------------------------

Average Raw material

INVENTORY 2006-07 26.23 4.19 6.26

2007-08 39.03 4.19 9.31

2008-09 57.04 4.71 12.11

2009-10 49.04 4.87 10.06

2010-11 67.54 6.76 9.99

Source: Annual Reports of Amara raja power system limited 2006-07&2010-11.

GRAPH 4.7

INFERENCE:

The above graph indicates that raw material turnover Ratio is 6.26 times in

the year 2006-07 and it is increased to 12.11 in the year 2008-09, again it is decreased

to 10.06 in the year 2009-10, again it is decreased to 9.99 in the year 2010-11.

WORK IN PROCESS TURNOVER RATIO

The ratio is helps the efficiency with which the firm convert work-in –

process in to finished goods. That it is helps to know the level of working process

inventory held by the firm on an average. The work-in process inventory should be

related to cost of production.

TABLE 4.8

(Rs .in crores)

PERIODCOST OF PRODUCTION

AVAREGE WORK IN PROCESS TURN OVER RATIO

2006-07 29.8 1.1 27.09

2007-08 43.79 2.47 17.73

2008-09 69.05 3.52 19.62

2009-10 66.95 2.62 25.55

2010-11 72.81 4.04 18.02

Source: Annual Reports of Amara raja power system limited 2005-06 & 2009-10.

Work in process Cost of Production

Turnover ratio = ----------------------------------

Average work in process

GRAPAH 4.8

INFERENCE:

The above graph indicates work-in-process turnover ratio is 27.09 times in the

year 2006-07 and it is decreased to 17.73 in the year 2007-08, and it is increased to

25.55 in the year 2009-10 and it is decreased to 18.02 in the year 2010-11.

FINISHED GOODS TURNOVER RATIO

The ratio is helps to know the level of finished goods inventory held by the

firm on an average. The finished goods inventory should be related to cost of

goods sold.

TABLE 4.9

(Rs .in crores)

PERIODCOST OF GOODS SOLD AVERAGE FINISHED GOODS TURN OVER RATIO

2006-07 30.67 0.44 69.7

2007-08 46.25 1.23 37.6

2008-09 71.53 1.24 57.69

2009-10 67.88 0.46 147.57

2010-11 73.65 0.42 175.36

Source: Annual Reports of Amara raja power system limited 2005-06 to 2009-10.

Finished goods Cost of goods sold

Turnover ratio = ----------------------------------

Average finished goods

GRAPH NO 4.9

INFERENCE:

The above graph indicates finished goods turnover ratio is 69.70 times in

the year 2006-07 and it is decreased to 37.60 in the year 2007-08. Then it is increased

continuously to 57.6, 147.57 and 175.36 in the year 2008-09, 2009-10 and 2010-11

respectively.

INVENTORY TURNOVER RATIO:

A ratio showing how many times a company’s inventory is sold and

replaced over a period and is valuable for spotting under - stocking, overstocking,

obsolescence and the need for merchandising improvement.

TABLE 4.10

(Rs .in crores)

period NET SALES AVERAGE INVENTORY TURN RATIO

2006-07 50.16 15.33 3.27

2007-08 60.44 37.03 1.63

2008-09 84.67 47.64 1.77

2009-10 81.78 30.8 2.65

2010-11 90.04 44.67 2.01

Source: Annual resource of Amara raja power systems Ltd, 2006-07 to 2010-11.

GRAPH -4.10

Inventory Net sales

Turnover ratio = -------------------------------

Average Inventory

INFERENCE:

The above graph indicates inventory turnover ratio is 3.27 times in the year

2006-07.and it is decreased to 1.63 in the year 2007-08, and then it is increased to 2.65

in the year 2009-10 and then it is decreased to 2.01 in the year 2010-11.

COMPARISON OF TURNOVER RATIOS

TABLE 4.11

Turnover Ratio 2006-07 2007-08 2008-09 2009-10 2010-11

Raw Materials 6.26 9.31 12.11 10.06 9.99

Work in Process 27.09 17.73 19.62 25.55 18.02

Finished Goods 69.7 37.6 57.69 147.57 175.36

Inventory 3.27 1.63 1.77 2.65 2.01

COMPARISON OF TURNOVER RATIOS

GRAPH: 11

INFERENCE:

The above graph indicates turnover ratio is to some extent decreased to

year by year like 2006-07 and 2007-08. But it is increased in the year 2009-10 and

2010-11 also.

RAW MATERIALS HOLDING PERIOD

Raw materials No of days in a year

Holding period = ---------------------------------------

Raw material turnover ratio

Period No of Days

Raw material

Turnover Ratio

Holding

period

2006-07 360 6.26 58

2007-08 360 9.31 39

2008-09 360 12.11 30

2009-10 360 10.06 36

2010-11 360 9.99 36

TABLE 4.12

Source: Annual Reports of Amara raja power system limited 2006-07 to 2010-11.

GRAPH 4.12

INFERENCE:

The above graph indicates that, the raw material holding period for the

financial year 2006-07 is 58 days, for 2007-08 is 39 days, for 2008-09 is 30 days , for

2009-10 is 36 days, for and the final year 2010-11 is 36 days it will be good for the

organization.

WORK IN PROCESS HOLDING PERIOD

TABLE 4.13

PERIOD NO OF DAYSWORK IN PROCESS TURNOVER

RATIO HOLDING PERIOD

2006-07 360 27.09 13

2007-08 360 17.73 20

2008-09 360 19.62 18

2009-10 360 25.55 14

2010-11 360 18.02 20

Source: Annual Reports of Amara raja power system limited 2005-06 to 2009-10.

GRAPH 4.13

INFERENCE:

Work in process No of days in a year

Holding period = -------------------------------------

Work in process turnover ratio

The above graph indicates that, the work in process holding period for the

financial year 2006-07 is 13 days, for 2007-08 is 20 days, for 2008-09 is 18 days and

2009-10 is 14 days and the final year 2010-11 is 20 days.

FINISHED GOODS HOLDING PERIOD:

TABLE 4.14

PERIOD NO OF DAYSFINISHED GOODS TURNOVER RATIO HOLDING PERIOD

2006-07 360 69.7 5

2007-08 360 37.6 10

2008-09 360 57.69 6

2009-10 360 147.57 2

2010-11 360 175.36 2

Source: Annual Reports of Amara raja power system limited 2005-06 to 2009-10.

GRAPH 4.14

Finished goods No of days in a year

Holding period = ---------------------------------------

Finished goods turnover ratio

INFERENCE:

The above graph indicates that, the finished goods holding period

for the financial year 2006-07 is 5 days, for 2007-08 is 10 days, for 2008-09 is 6 days,

2009-10 and 2010-11 is decreased to 2 days.

INVENTORY HOLDING PERIOD

Inventory Holding Period =

TABLE 4.15

YEARS NO OF DAYS IN A YEAR INVENTORY TURNOVER RATIO DAYS

2006-07 360 3.27 110

2007-08 360 1.63 221

2008-09 360 1.77 203

2009-10 360 2.65 136

2010-11 360 2.01 179

Source: Annual Reports of Amara raja power system limited 2006-07 to 2010-11.

GRAPH.NO 4.15

INTERPRETATION

The above graph indicates that, the inventory holding period for the

financial year 2006-07 is 110 days, for 2007-08 is 221 days, and for 2008-09 is 203

days and the year 2009-10 is 136 days and the final year 2010-11 is increased 179

days

COMPARISON OF INVENTORY HOLDING PERIOD

TABLE 4.16

Inventory 2006-07 2007-08 2008-09 2009-10 2010-11

Raw Materials 58 39 30 36 36

Work in Process 13 20 18 14 20

Finished Goods 5 10 6 2 2

Inventory 110 221 203 136 179

GRAPH-16

COMPARISON OF INVENTORY HOIDING PERIODS

INFERENCE:

The above graph indicates raw materials, work in process, finished goods

and inventory holding period is a little change to year by year like 2006-07, 2007-08

2008-09, 2009-10 and 2010-11 respectively.

FINDINGS:-

ABC analysis reveals consumption of product ‘A’ is very high when

compared to product ‘B’ and ‘C’.

The consumption value of product ‘A’ has increased tremendously.

The demands for all inventories are in the increasing trend.

In the year 2006-07 the consumption of product ‘A’ is increased trend

(79.89'%) when compared to product ‘B’ (15.02%) and ‘C’ (5%), the

consumption of product ‘B’ and ‘C ‘has decreased.

In the year 2007-08 the consumption of product ‘A’ has increased (79.98%)

when compared to product ‘B’ and ‘C’, and also the consumption value of ‘B’

and ‘C’ decreased.

In the year 2008-09 the consumption of product ‘A’ has increased trend

(80%).But the product consumption of product ‘B’ and ‘C’ has decreased.

In the year 2009-10 the consumption of product ‘a’ has decreased to (67%)

which is due to the decrease in its value, since the value of product of ‘B’ and

‘C’ has increased the consumption value has also increased accordingly.

In the year 2009-10 the consumption of product ‘A’ has decreased to (67%)

which is due to the decrease in its value, since the value of product of ‘B’ and

‘C’ has increased the consumption value has also increased accordingly. In the

year 2007 to 2009 the consumptions of product ‘A’ has increased to

(79.98%).And also product ‘B, C’ has decreased.

The turnover ratio is to some extent decreased to year by year like 2006-07 and

2007-08. But it is increased in the year 2009-10.

The raw materials, work in process, finished goods and inventory holding

period is a little change to year by year like 2005-06, 2006-07, 2007-08 2008-

09, and 2009-10 respectively.

The total assets turnover Ratio is 1.51 times in the year 2005-06 and it is

increased to 1.73 in the year 2006-07, it is increased to 2.54 in the year 2008-

09. Again it decreased to 2.41 in the year 2009-10.

The working capital turnover ratio is 1.84 times in the year 2005-06 and it is

increased continuously to 2.06, 2.1 and 2.98 in the year 2006-07, 2007-08 and

respectively. But, it is decreased to 2.916 in the year 2009-10.

The fixed assets turnover ratio is 8.56 times in the year 2005-06 and it is

increased to 17.45 in the year 2008-09. Then it is decreased to 14.14 in the

year 2009-10.

The debtors’ turnover ratio is increasing from2.42 to 3.44 the year 2005-06 to

2006-07. And then it starts decreasing from 2.51 to 2.06 in the year 2007-08 to

2009-2010.

The average collection period is 149 days in the year 2005-06 and then

decreased to 105 days in the year2006-07.And in the year of 2007-08 the

average collection period was increased to143 days and it increased to 175

days in the year 2009-10.

SUGGESTIONS:-

It is to be Suggest that to maintain optimum level of Economic Order

Quantity minimize the carrying cost Storage cost.

It is suggested that the production process should be done effectively so as to

increase the inventory turnover ratio.

Maintain quality product and reasonable price to increase orders.

Better coordination among purchase, production, marketing and finance

departments will help in achieving greater efficiency in inventory

management.

Companies should develop long term relationships with vendors. This would

help in improving quality and delivery.

CONCLUSION:

Inventory control is the “Life System” control needed for continuous operation

in all businesses. Inventory can be compared to the life blood of the human body. Just

as used-up red and white cells need replacement in the human body in the correct

quantity and quality at the right time for continuous operation. The inventory

management in the company is good. In order to compete the present day’s market, it

has to follow the suggestions made.

Comparative Balance Sheet on 31-3-2011

Particulars 2010 2011 + (Or) - % of +/-

1.Fixed Assets:        Total Fixed Assets 57809243 66895837 9086594 15.72

2.Investment 456000 456000 0 03.capital work-in process 4484844 2588075 -1896769 -42.29

4.Current Assets:        

Sundry Debtors 416646470 540816247 124169777 29.8

Cash & bank balance 14099441 20927726 6828285 48.43

Inventories 65246173 207233608 141987435 217.62

Loans & Advances 133532095 61217529 -72314566 -541.55

Total current assets 629524179 830195110 200670931 31.885.(-) Current liabilities:        

Liabilities 225900312 403177267 177276955 78.48

Provisions 123191718 12489107 1699353 1.38Total current

liabilities 349092030 415666374 66574344 19.07

6.Working Capital 280432149 414528736 133826587 47.72

Total Assets 343182236 484468648 141286412 41.17

7.Loan funds        

Secured Loans 80443588 130245248 49801660 61.9

Un Secured Loans 11673920 100673920 89000000 762.38 Total Loan funds 92117508 230919168 138801660 150.688.Capital & Reserves:        

share capital 17328000 17328000 0 0

Reserves & Surplus 232542328 234576064 2033736 0.87Total capital fund

(F) 249870328 251904064 2033736 0.819.Differed Tax Liability 1194400 1645416 451016 37.76

Total Liabilities 343182236 484468648 141286412 41.17

COMPARATIVE INCOME STATEMENT FOR AT THE YEAR END OF 31-03-2011

Particulars 2010 2011 + (Or) - % of +/-

Sales 817809575 900431577 82622002 1

0.10

(-) Cost of goods sold 577138125 736531556 159393431 13.77

Gross profit (A) 240671450 163900021 -76771429 -29.1

(-) Operating expenses: 0

Total Operating expenses (B) 205954202 29119365 -176834837 -22.75

Operating profit (A-B)=C 34717248 134780656 100063408 -52.36

(+)Non operating Incomes: 0

Other incomes (D) 10877065 1582988 -9294077 430.04

PROFIT BEFORE TAX(P.B.T) 45594313 6844375 -38749938 -39.15

(-)PROVISION FOR TAXATION 13803810 4810639 -8993171 -54.05

PROFIT AFTER TAX(P.A.T) 31790503 2033736 -29756767 -29.18

(+)Profit brought forward from previous year 190372056 208847062 18475006 15.25

Profit available for appropriation 222162559 210880798 -11281761 5.76

Surplus cared to balance sheet 208847062 210880798 2033736 9.7

Comparative Balance Sheet on 31-3-2010

Particulars 2009 2010 + (Or) - % of +/-

1.Fixed Assets:        

Total Fixed Assets 48546946 57809243 9262297 19.08

2.Investment 456000 456000 0 0.00

3.capital work-in process 790000 4484844 3694844 467.70

4.Current Assets:        

Sundry Debtors 376128492 416646470 40517978 10.77

Cash & bank balance 16318356 14099441 -2218915 -13.60

Inventories 95359669 65246173 -30113496 -31.58

Loans & Advances 118222950 133532095 15309145 12.95

Total current assets 606029467 629524179 23494712 3.88

5.(-) Current liabilities:        

Liabilities 213436209 225900312 12464103 5.84

Provisions 108809739 123191718 14381979 13.22

Total current liabilities 322245948 349092030 26846082 8.33

6.Working Capital 283783519 280432149 -3351370 -1.18

Total Assets 333576465.00 343182236.00 9605771.00 2.88

7.Loan funds        

Secured Loans 91595683 80443588 11152095 12.18

Un Secured Loans 11673920 11673920 0 0.00

Total Loan funds 103269603 92117508 11152095 10.80

8.Capital & Reserves:      

share capital 17328000 17328000 0 0.00

Reserves & Surplus 210888272 232542328 21654056 10.27

Total capital fund (F) 228216272 249870328 21654056 9.49

9.Differed Tax Liability 2090590 1194400 896190 42.87

Total Liabilities 333576465.00 343182236.00 9605771.00 2.88

COMPARATIVE INCOME STATEMENT FOR AT THE YEAR END OF 31-03-2010

Particulars 2009 2010 + (Or) - % of +/-

Sales 846761438.00 817809575.00 -28951863.00 -3.42

(-) Cost of goods sold 507290712.00 577138125.00 69847413.00 13.77

Gross profit (A) 339470726.00 240671450.00 -98799276.00 -29.10

(-) Operating expenses:

Total Operating expenses (B) 266592177.00 205954202.00 -60637975.00 -22.75

Operating profit (A-B)=C 72878549.00 34717248.00 -38161301.00 -52.36

(+)Non operating Incomes:

Other incomes (D) 2052126.00 10877065.00 8824939.00 430.04

PROFIT BEFORE TAX(P.B.T) 74930675.00 45594313.00 -29336362.00 -39.15

(-)PROVISION FOR TAXATION 30041036.00 13803810.00 -16237226.00 -54.05

PROFIT AFTER TAX(P.A.T) 44889639.00 31790503.00 -13099136.00 -29.18

(+)Profit brought forward from previous year

165176051 190372056 25196005.00 15.25

Profit available for appropriation 210065690.00 222162559.00 12096869.00 5.76

(-)Profit available for appropriation 19693634 13315497 -6378137.00 -32.39

Surplus cared to balance sheet 190372056.00 208847062.00 18475006.00 9.70

Comparative Balance Sheet on 31-3-2009

Particulars 2008 2009 + (Or) - % of +/-

1.Fixed Assets:

Total Fixed Assets 41591731 48546946 6955215 16.72

2.Investment 456000 456000 0 -

3.capital work-in process 790000 790000 0 -

4.Current Assets:

Sundry Debtors 317915356 376128492 58213136 18.31

Cash &bank balance 32733358 16318356 -16415002 -50.15

Inventories 97234402 95359669 -1874733 -1.93

Loans &Advances 86193246 118222950 32029704 37.16

Total current assets 534076362 606029467 71953105 13.47

5.(-) Current liabilities’:

Liabilities 177454005 213436209 35982204 20.28

Provisions 68742272 108809739 40067467 58.29

Total current liabilities 246196277 322245948 76049671 30.89

6.Working Capital 287880085 283783519 -4096566 -1.42

Total Assets 330717816.00 333576465.00 2858649 0.86

7.Loan funds

Secured Loans 115269169 91595683 -23673486 -20.54

Un Secured Loans 11673920 11673920 0 -

Total Loan funds 126943089 103269603 -23673486 -18.65

8.Capital & Reserves:

share capital 5776000 17328000 11552000 200.00

Reserves & Surplus 192396080 210888272 18492192 9.61

Total capital fund (F) 198172080 228216272 30044192 15.16

9.Differed Tax Liability 5602647 2090590 -3512057 -62.69

Total Liabilities 330717816.00 333576465.00 2858649 0.86

COMPARATIVE INCOME STATEMENT FOR AT THE YEAR END OF 31-03-2009

Particulars 2008 2009 + (Or) - % of +/-

Sales 604421203 846761438.00 242340235.00 40.09

(-) Cost of goods sold 395074801 507290712.00 112215911.00 28.40

Gross profit (A) 209346402 339470726.00 130124324.00 62.16

(-) Operating expenses:

Total Operating expenses (B) 117548810 266592177.00 149043367.00 126.79

Operating profit (A-B)=C 91797592 72878549.00 -18919043.00 -20.61

(+)Non operating Incomes:

Other incomes (D) 2110031 2052126.00 -57905.00 -2.74

PROFIT BEFORE TAX(P.B.T) 93907623 74930675.00 -18976948.00 -20.21

(-)PROVISION FOR TAXATION 33255440 30041036.00 -3214404.00 -9.67

PROFIT AFTER TAX(P.A.T) 60652183 44889639.00 -15762544.00 -25.99

(+)Profit brought forward from previous year

115657309 165176051 49518742.00 42.82

Profit available for appropriation 176309492 210065690.00 33756198.00 19.15

(-)Profit available for appropriation11133441 19693634 8560193.00 76.89

Surplus carried to balance sheet165176051 190372056.00 25196005.00 15.25

COMPARATIVE INCOME STATEMENT FOR AT THE YEAR END OF 31-03-2008

Particulars 2007 2008 + (Or) - % of +/-

Sales 400243117 604421203 204178086.00 51.01

(-) Cost of goods sold 265995084 395074801 129079717.00 48.53

Gross profit (A) 134248033 209346402 75098369.00 55.94

(-) Operating expenses:

Total Operating expenses (B) 75205835 117548810 42342975.00 56.30

Operating profit (A-B)=C 59042198 91797592 32755394.00 55.48

(+)Non operating Incomes:

Other incomes (D) 5469791 2110031 -3359760.00 -61.42

PROFIT BEFORE TAX(P.B.T) 64511989 93907623 29395634.00 45.57

(-)PROVISION FOR TAXATION 21943528 33255440 11311912.00 51.55

PROFIT AFTER TAX(P.A.T) 42568461 60652183 18083722.00 42.48

(+)Profit brought forward from previous year

81400272 115657309 34257037.00 42.08

Profit available for appropriation 123968733 176309492 52340759.00 42.22

(-)Profit available for appropriation 8311425 11133441 2822016.00 33.95

Surplus carried to balance sheet 115657308 165176051 49518743.00 42.82

Comparative Balance Sheet on 31-3-2007

Particulars 2006 2007 + (Or) - % of +/-

1.Fixed Assets:

Total Fixed Assets 36602887 36721467 118580 0.32

2.Investment 9504211 456000 -9048211 -95.20

3.capital work in process _ _

4.Current Assets:

Sundry Debtors 125961671 155061745 29100074 23.10

Cash & bank balance 41712910 42847929 1135019 2.72

Inventories 53133187 62440486 9307299 17.52

Loans & Advances 18391719 38692601 20300882 110.38

Total current assets 239199487 299042761 59843274 25.02

5.(-) Current liabilities & Provisions

Total current liabilities 68975287 105364083 36388796 52.76

6.Working Capital 170224200 193678678 23454478 13.78

Total Assets 216331298 230856145 14524847 6.71

7.Loan funds

Secured Loans 66371662 69305043 2933381 4.42

Un Secured Loans 38860170 11673920 -27186250 -69.96

Total Loan funds 105231832 80978963 -24252869 -23.05

8.Capital & Reserves:

share capital 5776000 5776000 0 0.00

Reserves & Surplus 100564760 139133975 38569215 38.35

Total capital fund (F) 106340760 144909975 38569215 36.27

9.Differed Tax Liability 4758706 4967207 208501 4.38

Total Liabilities 216331298 230856145 14524847 6.71

COMPARATIVE INCOME STATEMENT FOR AT THE YEAR END OF 31-03-2007

Particulars 2006 2007 + (Or) - % of +/-

Sales 313497275 400243117 86745842.00 27.67

(-) Cost of goods sold 171928478 265995084 94066606.00 54.71

Gross profit (A) 141568797 134248033 -7320764.00 -5.17

(-) Operating expanses:

Total Operating expenses (B) 130842701 75205835 -55636866.00 -42.52

Operating profit (A-B)=C 10726096 59042198 48316102.00 450.45

(+)Non operating Incomes:

Other incomes (D) 12242032 5469791 -6772241.00 -55.32

PROFIT BEFORE TAX(P.B.T) 22968128 64511989 41543861.00 180.88

(-)PROVISION FOR TAXATION 5097766 21943528 16845762.00 330.45

PROFIT AFTER TAX(P.A.T) 17870362 42568461 24698099.00 138.21

(+)Profit brought forward from previous year

67635040 81400272 13765232.00 20.35

Profit available for appropriation 85505402 123968733 38463331.00 44.98

(-)Profit available for appropriation 4105129 8311425 4206296.00 102.46

Surplus carried to balance sheet 81400273 115657308 34257035.00 42.08

BIBLIOGRAPHY:

BOOKS:

I.M. PANDEY (2002), "Financial Management", 8th Edition, Vikas Publishing House

Pvt. Ltd., New Delhi.

PRASANNA CHANDRA (2002), "Financial Management", 5th Edition, Tata-Mc Graw

hill publishing Company Ltd., New Delhi.

M.Y. KHAN and P.K. JAIN, "Management Accounting", Tata Mc Graw Hill Publishing

Company Limited, New Delhi.

JOURNALS:

VIDWAT “The Indian Journal of Management” Volume-3, Issue-1, Jan-July 2010.

“Management Accounting” Volume – 45, No.2, February 2010.

WEBSITE:

WWW.AMARARAJA.COM

WWW.GOOGLE.COM