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INDEX TABLE

SL.NO CONTENTS PAGE

NO.

1 CHAPTER - I 2 TO 6

 EXECUTIVE SUMMARY.

CHAPTER – II 7 TO 18
2
 INDUSTRY PROFILE.

S
CHAPTER - III 19 TO 39
3
 INTRODUCTION OF COMPANY.

CHAPTER - IV 40 TO 43
4
 OBJECTIVES OF THE STUDY.
 RESEARCH METHDOLOGY.

5 CHAPTER - V 44 TO 64
 INVENTORY MANAGEMENT

CHAPTER - VI 65 TO 76
6
 DATA ANALYSIS AND INTERPRETATION.

CHAPTER – VII 77 TO 80
 FINDINGS.
7
 SUGGESTIONS &

 CONCLUSIONS.
CHAPTER-VIII

8 81
 BIBILOGROPHY.

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CHAPTEr-I

EXECUTIVE SUMMARY

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EXECUTIVE SUMMARY

PROJECT TITLE: - A PROJECT REPORT ON INVENTORY MANAGEMENT AT

MAHALAKSHMI GRANITES. ILKAL

Granite is one of the commodities, which is having its own name in the international market.
There are number of granite companies throughout India which are situated in the states of Rajasthan,
Karnataka, Gujarat, etc. these are one of the sources to the government in the taxes as well as exporters
name in the market.
Granites are nothing but stones which are extracted from raw blocks, then they are cut into required
sizes and finally polished and are made as per they are ordered by the customers. These are used for the
purpose of decorating houses, decorating the hotel, decorating the tomb, etc.

The present project is intended to determine the industry practice in inventory management and
to evaluate management performance in this regard.

The importance of the project is emphasized by the fact manner by the fact manner of
administration of inventory management to a very large extent affects the success or failure of overall
operations of the industry. The proper management of Inventory management is crucial importance for
the success of the same.

INDUSTRY PROFILE:-
Granite Company was first established by Mahesh Gandhi in 1977-78 in balkundi village near
ilkal, later started by dhadanni brothers in kodagli village (NH) and then started by Gem Granites in
balkundi village in 1979. Later slowly other granite companies established in ilkal and in surrounding
villages. There are around 180 granite companies in ilkal and surrounding villages.
Granite, igneous rock of visible crystalline formation and texture. It is composed of feldspar (usually
potash feldspar and oligoclase) and quartz, with a small amount of mica (biotite or muscovite) and
minor accessory minerals, such as zircon, apatite, magnetite, ilmenite, and sphene. Granite is usually
whitish or gray with a speckled appearance caused by the darker crystals. Potash feldspar imparts a red
or flesh color to the rock. Granite crystallizes from magma that cools slowly, deep below the earth's
surface. Exceptionally slow rates of cooling give rise to a very coarse-grained variety called pegmatite.
Granite, along with other crystalline rocks, constitutes the foundation of the continental masses, and it is
the most common intrusive rock exposed at the earth's surface.

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COMPANY PROFILE:-
MAHALAKSHMI GRANITES is a private firm is very well known in the field of granites in
the national market. It was set up in 1994-1995 and is located at Ilkal city in Bagalkot district.

MAHALAKSHMI GRANITES mainly concentrates in the production of mudgal grey, cat’s eye,
rajeshree, red galaxy, ruby red etc. Ilkal has become famous in the national and interrnational market
because of granites exported with production of granite tiles taking the raw material from surrounding
quarries.

MAHALAKSHMI GRANITES has started with the owner of Mr. EKANATHASA H RAJOLLI
the production is 30000 sq ft approximately per month with the turnover of 25-50 lakhs per annum. Now
a day the demand for granites is increasing at a high speed.

NEED FOR THE STUDY:-

Inventory management being a very important concept in all the company’s having a void
coverage often calls for the managerial attention. In the modern times inventory management has
become the integral part of the all companies. So all the firm gives special importance for inventory
management.

OBJECTIVES OF THE STUDY:-

1. To study the inventory management based on the ratios.
2. To find out the impact of inventory on working capital.
3. To study the inventory management and its effective control through various techniques.
4. To suggest the measures for improving the inventory level.

SCOPE OF THE STUDY:-

Inventory management being a very important concept in all the company’s having a void
coverage often calls for the managerial attention. In the modern times inventory management has
become the integral part of the all companies. So all the firm gives special importance for inventory
management. The major objective of the study is to examine the effectiveness of inventory management

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system adopted by an industry; the study mainly focuses on the techniques used by the company to
control the inventory.

1.6 LIMITATIONS OF THE STUDY:-

 This report is based on the audited financials of the Company and other details orally provided
by the concerned department managers during the study.
 The analysis of data is based on the data collected during the study.
 The source of data is not concrete and is based on subjective details provided during the study.
 Most of the Inventory is stored at the project site store and lacks adequate controls.

METHODOLOGY:-
The study uses both primary and secondary data the primary data relating to organization
structure different departments and information relating to inventory control have been collected through
informal interviews with the official of the company format of different records used in the company are
also collected the secondary data relating to financial aspects, inventory turnover ratios, ABC Method,
of the company’s products have been collected form published annual reports of the company.

Primary Data:-
1. Interaction with personnel of the company
2. Direct Observation in Inventory
Secondary Data:-
1. Monthly Inventory Statements
2. Company Records
3. Internet
4. Balance Sheet

FINDINGS:-
 The company follows the first in first out method in issuing the materials to the production
department.
 The MAHALAKSHMI GRANITES follows different methods and systems of inventory control
techniques such as HML Analysis, FSN classification etc., at different levels for different
inventory.
 The company is following good business policies this means company is properly
manufacturing, distributing and controlling the financial activities.

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SUGGESTIONS:-

 The company’s current and quick ratio is near the standard ratio it has to maintain additional to
meet its current obligations.
 The company’s raw material turnover ratio is in a positive trend it has to maintain further for
proper utilization of raw material.
 The company should concentrate more on work in process turnover ratio in order meet the
requirement of finished goods.

CONCLUSION:-
After the study, we can come to a conclusion that, effectiveness of inventory management should
improve in all the aspects; hence the industry can still strengthen its position by looking into the
following.

 The inventory should be fast moving so that warehouse cost can be reduced.
 The finished goods have to be dispatched in feasible time as soon as manufacturing is
completed.

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CHAPTER-Ii

INDUSTRY PROFILE

Introduction to Granites

Quarrying granite for the Mormon Temple, Utah Territory . The ground is strewn with
boulders and detached masses of granite, which have fallen from the walls of Little Cottonwood
Canyon. The quarrying consists of splitting up the blocks

Granite (pronounced) is a common and widely occurring type of intrusive, felsic, igneous
rock. Granite has a medium to coarse texture, occasionally with some individual crystals larger than the
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groundmass forming a rock known as porphyry. Granites can be pink to dark gray or even black,
depending on their chemistry and mineralogy. Outcrops of granite tend to form tors, and rounded
massifs. Granites sometimes occur in circular depressions surrounded by a range of hills, formed by the
metamorphic aureole or hornfels.

Granite is nearly always massive (lacking internal structures), hard and tough, and therefore it
has gained widespread use as a construction stone. The average density of granite is 2.75 g/cm3 and its
viscosity at standard temperature and pressure is ~4.5 • 1019 Pa·s [1]

The word granite comes from the Latin granum, a grain, in reference to the coarse-grained
structure of such a crystalline rock.

Mineralogy:

Orbicular granite in Caldera, Chile

Granite is classified according to the QAPF diagram for coarse grained plutonic rocks
(granitites) and is named according to the percentage of quartz, alkali feldspar (orthoclase, sanding, or
microcline) and plagioclase feldspar on the A-Q-P half of the diagram. True granite according to modern
petrologic convention contains both plagioclase and alkali feldspars.

When a granitoid is devoid or nearly devoid of plagioclase the rock is referred to as alkali
granite. When a granitoid contains <10% orthoclase it is called tonalite; pyroxene and amphibole are
common in tonalite. A granite containing both muscovite and biotite micas is called a binary or two-
mica granite. Two-mica granites are typically high in potassium and low in plagioclase, and are usually
S-type granites or A-type granites. The volcanic equivalent of plutonic granite is rhyolite. Granite has
poor primary permeability but strong secondary permeability.

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Chemical composition:

A worldwide average of the average proportion of the different chemical components in

granites, in descending order by weight percent, is:[2]

 SiO2 — 72.04%
 Al2O3 — 14.42%
 K2O — 4.12%
 Na2O — 3.69%
 CaO — 1.82%
 FeO — 1.68%
 Fe2O3 — 1.22%
 MgO — 0.71%
 TiO2 — 0.30%
 P2O5 — 0.12%
 MnO — 0.05%

Based on 2485 analyses

Occurrence:

The Stawamus Chief is a granite monolith in British Columbia

Granite is currently known only on Earth where it forms a major part of continental crust.
Granite often occurs as relatively small, less than 100 km² stock masses (stocks) and in batholiths that
are often associated with organic mountain ranges. Small dikes of granitic composition called haplites

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are often associated with the margins of granitic intrusions. In some locations very coarse-grained
pegmatite masses occur with granite.

Granite has been intruded into the crust of the Earth during all geologic periods, although
much of it is of Precambrian age. Granitic rock is widely distributed throughout the continental crust of
the Earth and is the most abundant basement rock that underlies the relatively thin sedimentary veneer of
the continents.

Origin:

Close-up of granite exposed in Chennai, India.

Granite is an igneous rock and is formed from magma. Granitic magma has many potential
origins but it must intrude other rocks. Most granite intrusions are emplaced at depth within the crust,
usually greater than 1.5 kilometres and up to 50 km depth within thick continental crust. The origin of
granite is contentious and has led to varied schemes of classification. Classification schemes are
regional; there is a French scheme, a British scheme and an American scheme. This confusion arises
because the classification schemes define granite by different means. Generally the ‘alphabet-soup’
classification is used because it classifies based on genesis or origin of the magma.

Geochemical origins:

Granitoids are a ubiquitous component of the crust. They have crystallized from magmas that
have compositions at or near a eutectic point (or a temperature minimum on a cotectic curve). Magmas
will evolve to the eutectic because of igneous differentiation, or because they represent low degrees of
partial melting. Fractional crystallisation serves to reduce a melt in iron, magnesium, titanium, calcium
and sodium, and enrich the melt in potassium and silicon - alkali feldspar (rich in potassium) and quartz
(SiO2), are two of the defining constituents of granite.

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This process operates regardless of the origin of the parental magma to the granite, and
regardless of its chemistry. However, the composition and origin of the magma which differentiates into
granite, leaves certain geochemical and mineral evidence as to what the granite's parental rock was. The
final mineralogy, texture and chemical composition of a granite is often distinctive as to its origin. For
instance, a granite which is formed from melted sediments may have more alkali feldspar, whereas a
granite derived from melted basalt may be richer in plagioclase feldspar. It is on this basis that the
modern "alphabet" classification schemes are based.

Alphabet soup classification:

The 'alphabet soup' scheme of Chappell & White was proposed initially to divide granites into
I-type granite (or igneous protolith) granite and S-type or sedimentary protolith granite [3]. Both of these
types of granite are formed by melting of high grade metamorphic rocks, either other granite or intrusive
mafic rocks, or buried sediment, respectively.

M-type or mantle derived granite was proposed later, to cover those granites which were
clearly sourced from crystallized mafic magmas, generally sourced from the mantle. These are rare,
because it is difficult to turn basalt into granite via fractional crystallisation.

A-type or anorogenic granites are formed above volcanic "hot spot" activity and have peculiar
mineralogy and geochemistry. These granites are formed by melting of the lower crust under conditions
that are usually extremely dry. The rhyolites of the Yellowstone caldera are examples of volcanic
equivalents of A-type granite.[4] [5]

Granitization:

An old, and largely discounted theory, granitization states that granite is formed in place by
extreme metasomatism by fluids bringing in elements e.g. potassium and removing others e.g. calcium
to transform the metamorphic rock into a granite. This was supposed to occur across a migrating front.
The production of granite by metamorphic heat is difficult, but is observed to occur in certain
amphibolite and granulite terrains. In-situ granitisation or melting by metamorphism is difficult to
recognise except where leucosome and melanosome textures are present in gneisses. Once a
metamorphic rock is melted it is no longer a metamorphic rock and is magma, so these rocks are seen as
a transitional between the two, but are not technically granite as they do not actually intrude into other
rocks. In all cases, melting of solid rock requires high temperature, and also water or other volatiles
which act as a catalyst by lowering the solidus temperature of the rock.

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Ascent and emplacement:

The ascent and emplacement of large volumes of granite within the upper continental crust is
a source of much debate amongst geologists. There is a lack of field evidence for any proposed
mechanisms, so hypotheses are predominantly based upon experimental data. There are two major
hypotheses for the ascent of magma through the crust:

 Stokes Diapir
 Fracture Propagation

Of these two mechanisms, Stokes diapir was favoured for many years in the absence of a reasonable
alternative. The basic idea is that magma will rise through the crust as a single mass through buoyancy.
As it rises it heats the wall rocks, causing them to behave as a power-law fluid and thus flow around the
pluton allowing it to pass rapidly and without major heat loss (Weinberg, 1994). This is entirely feasible
in the warm, ductile lower crust where rocks are easily deformed, but runs into problems in the upper
crust which is far colder and more brittle. Rocks there do not defor expend far too much energy in
heating wall rocks, thus cooling and solidifying before reaching higher levels within the crust.

Nowadays fracture propagation is the mechanism preferred by many geologists as it largely

eliminates the major problems of moving a huge mass of magma through cold brittle crust. Magma rises
instead in small channels along self-propagating dykes which form along new or pre-existing fault
systems and networks of active shear zones (Clemens, 1998)[6]. As these narrow conduits open, the first
magma to enter solidifies and provides a form of insulation for later magma.

Granitic magma must make room for it or be intruded into other rocks in order to form an
intrusion, and several mechanisms have been proposed to explain how large batholiths have been
emplaced:

 Stopping, where the granite cracks the wall rocks and pushes upwards as it removes blocks of the
overlying crust
 Assimilation, where the granite melts its way up into the crust and removes overlying material in
this way
 Inflation, where the granite body inflates under pressure and is injected into position

Most geologists today accept that a combination of these phenomena can be used to explain
granite intrusions, and that not all granites can be explained entirely by one or another mechanism.

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Natural Radiation:

Granite is a natural source of radiation, like most natural stones. However, some granites have
been reported to have higher radioactivity thereby raising some concerns about their safety.

Some granites contain around 10 to 20 parts per million of uranium. By contrast, more mafic
rocks such as tonalite, gabbro or diorite have 1 to 5 ppm uranium, and limestones and sedimentary rocks
usually have equally low amounts. Many large granite plutons are the sources for palaeochannel-hosted
or roll front uranium ore deposits, where the uranium washes into the sediments from the granite
uplands and associated, often highly radioactive, pegmatites. Granite could be considered a potential
natural radiological hazard as, for instance, villages located over granite may be susceptible to higher
doses of radiation than other communities. Cellars and basements sunk into soils over granite can
[8]
become a trap for radon gas, which is heavier than air and is formed by the decay of uranium . Radon
[9]
can also be introduced into houses by wells drilled into granite . Radon gas poses significant health
concerns, and is the #2 cause of lung cancer in the US behind smoking [10].

However, in the majority of cases, although granite is a significant source of natural radiation
as compared to other rock it is not thought an acute health threat or significant factor

Various resources from national geological survey organizations are accessible online to assist
in assessing the risk factors in granite country and design rules relating, in particular, to preventing
accumulation of radon gas in enclosed basements and dwellings.

"A study of Granite Countertops by National Health and Engineering Inc of USA [1],
undertaken in November, 2008 however, did not find a single granite that poses any health risk.
Quantities of radon and radiation emitted by stones included in the analysis all fell well below average
outdoor background levels that are commonly found in the United States.

Scientists conducted more than 400 tests of 115 different varieties of granite countertops,
including stones cited in media reports as being potentially problematic. The stones tested include types
of granite that comprise approximately 80 percent of the annual

U.S. market share for granite countertops, based on the most recent market data available."

Uses

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Antiquity:

Life-size elephant and other creatures carved in granite; Mahabalipuram, India.

The Red Pyramid of Egypt (c.26th century BC), named for the light crimson hue of its
exposed granite surfaces, is the third largest of Egyptian pyramids. Menkaure's Pyramid, likely dating to
the same era, was constructed of limestone and granite blocks. The Great Pyramid of Giza (c.2580 BC)
contains a huge granite sarcophagus fashioned of "Red Aswan Granite." The mostly ruined Black
Pyramid dating from the reign of Amenemhat III once had a polished granite pyramidion or capstone,
now on display in the main hall of the Egyptian Museum in Cairo (see Dahshur). Other uses in Ancient
Egypt include columns, door lintels, sills, jambs, and wall and floor veneer.[11] How the Egyptians
worked the solid granite is still a matter of debate.

[12]
Dr. Patrick Hunt has postulated that the Egyptians used emery shown to have higher
hardness on the Mohs scale.

Many large Hindu temples in southern India, particularly those built by the 11th century king
Rajaraja Chola I, were made of granite. There is a large amount of granite in these structures. They are
comparable to the Great Pyramid of Giza.

Various resources from national geological survey organizations are accessible online to assist
in assessing the risk factors in granite country and design rules relating, in particular, to preventing
accumulation of radon gas in enclosed basements and dwellings.

"A study of Granite Countertops by National Health and Engineering Inc of USA [1],
undertaken in November, 2008 however, did not find a single granite that poses any health risk.
Quantities of radon and radiation emitted by stones included in the analysis all fell well below average
outdoor background levels that are commonly found in the United States. Scientists conducted more
than 400 tests of 115 different varieties of granite countertops, including stones cited in media reports as
being potentially problematic. The stones tested include types of granite that comprise approximately 80

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percent of the annual U.S. market share for granite countertops, based on the most recent market data
available."

Modern Building:

Granite has been extensively used as a dimension stone and as flooring tiles in public and
commercial buildings and monuments. Because of its abundance, granite was commonly used to build
foundations for homes in New England. The Granite Railway, America's first railroad, was built to haul
granite from the quarries in Quincy, Massachusetts, to the Neponset River in the 1820s. With increasing
amounts of acid rain in parts of the world, granite has begun to supplant marble as a monument material,
since it is much more durable. Polished granite is also a popular choice for kitchen countertops due to its
high durability and aesthetic qualities.

Curling stones are traditionally fashioned of Ailsa Craig granite. The first stones were made in
the 1750s, the original source being Ailsa Craig in Scotland. Because of the particular rarity of the
granite, the best stones can cost as much as US$1,500. Between 60–70 percent of the stones used today
are made from Ailsa Craig granite, although the island is now a wildlife reserve and is no longer used
for quarrying.[14]

Engineering:
Engineers have traditionally used polished granite surfaces to establish a plane of reference,
since they are relatively impervious and inflexible. Sandblasted concrete with a heavy aggregate content
has an appearance similar to rough granite, and is often used as a substitute when use of real granite is
impractical. A most unusual use of granite was in the construction of the rails for the Haytor Granite
Tramway, Devon, England, in 1820.

Rock climbing:

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The granite peaks of the Torres del Paine in the Chilean Patagonia

Granite is one of the rocks most prized by climbers, for its steepness, soundness, crack
systems, and friction. Well-known venues for granite climbing include Yosemite, the Bugaboos, the
Mont Blanc massif (and peaks such as the Aiguille du Dru, the Aiguille du Midi and the Grandes
Jorasses), the Bregaglia, Corsica, parts of the Karakoram, the Fitzroy Massif, Patagonia, Baffin Island,
the Cornish coast and the Cairngorms.

Granite rock climbing is so popular that many of the artificial rock climbing walls found in
gyms and theme parks are made to look and feel like granite. Most, however, are made from
manufactured materials, given the fact that granite is generally too heavy for portable rock climbing
walls, as well as the buildings in which stationary walls are located.

Granite is one of the most commonly used materials for construction purpose. Granite is a
natural stone, which is immensely used in home construction. Granite is available in various forms like
Granite tiles, Granite blocks, etc. Granite is highly durable, acid proof and hard material.

In addition to this, Granite is easy to maintain.

There is a vast variety of Granite tools available in the marketplace for cutting, polishing and
carving of Granite. Granite polishing adds a new luster in Granite. There are modernized Granite
polishing machines, which are capable of polishing the Granite very efficiently.

Granite resources of Karnataka

Karnataka is endowed with rich varieties of resources. Approximately one hundred varieties
of rocks are available in Karnataka. Granite with pleasing textures and color apart from the attractive
gneisses, migmatites and sober dyke rocks are abundantly available.

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Geomorphologically the investigations have indicated the availability of ornamental granite is
in the districts of Bangalore, mysore, chamarajnagar, Tumkur, kolar, Bellary, raichur, koppal, bagalkot,
hassan, chickmagalur and dakshina kannada. Important available varieties are pink granite, multi colour
granite, black granite, Hassan green, granite porphery, synites, hornblende granite, grey granite. They
have pleasing colour uniformity in texture and structure, ability to take polish, ability to yield thin and
large slab on cutting are some important properties of granites.

 Bagalkot district
1. Hungund taluk Pink granite, multi
Colored granite & catseye

 Bangalore district
1. Kanakpura taluk Pink multicolored
2. Magadi taluk Gneiss
3. Ramnagaram taluk Pink, multi colour gneiss
4. Nelamangala taluk Pink, multi gneiss

 Dharwad district
1. Shiratti taluk Grey granite
2. Ron taluk Brownish prophyry

 Gulbarga district
1. Shahpur taluk Pink granite
2. Shorapur taluk Pink and grayish pink

 Hassan district
1. Belur taluk Dyke
2. Hassan taluk Dyke

 Kolar district
1. Gudibhanda taluk Grey granite
2. Bhintamani taluk Grey granite
3. Bangarapet taluk Grey granite, Dyke

 Mysore district
1. Chamarajanagar taluk Dyke
2. MM hills taluk Dyke
3. Periyapatna taluk Yellow granite
4. TN pura taluk Yellow granite

 Bellary district
2. Tekkalkot taluk Pink granite, Grey
3. Singadevanahalli Pink granite, Grey

 Koppal district
1. Koppal taluk Pink
2. Yelburga taluk Porphery green granite
Pink, grey & black granite
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& pink gneiss

 Chitradurga district

Chitradurga district Grey granite

CHAPTER-III

INTRODUCTION OF COMPANY

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MAHALAKSHMI GRANITES PROFILE

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COMPANY PROFILE:

MAHALAKSHMI GRANITES is a manufacturer of granite tiles, it sales all types of granite tiles in the
national market.

Name of the FIRM : MAHALAKSHMI GRANITES

Owner of the firm : Mr. EKANATHASA H RAJOLLI

Manager : Mr. SHANKAR BHIDRALLI

Location : Balakundi road hire Upanal

ILKAL- 587 125

Tq : Hunagund, Dist: Bagalkot (Karnataka)

Tin : 29720115143

Type of unit : Private Company

Year of Establishment : 1994-1995

Total area covered : 2 acres

Number of employees : 40

Approximate production p.m : 30000 sq ft

Approximate sales p.m : 25000 sq ft

Total customers : 100% national oriented

Present turn over : 25-30 lakhs p.a

Competitors : G,M,granite , Saptagiri granite , durga parameshwari

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Granite , Mahesh granite , etc.

ORGANIZATION CHART

MANAGING DIRCTOR

GENARAL MANAGER

PERSONAL PRODUCTION MINING SECURITY STORES PUBLIC ACCOUNTS

MANAGER MANAGER MANAGER OFFICER MANAGER RELATION

MINING ASSISTANT ASSISTANT MANAGER

MINING FOREMAN CLERKS

MINING MATE STAFF

BLASTER

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HISTORY OF MAHALAKSHMI GRANITES

INTRODUCTION:

MAHALAKSHMI GRANITES is a private firm is very well known in the field of granites in
the national market. It was set up in 1994-1995 and is located at Ilkal city in Bagalkot district.
MAHALAKSHMI GRANITES mainly concentrates in the production of mudgal grey, cat’s eye,
rajeshree, red galaxy, ruby red etc. Ilkal has become famous in the national and international market
because of granites exported with production of granite tiles taking the raw material from surrounding
quarries.
MAHALAKSHMI GRANITES has started with the owner of Mr. Ekanathasa h rajolli. The
production is 25000-30000 sq ft approximately per month with the turnover of 25-50 lakhs per annum.
Now a day the demand for granites is increasing at a high speed.

Following are some of the Granites Factories with Profile

Factory Year of Initial No of Production Turnover

establishment investment employees per month

G. M. Granite 1997 1.2 Lakhs 20 20000sqft 1500000=00

Saptagiri Granites 2001 35 Lakhs 30 21000sqft 1800000=00
Mahesh granite 1999 80 Lakhs 40 24000sqft 2300000=00

TROLLY;

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This Trolley takes the raw blocks to the Cutting machine to cut them into tiles.

ESTABLISHMENT:
The MAHALAKSHMI GRANITES was established 1994-1995 and started production from feb-15-
1995 with 40 employees in Ilkal city which is surrounded by nearly 230 granite factories not only in
Ilkal but also nearby villages.

LOCATION:

Location is any area where the industry or firm is set up to carry out its activities more conveniently and
economically. Location of any firm plays an important role in controlling costs or expenses. A firm must
be located in an area where the transport facility, power facility, etc is easily available.

MAHALAKSHMI GRANITES is located nearby balakundi road which connects to different cities;
power facility is also made at work place with good infrastructure facility. The company is also
providing accommodation to its employees with lights and fans facility. In short we can say that the firm
provides very healthy and lively environment to work, which we can say is an ideal working
environment for any employee to work in the firm. The firm has separate office for business transactions
and sometimes during the excess production of tiles they are stored in office also. There are separate
quarters for employees to reside.

FIXED ASSETS:

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The investment made in the fixed assets that are required for permanent use in the enterprise.
Fixed assets are nothing but the immovable property related to business activity, which is owned by the
firm. These fixed assets include land and building, plant and machineries, etc.

MAHALAKSHMI GRANITES has its own land and building to carry out its business activities.
The firm has also invested Rs.75 lakhs in plant and machineries. The firm owns 4 machines each cost
Rs.20 lakhs. And it also has 5 polishing machines each cost of Rs.120, 000 i.e. Rs. 360,000. The output
given by each machine is 25000 sqft per month. And it has one edge cutting machine costing 150,000.

TARGET CUSTOMERS:

Target customers are the actual customers, who form a particular segment of the market and
these customers produce products keeping in mind the requirements and the standards specified.

The target customers of MAHALAKSHMI GRANITES are projects like Shopping malls,
Apartments, used in temples etc.

INVENTORY:

Inventory refers to those goods which are held for eventual sale by the business enterprise. In
other words inventories are stocks of the product a firm is manufacturing for sale and components that
make up the product. Thus inventories form a link between the production and sale of product.
Inventory is nothing but maintaining the stock of the raw materials and other required materials to carry
out production activities. Inventory plays very important role to carry out the production activity
continuously and to meet the increasing demands of the customers at any time.

NET WORK OR DISTRIBUTION CHANNEL:

Production is for consumption. Having produced the products these need to be made available
to the final users of the product i.e. the consumers scattered in large geographical areas. Since many a
times it becomes extremely difficult if not impossible to reach the customers on its own the firm needs
the help of marketing intermediaries like wholesalers and retailers to reach their products to the final
customers. These intermediaries serve as channels to reach the products to the customers. Network or
distribution channel is the process or steps undertaken by the firm, which includes the movement of
finished goods from production point to the consumption that is to the final consumers. Since from its
inception MAHALAKSHMI GRANITES follows the direct marketing as well as 1 level channel.

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Manufacturing Manufacturing

Customer Dealers

Customer

The firm sells its products directly to customers or through dealers, to the far places like Bangalore,
Delhi, Kolkata, Chennai, Kerala, Surat, Mysore, Mumbai etc. This is how the firm distributes its
products and reaches the final customers.

MANUFACTURING PROCESS;

The mine is situated in Ilkal town the granite were getting in this place is pink granite to
approach the deposited in the earth roadayswill be made after that top soil will be removed with the
excavator still we get the hard sheetrock. Then we will observe the height and the width of the sheet
(granite) next we will observe whether the sheet is free or not. If it is not free, jet burner or wire saw is
used to get the free face them. By observing natural joints resent in the sheet we will put the vertical
holes to the desired height or depth the holes will be drilled with jackhammer instrument the spacing
between the holes is to 30cms putting the holes. The holes will be located with proper quality of
explosive (gun powder) and it will be blasted. After this we will observe the blasted sheet is horizontally
free is there or not if it is not free we will put the horizontal holes to required depth and we will blast it.
This is one process of the taking primary block put of mainsheet rock.
After getting the primary block the color grain size and other defects will be checked after
checking the quality once again closer holes will be drilled on the all sides of the blocks to get a regular
shade or desired size the drilled hole on the block will be hammered with the help of chiseled roads to
take out the unnecessary part of the bock this process is called dressing of the block this process has
been done by the gagmen’s known the block is ready for the sale.

PRODUCTION:
Production deals with the relationship between the input and output. The process includes the
blasting of raw rocks and making from into the fine blocks, which are ready to export, and polishing
purpose. The raw materials, which are left after making the blocks, are stored in a unwanted place and

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this place is called as dump yard the distance between the dump yard and the production place should be
0.5 km to 2km.
The company purchases raw blocks from quarries and cut them in to fine tiles and after cutting
the tiles are sent to polishing unit, these polished tiles are stored in a go down and are ready to sell.
Quality with affordable price is the main motto of MAHALAKSHMI GRANITES.
The company is mainly producing rajashree, ruby red, mudgal grey, Himalayan blue, and other
available colors of tiles.

DEPARTMENTS:
The company has its own departments, which are carried out by the department heads, the following are
the departments:

MINING DEPARTMENT:

When the Geologist report is good then the management will appoint a manager who is a
manager, a mining engineer, who is having the certificate of managing issued by the Dept. of mining
safety only such persons are eligible to hold the job of mining manager. He in term takes the charge of
the quarry and virtue of the experience and quantity of production required by the company. The
management persons who are qualified and capable of holding to carry out the mining operations will
appoint him. The following are the list of person required for the mining:-
A) Manager.
B) Assistant Manager.
C) Mining fore man.
D) Mining mate.
E) Blaster.
F) Mechanical & Electrical Engineer.
The above said people are required running the quarry. They are qualified and have experience in
granite mining with good reputation for honest and good-working capability will consider.
The mining people will be operating mine under the instruction of mines manager and engineers
running the mechanical and electrical machineries.

Machineries used for production purpose:

1] EXCAVATORS: - This is the machine that is used for lifting of the material with the help of bucket.
The materials can be lifted up to 30 feet of the department of earth. They are also called as backhoe.

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2] DRILLING MACHINE: - This is the machine, which is used for the purpose of losing the rocks.
This is also called as jackhammer.
3] AIR COMPRESSOR: - This is the machine, which is used to supply the power to the Drilling
machine, without are compressor the drilling cannot work.
4] DUMPERS: It is the machine, which is used to transport the waste materials the working place up to
weight of 20-25

MATERIALS MANAGEMENT:

1. Materials department shall strictly comply with the procedure laid down under the Act and Rules.
2. Tender documents and conditions will be streamlined/ improved.
3. Periodical review of fast, slow and non-moving stores and ascertaining the causes and remedial action.
4. Duties and responsibilities of personnel in purchase, stores, and production departments will be defined
and laid down.
5. Inventory received shall be inspected and cleared by inspection department within 2-3 days.
6. Purchase department will be totally responsible for electing suppliers, complying with procedures and
getting timely supply of materials.
7. All departments will give complete technical specification, quality standards for consumption,
application, characteristics and other details for enabling the purchase department to prepare a directory.
8. Materials department to ensure free flow materials by procuring right quality, right quantity and right
price materials.

RAW MATERIAL:

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MAHALAXMI GRANITE purchases all its raw materials from the supplier’s at ILKAL and
BALKUNDI.

CUTTING MACHINE;

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There are totally 4 main cutting machines in the company. These are water cutting machines. These
machines cut the raw blocks into tiles of particular size specified by the customers. The following are
the different sizes of tiles.

POLISHING MACHINE:

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In MAHALAKSHMI GRANITES there are totally 5 polishing units. Each unit costing nearly 120000
rupees.
The polished granites tiles are packed in a systematic manner to avoid the breakage of tiles.
Then these are ready for export to national and international market.
There are no of workers working in the polishing factory. The workers are divided on their work
done, cutting men is separate one who has experience in cutting the blocks the polishing worker is been
appointed separately for polishing the granite tiles.
The polishing process required high technique machineries for cutting and polishing. The water
is required in the cutting and sizing the granite tiles.

FINANCE DEPARTMENT:

Introduction:

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Financial department is a vital department of an organization. Finance is a concerned with providing and
using cash and credit for carrying on business correctly. Finance is regarded as the lifeblood of a
business enterprise this is because on the modern economy finance is one of the basic needs of all of
kinds of economic activities. it is the matter key, which provided access to all source to be employed in
the manufacturing and mechanizing activities. The finance department should decide when, where and
how to achieve funds to meet the firms, investment needs.
The control issue before the finance department is to determine the proportion of equity and debt the
mix of equity and debt is known as the capital structure being one of the best-run co-operative mills in
India

Functions of finance department:

 If prepares and maintain journal books, cash and bank, books ledger a/c and a trial balance.
 To prepare trading account.
 To prepare profit and loss account.
 To prepare balance sheet.
 Maintenance of account is undertaken
 Rate fixing.
 Suppliers bill paying
 Cash and bank balance
 It makes calculation and decision regarding the funds of the company.

Finance dept deals with the financial activities of the company. It consists of different section.
 Inventory section
 Costing section
 Bills section
 Companies account
 Sales Tax account
 Employees account
 Trust account

INVENTORY SECTION:

Brief description about Inventory:

 Indent details like, number, Cost Code, Material Code and Quantity are entered.

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 After processing the Bills the Material receipts notes (MRN) details like, Material code,
Quantity, Bill amount, Freight, Insurance, Entry tax are entered to arrive at the unit rate of each
material.
 Stock ledger report is sent to stores for reconciliation with Bin card balances.
 Cost code with consumption report is given to costing for completion of the cost sheet.

PROBLEM AREAS IN INVENTORY;

 Flow of Indents/ Material receipt notes must be uniform i.e., documents should not be piled up
and dumped on one day
 The writing must be legible.
 Unit of measurement mentioned in the issue/receipt document should agree with master data
created in the beginning.
 Maximum care should be exercised while giving material code in issue/receipt document to
avoid duplication/wrong booking of codes, which may affect the cost shee

MARKETING DEPARTMENTS:
Marketing management in MAHALAKSHMI GRANITES:- Marketing is a philosophy of consumer
oriented venture in which managers make decisions to assure customer satisfaction as their top priority
and it’s a total system of interacting business activities designed to plan, price, promote and distribute
want satisfying products and services to present the potential customers.

“Objectives”
1. To understand the importance of marketing in MAHALAKSHMI GRANITES.
2. To forecast the future demand of tiles.
3. To identify target markets.
4. To identify the common marketing problem faced by the company.
5. To identify the marketing process of the company.
6. To understand the significance of service marketing.

Importance of Marketing :

1. It is totally depends on personal efforts and resources, making it informal and flexible.
2. To identify customer needs and wants
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3. Satisfying the customer needs and wants of the customer.
4. Understanding the prevailing market conditions.

Problems faced by the company:

1. Local and limited market: The Company is facing marketing problem in local and limited
market due to more competition.
2. Heavy competition: due to heavy competition it has became difficult to attract customers.
3. Lack of sales force: The Company cannot afford to maintain a well-oiled because of selling
expense will be increasing.
4. Lack of transportation: In this area we are not got the all transportation facilities, we have
using only road transport.

Marketing mix elements:

There are number of aspects involved in marketing a product. Some of them are controllable
and others are uncontrollable. It is the combination of 4 P’s viz

 Product

 Price

 Promotion

 Place

Product:
The product consists of the policies and procedures relating to the product times to be offered
and services to be rendered. It also includes research and development programmes and the new product
policy. It includes everything a customer gets design, quality, packaging.
MAHALAKSHMI GRANITES design on the basis of customer order and company preparing different
size on basis of customer order.
Types of tiles
1. Ruby red
2. Cats eye
3. Mudgal grey
4. Rajeshree
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5. Himalayan blue

Quality: the Company maintaining good quality in the field of granite products.

Packaging: packing is considered as an important element of product mix. MAHALAKSHMI

GRANITES material firm uses to pack the tiles is card board boxes which are packed by using gum
tape.

Price:
 This element of marketing mix consists of the policies and procedures relating to the price level, price
specification, and the price policy .The company charges the amount of money to the granite tiles, or
the sum of the values that consumers exchange for the benefits of the of having or using the product or
services.
 Ruby red Rs.105 per sq ft
 Cats eye Rs.165 per sq ft
 Mudgal grey Rs.85 per sq ft
 Rajeshree Rs.95 per sq ft
 Himalayan blue Rs.110 per sq ft

MAHALAKSHMI GRANITES has adopted penetration pricing strategy.

Promotion:
This element includes special selling plans or devices directed at or through the trade, form of
devices for consumer promotions and trade promotions. The company providing transportation facilities
on the basis of bulk orders.

Place:
This element includes policies and procedures relating to the channels to be used between the
plant and the consumer, the degree of selectivity among wholesalers and retailers and attempts to co-
operation of trade.

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COMPETATION:

MAHALAKSHMI GRANITES faces heavy competitions as there are many granite industries in ilkal.
But the firm mainly faces competition from following industries.

 G M Granite
 Saptagiri Granites
 Durga parameshwari Granites
 Mahesh Granite

MEDICAL FACILITY:

Every company or industry has its own medical facilities provided to the workers in the
company likewise the Gem Company. Has also medical facilities provided to the workers. The
company has its own separate dispensary, were the qualified and experienced medical officers has been
appointed.
The medical facilities are provided to the workers, if following conditions is there:

 If there is any injury during the blasting process

 If there is any accident by the vehicle while working in the company
 If there are any injuries while working in the machinery repairs.
 If there is any injury while working in the depth of the quarry
 If there is any injury working in the electrical department.

The medical facility is provided to workers is at the cost of the free services the workers don’t incurs the
cost.

LEAVES:

Every worker or employees require the leaves, which may be official or personal. The co. is
also providing the leaves facility to the employee working in the company. There are 12 casual leaves
and 15 sick leaves provided by the co. to the employees for every year for every 200 working days, the
company has provided I day leave for every 20 days.
More leaves are provided if the employees or workers are suffering from the diseases like fever,
malaria, typhoid, and other diseases. If they provide medical certificate to the co. the company has the
authority to deduct the absent salary from their monthly salary.

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The company provides the finance facility for the employee who is sick for long days. The
medical leaves are provided to the workers or employee on their sickness

SECURITY DEPARTMENT:
Roles:
 To Regulate in and out movement of men & materials in the company premises.
 To bring to the notice of the management any incident\activity this may Result in loss to the
company and prevent the same.
 To organize transportation of gold to Bangalore.
 Security Department prevents losses of all types of resources and thus needs to be integral part of
key management function.
 It helps productivities of all departments.
 The developed countries have realized that security has a direct bearing on profitability.

Security department prevent theft by the following means

 Canalize movement of employees by restricting movements through gates.
 Allow movement of workers by proper identification by using punching machines.
 Physically search employees while going out and selective search some times of employees
going in.
 Maintaining records of movement of employees and stores.

PRODUCT PROFILE:

MAHALAKSHMI GRANITES sales all the varieties of granite tiles and is one of the leading
manufacturing concern of granite tiles in Ilkal.

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MUDGHAL GREY GRANITE

RAJASHREE GRANITE
Stone name : Ruby Red
Stone name : Rajashree
Main color : Grey with black
Main color : red
Country of origin : India
Country of origin: India

RUBY RED GRANITE

Stone name : Ruby Red

Main color : Red

Country of origin : India

RED GELAXY

Stone name : Red Galaxy

Main color : Red

Country of origin: China

CATS EYE

Stone name : Cats eye

Main color : Brown

Country of origin: India

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HIMALAYAN BLUE

Stone name : Himalayan blue

Main color : black red

Country of origin: India

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CHAPTER-iV
OBJECTIVE OF STUDY
RESURCE METHODOLOGE

RESEARCH METHODOLOGY

Problem statement:

Now a day there is a heavy competition in each and every field and the granite industry is one
of the fast developing industries, it also faces the competition. Now-a- days granite industries are
established even in small towns, which are helping to provide employment opportunities in the local
areas.

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METHODOLOGY;

The study uses both primary and secondary data the primary data relating to organization
structure different departments and information relating to inventory control have been collected through
informal interviews with the official of the company format of different records used in the company are
also collected the secondary data relating to financial aspects, inventory turnover ratios, ABC Method,
of the company’s products have been collected form published annual reports of the company.

Tools of data collection;

Data is any information – facts, concepts, and sensation represented in a formal manner,
suitable for communicating, interpreting, or processing. Data is the base for every research work. The
data collected for the purpose of analysis include both primary and secondary data.

1) Primary Data: The primary data has been collected at first hand through direct personnel interviews
and also data has been collected directly from the respondents and the proprietor of the firm.

2) Secondary Data: I collected the information about the history of the Granite industries with the help
of Internet service and Annual reports, P&L A/C and Balance sheet of the MAHALAKSHMI
GRANITES.

OBJECTIVES OF THE STUDY:

1. To study the inventory management based on the ratios

2. To find out the impact of inventory on working capital.

3. To study the inventory management and its effective control through various techniques.

4. To suggest the measures for improving the inventory level

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SCOPE OF THE STUDY:

Inventory management being a very important concept in all the company’s having a void
coverage often calls for the managerial attention. In the modern times inventory management has
become the integral part of the all companies. So all the firm give special importance for inventory
management. The major objective of the study is to examine the effectiveness of inventory management
system adopted by MAHALAKSHMI GRANITES The study mainly focuses on the techniques used by
this company to control the inventory.

1. This study will be useful to know the technique of inventory control which is used by the
financial manage in determining the optimum level of investment in the inventory.

2. This study will be useful to know the maintains of the stock levels according to their product
code.

3. To know the cash management systems at MAHALAKSHMI GRANITES.

4. To achieve better working results and reduction in working capital.

LIMITATION OF THE STUDY:

 This report is based on the audited financials of the Company and other details orally provided
by the concerned department managers during the study.
 The analysis of data is based on the data collected during the study.
 The source of data is not concrete and is based on subjective details provided during the study.
 Most of the Inventory is stored at the project site store and lacks adequate controls.

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CHAPTER-V

INVENTORI MANAGEMENT

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INVENTORY MANAGEMEN

IMPORTANCE OF INVENTORY MANAGEMENT:

Investment in inventory normally accounts for about 1/3 value of the total assets and for an
average manufacturing concern, cost of inventory represents about one half of the product cost. Because
inventory constitutes such a significant part of product cost since the cost is controllable, proper
planning, purchasing, handling, accounting and control of inventories is of great significance.
Inventory management is now great significance in a view of imperative need for productivity
growth. Optimal utilization of all available resources and avoidance of all types of waste especially in
case of raw materials is required for an ambitious programmer of economic growth.
The importance of inventory management lies in the fact that much significant effort for the
reducing the materials cost will go a long way in improving the profitability and rate return on
investment.
Following are the benefits of optimum inventory management:
 It provides a check against the loss of materials through carelessness or pilferage. Inventory
management ensures an adequate supply of materials, stores, spares etc. Minimizes the stock out
and shortages an avoids a costly interruption in operations.
 It reduces length of manufacturing cycle to the minimum.
 It enables the management make cost and consumption between operations and periods.

INVENTORY MANAGEMENT:

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In modern competitive one of the burning problem of every business and industries that of cost
control and cost reduction. An all pervasive effort for cost control and cost reduction is of paramount,
importance for survival and growth of every industrial enterprise. This is why inventory management as
a scientific device for controlling inventory cost and eliminating wastage, is now regarded as an integral
part of industrial management. Inventory management does not involve any human factor, as it concerns
itself not with men but with inventory.

MEANING OF INVENTORY:

The term inventory includes raw materials, finished packaging, spares and other stocked
in order to meet an unexpected demand or distribution in the future.
OR
A stock of items held to meet future demand.
OR
A physical resource that a firm holds in stock with the intent of selling it or transforming it
into a more valuable state.

Components of Inventory:
From the above definitions, we can draw the components of inventory. The various forms in which
inventories exist in a manufacturing firm are,
 RAW MATERIALS
 WORK IN PROGRES
 FINISHED GOODS
 STORES&SPARES

1. RAW MATERIALS :
Raw materials are those inputs that are converted into finished goods through a manufacturing or
conversion process. These form a major input for manufacturing a product. In other words, they are very
much needed for uninterrupted production.

2. WORK IN PROGRESS :
Work in process is a stage of stocks between raw materials and finished goods. Work in
process inventories are semi-finished products. They represent products that need to undergo
some other process to become finished goods.

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3. FINISHED GOODS :
Finished products are those products, which are completely manufactured and ready for
sale. The stock of finished goods provides a buffer between production and market.

4. STORES AND SPARES :

Stores and spares inventory (include office and plant cleaning materials like, soap, brooms, oil,
fuel, etc.) are purchased and stored for the purpose of maintenance of machinery.

OBJECTIVES OF INVENTORY MANAGEMENT:

The main objectives of inventory management or operational and finances the operational
objectives mean that the materials and the spares should be Honorable in the sufficient liquidity is so
that work is not disrupted for want of infantry. The finance object means that investments in inventories
should be remain idle and minimum working capital should be locked in it the following are the
objectives of inventory management.
5. To study the inventory management based on the ratios.
6. To find out the impact of inventory on working capital.
7. To study the inventory management and its effective control through various techniques.
8. To suggest the measures for improving the inventory level.
9. To ensure continuous supply of materials spares and finished goods so that production should not
suffered at any time and the customers demand should also be met.
10. To avoid both over stocking and under-stocking inventory.
11. To minimize losses through deterioration, pilferage, wastages and damages.
12. Maintain sufficient finished goods inventory for smooth sales operation, and efficient customer
service.
REASONS FOR INVENTORIES:
 Improve customer service
 Economies of purchasing
 Economies of production
 Transportation savings
 Hedge against future
 Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.
 To maintain independence of supply chain

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PURPOSE-BENEFITS OF HOLDING INVENTORIES:

Although holding inventories involves blocking of firms funds and the cost of storage and
handling, every business enterprise has to maintain a certain level of inventories to facilitate
uninterrupted production and smooth running of business. In the absence of inventories a firm will have
to make purchases as soon as it receives orders. It will mean loss of time and delays in execution of
orders, which sometimes may cause loss of customers and business (stock out). Therefore also needs to
maintain inventories to reduce ordering costs and avail liquidity discounts etc... Generally speaking,
there are three main purposes or motives of holding inventories.

INVENTORY MANAGEMENT MOTIVES;

1. THE TRANSACTION MOTIVE: Transaction motive includes production of goods and sale of goods.
Transaction motive facilitates uninterrupted production and delivery of order at a given time.

2. THE PRECAUTIONARY MOTIVE: This motive necessitates the holding of inventories for
unexpected changes in demand and supply factors.

3. THE SPECULATIVE MOTIVE: This compels to hold some inventories to take the advantages of
changes in prices and getting quantity discounts.

Risks of holding inventories can be put as follows

1. Risk of fall in price.
2. Product deterioration.
3. Obsolescence.

1. Risk of fall in price:

Prices of the goods in the inventories Mau fall due to unexpected increase in their supply or
introduction of new products in the market or price-cutting by the competitors etc. This results in a great
loss to the firm.

2. Product Deterioration:

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If products are held in stocks for an unduly long time or improper storage conditions , they likely
to lose their quality , purity, taste, freshness, strength etc , and thereby cause a great loss to the firm.

3. Obsolescence:
The goods held in the stocks may become obsolete due to changes in customers tastes, fashions,
likes and dislikes etc, or due to new techniques of production, or due to improvements in the product
design, specifications etc, or due to introduction of improved products or low price etc.

The costs of holding inventories are as follows:

1. Material cost.
2. Costs associated with the placing of orders.
3. Storage cost.

1. Material cost:
This includes the cost of purchasing raw materials, transportation costs, handling charges etc,
less any discount allowed by the suppliers of goods.

2. Costs associated with the placing of orders:

Such costs include variable costs associated with the placing of small orders, the ordering costs
to be incurred by the firm.

3. Storage Cost:
The cost of storage of the goods in the warehouses is an important item of costs of inventory. It
comprises storage costs, insurance costs, spoilage costs, costs of funds tied up in inventories etc.
Nature of Inventories:
Material purchased pending usage is inventory. What is the company purchased for manufacture
of product is inventory?
Inventory is stock of the product a company is manufacturing for sale and components that make
up the product.
The various forms in which inventories exist in a manufacturing company, they are as follows.

Raw material, parts and components:

Are those inputs that are converted into finished product through the manufacturing process?
Raw material and components are those units which have been purchased and stored future productions.

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MRO Inventories:
Maintenance, repair, and operating supplies which are consumed in the production process, but
which do not become part of the product.

Work in process:
Inventories are semi-finished products, they represents products the need more work before they
become finished products for sale.

Finished Goods:
Inventories are those completed manufactured product which are ready for sale. Stocks of raw
materials and working process facilitate production. While stock of finished goods is required for
smooth market operations.
The inventories serve as a link between the production and consumption of goods. The levels of
three kinds of inventories for a firm depend on the nature of its business. A manufacturing firm will
have substantially high levels of all three kinds of inventories. Large heavy engineering companies
produce long production cycle products, they carry large inventories.

FIFO (First in First out):

First-in, first-out is a method of inventory accounting in which the oldest stock items in a
company's inventory are assumed to have been the first items sold. Therefore, the inventory that remains
is from the most recent purchases. In a period of rising prices, this accounting method yields a higher
ending inventory, a lower cost of goods sold, a higher gross profit, and a higher
The FIFO Method may come the closest to matching the actual physical flow of inventory. Since
FIFO assumes that the oldest inventory is always sold first, the valuation of inventory still on hand is at
the most recent price. Assuming inflation, this will mean that cost of goods sold will be at its lowest
possible amount. Therefore, a major advantage of FIFO is that it has the effect of maximizing net
income within an inflationary environment. The downside of that effect is that income taxes will be at
their greatest.

LIFO (Last in first out):

Last-in, first-out, on the other hand, is an accounting approach that assumes that the most
recently acquired items are the first ones sold. Therefore, the inventory that remains is always the oldest
inventory. During economic periods in which prices are rising, this inventory accounting method yields
a lower ending inventory, a higher cost of goods sold, a lower gross profit, and a lower income. The
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LIFO Method is preferred by many companies because it has the effect of reducing a company's taxes,
thus increasing cash flow. However, these attributes of LIFO are only present in an inflationary
environment.
The other major advantage of LIFO is that it can have an income smoothing effect. Again,
assuming inflation and a company that is doing well, one would expect inventory levels to expand.
Therefore, a company is purchasing inventory, but under LIFO, the majority of the cost of these
purchases will be on the income statement as part of cost of goods sold. Thus, the most recent and most
expensive purchases will increase cost of goods sold, thus lowering net income before taxes, and hence
net income. Net income is still high, but it does not reach the levels that it would if the company used
the FIFO method.
Given the importance differences that exist between the various inventory accounting
methodologies, it is that the inventory footnote be read carefully in financial statements, for this part of
the document will inform the reader of the method of inventory valuation chosen by a company.
Assuming inflation, FIFO will result in higher net income during growth periods and a higher and more
realistic inventory balance. In periods of growth, LIFO will result in lower net income and lower income
tax payments, thus enhancing a company's cash flow. During periods of contraction, LIFO will result in
higher income levels, but it will also inventory over time.
Small business owners weighing a switch to a LIFO inventory should note that while making the
change is a relatively simple process switching away from LIFO is not so easy. Once a company adopts
the LIFO method, it cannot switch to FIFO without securing IRS approval.

AVERAGE COST METHOD:

According to average cost method, each purchase is added to inventory and an average cost
determined. Materials are charged into cost of sales at this average until another lot is received, when a
new average unit inventory cost is calculated.
Note: There are so many other than these above methods but most wide usefully methods are these
three so here we discussed those three methods only.

Objectives of Inventory in Different Departments

Operating Objectives:

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1. Availability of materials.
2. Avoidance of wastage.
3. Promotion of manufacturing efficiency.
4. Better service to customers.
5. Optimal level of inventories.

1. Availability of materials:
These should be a continuous availability of all types of materials in the factory so that production is
not held up for want of any materials. A minimum quantity of each material should be maintained in
store to carry on production as per schedule.

2. Avoidance of wastage:
Inventory control is essential to avoid or minimize wastage of materials at all levels that is when
they are in storage in the god owns or when they are being used in the production. Normal wastage
cannot be avoided but abnormal wastage must be avoided. Wastage like leakage, theft, embezzlements
of materials and spoilage due to dust, or dirt should be avoided.

3. Promotion of manufacturing efficiency:

Manufacturing efficiency increases, if right types of raw materials are made available to the
manufacturing departments at right time and in right quantity. This reduces wastage and cost of
production and improves the morale of the workers.

4. Better service to customers:

It is the responsibility of the finance manager to maintain sufficient stock of finished goods so as to meet
the demand of the customers timely and retain their patronage towards the firm.

5. Optimal level of inventories:

The finance manager is primarily responsible to maintain optimal level of inventories which help
in achieving the goal of maximization of sales, profitability and wealth of the firm.

Financial objectives:
1. Economy in purchasing.
2. Optimum investment and efficient use of capital.

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3. Reasonable price.
4. Minimizing costs.

1. Economy in purchasing:
Proper inventory control enables the firm to derive the economies of bulk buying and take
advantage of favorable market conditions.

2. Optimum investment and efficient use of capital:-

The basic objective of inventory control is to achieve optimum level of investment in inventories and
utilize capital fully and efficiently for productive purpose and avoid unnecessary locking up of funds.
This is possible by determining and maintaining maximum and minimum level of inventories.

3. Reasonable price:-
The finance manager is responsible to see that raw materials are purchased at reasonable low price
low price but without sacrificing their quality. This helps him in controlling the cost of production and
the quality of the finished goods in order to maximize the profits and wealth of the firm.

4. Minimizing costs:-
The finance manager is also responsible to see that the inventory cost is minimized. Inventory costs
are a part of the total cost of production and hence minimization of inventory costs results in the
minimization of production costs, and fixation of lower and competitive price for the products of the
firm.

Importance of inventory control:-

The importance of inventory control is well explained in terms of the objectives of inventory
control as explained above.

A proper inventory control aims at lowering the cost of inventory and production and
maximizing the profits of the firm. The following are the advantages of available from the efficient
inventory management;
1. Reduction in investment in inventories.
2. Proper and efficient use of raw materials.
3. Ensuring continuous production and maximum sales.

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4. Maintaining sufficient stock of finished goods for smooth and timely supply of goods to
customers and maintain their patronage.
5. Minimizing inventory costs.
6. Efficient and optimum use of physical as well as financial resources.

Essential of a good inventory system:-

A good and efficient inventory management system should possess the following essentials.
1. Classification and identification of inventories.
2. Standardization and simplification of inventories.
3. Settings maximum and minimum limits and re-order points for each article in the inventory.
4. Economic order quantity (EOQ).
5. Adequate records and reports.
6. Adequate storage facilities.
7. Intelligent and experienced personnel.
1. Classification and identification of inventories:-
The inventory of a manufacturing firm includes raw materials, maintenance supplies, stores,
work in progress, components and spare parts etc.each item in the inventory must be assigned a
particular code number and classified into suitable groups or sub divisions for the purpose of facilitating
prompt recording and dealing them . ABC analysis of materials is very useful in the regard.

2. Standardization and simplification of inventories:-

Control inventories effectively, the inventory line should be simplified. It refers to the
elimination of excess types and sizes of items; standardization refers to the fixation of standards of raw
materials to be purchased and specifications of the components and tools used. Simplification, on the
other hand, results in the reduction in inventory and its carrying cost.

3. Settings maximum and minimum limit and re-order points for each article in the inventory:-
Another essential of good inventory system is set the minimum and maximum levels of stock of
each article as well as fix the re-order point for each article in the inventory. This avoids chances of
over-investment as well as shortage of any item during the course of production and sale.

4. Economic order quantity (EOQ):-

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Another basic requirement of a good inventory system is to determine the quantity of each article
to be ordered at a time. In determining economic order quantity (EOQ), two opposing costs are banned.
Viz;
1. Order costs.
2. Carrying costs.
The quality of each article should be fixed in advance.

5. Adequate records and reports:-

An efficient inventory control requires maintenance of adequate inventory records and reports.
The records must contain information to meet the requirements of production, purchase and sales
departments. The typical information required relates to the quantity on hand, quantities in transit, unit
cost, EOQ, re-order point, safety level, etc for each item of inventory. Reports and statements should be
so designed as to keep the clerical cost of maintaining these records at a minimum.

6. Adequate storage facilities:-

Adequate storage facilities are quite essential to make the inventory system successful and
efficient. Storage area should be sufficient so as to allow for proper handling of the materials in stock.

7. Intelligent and experienced personnel:-

Mere maintenance of records and procedures is not sufficient for getting the desired results from
the inventory as they are not the substitutes for efficient employees. Therefore appointment of intelligent
and experienced personnel in production, purchase and sales departments is quit essential to make the
inventory control effective and successful.

Inventory Control Techniques:-

These are different inventory control techniques are employed by the organization. Several
techniques of inventory control are in use and it depends on the convenience of the firm to adopt any of
the techniques. It is the need to cover all items of inventory and all stages. That is from the stage of
receipt from suppliers to the stage of their use.
The techniques most commonly used are the following:-
1. Always better control (ABC) classification.
2. High, medium and low (HML) classification.
3. Vital, essential and desirable (VED) classification.
4. Scarce, difficult and easy to obtain (SDE).

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5. Fast moving, slow moving and non- moving (FSN) classification.
6. Economic order quantity (EOQ)
7. Maximum and minimum system.
8. Two bin system.
9. Material Requirement Planning.
10. Just-in-time (JIT)

Always better control analyses:-

Usually a firm has to maintain several types of inventories. It is not desirable to keep the same
degree of control on all the items. The firm should pay maximum attention to those items whose value is
the highest. The firm should receive the most effort in controlling. The firm should be selective in its
approach to control investment in various types of inventories. This analytical approach is called the
ABC analysis and tends to measure the significance of each item of inventories in terms of its value the
high value items are classified as ‘A’ items and would be under the tightest control, ‘C’ class items
represent relatively least value and would be under simple control, ‘B’ class items fall in between these
two categories and require reasonable attention and management.
These important items usually designated as class A may account for more than half the total
value usage in the inventory. These items require very careful management and special careful
estimates of future usually class C items which in total account for only a few percent of the total value
of usage very little effort should be devoted to forecast the requirement of items. The inter mediate class
B items justify a reasonable but routine effort in forecasting demands and managing inventory.
The ABC approach means of category inventory items into three class, A, B and C according to
potential amount to be controlled.

A - Items, which are the 10%

B - Items, which are the 20%
C - Items, which are the 70%

Always better control analyses:-

A.B.C. analysis is a selective technique of controlling different items of
inventory. In actual practice, thousands of items are included in business as inventories. But all these
items are not equally important. According to this technique, only those items of inventory are paid
more attention which are significant for business. According to this technique, all items are
classified into 3 categories A.B. and C. In ‘A’ category those items are taken which are very precious
and their quantity.
ABC ANALYSIS - 1
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One of the most important considerations of control is the value of annual consumption of inventory
items in a year.
Only a small number of inventory items consume a very large share of inventory consumption during
the year.
A little larger number of inventory items covers a moderate share of annual inventory consumption.
A very large number of items just cover a very small share of annual inventory consumption.

ABC ANALYSIS – 2

It has been observed that in an industrial unit only 10% of items have 70% of the annual inventory
consumption.
20% of the items have 20% of annual inventory consumption, and
70% of the items have only 10% of the annual inventory consumption.
Since 70% of the annual consumption of inventory is covered by only 10% of the items in the
inventory, these items deserve highest attention and are classified as ‘A’ items
Similarly 20% of the items covering 20 % of the inventory investment are B class items.
Balance 70% of the inventory items are termed as C class items.

STEPS IN ABC ANALYSIS:-

The steps in computing ABC analysis are:

 Determine the annual usage in units for each item for the past one-year.
 Multiply the annual usage quantity with the average unit price of each item to calculate the annual usage
in for each item.
 Item with highest volume usage annually is ranked first. Then the next lower annual usage item is listed
till the lowest item is listed in the last.
 Arrange the items in the inventory by cumulative annual usage and by cumulative percentage.
Categorize the items in A, B, and C categories.

High, medium and low (HML) Classification:-

The high, medium and low classification follows the same procedure as is adopted in ABC
classifications. 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 to the management to fix limited for three categories.

Vital essential and desirable (VED)Classification:

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Inventories are classified on basis for vital, essential and desirable categorization. The VED
analysis is done to determine the critically of vital classification items a large stock of inventory is
generally maintained, while for ‘D’ items, minimum stock is enough.

Scarce, difficult and easy to obtain (SDE) Classification:-

The SDE analysis is based upon the availability of items and is very useful in the context of
scarcity of supply. In the analysis, ‘S’ refers to scarce items, generally imported, and those which are in
short supply, ‘D’ refers to difficult items which are available indigenously bit are difficult items to
procure. Item’s 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.

Fast moving, slow moving & non-moving (FSN) Analysis:-

FSN stands for fast moving slow moving and non-moving. Here, classification is based on the
pattern of issues from stores and useful in controlling obsolescence.

Economic Order Quantity(EOQ):-

The EOQ is that inventory level which minimizes the total of ordering cost and carrying costs.
The EOQ is the one of the important techniques which is suitable for the materials which are purchasing
from long distance and in bulk quantity.
EOQ is the order size at which the total cost comprising ordering cost plus carrying cost is the
least.
EOQ is essentially an accounting formula that determines the point at which the
combination of order costs and inventory carrying costs are the least. The result is the most cost
effective quantity to order. In purchasing this is known as the order quantity, in manufacturing it is
known as the production lot size.
While EOQ may not apply to every inventory situation, most organizations will find it beneficial
in at least some aspect of their operation. Anytime you have repetitive purchasing or planning of an
item, EOQ should be considered. Obvious applications for EOQ are purchase-to-stock distributors and
make-to-stock manufacturers, however, make-to-order manufacturers should also consider EOQ when
they have multiple orders or release dates for the same items and when planning components and sub-
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assemblies. Repetitive buy maintenance, repair, and operating (MRO) inventory is also a good
application for EOQ. Though EOQ is generally recommended in operations where demand is relatively
steady, items with demand variability such as seasonality can still use the model by going to shorter time
periods for the EOQ calculation. Just make sure your usage and carrying costs are based on the same
time period.

Ordering Cost:-
Also known as purchase cost or set up cost, this is the sum of the fixed costs that are incurred
each time an item is ordered. These costs are not associated with the quantity ordered but primarily with
physical activities required to process the order.
For purchased items, these would include the cost to enter the purchase order and/or requisition, any
approval steps, the cost to process the receipt, incoming inspection, invoice processing and vendor
payment, and in some cases a portion of the inbound freight may also be included in order cost. It is
important to understand that these are costs associated with the frequency of the orders and not the
quantities ordered. For example, in your receiving department the time spent checking in the receipt,
entering the receipt, and doing any other related paperwork would be included, while the time spent
repacking materials, unloading trucks, and delivery to other departments would likely not be included.
If you have inbound quality inspection where you inspect a percentage of the quantity received you
would include the time to get the specs and process the paperwork and not include time spent actually
inspecting, however if you inspect a fixed quantity per receipt you would then include the entire time
including inspecting, repacking, etc. In the purchasing department you would include all time associated
with creating the purchase order, approval steps, contacting the vendor, expediting, and reviewing order
reports, you would not include time spent reviewing forecasts, sourcing, getting quotes (unless you get
quotes each time you order), and setting up new items. All time spent dealing with vendor invoices
would be included in order cost.
Associating actual costs to the activities associated with order cost is where many an EOQ formula runs
afoul. Do not make a list of all of the activities and then ask the people performing the activities "how
long does it take you to do this?" The results of this type of measurement are rarely even close to
accurate. I have found it to be more effective to determine the percentage of time within the department
consumed performing the specific activities and multiplying this by the total labor costs for a certain
time period (usually a month) and then dividing by the line items processed during that same period.

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It is extremely difficult to associate inbound freight costs with order costs in an automated EOQ
program and I suggest it only if the inbound freight cost has a significant effect on unit cost and its effect
on unit cost varies significantly based upon the order quantity.
In manufacturing, the order cost would include the time to initiate the work order, time
associated with picking and issuing components excluding time associated with counting and handling
specific quantities, all production scheduling time, machine set up time, and inspection time. Production
scrap directly associated with the machine setup should also be included in order cost as would be any
tooling that is discarded after each production run. There may be times when you want to artificially
inflate or deflate set-up costs. If you lack the capacity to meet the production schedule using the EOQ,
you may want to artificially increase set-up costs to increase lot sizes and reduce overall set up time. If
you have excess capacity you may want to artificially decrease set up costs, this will increase overall set
up time and reduce inventory investment. The idea being that if you are paying for the labor and
machine overhead anyway it would make sense to take advantage of the savings in reduced inventories.
For the most part, order cost is primarily the labor associated with processing the order; however,
you can include the other costs such as the costs of phone calls, faxes, postage, envelopes, etc.

Carrying Cost:-
Also called Holding cost, carrying cost is the cost associated with having inventory on hand. It is
primarily made up of the costs associated with the inventory investment and storage cost. For the
purpose of the EOQ calculation, if the cost does not change based upon the quantity of inventory on
hand it should not be included in carrying cost. In the EOQ formula, carrying cost is represented as the
annual cost per average on hand inventory unit. Below are the primary components of carrying cost.

Interest:-
If you had to borrow money to pay for your inventory, the interest rate would be part of the
carrying cost. If you did not borrow on the inventory, but have loans on other capital items, you can use
the interest rate on those loans since a reduction in inventory would free up money that could be used to
pay these loans. If by some miracle you are debt free you would need to determine how much you could
make if the money was invested.

Insurance:-
Since insurance costs are directly related to the total value of the inventory, you would include
this as part of carrying cost.

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Taxes:-
If you were required to pay any taxes on the value of your inventory they would also be
included.

Storage Costs:-
Mistakes in calculating storage costs are common in EOQ implementations. Generally
companies take all costs associated with the warehouse and divide it by the average inventory to
determine a storage cost percentage for the EOQ calculation. This tends to include costs that are not
directly affected by the inventory levels and does not compensate for storage characteristics. Carrying
costs for the purpose of the EOQ calculation should only include costs that are variable based upon
inventory levels.

If you are running a pick/pack operation where you have fixed picking locations assigned to each
item where the locations are sized for picking efficiency and are not designed to hold the entire
inventory, this portion of the warehouse should not be included in carrying cost since changes to
inventory levels do not effect costs here. Your overflow storage areas would be included in carrying
cost. Operations that use purely random storage for their product would include the entire storage area
in the calculation. Areas such as shipping/receiving and staging areas are usually not included in the
storage calculations. However. If you have to add an additional warehouse just for overflow inventory
then you would include all areas of the second warehouse as well as freight and labor costs associated
with moving the material between the warehouses.
Since storage costs are generally applied as a percentage of the inventory value you may need to
classify your inventory based upon a ratio of storage space requirements to value in order to assess
storage costs accurately.
A portion of the time spent on cycle counting should also be included in carrying cost, remember
to apply costs which change based upon changes to the average inventory level. So with cycle counting,
you would include the time spent physically counting and not the time spent filling out paperwork, data
entry, and travel time between locations.

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Other costs that can be included in carrying cost are risk factors associated with obsolescence,
damage, and theft. Do not factor in these costs unless they are a direct result of the inventory levels and
are significant enough to change the results of the EOQ equation.

Minimum-Maximum techniques:-
The minimum-maximum system is often used in connection with manual inventory control
systems. The minimum quantity is established in the same way as any re-order point. The maximum is
the minimum quantity plus the optimum lot size. In practice, a requisition is initiated when, a
withdrawal reduces the stock level, the order quantity will be higher than the calculated EOQ.
The effectiveness of a minimum-maximum system is determined by the method and precision
with which the minimum and maximum parameters are established. If these will be limited in its
effectiveness. If the minimum-maximum are based on an objective rational basis, the system can be very
effective.

Two bin technique:-

One of the oldest systems of inventory control is the two-bin system, which is mainly adopted to
control ‘C’ group inventories. In the two-bin system, stock of each item is separated into 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 pf 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.

Material Requirement Planning:-

MRP is a new solution to an old problem, having stock of materials always on hand when needed
without carrying excess inventory. Highly dependent upon computer technology, MRP is most helpful
to firms with finished goods or end products which are made from a number of components and which
are also subject to uneven or lumpy demand. The technique separates the various components and co-
ordinates purchasing and delivery with production.
MRP operates inputs from management and sales would be customers orders to produce within
the company for stock. Basic inventory information would be provided by regular inventory records.
MRP would then co-ordinate the above information with a bill of material, usually prepared by
production engineers. The bill of materials is not simply a list of parts, but is structured, meaning that, it
indicated the manner in which a product is put together from parts into subassemblies and than into final

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assemblies. The items listed can then be time phased and made into a master schedule, which becomes a
prime tool of MRP. The master schedule can be thought of as production forecast, which in turn can
generate material and capacity records over a period of time, taking into account, the inter dependency
of these requirements. Then issues orders for materials either through purchasing or through the internal
manufacturing facility.
Computer-based information system designed to handle ordering and scheduling of dependent-
demand inventories (such as raw materials, component parts, and subassemblies that will be used in the
production of a finished product). MRP is designed to answer three questions: what is needed, how
much is needed, and when is it needed. The primary inputs of MRP are a bill of materials, which tells
what goes into a finished product; a master schedule, which tells how much finished product is desired
and when; and an inventory records files, which tells how much inventory is on hand or on order. This
information is processed, using various computer programs to determine the net requirements for each
period of the planning horizon. Outputs from the process include planned-order schedules, order
releases, changes, performance-control reports, planning reports, and exception reports.

Just In Time (JIT):-

It is an inventory strategy implemented to improve the return on investment of a business by

reducing in-process inventory and its associated costs. The process is driven by a series of signals that
tell production processes when to make the next part. Kanban are usually 'tickets' but can be simple
visual signals, such as the presence or absence of a part on a shelf. When implemented correctly, JIT can
lead to dramatic improvements in a manufacturing organization’s return on investment, quality, and
efficiency.

New stock is ordered when stock drops to the re-order level. This saves warehouse space and
costs. However, one drawback of the JIT system is that the re-order level is determined by historical
demand. If demand rises above the historical average demand, the firm will deplete inventory faster than
usual and cause customer service issues. To meet a 95% service rate a firm must carry about 2 standard
deviations of demand in safety stock. Forecasted shifts in demand should be planned for around the
Kanban until trends can be established to reset the appropriate Kanban level. Others have suggested that
recycling Kanban faster can also help flex the system by as much as 10-30%. In recent years
manufacturers have touted a trailing 13 week average as a better predictor than most forecasters could
provide.

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BENEFITS OF INVENTORY MANAGEMENT AND CONTROL:-

Proper management and control of inventories will result in the following benefits to an
organization.
1. Inventory control ensures an adequate supply of materials and stores minimizes stock outs and
shortages and avoids costly interruptions in operations.
2. It keeps down investment in inventories, inventory carrying costs and obsolescence losses to the
minimum.
3. It facilitates purchasing economies through the measurement of requirements on the basis of
recorded experience.
4. It eliminates duplication in ordering or in replenishing stocks by centralizing the source from
which purchase requisitions emanate.
5. Its permits better utilization of available stocks by facilitating inter-department transfers within a
company.
6. It facilitates cost accounting activities by providing a means for allocating material cost to
products, departments or other operating accounts.
7. Perpetual inventory values provide a consistent and reliable basis for preparing financial
statements

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CHAPTER-VI

DATA ANALYSIS &INTERPRETATION

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ANALYSIS AND INTERPRETATION:-

The data collected through primary and secondary sources were processed and presented in
the chapter Data Analysis by various table and explanations. The table thus obtained were analyzed by
calculating averages, percentages, Ratios and they are followed in respect of the stock of raw material ,
spares, work in progress, Sales, Inventory control procedures and thus to draw conclusions from the
analysis done.

The performance of inventory management can be measured, to ensure the effectiveness of

inventory management and control, through ratio analysis. The useful ratios in effective monitoring and
control of inventory management are as follows:

1. LIQUIDITY RATIO:
 CURRENT RATIO
 QUICK RATIO
 INVENTORY TO CURRENT ASSETS RATIO
 INVENTORY TO NET WORKING CAPITAL RATIO

2. TURNOVER RATIO:
 INVENTORTORY TURNOVER RATIO

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 TURNOVER OF STOCK OF MATERIAL INVENTORY
 TURNOVER OF WORK IN PROGRESS INVENTORY

3. AVERAGE ANALYSIS:
 AVERAGE OF STOCK OF MATERIAL INVENTORY
 AVERAGE AGE OF WORK IN PROGRESS INVENTOR
 AVERAGE AGE OF FINISHED GOODS INVENTOTY

CURRENT RATIO:-
It is a ratio, which expenses the relationship between the total current assets to current liabilities.
It is the of firms short-term solvency.

Curent Assets
Current Ratio =
Current liability

Current Ratio
Current Assets Current Liability Current Ratio
2010-2011 36,86,237 5,62,127 6.55
2011-2012 53,26,194 12,55,572 4.24
2012-2013 55,78,802 7,89,904 7.06

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Current Ratio

8
7
6
5
4 Current ratio
6.55 7.06
3
4.24
2
1
0
2010-11 2011-12 2012-13

INTERPRETATION:-
By seeing the above graph we come know that Current ratio in the year 2010 to 2011 was 6.55 and it
was decreased to 4.24 in the year 2011 to 2012 & in the year 2012 to 2013 it was increased to 7.06. This
ratio was favorable for the company.

QUICK RATIO:-
This ratio expresses the relationship between liquid assets and the current liabilities. It reveals
the firm’s position to meet the current liability through quick assets.

Quick Assets
Quick Ratio =
Current liability

Quick Ratio
Year Quick Assets Current Liability Quick ratio
2010-2011 30,99,110 5,62,127 5.51
2011-2012 41,13,179 12,55,572 3.27
2012-2013 50,40,737 7,89,904 6.38

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Quick ratio
7

6.38 Quick Ratio

3 5.51

2
3.27
1

0
2010-11 2011-12 2012-13

INTERPRETATION:-
By seeing the above graph we come know that quick ratio was increased in the year 2010 to
2011 was 5.51 and it was decreased to 3.27 in the year 2011 to 2012 & in the year 2012 to 2013 it was
increased to 6.38. So this is good sign for the firm.

INVENTORY TURNOVER RATIO:-

Meaning:-
This ratio indicates the speed at which the inventory is converted into sales, which
Contributed, to the profits of the organization. Higher the ratio better will be the efficiency.

Cost of goods sold

Inventory Turnover Ratio =
Average Inventory

Inventory Turnover Ratio

Years Cost of goods sold Average Inventory Ratio
2010-2011 42,20,915 8,83,650 4.77
2011-2012 56,06,778 10,32,907 5.42
2012-2013 66,01,172 8,50,540 7.76

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Inventory Turn Over Ratio

9

4 I T Ratio
7.76
3
5.42
4.77
2

0
2010-11 2011-12 2012-13

INTERPRETATION:-
It is evident from the graph indicates the efficiency of the firm in procuring and selling its products.
A high turnover ratio indicates fast moving product. As compare to the previous year (2011-12) the ratio
has been increased which indicate that inventory being converted in to cash immediately. So this ratio
was favorable for the company.
FINISHED GOODS TURNOVER RATIO:-

Finished goods turnover ratio is velocity at which finished goods converted into for sale. If
finished goods turnover ratio is high then company is efficient.

Formula: = Cost of goods sold

Average finished goods

Finished goods Turnover Ratio

Year Cost of goods sold Average Finished goods Ratio
2010-2011 42,20,915 8,83,650 4.77
2011-2012 56,06,778 10,32,908 5.42
2012-2013 66,01,172 8,50,540 7.76

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Finished Goods Turn Over Ratio

4 7.76 F G T Ratio

3 5.42
4.77
2

0
2010-11 2011-12 2012-13

INTERPRETATION:-
It is evident from the graph indicates the efficiency of the firm in converting semi finished goods
into finished goods. A high turnover ratio indicates fast moving goods. As compare to the previous year
(2012-13) the ratio has been increased which indicate that semi finished goods converted in to finished
goods rapidly.

RAW MATERIAL TURNOVER RATIO:-

Raw material turnover ratio is velocity at which raw material converted into goods ready for sale.
If raw material turnover ratio is high then company is efficiency converting into finished goods.

Material consumed
Raw Material Turnover Ratio =
Average raw material

Raw Material Turnover Ratio

Years Material consumed Average raw material RMT Ratio
2010-2011 31,96,691 8,83,650 3.61
2011-2012 22,46,265 10,32,908 2.17
2012-2013 30,27,508 8,50,540 3.55

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Raw Material Turn Over Ratio

4 3.61 3.55

3.5

3
2.17
2.5

2 R M T Ratio

1.5

0.5

0
2010-11 2011-12 2012-13

INTERPRETATION:-
By seeing the above graph we come know that raw material turnover ratio was increased in the
year 2010 to 2011 was 3.61 and it was decreased to 2.17 in the year 2011 to 2012 & in the year 2012 to
2013 it was increased to 3.55. So Indicates that company is converting raw material into finished or semi
finished goods very quickly.
WORK IN PROCESS TURNOVER RATIO:-
Work in process turnover ratio is velocity at which W.I.P converted into goods ready for sale. If
W.I.P turnover ratio is high then company is efficiency converting into finished goods.

Cost of Production
Work in Process Turnover Ratio =
Average WIP

Work in Process Turnover Ratio

Year Cost of Production Average WIP WIPT Ratio
2010-2011 42,20,915 8,83,650 4.77
2011-2012 56,06,778 10,32,908 5.42
2012-2013 66,01,172 8,50,540 7.76

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Work In Process Turn Over Ratio

9

4 W I P T RATIO
7.76
3
5.42
4.77
2

0
2010-11 2011-12 2012-13

INTERPRETATION:-

The work in progress turnover ratio in the year 2010-2011 was 4.77 and it was increased to 5.42
in the year 2011-2012 & in the year 2012 to 2013 it was increased to 7.76 It shows that the work in
progress turnover ratio was favorable for the company.

INVENTORY TO WORKING CAPITAL:-

This ratio indicates the relationship between inventory to working capital and it also indicates the
amount to inventory tied up in the working capital and it also shows the efficiency of inventory
management.

Formula = Inventory
Working capital

Inventory to Working Capital

Year Inventory Working Capital Current Ratio
2010-2011 9,27,800 30,99,110 0.29
2011-2012 11,63,015 40,20,622 0.28
2012-2013 5,13,065 47,63,898 0.10

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Inventory To Working Capital Ratio

0.3

0.25

0.2

0.15 0.29 0.28 I T W C RATIO

0.1

0.05 0.1

0
2010-11 2011-12 2012-13

INTERPRETATION:-
The inventory to working capital ratio in the year 2010 to 2011 was 0.29 and it was decreased to
0.28 in the year 2011 to 2012 & in the year 2012 to 2013 again it was decreased to 0.10 It shows that the
work in progress turnover ratio was not favorable for the company.

INVENTORY TO CURRENT ASSET RATIO:-

This ratio indicates the relationship between the inventory and current assets. It shows the
percentage or ratio of inventory to current assets, which helps the organizations in deciding the current
assets policy which also affect the liquidity position of the organization.

Inventory
Formula: Inventory to Current Asset Ratio =
Current Assets

Inventory to Current Assets

Years Inventory Current Assets Percentage
2010-2011 9,27,800 36,86,237 25.16%
2011-2012 11,63,015 53,26,194 21.83%
2012-2013 5,13,065 55,78,802 9.19%

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Inventory To Current Assets Ratio

30.00%

25.00%

20.00%

15.00%
I T C A Ratio
25.16%
21.83%
10.00%

5.00% 9.19%

0.00%
2010-11 2011-12 2012-13

INTERPRETATION:-
The inventory to current assets ratio in the year 2010 to 2011 was 25.16% & it was decreased to
21.83% in the year 2011-12 & in the year 2012 to 2013 it was decreased to 9.19% It shows that the work
in progress turnover ratio was not favorable for the company.

INVENTORY TO COST OF GOODS SOLD RATIO:-

This ratio shows the total inventory in relation to total revenue. It shows how much of the inventory is
lying in the stock at the end of the given period. Higher the ratio indicates that lot of inventory is idle
and cost of goods sold efforts need to be made.

Average Inventory
Formula: Inventory to Cost of Goods Sold =
Cost of Goods Sold

Inventory to Cost of Goods Sold

Years Average Inventory Cost of Goods Sold Ratio
2010-2011 8,83,650 42,20,915 0.20
2011-2012 10,32,907 56,06,778 0.18
2012-2013 8,50,540 66,01,172 0.12

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Inventory to Cost of Goods Sold

0.2
0.18
0.16
0.14
0.12
0.2 I C D S Ratio
0.1 0.18
0.08
0.12
0.06
0.04
0.02
0
2010-11 2011-12 2012-13

INTERPRETATION:-
It is evident from the graph which shows that inventory to cost of goods sold ratio has been
decreased as compared to year 2010-11. Which shows that inventory is not being idle for the longer
period of the time and indicates that improve in the efficiency in selling its product.

INVENTORY CONVERSION PERIOD:-

Inventory conversion period means the average times taken for clearing the stocks. It help in
deciding the firm’s efficiency.

Annual days
Inventory Conversion Period=
Inventory Turn Over ratio

Inventory Conversion Period

Inventory Turn Over Inventory Conversion
Years Annual days
Ratio Period
2010-2011 360 4.77 75
2011-2012 360 5.42 66
2012-2013 360 7.76 46

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Inventory Conversion period

80

70

60

50

40
75 Conversion Days
66
30
46
20

10

0
2010-11 2011-12 2012-13

INTERPRETATION:-
The holding period ratio in the year 2010 to 2011 was 75 and it was decreased to 66 in the year
2011-2012 & in the year 2012 to 2013 it was decreased to 46. It shows that the work in progress
turnover ratio was not favorable for the company.

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CHAPTER VIII

FINDINGS
SUGGESTION
CONCLUSIONS

FINDINGS & SUGGESTIONS

FINDINGS:

 The company follows the first in first out method in issuing the materials to the production
department.

 The MAHALAKSHMI GRANITES follows different methods and systems of inventory control
techniques such as HML Analysis, FSN classification etc., at different levels for different
inventory.

 The company is following good business policies this means company is properly
manufacturing, distributing and controlling the financial activities.

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 The current ratio of the firm is satisfactory because the firm is utilizing available recourses
properly. The lowest ratio is 4.24 recorded in the year 20011-12 and the highest ratio is 7.06
recorded in the year 2012-13 so the current ratio is acceptable. In the beginning few years the
current ratio is not healthier for the company.

 The quick ratio of firm is acceptable. The lowest quick ratio is 3.27 recorded in the year 2011-12
and the highest ratio is 6.38 recorded in the year 2012-13.

 The raw material turnover ratio is increasing year to year. The lowest raw material turnover ratio
is 2.17 recorded in the year 2011-12 and the highest ratio is 3.61 recorded in the year 2010-11.

 The Work in process turnover ratio is increasing from 2010-11 to 2011-12 i.e. 4.77 & 5.42
and respectively.

 The Inventory turnover ratio is slightly near the model/standard ratio of 8.0 times. Since it
is 4.77 times in 2010-11 and 7.76 times in 2012-13. It indicates that the inventory turnover
ratio is satisfied compare to previous year. It is good sign for the company.

 The inventory to working capital ratio is not satisfactory because in the year 2010-11 i.e. 0.29
recorded but in the next years it was continuously decreased i.e.0.28, and 0.10, respectively.
SUGGESTIONS:
 The company should adopt economic order quantity technique in order to reduce the ordering
and carrying cost. For purpose of major raw materials the company is not following this method,
the company places orders for these materials once in a year and because of these bulky orders
the company gets price benefit and therefore it need not follow EOQ for the purchase of major
raw materials.

 The company should avoid over stocking or under stocking in the stores and spares department.
This can be done by maintaining stock levels, based on the following categories:
a) Shelf Life: The items those who have less shelf life should not be overstocked and the items
should be monitored in between and make sure that the shelf life is good and has not expired.
b) Critical: These items should stock for an average of 3 years because the scarcity of these items
can stop the production process.

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c) Normal (eagerly available): The inventory for these items should be limited because they are
readily available in the market easily.

 The company’s current and quick ratio is near the standard ratio it has to maintain additional to
meet its current obligations.

 The company’s raw material turnover ratio is in a positive trend it has to maintain further for
proper utilization of raw material.

 The company should concentrate more on work in process turnover ratio in order meet the
requirement of finished goods.

 The company should follow the same inventory turnover. In order to meet the demand of
customers effectively.

 The period of ordering can be reduced to avoid deterioration of materials and holding costs.

 The company must need to maintain sufficient cash balances to meet the current obligations.

 The company must improve its inventory turnover ratio more efficiently.

CONCLUSION:-

After the study, we can come to a conclusion that, effectiveness of inventory management should
improve in all the aspects; hence the industry can still strengthen its position by looking into the
following.

 The inventory should be fast moving so that warehouse cost can be reduced.

 The finished goods have to be dispatched in feasible time as soon as manufacturing is

completed.

 Optimum order quantity should be maintained, hence cost can be minimized.

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BIBLOGRAPHY

 M Y Khan / P K Jain , financial management text , problem’s cases , 5 th edition

tata m c Graw-hill publishing company ltd new delhi,2007.
 Prasanna chandta, management theory and practice ,5th edition tata m c Graw-hill
publishing company ltd new delhi,-200
 Company annual report.
 Balance sheet

WEB SITE VISITED

 www.googal .com

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 http//www.scribd.com/.

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