Académique Documents
Professionnel Documents
Culture Documents
PROJECT REPORT
ON
HYDERABAD
SUBMITTED BY
T.RAVI
(Affiliated to O.U)
Hyderabad
(2009 – 11)
2
ACKNOWLEDGEMENT
Behind every successful achievement lies great contribution by those without whom
that could have been achieved to them, although more words of gratitude is
insufficient for their unlimited contribution, I take this opportunity to revel my heart
felt gratitude imprinted deep within me. I am very much thankful to the finance
manager Mr. RAGHU and the staff of HERITAGE FOODS INDIA LIMITED
Industries for giving encouragement and their kind cooperation. I am extremely
grateful to Mr. KALESHWAR RAO assistant general manager (IR & HRD) of
HERITAGE FOODS INDIA LIMITED; kindly guiding me without whose kind help
it would not have been possible for me to complete this project work. I wish to
express my sincere thanks to (H.O.D) & Guide and also the management and staff of
my college for providing the guidance and support.
T.RAVI
3
DECLARATIONS
an original work done by me and to the best of my knowledge this work is not
submitted to any other university or college for award of any other degree, diploma or
fellowship.
T.RAVI
4
LIST OF TABLES
5
LIST OF FIGURES
6
Current Ratio
Quick Ratio:
ABSTRACT
7
Trade and quantity are to be excluded from unit cost since these discount exist
for the purpose of defining the true invoice cost of merchandise. Cash discounts, on
the other hand, have been considered as a reward for early payment and a penalty for
late payment. The “reward” has often been interpreted as a loss rather than a part of
unit cost.
In financial parlance, inventory is defined as the sum of the value of the raw
materials, fules and lubricants to maintenance consumable semi processed materials
and finished goods stock at any giving point of time. The operational definition of
inventory world be amount of raw materials, fuel and lubricants and semi – processed
materials to be stock for the smooth running of the plant / industry.
CONTENTS
8
TOPICS PAGE
NO.
CHAPTER- I 1-4
INTRODUCTION
CHAPTER- 2 5-16
COMPANY PROFILE
CHAPTER- 3 17-54
CONCEPTUAL BACKGROUND
CHAPTER- 4 55-73
CHAPTER- 5 74-77
BIBLIOGRAPHY
9
CHAPTER – I
10
INVENTORY MANAGEMENT
INTRODUCTION:
Every enterprise needs inventory for smooth running of it’s activities. It serves
as a link between production and distribution process. There is, generally, a time lag
between the recognition of a need and its fulfillment. The greater the time lag, the
higher requirements for inventory. It also provides a cushion for future price
fluctuations.
The study helps a log to various departments to take steps to control the
inventory process.
11
1. The study is limited only for a period of 5 years i.e., from 2005 -06to
2009 -10.
CHAPTER – II
COMPANY PROFILE
14
COMPANY PROFILE
Heritage at a Glance:
The Heritage Group, founded in 1992 by Sri Nara Chandra Babu Naidu,
is one of the fastest growing Private Sector Enterprises in India, with three-business
divisions viz., Dairy, Retail and Agri under its flagship Company Heritage Foods
(India) Limited (HFIL), one infrastructure subsidiary - Heritage Infra Developers
Limited and other associate Companies viz., Heritage Finlease Limited, Heritage
International Limited and Heritage Agro Merine Private Limited. The annual turnover
of Heritage Foods crossed Rs.347 crores in 2008-09 and is aiming for Rs.700 crores
during 2009-10.
In the year 1994, HFIL went to Public Issue to raise resources, which
was oversubscribed 54 times and its shares are listed under B1 Category on BSE
(Stock Code: 519552) and NSE (Stock Code: HERITGFOOD)
Sri Naidu held various coveted and honorable positions including Chief Minister of
Andhra Pradesh, Minister for Finance & Revenue, Minister for Archives &
Cinematography, Member of the A.P. Legislative Assembly, Director of A.P. Small
Industries Development Corporation, and Chairman of Karshaka Parishad.
Sri Naidu has won numerous awards including " Member of the World
Economic Forum's Dream Cabinet" (Time Asia ), "South Asian of the Year " (Time
Asia ), " Business Person of the Year " (Economic Times), and " IT Indian of the
Millennium " ( India Today).
Mission:
16
Vision:
Heritage Slogan:
Purchase, Stores, Marketing and Training have been documented with detailed quality
plans in each of the departments.
Today Heritage feels that the ISO certificate is not only an epitome of
achieved targets, but also a scale to identify & reckon, what is yet to be achieved on a
continuous basis. Though, it is a beginning, Heritage has initiated the process of
standardizing and adopting similar quality systems at most of its other plants.
Commitments:
Milk Producers:
Heritage
Customers:
Employees:
Heritage forges ahead with a motto "add value to everything you do"
Shareholders:
Returns:
Service:
Suppliers:
Society:
1. Customer focus to understand and meet the changing needs and expectations
of customers.
2. People involvement to promote team work and tap the potential of people.
3. Leadership to set constancy of purpose and promote quality culture trough out
the organization.
The total turnover is Rs 341 Crores during the financial year 2009-10
against the turnover of 292.02 Crores in 2008-09. Today Heritage distributes quality
milk & milk products in the states of A.P, Karnataka, Kerala & Tamil nadu.
During the year 2009-10 liquid milk sales was Rs.28329.79 lakhs
against Rs.24525.23 lakhs in the previous year. The sales of milk products including
bulk sales of cream, ghee and butter were recorded Rs 5781.59 lakhs against Rs
4677.21 lakhs.
Milk sales:
23% growth was recorded in AP 2.38 lakhs litres per day(LLPD) in 2009-10
against 1.93 LLPD in 2008-09. 13% growth was recorded in Tamilnadu-1.53 LLPD
in 2009-10 against 1.35 LLPD in 2008-09. Over all growth of 6% was recorded- 5.49
LLPD in 2009-10 against 5.16 LLPD. Flavoured milk sales recorded a growth rate of
77% over 2008-09. Butter milk sales have gone up by 45% over 2008-09.
Outlook:
BRANCHES OF HFIL:
1. Dairy
2. Retail
3. Agribusiness
21
1. Dairy:
It is the major wing among all. The dairy products manufactured by HFIL are
Milk, curd, butter, ghee, flavoured milk, paneer, doodhpeda, ice cream.
2. Retail:
In the retail sector HFIL has outlets namely “Fresh@”. In those stores the
products sold are vegetables, milk& milk products, grocery, pulses, fruits etc.
3. Agri Business:
CHAPTER – III
CONCEPTUAL BACKGROUND
In accounting language, inventory may mean the stock of finished goods only.
In a manufacturing concern, it may include raw materials, work- in – progress and
stores etc.,
a) Raw Material: Raw material from a major input into the organization.
They are required to carry out production activities uninterruptedly. The
quantity of raw materials required will be determined by the rate of
consumption and the time required for replenishing the supplies. The
factors like the availability of raw materials and Government regulations
etc., too affect the stock of raw materials.
c) Consumables: These are the materials which are needed to smoother the
process of production but they act as catalysts.
d) Finished goods: These are the goods, which are ready for the
consumers. The stock of finished goods provides a buffer between
production and market, the purpose of maintaining inventory is to ensure
proper supply of goods to customers.
A firm also needs to maintain inventories to reduce ordering cost and avail
quantity discounts etc.
The funds may be arranged from own resources or from outsiders. But in both
the cased, the firm incurs a cost. In the former case, there is an opportunity cost of
investment while in the later case; the firm has to pay interest to t he outsiders.
The operational objective mean that the materials and should be available in
sufficient quantity so that work is not disrupted for want of inventory.
The financial objective means that inventory should not remain idle and
minimum working capital should be locked in it.
4. To keep material cost under control so that they contribute in reducing the
cost of production and overall costs.
9. To facilitate furnishing of data for short – term and long – term planning and
control of inventory.
28
A proper inventory control not only helps in solving the acute problem of
liquidity but also increases profit and causes substantial reduction in the working
capital of the concern. The following are the important FOODS and techniques
of inventory management and control.
It represents the quantity below its stock of any item should not be allowed to
fall.
Lead time: A purchasing firm requires sometime to process the order and time
is also required by the supplying firm to execute the order.
The time in processing the order and then executing it is know as lead time.
Nature of materials: The nature of material also affects the minimum level. If
a material is required only against the special orders of the customer then minimum
stock will not be required for such material.
29
Minimum stock level can be calculated with the help of following formula.
b) Re – ordering Level:
When the quantity of materials reaches at a certain figure then fresh order is
sent to get materials again. The order is sent before the materials reach minimum
stock level.
c) Maximum Level:
It is the quantity of materials beyond which a firm should not exceeds its
stocks. If the quantity exceeds maximum level limit then it will be over – stocking.
Overstocking will mean blocking of more working capital, more space for
storing the materials, more wastage of materials and more chances of losses from
obsolescence.
30
It is fixed below minimum stock level. The danger stock level indicates
emergency of stock position and urgency of obtaining fresh supply at any cost.
This stock level indicates the average stock held by the concern.
In order to protect against the stock out arising out of usage fluctuations, firms
usually maintain some margin of safety stocks.
Two costs are involved in the determination of this stock that is opportunity
cost of stock outs and the carrying costs.
If a firm maintains low level of safety frequent stock outs will occur resulting
into the larger opportunity costs. On the other hand, the larger quantity of safety
stocks involves carrying costs.
31
This quantity is fixed in such a manner as to minimize the cost of ordering and
carrying costs.
Total cost material = Acquisition Cost + Cost + Carrying Costs + Ordering Cost.
Carrying Cost:
Ordering Cost:
EOQ = 2CO / I
O = Ordering Cost
Almost 10% of the items contribute to 70% of value of consumption and this
category is called ‘A’ category.
About 20% of the items contribute about 20% of value of category ‘C’ covers
about 70% of items of materials which contribute only 10% of value of consumption.
The VED analysis is used generally for classified as Vital(V), Essential (E)
and Desirable (D).
The vital spares are a must for running the concern smoothly and these must
be stored adequately. The ‘E’ type of are also necessary but their stocks may be kept
at low figures. The stocking of ‘D’ type may be avoided at times. If the lead time of
these is less, then stocking of these can be avoided.
Inventory conversion period may also be calculated to find the average time
taken for clearing the stocks. Symbolically.
__________________________
Or
= Net sales
_____________________
(Average) Inventory
33
______________________
The inventories should first be classified can then code numbers should be
assigned for their identification. The identification of short names are useful for
inventory management not only for large concerns but also for small concerns. Lack
of proper classification may also lead to reduction in production.
The class of materials is assigned two digits and then two or three digits are
assigned to the categories of items divided into 15 groups. Two numbers will be
category of materials in that class.
Area of improvement:
Inventory management in India can be improved in various ways.
Improvements could be affected through.
Need of Inventory:
Inventories are maintained basically for the operational smoothness which
they can be affected by uncoupling successive stages of production, whereas the
monetary value of the inventory serves as a guide to indicate the size of the
investment made to achieve this operational convenience. The materials management
departments primary function is to provide this operational convenience with a
minimum possible investment in inventories. Materials department is accused of both
stock outs as well a large investments in inventories. The solution lies in exercise a
selective inventory control and application of inventory control techniques.
Inventories build to act as a cushion between supply and demand. It is sufficient to
take care of the requirements of demand till the next supply arrives. It is sufficient to
take care of probable delays in supply as well as probable variations in demand.
The size of the inventory depends upon the factors such as size of industry internal
lead time for purchase, supplier’s lead time, vendor relations availability of the
materials, annual consumption of the materials. Inventory coat can be controlled by
36
applying Modern Techniques viz., ABC analysis, SDE, ESN, HMC, VED etc. These
techniques can be used effectively with the help of computerization.
Basically there are four costs for consideration in developing and inventory
model.
1. The cost of placing a replenishment order.
2. The cost of carrying inventory.
3. The cost of under stocking and
4. The cost of over stocking.
The cost of ordering and inventory carrying cost are viewed as the supply side
costs and help in the determination of the quantity to be ordered for each
replenishment.
The under stocking and over stocking costs are viewed as the demand side
costs and help in the determination of the amount of variations in demand and the
delay in supplies which the inventory should withstand.
Whenever an order placed for stock replenishment, certain costs are involved,
and, for most practical purpose it can be assumed that the cost per order is constant.
The ordering cost may vary depending upon the type of items, for example raw
material like steel against production component like castings in steel plants, support
materials in the case of coal industry.
time of procurement of entire life time of machine. In the case of one time purchases,
over cost would be = Purchase Price – Scrap Price.
When the “current repla FOODS cost” of material on hand at the close of a
year is less than the actual cost, the inventory value is reduced to repla FOODS cost
(current market price). Thus the acceptable basis inventory valuation is the “lower of
cost or market” or more properly the “lower of actual cost or repla FOODS cost”.
The determination of inventory values is very important from the point of
view of the balance sheet and the income statement since costs not included in the
inventory (the balance sheet) are considered to be expensive and are thus included in
the income statement.
Under this method it is assumed that the materials or goods first received are
the first to be issued or sold. Thus, according to this method, the inventory on a
particular date is presumed to be composed of the items which were acquired most
recently.
The value inventory would remain the same even if the “perpetual inventory
system” is followed.
Advantage:- The FIFO method has the following advantages.
1) It values stock nearer to current market prices since stock is presumed to
be consisting of
2) The most recent purchases.
3) It is based on cost and, therefore, no unrealized profit enters into the
financial accounts of the company.
4) The method is realistic since it takes into account the normal procedure of
utilizing or selling those materials or goods which have been longer
longest in stock.
This method is based on the assumption that last item of materials or goods
purchased are the first to be issued or sold. Thus, according to this method, inventory
consists of items purchased at the earliest cost.
Weighted average price method is very popular on account of its being based
on the total quantity and value of materials purchased besides reducing number of
calculations. As a matter of fact the new average price is to be calculated only when a
fresh purchase of materials is made in place of calculating it every now and then as is
the case with FIFO, LIFO methods. However, in case of this method different prices
of materials are charged from production particularly when the frequency of
41
purchases and issues/sales in quite large and the concern is following perpetual
inventory system.
With the transfer of materials to work in process, the cost flow or transfer with
have its impact on the work in process inventory and the transfer of completed
merchandise to finished gods. Ultimately when goods are sold; the varying methods
of valuing inventories will have their impact on cost of goods sold and these profits.
The effects of the cost flows on cost of gods sold and profits can be accentuated
further it the differing methods of valuing inventories are applies to work in process
and finished goods.
cost flows when prices are rising and smaller cost flows when prices are falling. A
final item to consider is that the average method produces results which fall between
the extremes of LIFO and FIFO.
The primary difference between the FIFO and average methods is centered on
the physical flow since both methods could involve identical and interchangeable
units. The FIFO method fits a first-in first-out physical flow. The average method fits
a system which has no specific pattern of physical flow. Finding a situation where
there is no specific pattern of physical flow should be quite difficult because of the
fact that most inventory items are subject to deterioration by instituting a person
would attempt to reduce such deterioration and any reasonable person would attempt
to reduce such deterioration by instituting a physical flow approximating first-in-first-
out. The major reason for the use of the average method is something other than the
lack of specific physical flow.
Ordinarily the LIFO method cannot be justified on the basis of the physical
flow of materials. Under conditions of changing prices, the advocate of LIFO says
that the only method which matches costs and revenues is the LIFO method. The
LIFO method assumes that the latest item is the first item out, and thus the current
costs of materials are matched with the other hand, assumes that the first item in is the
43
first item out, and thus the non-current costs of matching current costs with current
revenues is the essence of the argument for the LIFO method.
As can be seen by the above comments, there is no one best method of valuing
inventories. The method chosen should fit the situation. A physical flow pattern
comparable to FIFO would force one to consider the FIFO method. The lack of a
discernible physical flow pattern would force one to consider the average method.
Concentration on cost flows, as distinct from physical flows, would force to consider
the LIFO method especially where there appears to be a discernible trend towards
rising prices (or falling prices) as has been the case in our economy during recent
years.
As shown above, there is need only for physical quantities since the inventory
values is the physical quantity multiplied by the standard cost. With the cost and value
columns disposed off, a perpetual inventory card can include additional data such as
44
quantities on order, quantities reserved, and quantities available. These additional data
are very useful for inventory and production control purpose. On the basis of a few
calculations concerning into inventories on a FIFO, a LIFO, or an average cost basis.
Inventory of Obsolescence:
Absolvent inventories cannot be used or disposed off at values carried on the
books. Frequent reviews should be made of all inventories, and when obsolescence is
indicated a request for revaluation should be prepared for approval by management.
The difference between original and obsolete value should be recorded by a change to
an operating account. Inventory obsolescence, and a credit to inventory. If the
material is scrapped, this will be for the full inventory value or used in areas where it
will be work less than its original value, the entry would be only for the amount of
write down. Some companies carry a solvage inventory and transfer to it materials
which may be sold or used at reduced values.
Where this is done, the entry would be:
Dr. Solvage inventory
Dr. Inventory Obsolescence. Cr. Raw Material inventory or Supplies
inventory.
Inventory cost of any organization also adversely affects by retaining obsolete / scrap
and inventory costs can be reduced by management with an advance planning of
procurement of materials, periodical reviews of existing spares with reference to the
fast consumption, ascertaining the information regarding the availability of in other
areas. Holding of extra inventory will be an additional financial burden to the
company due to payment of interest charges on the materials purchased, diminishing
value of materials purchased, diminishing value of materials by keeping them in
stores for a log time, handling charges, etc.,
The inventory of HERITAGE FOODS INDIA LIMITED mainly includes
Foods, , CNC FOODS, Dairy. Inventory in HERITAGE FOODS INDIA
LIMITED during 2005 -06to 2009 -10are as follows: (Units in m.t)
Years 2005 -06 2006 -07 2007 -08 2008 -09 2009-10
Foods 1051620 96465 966540 958620 1209536
HFIL 44637 45267 42871 43151 65960
Agro
22142 19602 20705 22011 36567
Merine
Dairy 4756 9022 16201 32607 149255
The value of the above raw materials for the year 2005 -10are as follows: (Value in
Rs.)
Years 2005 -06 2006 -07 2007 -08 2008 -09 2009-10
Imported
2009
Years 2005-06 2006 -07 2007 -08 2008 -09
-10
49300563 76618001 15542
Raw Materials 94753497 451229526
3 5 36987
Finished 51157705 41178
521577053 76345208 121624112
Goods 7 038
Indigenous
Years 2005-06 2006 -07 2007 -08 2008 -09 2009 -10
108578687 299587841 345776542 410760522
Raw Materials 7806531617
9 2 7 8
Finished 126467428
508106545 881880956 179159560 3776712867
Goods 6
INDENTS:
1. ANNUAL INDENTS FOR CONSUMABLE ITEMS (STORES ITEMS).
2. REGULAR INDENTS RAISED BY CONSUMING DEPARTMENTS.
3. ANNUAL REQUIREMENT OF RAW MATERIALS PROMOP & QC.
ENQUIRIES:
1) ENQUIRES WILL BE SENT APPROVED SUN CONTRACTORS.
PURCHASE ORDER:
1) PREPARE PURCHSE ORDER ON SELECTED PARTY.
2) SEND PURCHASE ORDER COPIES TO PARTY, STORES AND
DEPARTMENTS.
PURCHASE DEPARTMENT:
ACTIVITY RECEIVING INDENTS:
FLOW CHART:
Receipt of annual indents for consumable items / stores items
from stores department.
Checking of indent number an authority of item, delivery time
consumption period.
In case of any deficiency, send the information to concerned
department for clarification.
48
PURCHASE DEPARTMENT
PURCHASE ENQUIRY
Ms.
Sl. When
Material Code Department Quantity Unit
No. Required
49
PURCHASE DEPARTMENT
ORDER PROCESSING FORM
Material
Sl. Indent
Code Description Size Qty 1 2 3 4 5 6 Remarks
No. Ref
No.
50
PURCHASE DEPARTMENT
PURCHASE ORDER
Indent Item
Sl. No. Description Qty Rate Unit Amount
No. Code
51
PURCHASE DEPARTMENT
AMENDMENT / CANCELLATION OF ORDER
PURCHASE DEPARTMENT
ACTIVITY: IMPORTS:
FLOW CHART:
• Receipt of indents for import items from stores department.
53
• Enter price and other terms of the quotations received from overseas
• Examine order processing form and decide the sub – contractor to whom
• Prepare purchase order after finalization of price and other technical terms
1) Material code
2) Indent number
4) Quantity
5) Rate
6) Payment
overseas supplier.
STORES DEPARTMENT
54
site.
• All safety precautions are taken while unloading of material like workers
should wear safety shoes, helmets, leather head gloves, noise respirator,
nose mask.
using chain pulley Blocks, Wire Rope Ceilings, Fork Lift. After UIL
register.
STORES DEPARTMENT
55
a) General
b) Stationery
c) Block
• Checking with P.O. and mentioning Material Code, Party Code, Indent
STORES DEPARTMENT
incharge.
STORES DEPARTMENT
RECEIPT NOTES:
to concern person.
STORES DEPARTMENT
STORES DEPARTMENT
delivery challans.
• Duplicate for transport copy of excise invoice over to bills section for
delivery challans.
STORES DEPARTMENT
• Verification of MRP.
• Issuing to dispensary.
payment.
59
CHAPTER – IV
60
RATIO ANALYSIS
61
The investment on raw materials over a period of 5 years from 2000 to 2010 is
presented in the following table.
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1) From the above table it can be understood that the inventory of HERITAGE
FOODS INDIA LIMITED was recorded at 12226.70 during the year 2004 -05
and it is increased to 87905.86 during the year 2008 -09.
2) It shows that there is on increase in the inventory to the more extent of
87905.86.
3) The average inventory of HERITAGE FOODS INDIA LIMITED was
recorded at Rs52454.75
4) The highest investment in inventory was recorded in the years 2009-10
62
2. Trend Analysis:
Trend analysis technique is applied to know the growth rate in investment of
raw material of HERITAGE FOODS INDIA LIMITED over the review period which
is shown in the following table.
Trend Analysis:
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1) The investment on investment has increased in the year 2008 -10. And the lost
year investment has declared continuously. The percentage in 2005 -06was
295% as compared to years 2006 -07 to 2009 -10.
63
2) The trends in inventories show that inventory have been more in the year 2009
-10and then it has shown a downward trend and again it increased to some
extent.
120000
100000
80000
60000
40000
20000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1. From the above table 2004 it can be observed that (1) inventory turn
over ratio is 8.58 during 2004 – 2005 and it gradually decreased to 1.58 during
2005 – 2006.
2. In the year 2006 -07 it is clear that the ratio is very less i.e., he stock
64
It may also be of interest to see average time taken for clearing the stocks.
This can be possible by calculating inventory conversion period. This period is
calculated by dividing the number of the days by inventory turn over.
This formula may be as:
Days in a year (360 days)
Inventory conversion period = _____________________
Inventory turnover ratio
Inventory conversion period: (in crores)
Cost of goods Avg.
Year Ratio ICP (Days)
sold inventory
2004 – 2005 59225.45 6900.22 8.58 42
2005 – 2006 58022.22 36225.20 1.58 230
2006 – 2007 110221.21 96075.65 1.14 26
120522.68
11490.07 10.48 33
2007– 2008
2008 – 2009 125492.78 12223.99 10.26 32
2009 – 2010 309266.98 150025.22 2.06 271
120000
100000
80000
60000
40000
20000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
65
Interpretation:
From the above table it can be identified the following observations:
1) The inventory conversion period was 230 days during the year 2005 -06but it
declined to 204 during 2006 - 05, which indicates that the stock has been very
quickly converted into sales which mean the company is managing the
inventory efficiently.
2) The lowest inventory conversion period was recorded at 26 days in the year
2006 -07 and the highest inventory conversion was recorded at 271days in the
year 2009 -10.
3) The average inventory conversion period was recorded at 107 days during the
review period.
66
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1) From the above table it can be understand that the % of inventory over current
assets ratio was showing a declining trend for two years 2004 - 2005.
2) However from the year2009 -10it is showing an increasing trend.
3) The lowest inventory over current assets ratio was recorded at 39% during the
year 2005 -06and the highest inventory over current assets ratio we recorded at
108% during 2009 -10.
4) The average inventory over current assets ratio was recorded at 85%.
67
250000
200000
150000
100000
50000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
40000
35000
30000
25000
20000
15000
10000
5000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1) From the above table it can be understand that the %
inventory over current liabilities ratio was showing a declining trend for two
years 2004 -05
2) During the year 2005-06the ratio was it gradually increased
to 145 and there is a net increase to the extent of 128.
3) The lowest inventory over total amounts ratio was recorded
at 18 during the year 2004 -05
69
8. Current Ratio:
In order to know the current ratio the percentage of current assets to current
liabilities is calculated and which is presented in the following table.
Current assets
Current Ratio = _____________________
Current liabilities
Calculation of Current Ratio’s:
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1) From the above table it can be interpreted that the % of current assets over
current liabilities ratio i.e., current ratio was showing a decreasing trend
from year 2005 -06
2) In the year 2004 -05the ratio was 3.15% and has increased to 3.70% in the
year 2005 -06
3) The lowest current ratio was recorded at 2009 -10which is 2.35% and the
highest current ratio was recorded at 3.70% during the year 2005 -06
4) The average current ratio was recorded at 3.09% during the review period.
70
9. Quick Ratio:
The quick ratio is the relationship between quick to current liabilities quick
assets is more rigorous test of liability position of a firm it is computed by applying
the following formula.
Quick ratio = Quick assets / Current Liabilities
Where Quick assets = Current Assets – Inventory
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Interpretation:
1) From the above table it can be understand as that the % of quick assets to
current liabilities i.e., the quick ratio was 0.002% in 2006 -07and from that
year it is showing increasing trend.
2) The highest quick ratio was recorded at 2.42% during the year 2005
-06and the lowest quick ratio was recorded at 0.21% during the year 2006
-07
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CHAPTER – V
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CONCLUSIONS;
SUGGESTION:
1) Though the production is higher is the year 2006 -07 and the sales were
very high i.e., as per inventory conversion period it took 270 days. This
shows that there is demand for FOODS and the funds unnecessarily tied
up. So, proper demand forecasting should be done and according to that it
may be manufactured.
2) The investment on raw material should be made as per the requirement.
Unnecessary investment may block up the funds.
3) Neither too high nor too low inventory turnover ratios may reduce profit
and liquidity position of the industry. So, proper balance should be made
to increase profits and to ensure liquidity.
4) The raw material should be acquired from the right source at right quality
and at right cost.
5) The process that was being used by HERITAGE FOODS INDIA
LIMITEDs with the purchasing department should undergo changes, so
that, it seeks enhance the celerity of the delivery of a product without
compromising its quality by improving the utilization of materials, labour
and equipment.
6) To reduce the work, the purchasing department may enter the purchasing
order into database and did not send a copy to any one. When the
merchandise arrived, the receiving clerk would enter the database and
determine whether the order agreed with the electronic purchase order.
If it did, payment was authorized to be made at the appropriate
Time. If it didn’t match, the order would be returned until if it is agreed by the
HERITAGE FOODS INDIA LIMITED.
If it institutes “Invoice less purchasing” where the supplier did not need to
send an invoice to be paid.
This generally simplifies the process for all concerned. As a result, it would
able to reduce the work of its accounts payable department.
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BIBLIOGRAPHY