STUDY ON INVENTORY MANAGEMENT

CHAPTER-1

1. INTRODUCTION

1.1. Introduction

Inventory control is vitally important to almost every type of business, whether product or

service oriented. Inventory control touches almost every facets if operations. A proper

balance must be struck to maintain proper inventory with the minimum financial impact on

the customer. Inventory control is the activities that maintain stock keeping items at desired

levels. In manufacturing since the focus is on physical product, inventory control focus on

material control.

“Inventory” means physical stock of goods, which is kept in hands for smooth and efficient

running of future affairs of an organization at the minimum cost of funds blocked in

inventories. The fundamental reason for carrying inventory is that it is physically impossible

and economically impractical for each stock item to arrive exactly where it is needed,

exactly when it is needed.

Inventory management is the integrated functioning of an organization dealing with supply

of materials and allied activities in order to achieve the maximum co-ordination and optimum

expenditure on materials. Inventory control is the most important function of inventory

management and it forms the nerve center in any inventory management organization. An

Inventory Management System is an essential element in an organization. It is comprised of

a series of processes, which provide an assessment of the organization’s inventory.

1.2. Statement of the problem

The study is needed to analyze the inventory management of the company. It is also

necessary to identify the stock in the company

1.3. Objective of the study

1.3.1. Primary objective

To study the Inventory Management at Bharath weildequip & system.

1.3.2 Secondary objective

To analyze the existing Inventory Management procedure and techniques in the

organizations.

To determine the current inventory position of the company.

1.4. Scope of study

This study analyses the existing system of inventory management using inventory

ratios and correlation analysis. It focuses on introducing inventory management

techniques like ABC analysis, to the existing system which will affect the production and

marketing process.

This study would provide information that helps the company to minimize the

inventory while at the same time balancing out the inventory supply of all products to

make their inventories more proportional, and thereby closer to achieving the primary goal.

The research will also support the company to allow the desired inventory

proportions to be dynamic by determining expected sales out into the future. Integrating

demand forecasting into inventory management in this way also allows for the prediction

of the "can fit" point when inventory storage is limited on a per-product basis.

1.5. Research methodology

Research is a process in which the researchers wish to find out the end result for a given

problem and thus the solution helps in future course of action. The research has been defined

as “A careful investigation or enquiry especially through search for new facts in branch of

knowledge”

1.5.1. Research design

The research design used in this project is Analytical in nature the procedure using, which

researcher has to use facts or information already available, and analyze these to make a

critical evaluation of the performance.

In this study analytical research design is used which helps to achieve the set of objectives

of study

The researcher has to use facts or information already available and analyze that fact to

make critical evaluations of the inventory management

1.5.2. Data source

The data were collected from secondary data such as

1. The data are collected from the annual reports maintained by the

company for the past six years viz., 2006-2011

2. Data are collected from the company’s website.

3. Books and journals pertaining to the topic.

Tools to be used

INVENTORY RATIO CORRELATION ANALYSIS FORECAST

Limitation of study1. The entire analysis only to bharath weildequip & system.

2. The study takes into account only the quantitative data and the qualitative aspects

were not taken into account

CHAPTER-2

2.1 industry profile

BHARATH WELDEQUIP & SYSTEMS

An ISO 9001 – 2008 Certified Company

About Us:

BHARATH WELDEQUIP & SYSTEMS Established in 1994 has a proud tradition of

manufacturing Welding spares & Safety equipment. It is combined with a policy of

continuous investment in the latest technology to meet the requirements of very discerning

and demanding buyers. We completed the ISO 9001:2008 audits for the ANAB & NABCB

certified for the year of March 2008. Since our inception we have constantly redefined and

mastered our core competencies through continuous customer feedback, innovation and hard

work. This has helped us to build a strong brand name and achieve a high acceptance in our

customers. Moreover we completed the recertification audit for the month of March-2012 an

ISO 9001-2008 NABCB certified. The Company is manufacturing a wide range of welding

spares. Tool Room spares, JIG Fixer, SPM Spares and Machining components we strive to

achieve an excellence in servicing the customers through continuous improvement in

product quality, delivery schedules and services.

BHARATH WELDEQUIP & SYSTEMS Established in 1994 has a proud tradition of

manufacturing Welding spares & Safety equipments. It is combined with a policy of

continuous investment in the latest technology to meet the requirements of very discerning

and demanding buyers. We completed the ISO 9001:2008 audits for the ANAB & NABCB

certified for the year of March 2008. Since our inception we have constantly redefined and

mastered our core competencies through continuous customer feedback, innovation and hard

work. This has helped us to build a strong brand name and achieve a high acceptance in our

customers. Moreover we completed the recertification audit for the month of March-2012 an

ISO 9001-2008 NABCB certified. The Company is manufacturing a wide range of welding

spares. Tool Room spares, JIG Fixer, SPM Spares and Machining components we strive to

achieve an excellence in servicing the customers through continuous improvement in

product quality, delivery schedules and services.

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Chapter 1 Gas nozzle hot end

Gas nozzle hot end

Release status: working

DescriptionTutorial to prepare an hot end using some commercial gas nozzles

License Gpl

Author hariseldo78

Based-on extruder nozzle variations

Categories hot end, extruders

Cad model(s)None

External linkNone

nb: the following tutorial need the use of power tools (drill press) in some non-standard

way. There will also be dangerous metallic dust filling the room. Also the tools and parts

you are machining can easily break, projecting pieces of all dimensions and at high speed.

Please wear heavy gloves, ant dust mask and goggles at all time when using the tools. Some

noise protection will be good too. I know it's not comfortable working in that way, but you

really don't want to loose a finger or an eye, or breathing some aluminium and brass, just to

make an hot end.Gas nozzles come in many different shapes but they all have 1 thing in

common: they are really cheap. I paid 6€ for a set of 5. After looking to various models i

found the better suited are the "gpl nozzles", with 8mm screw and round body. The inside

diameter is 5mm. Don't take the methane nozzles because they have bigger holes. With the

smallest gpl nozzle the pla filament i get is something between 0.45 and 0.5 mm which for

me is more than satisfying.

My suggestion is to test all the machining first with the biggest hole nozzle, so any error in

the process won't damage the little hole one, which is the most useful.

to be able to connect the nozzle to the other parts of our hot end we must use the die tool.

The screw thread already present on the nozzle is not compatible with usual m8 bolts and

nuts, so all become easier if we remake the thread. I used a die of size 8mm x 1.25.

   

 

now we want to make the thread on the long side of the nozzle, to be able to mount the

heater on it. We start by reducing the external diameter from 10mm to little more than 8mm.

I didn't want to damage the thread mounting the nozzle directly on the drill press, so i used

an m8 bolt with cut head and a long nut. Use a cheap metal file (i bought a set of 6 for less

than 5€). Be careful not to damage the hexagonal part of the nozzle, it is very useful!

Nb:i made the photo with the drill press turned off. This is why i'm not wearing gloves.

Don't do it without gloves!

   

now using the same die tool used before we make a thread on the other part of the nozzle.

Use a bit of oil so you don't damage the tool and go slowly .  

    this is

the threaded nozzle:

 

the internal diameter of the nozzle is 5 mm, which is a bit too much for our needs. From my

tests the nozzle would contain too much melted pla and would be nearly impossible to stop

the extrusion.. It works, but not very well. So i decided to reduce the diameter. I cut a

15x15mm piece of a sheet of 0.5mm aluminium, rolled it around a 4mm drill bit, inserted it

in the nozzle and cut the exceeding part, leaving just a bit as you can see in the photo.

Probably a little tube of ptfe would be even better, maybe put your experience in this page if

you want to try it.

 

the remaining parts are mostly like the standard nozzles. I drilled a cylinder of ptfe with a

3.5mm drill bit, and the last 5 mm drilled with a 6.5 mm drill bit.

then i made an 8mm thread with an 8mm tap in the bigger hole.this is quite cosmetic

because the ptfe is too soft when heated and it will leak. My solution was to make a little

aluminium collar, height 5mm, to place around the ptfe in the point where the nozzle screw

is.. Uhm.. Screwed. Don't make it too big because the aluminium will accumulate heat and

we don't want to propagate additional heat over the ptfe channel.

1.1 Company profiles

BHARATH WELDEQUIP & SYSTEMS Established in 1994 has a proud

tradition of manufacturing Welding spares & Safety equipments. It is combined with a

policy of continuous investment in the latest technology to meet the requirements of very

discerning and demanding buyers. We completed the ISO 9001:2008 audits for the ANAB

& NABCB certified for the year of March 2008. Since our inception we have constantly

redefined and mastered our core competencies through continuous customer feedback,

innovation and hard work. This has helped us to build a strong brand name and achieve a

high acceptance in our customers. Moreover we completed the recertification audit for the

month of March-2012 an ISO 9001-2008 NABCB certified. The Company is manufacturing

a wide range of welding spares. Tool Room spares, JIG Fixer, SPM Spares and Machining

components we strive to achieve an excellence in servicing the customers through

continuous improvement in product quality, delivery schedules and services.

Quality Testing:

The Company has consistently demonstrated the ability to meet the most stringent quality

assurance standards. This commitment is reflected by the meticulous application of

monitoring procedures, which ensure complete material traceability throughout the

production cycle.

A. Instruments B. Specifications

Micrometer0-25,25-50,50-75,75-100 ; - LC 0.01mm 100-

125,125-150

Depth Micrometer 0-25 ; - LC 0.01mm

Dial Vernier 0-300 ; - LC 0.01mm

Vernier Caliper 0-200 ; - LC 0.02mm

Digital Vernier 0-200; - LC 0.01mm

Digital Vernier 0-300; - LC 0.001mm

Vernier Caliper 0-600; - LC 0.02mm

Dial Vernier 0-600; - LC 0.001mm

Depth Vernier 0-200 ; - LC 0.02mm

Height Gauge 0-300 ; - LC 0.02mm

CI Surface Plate (630 X630)

Granite Plate (630x630)

Granite Plate 1200mm x 1600mm

Conventional Machine Section:

We also have some of the latest technology conventional machines.

They are:

Heavy Duty Lathe Machines

Heavy Duty Long Type Lathe Machines

Medium Duty Lathe Machines

High Speed Lathe Machines

Milling Machine

Slotting Machine

Shaping Machine

Heavy duty Drilling Machines

Medium Duty Drilling Machine

Surface Grinding Machine

Cylindrical Grinding Machine

M & DRO CNC Drilling Machine Model-3

Band saw Cutting Machine

Tool & Cutter Machine

Second Operation Capston Lathe

Quality Instruments Digital & Dial Checking Gauges

Quality Checking Pin Gauge, Thread Plug gauge, Thread Ring Gauge, NO GO ,

GO, Bore Gauge, Slip Gauge.

Quality Taps & Die as per approved company branded

Fabrication shop:

We can fabricate a variety of equipment for construction and maintenance of various

infrastructure-related activities. We operate a modern machine, welding and fabrication shop

capable of a wide range of design, machining, welding, fabricating and manufacturing of

metals and components to suit many applications. In our fabrication shop we have

MIG Welding Machine Set

ARC Welding Machine Set

Band Saw Cutting Machine

Hand Cutting Machine

Grinding Machines

Hand Press

Material

Handling:

Material handling equipment (MHE) is used for the movement and storage of material

within a facility or at a site. We offer a wide range of wire ropes, slings, hooks, chain pulley

blocks and much other equipment. These material handling equipment products are used in

various industries for transporting, positioning, load formatting and for much other purpose.

Product range:

Welding Accessories:

All Types of Co2 , MIG, TIG, PLASMA, SUB ARC, AUTO Weld , Air Cooled , Water

Cooled Torches & Consumables, Special Type of Gas Cutting Torches, Welding Torches,

Wire Feed Rollers & Safety Equipment’s Machined components accessories ,Tool Room

Spares ,Jig & Fixtures, and all kinds of fabrications as per your requirement of Special

purpose spares & Development items also.

Our Patrons:

We have ruled the market and are still ahead of others in our sphere of operation.

Consequently, we have amassed a large number of clients throughout India we supply our

materials to TVS Group of companies like Wheels India Ltd – Padi Plant, Sriperumbudur

Plant, Bawal Plant, Pune Plant, Rampur Plant, Uttrakhand Plant, Axles India Ltd 100%

EOU, Axles India Ltd Plant-I, Axles India Ltd Plant-II, Brakes India, Delphi TVS, apart

from TVS Group we supply Renault Nissan, Daewon India, Indotech, Wipro Infrastructure

Engg, Steel Strips Wheels Ltd, Caterpillar India Ltd, Hindustan Motors, Primo Automation

Systems , Larsen & Toubro Limited and etc..

MANIBALA WELDTECH CORPORATION

Established in 2007 has a proud tradition of manufacturing Welding spares & safety

equipments. It is combined with a policy of continuous investment in the latest technology

to meet the requirements of very discerning and demanding buyers. Since our inception we

have constantly redefined and mastered our core competencies through continuous customer

feedback, innovation and hard work. This has helped us to build a strong brand name and

achieve a high acceptance in our customers. The Company is manufacturing a wide range of

welding spares and we are supply of special application of higher strength Tapes also

supplied. We strive to achieve excellence in serving customers through continuous

improvement in product quality, delivery schedules and services.

Quality Testing

The Company has consistently demonstrated the ability to meet the most stringent quality

assurance standards. This commitment is reflected by the meticulous application of

monitoring procedures, which ensure complete material traceability throughout the

production cycle.

C. Instruments D. Specifications

Micrometer0-25,25-50,50-75,75-100 ; - LC 0.01mm 100-

125,125-150

Depth Micrometer 0-25 ; - LC 0.01mm

Dial Vernier 0-300 ; - LC 0.01mm

Vernier Caliper 0-200 ; - LC 0.02mm

Depth Vernier 0-200 ; - LC 0.02mm

Height Gauge 0-300 ; - LC 0.02mm

CI Surface Plate (630 X630)

Conventional Machine Section

We also have some of the latest technology conventional machines. They are:

Heavy Duty Lathe Machines

Medium Duty Lathe Machines

High Speed Lathe Machines

Milling Machine

Slotting Machine

Heavy duty Drilling Machines

Surface Grinding Machine

Band saw Cutting Machine

Fabrication Shop:

We can fabricate a variety of equipment for construction and maintenance of various

infrastructure-related activities. We operate a modern machine, welding and fabrication shop

capable of a wide range of design, machining, welding, fabricating and manufacturing of

metals and components to suit many applications. In our fabrication shop we have:

MIG Welding Machine Set

ARC Welding Machine Set

Band Saw Cutting Machine

Hand Cutting Machine

Grinding Machines

Material Handling:

Material handling equipment (MHE) is used for the movement and storage of material

within a facility or at a site. We offer a wide range of wire ropes, slings, hooks, chain pulley

blocks and much other equipment. These material handling equipment products are used in

various industries for transporting, positioning, load formatting and for many

Other purpose

Product range:

All Types of Co2 , MIG ,TIG Torches & Consumables, DN 421 Water Cooled Torch,

PLASMA Torches, AOL, OTC, Auto Weld Torch, Special Type of Gas Cutting Torches

Safety Equipment’s, Wire Feed Rollers, Regulator & Cutting Torch Spares and Tesa

Product special tapes.

Our Patrons

We have ruled the market and are still ahead of others in our sphere of operation.

Consequently, we have amassed a large number of clients throughout India we supply our

materials to TVS Group of companies like Wheels India Ltd – Padi Plant, Sriperumbudur

Plant, Bawal Plant, Pune Plant, Rampur Plant, Uttrakhand Plant, Axles India Ltd 100%

EOU, Axles India Ltd Plant-I, Axles India Ltd Plant-II, Brakes India, Delphi TVS, apart

from TVS Group we supply Renault Nissan, Daewon India, Indotech, Wipro Infrastructure

Engg, Steel Strips Wheels Ltd, Caterpillar India Ltd, Hindustan Motors, Primo Automation

Systems , Ashok Leyland John Deere Cons Co Pvt Ltd, Larsen & Toubro Limited and etc..

CHAPTER-3

REVIEW OF LITERATURE

3.1 CONCEPTUAL REVIEW

Definition of inventory:

Inventory is defined as the some of the raw materials, fuels and lubricates, spare parts,

maintenance consumables; semi processed materials and finished goods stock at any given

point of time.

Inventory is very expensive asset that can be replaced with a less

Expensive asset called ‘information’. In order to his, the information asset is timely,

accurate, reliable and consistent. When this happens, you carry fewer inventories, reduce

cost and get products to customer faster.

The American product and inventory society (APICS) defines inventory management as

branch of business management concerned with planning and control inventories. The role

of inventory management is maintained desires level of stock products or item.

The “supply chain” of a product is the process from raw material through

the final product available to the end users and with linkage of all suppliers involved in the

process.

2. Reviews and articles:

1. The research was done on inventory management which was presented in

International conferences on Industrial Engineering and system Management by Y.Dallery,

Z. Babai 2002. The purpose of this paper is to provide a literature review on inventory

management policies by comparing / distinguishing forecast Based approach so as to

provide a focus on the advance demand information based approach and also provide future

directions for inventory management.

2. .The research was done on inventory management research in major Logistics

Journals, Themes and future directions by Brent D. Williams 2009. The purpose of this

paper is to provide a review of inventory management articles published in major logistics

outlets, identify themes from the literature and provide future direction for inventory

management to be published in logistics journals.

3. The research was done on inventory in order to achieve effectiveness in inventory

management by R.Michel Donovan 2006. This paper emphasize that Effective inventory

management allows a distributor to meet or exceed his or her customer’s expectation of

product availability with the amount of each item that will maximize the distributors’ net

profits.“Initially all manufacturing companies, there is a direct relation between inventory

levels and overall business performance”.

4. .The article on inventory management flexibility by Hua song & Yuan-Fang Song

2007 which summarizes the literature on inventory management flexibility from a

competence perspective, and it classifies the work according to inter-firm and intra-firm and

intra-firm flexibilities. It also explores the relationships between inventory competence

flexibility, service capabilities flexibility, and performance. The results show that intra-firm

inventory management flexibility, which reflects internal competence, has a positive impact

on service capabilities and performance, while inventory coordination flexibility, which

captures inter-firm competence, has no significance on those elements.

5. The article on “Guide to Inventory Accuracy” by Dave Piasecki March 15,

2003. In this paper we discuss problems with inventory accuracy. The problems in

attaining accuracy in inventory are overcome by implementing technologies such as bar

coding systems, RFID, and pick-to-light are often assumed to be the solutions to inaccurate

inventories. The author of this article suggested that whether we are planning on

implementing additional systems or not , we should consider taking care of the basics first

The Basics

Attitude

Process Definition

Procedure Documentation

Employee Training

Employee Testing

Setting Standards

Re- evaluate

6. The articles “Deciding How Much to Buy Jon Schreibfeder”2010. The author

explains that in today’s economy as many companies emphasizing “cash flow

management” over profitability. That is, companies are willing to sacrifice some profit

dollars in order to invest smaller amounts in inventory. In this situation, the author

suggested an alternative reordering strategy that may meet this needs for many of the

companies. When placing a replenishment order, how do your buyers decide how much of

each items to order? Often, reorder quantities are based on “habit” (i.e., “this is the way

we’ve always done it“) rather than logic. However, most computer system will allow you to

reorder using an economic order quantity (EOQ).This is the quantity that will minimize the

total cost of inventory for each product with recurring usage that buy.

The EOQ balances four factors:

The current forecast demand for the product.

The cost of carrying inventory (also known as the “K” cost).

The cost of issuing a replenishment order (also known as the “R” cost

The replacement or landed cost per piece of the item.

It is important that these four factors of the EOQ are accurate. In previous newsletters

we’ve discussed forecast accuracy. We also provide free help in calculating your “K” and

“R” costs in the articles.” The Mysterious Cost of Carrying Inventory” and How Much Does

it Cost You to Buy.” By utilizing an accurate EOQ you will ensure that you are buying the

quantity that will maximize your corporate profitability.

7. The article on inventory management research by Brent D. Williams, (Department of

Marketing and Logistics, Sam M. Walton College of Business , University of Arkansas,

Fayetteville , Arkansas , USA) , Travis Toker , ( The Ohio State of university , Fisher

college of Business , Marketing and Logistics , Columbus, Ohio, USA) 4 th JUN 2004:

Articles published in major Logistics articles , beginning in 2004, Which contribute to the

inventory management literature are reviewed and cataloged. The articles are segmented

based on major themes extracted from the literature as well as key assumptions made by the

particular inventory management model. In this article two major themes are found to

emerge from logistics research focused on inventory management. First, logistics

researchers have focused considerable attention on integrating traditional logistics decisions,

such as transportation and warehousing, with Inventory management decisions, using

traditional inventory control models. Second, logistics researchers have more recently

focused on examining inventory management through collaborative models. This paper

catalogs the inventory management articles published in the major logistics journals,

facilitates the awareness and appreciation of such work, and stands to guide future

Inventory management research by highlighting gaps and unexplored topics in the extent

literature.

8. The article on “Simple way to find order quantities subject to an aggregate

constraint” by Silver, Edward A. Dec 22, 2002; the article considers the context of a

population of items for which the assumptions underlying the economic order quantity

derivation hold reasonably Well. However, as is frequently the case in practice, there is an

aggregate constraint that applies to the population as a whole. Two common forms of the

constraint are (1) the existence of a budget to be allocated among the stocks of the items and

(2) a purchasing or production facility having the constraint, the individual replenishment

quantities cannot be selected independently. Moreover, often parameters such as the fixed

(setup) cost per replenishment and the inventory carrying charge are very difficult to

estimate in practice.

9. The article on “Average cost lot-sizing heuristics: revised stopping conditions with

increased intuition” by Tibben-Lembke, Ronald S Dec 22, 2002; Investing in inventory. A

firm must have reasonable stock in comparison to sales. It is the ratio of net sales and the

average inventory. This ratio helps the financial manager to evaluate inventory policy. This

ratio reveals the number of times finished stock is turned over during a given an accounting

period.

CORRELATION ANALYSIS:

The concept of correlation is based on Galton and Pearson's notion that there is a

category beyond causation of which causation is only a limit.

Galton and Pearson hoped to bring the quantitative rigor of the physical sciences to the

social sciences that were at that time dominated by qualitative descriptions and philosophical

speculations.

The method of correlation opened new vistas for quantitative social science.

The notion of causality as the sole explanatory principle of events was broadened to

include the notion of association between events.

Correlation coefficient r:

The correlation coefficient r is a measure of the linear relationship between two attributes or

columns of data. The correlation coefficient is also known as the Pearson product-moment

correlation coefficient. The value of r can range from -1 to +1 and is independent of the

units of measurement. A value of r near 0 indicates little correlation between attributes; a

value near +1 or -1 indicates a high level of correlation.

A correlation coefficient of less than 0 indicates a negative correlation. That is, when one

attribute shows an increase in value, the other attribute tends to show a decrease.

Consider two variables x and y:

If r = 1, then x and y are perfectly positively correlated. The possible values of x and y all

lie on a straight line with a positive slope in the (x,y) plane.

If r = 0, then x and y are not correlated. They do not have an apparent linear relationship.

However, this does not mean that x and y are statistically independent.

If r = -1, then x and y are perfectly negatively correlated. The possible values of x and y all

lie on a straight line with a negative slope in the (x,y) plane.

Correlation between the following has been worked out:

Correlation between sales and profit.

.Correlation between services and profit.

.

INVENTORY RATIO

Analysis and interpretation of financial statements with the help of financial statements.

With the help of ratio is termed as ‘Ratio Analysis. Ratio Analysis was pioneered by

Alexander wall who presented a system of ratio analysis in the year 1909.

A ratio is a mathematical relationship between two items in a quantitative form. Two of the

main inventory ratios are Inventory or Stock turnover ratio and stock velocity ratio.

DEFINITION:

Stock turnover ratio and inventory turnover ratio are the same. This ratio is a relationship

between the cost of goods sold during a particular period of time and the cost of average

inventory during a particular period. It is expressed in number of times. Stock turnover

ratio / Inventory turnover ratio indicates the number of time the stock has been turned over

during the period and evaluates the efficiency with which a firm is able to manage its

inventory.

Inventory turnover ratio is one of the Accounting turnover ratios, a financial ratio. This ratio

measures the number of times, on average; the inventory is sold during the period. Its

purpose is to measure the liquidity of the inventory.

Inventory turnover ratio = Cost of goods sold / Average inventory

Average days to sell the inventory = 365 / Inventory Turnover Ratio

COMPONENTS OF THE RATIO:

Average inventory and cost of goods sold are the two elements of this ratio. Average

inventory is calculated by adding the stock in the beginning and at the end of the period and

dividing it by two.

FORMULA of Stock Turnover/Inventory Turnover Ratio:

The ratio is calculated by dividing the cost of goods sold by the amount of average stock at

cost.

Generally, the cost of goods sold may not be known from the published financial statements.

In such circumstances, the inventory turnover ratio may be calculated by dividing net sales

by average inventory at cost. If average inventory at cost is not known then inventory at

selling price may be taken as the denominator and where the opening inventory.

1) (Inventory Turnover Ratio = Cost of goods sold/Average inventory at cost)

2) (Inventory Turnover Ratio = Net Sales/Average Inventory at Cost)

3) (Inventory Turnover Ratio = Net Sales/Average inventory at Selling Price)

INVENTORY RATIO

TABLE4.2: OVERALL INVENTORY RATIO

Particulars

Year 2006-2007 2007-2008 2008-2009 2009-20010

Cost of goods sold Rs’.000 Rs’.000 Rs’.000 Rs’.000

Opening stock 30500 154250 124935 270684

Add: purchase + direct expenses 3321661 8133051 7888064 3730091

Less : closing stock 154250 124935 270684 570736

Cost of goods sold 3197911 8162366 7742315 3430039

Average inventory

(opening stock +closing stock) 92375 1395925 197810 420710

Inventory Turnover Ratio: Times

35 6 39 8

2006-2007 2007-2008 2008-2009 2009-20010

35

6

39

8

Inventory Turnover Ratio: TimesInventory Turnover Ratio: Times

.

YEAR SALES (X) PROFIT (Y)

2007 10047456 1141360

2008 11473216 678366

2009 6765631 854826

2010 12877571 1354799

CORRELATION 0.430427104

1 2 3 40

2000000

4000000

6000000

8000000

10000000

12000000

14000000

SALES (X)PROFIT (Y)

YEAR SERVICES (X)

PROFIT (Y)

2008 1028462

678366

2009 2643950

854826

2010 2865694.89

1354799

CORRELATION 0.776169537

1 2 30

500000

1000000

1500000

2000000

2500000

3000000

SERVICES (X)PROFIT (Y)