TABLE OF CONTENTS

SI.NO. CONTENTS PAGE NO.

CHAPTER-I

1.1 Introduction 5
1.2 Industry profile 9
1.3 Company profile 13
1.4 Functioning department 17

CHAPTER-II

2.1 Review of literature 32

CHAPTER-III

Title of study
3.1 33
Objective of the study
3.2 33
Scope of the study
3.3 33
Significance of the study
3.4 33
Limitation of the study
3.5 34
Research Methodology
3.6 34
Research Design
3.7 34
Financial Design
3.8 35
3.9 Period of the study 35
3.10 Financial analysis 39
3.11 Statistical analysis 43
CHAPTER-IV
4.1 Data Analysis and Interpretation 45
CHAPTER-V
5.1 Finding 71
5.2 Suggestions 73
5.3 Conclusion 73
Bibliography
Reference
 LIST OF TABLES

TABLE NO. TITLE PAGE NO.

1.4.7 Table showing Milk Procurement price 24

1.5.1 Table showing Sachet Milk: Milk Tariff 26

Table showing price list

1.6 27

1.9 Table showing Animal Strength 30

4.1.1 Table showing ABC Analysis for control panel 45

4.1.2 Table showing ABC Analysis the period for relays 46

4.2.1 Table showing Operating Ratio 48

4.2.2 Table showing Inventory turnover ratio 49

4.2.3 Table showing Stock period in days 50

4.2.3 Table showing Stock period in months 51

4.2.4 Table showing working capital turnover ratio 52

4.2.5 Table showing Current ratio 53

4.2.6 Table showing Acid test ratio 54

4.2.7 Table showing Current asset intensity ratio 55

4.2.8 Table showing Inventory to networking capital 56

4.2.9 Table showing Work in progress to inventories 57

4.2.10 Table showing Finished good to inventory 58

4.2.11 Table showing Cost of goods sold ratio 59

4.3 Table showing Correlation between Inventory & Debtors 60

4.3.1 Table showing Correlation between Inventory & Creditor 61

4.3.2 Table showing Correlation between Inventory & Sales 62

4.3.3 Table showing Chain base index Number for steel 63

4.3.3 Table showing Chain base index Number for Copper 64

Table showing Chain base index Number for Aluminum
4.3.3 65
Table showing Estimation of inventories for the year 2018-
2019
4.3.4 66
Table showing Estimation Sales for the year 2018-2019
4.3.5 67
 LIST OF CHARTS

TABLE NO. TITLE PAGE NO.

4.1.1 Chart showing ABC Analysis for control panels 45

4.1.2 Chart showing ABC Analysis the period for relays 46

4.2.1 Chart showing Operating ratio 48

4.2.2 Chart showing Inventory turnover ratio 49

4.2.3 Chart showing Stock period in days 50

4.2.3 Chart showing Stock period in months 51

4.2.4 Chart showing Working capital turnover ratio 52

4.2.5 Chart showing Current ratio 53

4.2.6 Chart Showing Acid test ratio 54

4.2.8 Chart showing Current asset intensity ratio 55

4.2.9 Chart showing Inventory to networking capital 56

4.2.10 Chart showing Work in progress to inventories 57

4.2.11 Chart showing Finished good to inventory 58

4.2.11 Chart showing Cost of goods sold ratio 59

Chart showing Estimation of inventories for the year 2018-

4.3.3 2019 67

4.3.4 Chart showing Estimation Sales for the year 2018-2019 69

 CHAPTER– I
INTRODUCTION

1.1 Meaning of Finance

Finance is regarded as the lifeblood of a business enterprise. This is because in the

modern money-oriented economy, finance is one of the basic foundations of all kinds of
economic activities. It is the matter key, which provides access to all sources for being
employed in manufacturing and merchandising activities. It has rightly been said that
business needs money to make more money. However, it is also true that money begets more
money, only when it is properly managed. Hence, efficient management of every business
enterprise is closely linked with efficient management of its finance.

1.1.2 Business Finance

Accounting is the process of identifying measuring and communicating economic to
permit informed judgments and decisions by users of the information. It involves recording,
classifying and summarizing various business transactions. The end products of business
transactions are the financial statements comprising primarily the position statement or the
Balance sheet and the income statement or profit and loss Account. These statements are the
outcome of summarizing process of accounting and are, therefore, the sources of information
on the basis of which conclusions are drawn about the profitability and the financial position
of a concern. Financial statements are the basis for decision making by the management as
well as all outsiders who are interested in the affairs of the firm such as investors, creditors,
customers, suppliers, financial institutions, employees, potential investors, resourcement and
general public the analysis and interpretation of financial statements depends on the nature
type of information available in these statements.

5
1.1.3 Importance of Finance
A financial statement is a collection of data organized according procedure. Its
purpose is to convey an understanding of some financial aspects of a business firm. It may
shoe a position at a moment in time, as in the case of a balance sheet, or may reveal a series
of activities over a given period of time, as in the case of income statement.

Thus, the term financial statements generally refers to the two statements:
(i) The position statement or balance sheet
(ii) The income statement or profit and loss account. These statements are used to
convey to management and other interested outsiders the profitability and
financial position of a firm.

Financial statements are the sources of information on the basis of which conclusions
are drawn about the profitability and financial position of a concern. They are the major
means employed by firms to present their financial situation of owners, creditors and the
general public. The primary objective of a financial statement is to assist in decision making.
Financial statements are prepared primarily for decision making. They play a
dominant role in setting the frame work of managerial decisions. But the information
provided in the financial statements is not an end in itself as no meaningful conclusions can
be drawn from these statements alone. However, the information provided in the financial
statements is to immense use in making decisions through analysis and interpretation of
financial statement. Financial analysis is the process of identifying the financial strengths
and weakness of the firm by properly establishing relationship between the items of balance
sheet and the profit and loss account. These are various methods or techniques used in
analyzing financial statements, such as comparative statements, trend analysis, common size
statements, schedule of changes in working capital, funds flow and cash flow analysis, cost-
volume profit analysis and ratio analysis.
Finance is the vital factor without which no economic utilization of all other
factors of production. Perpetual existence of the economic enterprise depends on effective
procurement and optimal utilization of finance. Management of finance to secure good
working results becomes inevitable in the modern business world. If it is managed
systematically, a good return in terms of profit can be expected. If nor, the very existence of
the economic enterprise will become questionable.

6
 Financial management is the use of accounting knowledge, economic models,
mathematical rules and aspects of a system analysis and behavioural science for he specific
purpose of assisting management in its functions of financial planning and control. It
explains that financial management takes much of the materials found in other subjects and
uses as its tools. It also stress on financial planning and control.
The importance of financial management cannot be over emphasized. In every
organization, where the funds are involved, sound financial management is necessary. “Bad
production management and bad sales management have slain in hundreds, but faulty
financial management have slain in thousands”. Finance managers must realize that when a
firm makes a major decision, the effect of the action will be felt throughout the enterprise.

1.1.4 Objectives of financial statements:

 To provide reliable financial information about economic resources and obligations of

a business firm.
 To provide other needed information about change in such economic resources and
obligations.
 To provide reliable information about changes in net resources (resources less
obligations arising out of business activities.)
 To provide financial information that assists in estimating the earning potential of
business.
 To disclose, to the extent possible, other information related to the financial
statements that is relevant to the needs of the users of these statements.

1.1.5 Limitations of Financial Statements:

The Financial Statements suffer from the following limitations:

 Only Interim Reports:

 These statements do not give a final picture of the concern. The data
given in these statements is only approximate. The actual position can
only be determined when the business is sold or liquidated.

7
 Do not give Exact Position:
 The Financial statements are expressed in monetary values, so they
appear to give final and accurate position. The concern is expected to
continue in the future. So fixed assets are shown at cost less
accumulated depreciation.
 Historical Costs:
 The Financial Statements are prepared on the bases of historical costs
or original costs. The value of assets decreases with passage of time
current price changes are not taken in to account.

 Impact of Non-monetary Factors Ignored:

 There are certain factors, which have a bearing on the financial
position an operating result of the business, but they do not become a
part of these statements because they cannot be measured in monetary
terms.
 No Precision:
 The precision of Financial Statements data is not possible because the
statements deal with matters, which cannot be precisely stated.

8
 1.2 INDUSTRY PROFILE

The Dairy Development Department was established in 1958 in Tamilnadu. The

administrative and statutory control over all the milk cooperatives in the State were
transferred to the Dairy Development Department on 1.8.1965. The Commissioner for Milk
Production and Dairy Development was made as the functional Registrar under the
Tamilnadu Cooperative Societies Act. With the adoption of 'Anand pattern' in the State of
Tamilnadu, Tamilnadu Co-operative Milk Producers' Federation Limited was registered in
the State on 1st February 1981.

The commercial activities of the Department such as Milk Procurement, Processing,

Chilling, packing and sale of milk to the consumers etc., hitherto dealt with by the Tamilnadu
Dairy Development Corporation Ltd., were transferred to the newly registered Tamilnadu
Co-operative Milk Producers' Federation Limited, popularly known as "Aavin".

In the wake of liberalization policy, private dairies have also entered into the field of
dairying. As per the directions of the Honorable Chief Minister of Tamilnadu high priority
has been given for improving the performance of milk Co-operatives by adopting a
systematic approach and proper strategy in Milk Co-operatives. Significant achievement has
been made by Milk Producers' Cooperative Societies, Unions and Federation in the State of
Tamilnadu.

The cattle population in India is approximately 15% of total cattle population in the
world. India stood no. 1 position in milk production. Tamilnadu is one of the leading state in
milk production. The milk production in Tamilnadu per day is 145.88 Lakh litres.

9
1.2.1 OBJECTIVES OF THE DAIRY DEVELOPMENT DEPARTMENT:

 Assure a remunerative price for the milk produced by the member of the Milk
Producers' Co-operative Societies through a stable, steady and well organized
market support.
 Distribution of quality milk and milk products to the consumers at reasonable
price.
 Keeping these objectives in mind, a number of activities are undertaken by the
Dairy Development Department, viz., Provision of free veterinary health cover
to all animals owned by the members of milk cooperatives, implementation of
Artificial Insemination Programme, supply of balanced cattle feed and
inculcation of farmers with the modern animal husbandry methods and
practices.
 All activities, which are essential for the up gradation of the milch animals and
improving their productivity in the long run, have been undertaken.
 Provision of necessary infrastructure facilities for marketing milk and milk
products and supply of quality milk to the consumer has been made by way of
establishing new chilling centers, pasteurization plants and adoption of
modern processing system.

1.2.2 DEPARTMENTAL SET UP:

The Commissioner for Milk Production and Dairy Development is the Head of
the Dairy Development Department. He is the functional registrar in respect of Dairy Co-
operatives in the State. He is also the Ex-officio Managing Director of the Tamilnadu
Cooperative Milk Producers' Federation Limited. i.e. Aavin.
The Commissioner for Milk Production and Dairy Development exercises all the
statutory powers with regard to the registration of societies, supervision, inspection, inquiry,

10
disputes, liquidation of milk cooperatives including the District Cooperative Milk Producers'
Unions and Federation under the relevant provisions of the Tamilnadu Cooperative Societies
Act, 1983 and Tamilnadu Cooperative Societies Rules, 1988. While discharging the statutory
functions, the Commissioner for Milk Production and Dairy Development is assisted by the
Deputy Milk Commissioner (Co-operation) in the rank of Joint Registrar of Cooperative
Societies and a Deputy Registrar at the Headquarters besides 23 Deputy Registrars (Dairying)
at the District level by way of conferring the powers of the functional Registrar.

1.2.3 FUNCTIONS OF THE DAIRY DEVELOPMENT DEPARTMENT:

The main functions of the Dairy Development Department include Organization of

societies, registration of societies, supervision and control of primary milk cooperatives,
District Cooperative Milk Producers Unions and Tamilnadu Cooperative Milk Producers
Federation.

The Dairy Development Department exercises statutory function - like Inquiry,

Inspection, Surcharge and Super session, appointment of special officers, liquidation and
winding up of dormant Societies etc. The Commissioner for Milk Production and Dairy
Development, Deputy Milk Commissioner (Co-operation), and Circle Deputy Registrars
(Dairying) are vested with quasi-Judicial powers in respect of settlement of disputes, appeal,
revision and review under various provisions of Tamilnadu Cooperative Societies Act, 1983
& the Tamilnadu Cooperative societies Rules, 1988 made there under.The Commissioner for
Milk Production and Dairy Development has been designated as the State Registering
Authority for the state of Tamilnadu, under the provisions of Milk and Milk Produce
Order'92. All the Dairy units including private Dairies handling more than 10,000 lpd of milk
or Milk Products containing milk solids in excess of 500 Metric tones per annum have to
obtain registration certificate under the provision of Milk and Milk Products Order'92. The
Commissioner for Milk Production and Dairy Development / State Registering Authority has
been conferred with powers to register the dairy units having handling capacity from 10,000
lpd to 2,00,000 lpd. The Commissioner / State Registering Authority, Deputy Milk
Commissioner (Co-operation) / District collectors and Deputy Registrars (Dairying) have
been authorized to carry out supervision and periodic inspection of the dairies.

11
1.2.4 PRIMARY DAIRY COOPERATIVES MILK SOCIETIES:

A minimum of 25 or more individuals competent to contract under section 11 of the

Indian Contract Act of 1872, owning Milch animals, can form a Primary Dairy Cooperative
Society, with one or more villages as its area of operation. Such persons have to approach the
Circle Deputy Registrar's (Dairying) office functioning at the District for further guidance.

The members of Primary Cooperative milk society have to supply milk to the Society
which will procure milk on quality basis and they will receive milk cost once in 10 days / 15
days from the Society. Milch animals are provided with free veterinary health cover, artificial
insemination and the supply of balanced cattle feed.

1.2.5 WOMEN MILK PRODUCERS CO-OPERATIVE SOCIETIES:

In order to encourage the women members to contribute more to the dairy sector, they
are being called upon to organize women milk producers' cooperative societies in their
respective areas. There are 1210 women milk Producers’ cooperative societies functioning in
Tamilnadu.

Primary Milk Cooperative Societies and District cooperative Milk Producers Unions
and Federation were previously administered by elected Boards. As the terms of office of the
members of elected Board already expired and as they were continuing only on extended
term of office as per section 33(10)(aa) of Tamilnadu Cooperative Societies Act, 1983, the
Government issued orders terminating the extended term of office of members of Boards of
these societies and the Special Officers have been appointed under section 89(1) of
Tamilnadu Cooperative Societies Act, 1983. All the primary Milk Cooperative Societies are
now functioning under the Control of Special Officers since 26.5.2001. In respect of District
Cooperative Milk Producers Unions, the Collectors of respective Districts have been
appointed as Special Officers and for Tamilnadu Cooperative Milk Producers Federation
Ltd., the Managing Director of the Federation has been appointed as Special Officer.
Consequent on the bifurcation of the Dharmapuri District and creation of new District namely
Krishnagiri, the District Collector of Krishnagiri has been appointed as Special Officer of
Dharmapuri District Cooperative Milk Producers’ Unions Ltd., with effect from 27

12
 1.3 COMPANY PROFILE

1.3.1 NAME OF THE COMPANY:

KANYAKUMARI DISTRICT CO-OPERATIVE MILK

PRODUCER’S UNION LTD.,

1.3.2 BRAND NAME:

AAVIN

1.3.3 SLOGAN:

PURE, FRESH AND HEALTHY

1.3.4 LOGO:

13
1.3.5 HISTORY:

The Kanyakumari District Co-operative milk producers union ltd is an co-operative

organisation and it has been registered under co-operative society act on 25th January1949
under registration number 2946. The union started functioning on 7th February 1950. Later it
was elevated as NANGIL NAADU MILK supply co-operative union on january 1951 and
during 1961 it was renamed as Kanyakumari District Co-operative union. Then again it was
converted as Kanyakumari District Co-operative milk producers union ltd., This dairy is
located at NAGERCOIL., the headquarters of Kanyakumari District.

1.3.4 ARTIFICIAL INSEMINATION:

To improve the variety and introduce different breeds of cattles in their members
societies, the artificial insemination scheme had been introduced in this union from 22nd sept
1988. The union is taking various steps to provide adequate training to its employees to do
artificial insemination by sending them various training institutes and place them in different
societies to do AI services to the cattles of member societies.

1.3.5 ETP (Effluent Treatment Plant):

It is a cycle process used to purify the contaminated water release from the areas of
tub wash and from the lab. Also it is helpful to arrest the spread age of some harmful diseases
and the partially purified water is regenerated to plant. The water being coming out from
dairy and to avoid the pollution in the surrounding of the union.

1.3.8 CATTLE FIELD:

Kanyakumari milk union limited is procuring compounded cattle feed pallets from
Tamil Nadu Milk Producer Federation Ltd., from Chennai and Erode and TANFED and
distributing it to primary societies of credit basis

14
1.3.9 VISION:

 Kanyakumari District Co-operative Milk Producers Union vision is to establish

sustainability to farmers in their social needs on economic growth, health, education
awareness, rural hygiene, women development, maternal and child health, roads and
communication, drinking water, solar energy etc.,. Above all it is our self-
independence through Co-operative Milk Society. This is the vision for milk
producers and farmers of the villages.
 In consumer front, Kanyakumari Milk Union’s vision is to fulfil the demand of
consumers with range of milk and milk products that are nutritious, have exceptional
taste and their sustainable nature, cast effectiveness and quick availability. The
envision these with good networking facilities both in urban and rural markets to
invigorate accessibility.

1.3.10 MISSION:

To made the above vision work with utmost efficiency, it is absolutely mandatory to
work dedicatedly without considering the number of working hours and time spend in
villages/plant/market. Continuous and strategic planning discussion and implantation of
different programs, robust evaluation method to measure the success and reframe lines of
action are must in making envisioned thoughts turn in to a reality.

15
1.3.11 AGLANCE OF AAVIN

Date of Registration 25.01.1949

Date of Functioning 07.02.1950
Conversion as Producers Union 16.02.1982
Area of Operation Kanyakumari District
Total number of Societies 52
Functioning Societies 48
Number of Societies is Supplying Milk to Union 42
Number of Milk Collection Routes 4
Present Selling Ratio 16,000 litre per day
Milk Procurement Team 2
Number of Societies doing Artificial insemination 21 socities
Mobile Veterinary Unit 2
Dairy Capacity 30,000 litres
Pasteurization Capacity 5000 litres per hour
Milk Storing Capacity 30,000 litres
Boiler 2x1 ton
Milk Tanker 1 6650 litres capacity
Milk Purchase Rate Based on Quality
Milk Payment For every 15 days
Generator 75 kilo watt
Milk packet machine packaging capacity IS3 &IS5 2500 sachets per hour &5000
sachets per hour

16
1.4 FUNCTIONING DEPARTMENT

1.4.1 Financial Department Chart

BOARD OF DIRECTORS

CHAIRMAN

GENERAL MANAGER

DEPUTY MANAGER
FINANCE-1

EXECTIIVE OFFICER-1

JUNIOR EXECUTINE-5

17
1.4.2 Process
It is headed by the General Manager and controlled by deputy manager of
Accounting and Finance. They are assisted by an executive officer and junior executives.

Functions

 The accounting department functions are the transactions related to purchase and sales
are recorded in the accounts book. The accounts are prepared under the finance
department only.
 Cash is received in the evening and the amount is banked in the next day morning. All
the payments are mostly paid by cheques.
 Using available financial resources properly.
 Paying taxes and insurance in time.
 Only cash transactions and cheques, there is no credit facility.
 Payment of milk is done by every 15 days

Selling Price Fixing:

 In aavinparlours (own), the products are sold for the MRP rate.
 In agent parlours, the products are sold less than the MRP rate, to get profit.

Types of Software for Accounting procedure

The software which is used for the purpose of accounts are Tally , MS
office,& MS excel software of 7.1 version which covers all recent updates, accounting
standards and also tally software of 7.1 version covers VAT concept which marks very easy
for company to fill the tax according rules and regulation.

Banking With

 Kanyakumari District Central Co-operative Bank

 State Bank of India
 State Bank of Travancore
 Canara Bank
 Axis Bank.

18
1.4.3 Profit allocation

Co-operative & Research Fund 3%

Education 2%

Dividend on Share Capital 14%

Build Fund 10%

Common Good Fund 10%

Reserve Fund 20%

Dividend Equalization Fund 2%

Dairy Research Fund 3%

19
1.4.4. Products

1. Milk and milk products in Kanyakumari union

 Cow milk (3.5% fat )

 Double toned milk (1.5% fat)
 Badam mix powder
 Butter milk
 Curd
 Milk peda

1.4.5 Milk and milk products hiring from other unions

There are some products that have been hired from other unions in other districts also,
which are sold under the brand name Aavin. Such products are ,

 Ghee
 Milk shake
 Ice cream
 Flavoured Milk
 Paneer
 Butter

I. Double Toned Milk (1.5% fat & 9% SNF)

Double toned milk is nutritious and with low fat content. It is mainly considered for
morning sales and it package outlook is pink. Mostly calorie conscious people prefer this type
of milk.

II. Cow Milk (3.57% fat & 8.5% SNF)

Cow milk contains arytenoids and is a good source of vitamin- A. Cowmilk is easily
digestible and is considered to be close to mother’s milk and it is mainly consider for sales
except morning the packaging outlook is orange.

20
III. Flavoured milk and Milkshake
The types of flavoured milk are,

 Strawberry
 Pista
 Cardamom

The types of milkshake are

 Chocolate
 Apple
 Vennila
 Mango
 Carrot
 Badam

IV. Badam mix powder

It is an healthy powder to make an delicious milk drink. The badam mix powder can
be kept for 120 days and it is packed in an pet jar. Badam mix powder sales rate is
high in Chennai.

V. Milk peda

It is an sweet prepared with milk and sugar as main ingredient and it is thick,
semisoft pieces in 50 gms ,250 gms and it can be stored for 5 days.

VI. Curd

The curd is soft and solid white substance formed when milk coagulates or forms
when milk turns sour.

21
VII. Ice cream

Aavin ice creams are very popular in the metro city and urban. There are 25
flavours that are moderately priced available in all milk parlours and franchise retail
outlets. It is considered to be of high quality by all most of the people.

Distribution of channel products

The milk is supplied in poly film packet in 500 ml and 250 ml. It is marketed by,
 Agent
 Aavin parlour (Own)
 Aavin parlour agent
 Milk producers co-operative society.

1.4.6 FUNCTIONS OF DISTRICT COOPERATIVE MILK PRODUCERS UNIONS:

There are 17 District Cooperative Milk Producers' Unions functioning in the
State of Tamilnadu covering 30 Districts. There are 15 Dairies in District Co-operative Milk
Producers' Unions with an installed processing capacity of 19.42 llpd. There are 36 Chilling
Centres (Functional) in District Co-operative Milk Producers' Unions with installed chilling
capacities of 13.55 llpd.

Establishment of chilling centers:

 Supply of quality milk to Chennai Metro under hygienic conditions.

 Fixation of procurement and selling price of Milk
 Increase of liquid milk sales by introducing innovative sales promotional activities.
 Supply of inputs to the members of the societies.
 Extending Artificial insemination services to the cattle owned by the members of
Milk Cooperative Societies.
 Providing milk cans, Milk 'O' testers and LN2 containers.

22
  Salem, Erode, Madurai and Dharmapuri Unions are the Feeder Balancing Dairies.
Surplus milk in the District Unions, after meeting their local sales is diverted to the
nearest Feeder Balancing Dairies for conversion into milk products, such as Skim
Milk Powder, Butter and Ghee.
 The three Cattle Feed Plants at Madhavaram, Erode and Kappalur are run by the
Kancheepuram - Tiruvallur Union, Erode Union, Madurai Union respectively. The
production capacity of these cattle feed plants is 100 MT per day each. The balanced
cattle feed produced in the form of pellets and mash are supplied to the members of
the Milk Co-operatives, livestock farms manned by the Animal Husbandry
Department and to various local bodies including the Corporation of Chennai.

1.4.7 MILK PROCUREMENT BY DCMPU’s:

Most of the rural people especially women make their livelihood by rearing Milch
animals and by supplying milk to the Co-operatives. Keeping this in view and to improve the
rural economy and to enhance the personal income of the stake holders in rural area,
Government of Tamilnadu directed the Tamilnadu Co-operative Milk Producers’ Federation
and District Co-operative Milk Producers’ Union to raise the procurement price of the cow's
milk from Rs.10.50 to Rs.12.00 per liter and that of the buffalo’s milk from Rs.12.50 to
Rs.14.00 with effect from 07.03.2018 and the milk cost as per the revised procurement price
is being disbursed to the Milk producers.

The procurement price payable to milk producers was increased from 01.09.2018 as follows:

23
 Milk Procurement price Table No. 1.4.7

Buffalo milk Cow milk

Price per Litre (in Rs.) Price per Litre (in Rs.)

7.0%Fat and 8.8% SNF 4.5% Fat and 8.5% SNF

Before Before
From 7.3.2018 From 7.3.2018
7.3.2018 7.3.2018

14.00 17.50 12.50 14.50

Average milk procurement in DCMPUs in lakh liters per day

Average Milk Procurement Table no. 1.4.7

Year 2013-2014 17.49

Year 2014-2015 15.79

Year 2015-2016 17.26

Year 2016-2017 20.56

Year 2017-2018 21.59

Year 2018-2019 22.10

24
 AVM UNITS

Standardised Milk (Per litre)

4.5% / 8.5%

Card MRP

Rs. 15.50 Rs. 16.00

Standardized Milk Tariff Table No. 1.4.8

1.5 MARKETING:

The three wings are carrying out the marketing of milk and milk products of the Federation
namely:

1. Metro Liquid milk marketing.

2. Metro Milk Product marketing.
3. Up country marketing.

The product wing of the Federation directly carries of marketing of the products.
The sales of milk in sachets is being carried out through 24 zones, 516 Depots, 364
Distribution Points, 35 Whole Sale Milk Distributors, 89 Milk Retailers and 48 Milk
Consumers’ Co-operative Societies. The sale of milk product is being carried out through 42
parlours, 185 Franchise Retail Outlets (FROs), 12 Wholesale dealers, and 4824 Retailers.
Standardised milk, Buffalo milk and double toned milk are being sold through 218 Automatic
Vending Machines and 185 FRPs to the city consumers. Milk products are also sold in certain
AVM Units. Sachet milk sales are also carried out in AVM unit.

25
1.5.1 MILK SELLING PRICE:
The selling price of Toned / Standardized / Full Cream milk in sachets and in AVM units are
as detailed below
New price chart (With Effect From 01-09-2018)

AAVIN MILK: TARIFF STRUCTURE (in Rs)

Variety Fat SNF * Monthly Card ** Maximum Retail Price

(%) (%) Present Present Revised

Revised
rate rate rate
rate

Toned milk 3 8.5 15.75 17.75 18.00 20.50

1 lit

Tone milk 3 8.5 7.90 8.90 9.00 10.25

500 ml

Standardized 4.5 8.5 9.50 11.00 11.00 13.00

milk 500 ml

Standardized 4.5 8.5 9.25 10.75 10.00 12.00

milk 500

ml ***

Full cream 6.0 9.0 10.50 12.00 12.00 14.00

milk 500 ml

Double toned 1.5 9.0 7.75 9.25 9.00 11.00

milk 500 ml

Sachet Milk: Milk Tariff Table No. 1.5.1

26
1.6 PRICE LIST

S.NO NAME OF THE PRODUCTS MRP Rs.Ps.

1 DTM MILK 250ML 9.50
2 DTM MILK 500 ML 19.00
3 COWMILK 500 ML 21.00
4 FCM MILK 500 ML 23.00
5 MILK PEDA 50 GM 21.00
6 MILK PEDA 250 GM 105.00
7 BADAM MIX POWDER 80.00
8 F.M.TETRA 20.00
9 MILK SHAKE 22.00
10 MAAVIN 15.00
11 GHEE 200 ML 100.00
12 GHEE 500 ML 235.00
13 GHEE 1000 ML 460.00
14 GHEE 5000 ML 2300.00
15 GHEE 15 KG TIN 7580.00
16 BUTTER MILK 200 ML 8.00
17 CURD 200 ML 11.00
18 CURD 500 ML 25.00
19 BUTTER 500 GM 220.00
20 PANEER 200 GM 65.00
21 GULAB JAMUN 50.00

Products price list Table No. 1.6

27
1.7 STRENGTHENING INFRASTRUCTURE FOR QUALITY AND CLEAN MILK
PRODUCTION:

Government of India sponsored a scheme called ‘Strengthening Infrastructure for

Quality and Clean Milk Production’ to strengthen infrastructure facilities and to ensure Clean
milk production at village level. The period of the scheme is two / three years.

Objective of the scheme is to train farmers on clean milk production activities, to

provide chemicals and utensils to pouring members, to strengthen district union dairies /
chilling centers laboratory and to install bulk milk coolers at societies to improve initial
quality of milk.

Government of India will release the entire amount as full grant for training, provision
of antiseptic solutions, supply of stainless steel utensils and modernization of Quality Control
Labs at Dairies / Chilling Centers. Government of India will release 75 percent as grant for
installation of bulk milk coolers and the remaining 25 percent will be met by the concerned
beneficiary District Unions.

Government of India so far has sanctioned Rs.1224.21 lakhs to Kanyakumari,Vellore,

Villupuram, Trichy, Dharmapuri, Salem Kancheepuram-Tiruvallur, Erode, Nilgiris and
Madurai milk Unions for the implementation of the scheme.

Under these schemes, 48001 members will be benefited, 90 Bulk Milk Coolers will be
installed and the chilling capacity will be increased by another 3.71 lakhs LPD

1.8 DISTRICT UNIONS OF FEDERATION :

There are 17 District Co-operative Milk Producers’ Unions functioning in Tamil Nadu,
covering 30 Districts. They are 1.Kancheepuram-Tiruvallur , 2.Villupuram , 3.Vellore ,
4.Dharmapuri , 5.Salem , 6.Erode , 7.Coimbatore , 8.Nilgiris , 9.Madurai , 10.Dindigul ,
11.Trichy , 12.Thanjavur , 13.Pudukkottai, 14.Sivagangai , 15.Virudhunagar ,16.Tirunelveli ,
17.Kanyakumari

28
THE TAMILNADU CO-OPERATIVE MILK PRODUCERS’ FEDERATION LTD
NUCLEUS JERSEY AND STUD FARM
FINGER POST P.O., OOTACAMUND – 643 006, NILGIRIS DISTRICT, TAMIL NADU
PHONE: (0423) 2444059, FAX: (0423) 2400143, email: [email protected]

INCEPTION:

Started at Udhagamandalam on 29.03.1973 under the direct control of the Tamil Nadu Dairy
Development Corporation now Tamilnadu Co-operative Milk Producers’ Federation Limited.

LOCATION:

Situated in 37.725 acres of land taken on lease from the Forest Department, adjacent to
the Gymkhana Club, Ooty. Financial Assistance – The erstwhile Indian Dairy Corporation
Technical Guidance – National Dairy Development Board.
Divisions of the Farm -
(a) Bull Mother Farm
(b) Stud Farm
(c) Frozen Semen Bank
(d) Liquid Nitrogen Plant
(e) Fodder Farm
(f) Quality Control Laboratory

1.8 OBJECTIVES OF STUDY

i) To maintain pedigreed Jersey cattle, to produce genetically superior Jersey

Breeding Bulls and Cows.
ii) To produce Frozen Semen Straws from genetically superior Jersey , Friesian and
Cross-bred Bulls and supply the same throughout Tamil Nadu for Artificial
Insemination of Cattle.
iii) To augment milk production in local cattle in the milk sheds of Tamil Nadu under
Operation Flood by Cross-breeding through Artificial Insemination using quality
Frozen Semen produced from high milk
yielding pure-bred and cross-bred bulls with superior germ plasm.

29
1.9 ANIMAL STRENGTH AS ON 31-12-2018

JERSEY FRIESIAN
DESCRIPTION JERSEY FRIESIAN TOTAL
CROSS CROSS

COWS 12 -- -- -- 12

FEMALES
CALVES: 05 -- -- -- 05
HEIFERS 02 -- -- -- 02

MALES:
CALVES
09 -- 01 10
YOUNG
1 02 03
BULLS

BREEDING
29 49 03 0 81
BULLS

TOTAL 58 49 03 03 113

Animal Strength Table No. 1.9

SEMEN DISTRIBUTION:
Frozen Semen Straws produced from this unit are distributed to all the District Co-operative
Milk Producers’ Unions in Tamil Nadu.

Our other Customers:

1. Chittoor District Co-operative Milk Producers’ Union, A.P.

2. Andhra Pradesh Livestock Development Agency, A.P.
3. Kerala Livestock Development Agency, Palakkad (on exchange basis)
4. National Dairy Research Institute, Kalyani
5. Department of Animal Husbandry, Haryana
6. Patna Animal Development (Pvt) Ltd., Bihar
7. Private practitioners.
8. Sikkim Livestock Development Board , Sikkim
9. Department of Animal Husbandry, Tamil Nadu.
10. Department of Animal Husbandry, Pondichery .

30
Quality Policy

"TCMPF Ltd., is committed to supply milk, and milk products of quality at competitive price
to satisfaction of the customers and to strive for excellence and customer delighted.

Liters per day in sachets and 0.3 Lakh Liters per day for Bulk Vending
dispatches.This is the first automatic Dairy having Reception, Quality check and Processing
with Programmed Logistics Control System. The dairy is equipped with Processing, Quality
assurance, CIP, Packing and Cold Storage facilities. Dairy is equipped with latest Effluent
Treatment Plant to handle 5.0 Lakh Liters per day. Effluent Treatment Plant is operated as
per the Tamilnadu Pollution Control Board norms and the treated trade effluent water is used
for agriculture purpose within the Dairy premises Milk Producers’ Unions in Tamil Nadu.

Our other Customers:

1. Chittoor District Co-operative Milk Producers’ Union, A.P.
2. Andhra Pradesh Livestock Development Agency, A.P.
3. Kerala Livestock Development Agency, Palakkad (on exchange basis)
4. National Dairy Research Institute, Kalyani
5. Department of Animal Husbandry, Haryana
6. Patna Animal Development (Pvt) Ltd., Bihar
7. Private practitioners.
8. Sikkim Livestock Development Board , Sikkim
9. Department of Animal Husbandry, Tamil Nadu.
10. Department of Animal Husbandry, Pondichery

31
 CHAPTER-II

REVIEW OF LITERATURE

2.1 REVIEW OF LITERATURE

For every project literature review is quite essential as it reveals the synopsis, reason
behind the choice of particular area of study. It enables a person to get an idea about the study
being made and forms the base for further analysis.

Academic journals, books, published and unpublished bibliographies are the primary
sources are the review of earlier studies. Before choosing a project it is essential that one
should be thorough with the area of study and able to rephrase the same in meaningful terms.

Inventories are the stock of products that the company manufactures for sale and
components that make up the products. The inventory of a manufacturing unit includes raw
materials, work in progress, finished goods and supplies.

Inventories constitute a significant part of the current assets of a 60% of current assets
in Indian Companies. Because of large size of inventories maintained by firms a considerable
amount of funds is required to be committed to them. It is therefore absolutely imperative to
manage inventories efficiently and effectively in order to avoid unnecessary investment.

A firm neglecting the management of inventories will be jeopardizing its long run
profitability and may fail ultimately. It is possible for a company to reduce its level of
inventories to a considerable degree. E.g.10 to 20% without any adverse effect on production
and sales by using simple inventory planning and control techniques. The reduction in
excessive inventories caries a favorable impact on a company’s profitability

32
 CHAPTER-III

RESEARCH METHODOLOGY

3.1 TITLE OF STUDY:

A study of inventory management in the kanyakumari district

co-operate milk producer union ltd.

3.2 OBJECTIVES OF THE STUDY:

3.2.1 Primary Objective:

To Study on Financial Analysis in Aavin

3.2.2 Secondary Objective:

1. To study the liquidity of AAVIN
2. To study the solvency of the Company.
2. To study the profitability of the Company.
3. To identify the problems of the Company in the areas of liquidity, solvency and
profitability and to offer concrete suggestions to tackle the problems.

3.3 SCOPE OF THE STUDY:

There are various methods of research study. Case study is one of the research
studies. In this study, the present researcher has analyzed the Financial performance of
AAVIN. The liquidity solvency and profitability was analyzed to know whether the company
is capable of generating profits and capable of meeting its obligations in time.

3.4 SIGNIFICANCE OF THE STUDY:

This study aims at creating an awareness among he management and share holders of
AAVIN regarding the importance of financial management through proper methods. The
present study will throw light on the finance performance of the Company in terms of
liquidity, solvency and profitability. The tools applied to find out the level of financial
performance will pinpoint the areas requiring improvement.

33
3.5 LIMITATIONS OF THE STUDY:
The limitations of the study are furnished below:
1. Financial account itself has its own limitations like personal
Judgment of the accountant.
2. In this study, only selected ratios were used.
3. Since the study relates to AAVIN the findings and suggestions cannot be
generalized.

3.6 RESEARCH METHOLODOGY

Research methodology is the way to systematically solve the research problem.

This study on Inventory Management can be grouped under the analytical research studies.
The study can also be called as analytical studies because the facts and information’s that is
readily available are being used to make critical evaluations of Inventory Management at
AAVIN LTD, CHENNAI. The study can also be called as a descriptive studies because the
portrays accurately the characteristics of a particular individual, situation or a group.

3.7 RESEARCH DESIGN

3.7.1 ANALYTICAL DESIGN

The researcher has to use facts or information already available and analyze those facts
to make a critical evaluation of the material.

3.7.2 DATA COLLECTION METHOD

Secondary Data

Apart from the primary data, the branch schedules, audited accounts and system
applications and data processing (SAP) package for the relevant period have also been used
extensively. The data from the reports have been analyzed using various tools and techniques
with the view to evaluate the performance in the management of current assets.

34
3.7.3 INVENTORY CONTROL TECHNIQUES

A. ABC Analysis

B. XYZ Analysis

C. SED Analysis

D. FSND Analysis

3.8. FINANCIAL ANALYSIS

A. Ratio analysis

3.8.1 STATISTICAL TOOLS

A. Coefficient of Correlation

B. Index Numbers

C. Trend Analysis

D. FSND Analysis

3.8 PERIOD OF STUDY:

The study covers a period of five years from 2004 - 05 to 2008 - 09. The accounting
year of the company is 1st April to 31st March every year.

3.8.1 INVENTORY CONTROL TECHNIQUES

Every organization consumes several items of stores. All these items don’t need
equal importance. A high degree of control of inventories of each item is neither practical
nor worthwhile. Therefore, it becomes necessary to classify items in-group depending upon
their degree of importance.

35
A. ABC ANALYSIS OF INVENTORY CONTROL

ABC analysis is a basic analytical management tool, popularly known as “Always

Better Control”, has universal applications in many are as of human endeavor. This technique
tries to analyze the distribution of any characteristic by money value of importance in order
to determine priority. In materials management, this technique has been applied in areas
needing selective control, such as inventory, criticality of items, obsolete stocks, purchasing
order, inspections etc.

A= 5-10% of top number of items account for 70% total consumption. value
B= 15-20% of the number of items account for 20% of total consumption value C=
70-80% of the number of items account for 15% of total consumption value.

B. XYZ ANALYSIS:

While the ABC classification of inventories has consumption value as basis, the XYZ
analysis has the closing inventory value as the basis for classification of inventories.

X- Items with high inventory value

Y- Items with moderate inventory value.
Z- Items with low inventory value

The XYZ analysis, done once in a year, helps to identify the items that are being stocked
extensively. A combination of ABC & XYZ analysis will help the firm to have better
inventory control

C. SED ANALYSIS

SED Analysis helps firm to classify its materials based on their availability in
the market. This will have an impact on the decision for fixing lead-time for any time.
Longer the lead-time indicates the criticality of the item. The classification runs like this:

36
 S= Scarce Items
E= Easy (not difficult to get) Items
D= Difficult (to procure) Items
The items needed to manufacture the relays; control panel and medium voltage are
grouped as local and foreign supplies. RMC1, RMC2 are the item classes that indicates local
purchase. RMC3, RMC4 represents the imported items. RMC4 category exists only for the
Relays being produced. AREVA considers the RMC4 items as scarce items(S items).
The local suppliers being prompt and reliable for RMC1, RMC2 are considered as
items that are always available (E items). The RMC3 & RMC4 items, through available in
the market, are considered as trading items and are grouped under those items which are
available in the market with difficulty (D items).

D.FSND ANALYSIS

All the items are not required with the same frequency in any organization.
Some are required regularly, some occasionally and some once in a while

FSND Analysis places the items in four categories:

F= Fast Moving Items
S= Slow Moving Items
N= Non-Moving Items
D= Dead Items
Inventory policies and models for these groups are different. Theoretical models
have validity for F items with regular consumption. Spares are slow moving (s) and require
special management. Disposal policies are designed to control dead stock. This analysis is
useful mainly to combat obsolete items. Cut-off points are usually based on the number of
issues in the past 2-3 years.

37
3.8.2 FSND IN TCMPF LTD

The products manufactured inAAVIN LTD, based on KANYAKUMMARI

customer’s demand for the same over a period of time. In AAVIN LTD,
KANYAKUMMARI , the products for which demand is regular over the entire year
including peak demands are considered as fast moving & the items used to produce those
products are labeled as ‘F’ items

The demand doesn’t remain in the peak all the time. When the demand for a
product reduces, the items used to make that product remains in stores and moves slowly.
They are termed as “S” items. There are products, which are demanded, in a particular
season.

The demand for these items is more when electric supply fluctuations are more.
For rest of the period, these items are considered as non-moving and are stored as the stocks.

Dead items are those items, which constitute to make a product, which has
become obsolete due to change in design of a product demanded. E.g., the Air circuit
breakers, which were produced, based on the expectation that its demand will continue,
become obsolete due to change in requirement pattern of the product.

The items forming part of such products are considered as dead items. AAVIN
LTD, KANYA KUMMARI takes due care that the items stored especially the Dead and a
Non-moving item doesn’t affect its cost constitution to a major extent. The inventory policy
is designed with the base to avoid unnecessary cost on inventory.

38
3.9. FINANCIAL ANALYSIS

A. RATIO ANALYSIS
RATIO
A ratio is a mathematical relationship between two items expressed in quantitative
form. Ratio can be defined as
“Relationships expressed in quantitative items between figures which have cause
and effect relationships or which are connected with each other in some manner or the
other”

1. PROFITABILITY RATIO

Ability to make maximum profit from optimum utilization of resources by a business

concern is termed as “profitability”. Profit is an absolute measure of earning capacity. It
depends on sales, cost and utilization of resources.

Operating ratio:

This ratio indicates the relationship between total operating expenses and sales.

Operating Ratio = Cost of sales + operating expenses X 100

Net Sales
Total Operating expenses include cost of goods sold + Administrative, Selling and
distributing expenses
Net Sales = Total Sales – Sales Returns
Operating ratios measures the amount of expenditure incurred in production, sales and
distribution of output.
It indicates operational efficiency of the firm. Lower the ratio more is the efficiency. It
should provide fair return to shareholders and other investors.

39
2. ACTIVITY RATIOS

These ratios are also called as performance or turnover ratios. The term operational
efficiency, highlighted by activity ratios, refers to effective, profitable and rational use of
resources available to the concern. To examine the judicious utilization of resources, wisdom
and farsightedness in observing the financial policies lay down & these ratios are computed.

3. INVENTORY TURNOVER RATIO:

It is also called as stock turnover ratio or stock velocity ratio. This ratio is calculated
to ascertain the efficiency of inventory management in terms of capital investment. It shows
the relationship between the cost of goods sold and the amount of average inventory. This
ratio helps to evaluate and review the inventory policy of the firm. It indicates the number of
times the inventory is turned over during a particular accounting period.

Stock turnover ratio = Cost of goods sold

Average inventory
Where, average inventories = Opening stock + closing stock
2
WORKING CAPITAL TURNOVER RATIO:

Working capital ratio measures the effective utilization of working capital. The ratio
establishes relationship between cost of sales and working capital.

Sales (or) cost of sales

Working capital turnover ratio =
Net working Capital

Where, Net working capital = Current Assets – Current liabilities

Higher sales in comparison to working capital indicate overtrading and longer sales in
comparison to Working capital indicate undertaking. A higher ratio is the indication of lower
investment of working capital and more profit.

40
4. SOLVENCY OR FINANCIAL RATIOS

Current Ratio:
= Current Assets / Current Liabilities.
Current Ratio: In the operating cycle of the firm the current assets are converted into
cash to provide funds for the payment of current liabilities. So higher the current ratio, higher
the short term liquidity, But care should be taken regarding the composition of current assets.
A firm that has large amount of cash and accounts receivable is more liquid than a firm
having large amount of inventories in its current assets
Quick Ratio :

This is a more stringent measure of liquidity because inventories, which are least liquid of
current assets, are excluded. This is because inventories have to go through a two-step
process of first being sold and converted into receivables and secondly collected. Quick ratio
indicates the ability of the firm to meet its liabilities without relying on the sale and recovery
of its inventories

It is calculated by comparing the quick assets with the current liabilities

Quick asset
Quick ratio = Current liability

Where, quick asset refers to assets, which are quickly convertible to cash. Current asset other
than stock and prepaid expenses are considered as quick assets. The ideal liquid ratio is “1”

5. CURRENT ASSET INTENSITY RATIO:

Inventory constitutes an important item of current assets. Inventories are considered

as a part of current asset wherein more concentration is needed especially in a manufacturing
unit. The current asset intensiveness indicates the high degree of relationship that exits in
between the two variables viz., inventory and current assets.
Inventory
Current Asset Intensity Ratio = -------------------------------- X 100
Current Asset
41
6. ROPORTION OF INVENTORY TO NETWORING CAPITAL:

Net working capital is the excess of current asset over Current liabilities. It refers to
that part of Current asset, which remains after the current obligations are being met out of
Current asset. Inventory also forms part of Current Asset and hence can be included to
discharge the current obligation. The inventory to Net working capital table below helps to
find the ability of AAVIN LTD, KANYAKUMARI., works to pay off its Current Liabilities.
The ration is arrived as under.

Inventory
Inventory to Net Working Capital =
Net working Capital
7. WORK -IN- PROGRESS TO INVENTORIES:
The ratio helps to analyze the position of work-in-progress in total inventory. It
shows clearly how funds are locked up in work-in-progress. The table indicates the
proportion of work-in-progress to the inventories in AAVIN LTD, KANYA KUMARI.

8. FINISHED GOODS TO INVENTORIES:

This ratio shows the constitution of finished goods in the overall inventories at AAVIN
LTD, KANYAKUMARI. The exact relationship among the two variables viz., inventories
and finished goods are found with the help of this ratio. This ratio is calculated as
Finished goods
Finished Goods to Inventories = ---------------------
Inventory

This ratio measures the efficiency of the manufacturing function in scheduling the
production and the efficiency of the marketing function in disposal of outputs of an enterprise
by constantly feeding the distribution channels. This ratio also indicates the presence of
unresolved conflicts between the marketing management and the financial management; the
former trying to keep its distribution channel overstocked for fear of stock outs and the latter
trying to keep it low for fear of high interest cost involved in carrying these inventories low
ratio not only indicated the presence of unresolved conflicts but also indicate that the

42
products of the enterprise are losing markets due to price competition or general recession. A
higher value of this ratio indicates that the firm’s products are being sold fast.

Finished goods inventory turnover ratio helps credit manager to decide on the length
of the credit he might allow to the applicant firm.

If the firm is a manufacturing firm, and the vendor firm supplies material-inputs, then
maximum number of day’s credit that may be allowed will be calculated by extending the
chain backward to include turnover of the raw material and work-in-process inventories.

9. COST OF GOODS SOLD RATIO

A firm may decompose the operating expenses as cost of goods sold ratio and other
operating expenses ratio, the ratio below portrays the cost of goods sold ratio for AAVIN
LTD, KANYAKUMARI.

Cost of goods sold

Cost of goods sold ratio = -----------------------------------
Sales

3.10 STATISTICAL ANALYSIS

A. COEFFICIENT OF CORRELATION

The Co-efficient of correlation measures the relationship between two sets of

variables. According to L.C. CORNER

‘‘If two or more quantities vary in sympathy, so that movements in one ten to be
compared by corresponding movements in the other, then they are said to be correlated.’’The
relative measure forms base for ascertaining the degree of correlation and it is denoted as ‘r’.
The value of ‘r’ is within the range of 1 to -1.

43
 B. INDEX NUMBER

Index number is a summary measure, which states a relation between groups of

related items. It is a statistical device for comparing the general level of magnitude of a group
of distinct but related variables in two or more situations. The chain – based index number is
used only when comparison is desired from year to year. The relatives for each year are
worked out on the basis of prices of the preceding year. The base year always changes. So, it
is also referred as “shifting base system”. The index number constructed on chain base
system indicates short – term fluctuations.
Formula for chain based index numbers

Current year L.X.R Previous year P.R

Chain based index =
100

Where, L.R. Indicates Link Relatives and P.R indicates the Price Relatives.

Price relative for the current year

Link relative =
Price relative for the previous year
Price relative for any year = the price relative of the previous year X the link relative of the
current year.

C.TREND ANALYSIS

The general tendency of the series to increase or decrease over the period of time is
called the Trend of series. No Short – range oscillations are included. It is a set of observation
taken at specified time interval, usually at ‘equal intervals’ from a sufficiently long period of
time. They help in making estimates of futures. The estimate made for the future period are
the forecasting and are approximate.

44
 CHAPTER - IV
DATA ANALYSIS AND INTERPERTATION

4.1 INVENTORY CONTROL TECHNIQUES

A.ABC ANALYSIS OF INVENTORY CONTROL

4.1.1 TABLE SHOWING ABC ANALYSIS FOR CONTROL PANEL

year 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

A Value 27955081 52908923 23966703 28389139 24909112

(Rs)
B Value 7987166 15116835 6847629 8111182 7116889
(Rs)
C Value 3993585 7558417 3423815 4055591 3558444
(Rs)

4.1.1 CHART SHOWING ABC ANALYSIS FOR CONTROL PANELS

ABC ANALYSIS FOR CONTROL PANELS

60000000
50000000
40000000
30000000 A
20000000 B
10000000 C
0
VALUE
2015 2016 2017 2018 2019
YEAR

45
4.1.2 ABC ANALYSIS THE PERIOD FOR RELAYS

4.1.2 TABLE SHOWING ABC ANALYSIS THE PERIOD FOR RELAYS

YEAR 2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

A Value 66563657 51305726 83118691 50758641 56033396

B Value 19018188 14658779 23748198 14502469 16009542

C Value 9509094 7329390 11874098 7251233 8004770

4.1.2 CHART SHOWING ABC ANA RELAYS

2015, 16009542
2015, 56033396
90000000
2015, 8004770
80000000
70000000 2016, 14502469
2016, 50758641
60000000
2016, 7251233
50000000
2017, 11874098
40000000
2017, 23748198
30000000 2017, 83118691
20000000 2018, 14658779
10000000 2018, 51305726
0 2018, 7329390
2015 2016 2017 2018 20019 2019, 19018188
2019, 66563657
2019, 9509094

46
4.1.3 XYZ ANALYSIS AT AAVIN

TABLE 4.1.3 TABLE SHOWING RELAY &CONTROL PANELS

YEAR RELAYS (RS) CONTROL PANELS

(RS)

2014-2015 95090939 39935830

2015-2016 73293895 75584175

2016-2017 118740987 34238147

2017-2018 72512343 40555912

2018-2019 80047708 35584445

Source: Secondary Data

INTERPRETATION:

The above table shows the XYZ analysis for the company for a period of 5
years.The relay products which have high inventory value are grouped as “X” items. The
control panels which have moderate inventory values are grouped as “Y” items. The
manufacturing and service panels which require only fewer inventories are grouped under the
“Z” category. Relays are stocked extensively to meet the growing demand for products.

47
4.2 FINANCIAL ANALYSIS

A. RATIO ANALYSIS

4.2.1.CHART SHOWING OPERATING RATIO

TABLE 4.2.1.TABLE SHOWING OPERATING RATIO

OPERATING NET OPERATING

YEAR
EXPENSES SALES RATIO (%)
2014-2015 4000953 3952423 101.22
2015-2016 3775629 3809250 99.12
2016-2017 4475309 4559573 98.15
2017-2018 5443039 5554969 97.98
2018-2019 7336429 7746628 94.70
Source: Secondary Data

INTERPRETATION:

Operating Ratio = Cost of sales + operating expenses X 100

Net Sales

A higher operating expense ratio is unfavorable since it will leave a small amount
of operating income to meet interests, dividends etc. Hence lower the ratio more is the
efficiency. From the above table it can be inferred that in the initial years i.e. in 2015 and
2016 the operating expenses ratio was high, but subsequently in the following years has
reduced its operating ratios to 98.15, 97.9 and 94.70 in the years 2017, 2018, and 2019
respectively.

1. OPERATING RATIO

OPERATING RATIO
102
100
98

(%)96
94
92 OPERATING RATIO
90
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

YEAR

48
 2. ACTIVITY RATIO

4.2.2 INVENTORY TURNOVER RATIO:

TABLE 4.2.2.TABLE SHOWING INVENTORY TURNOVER RATIO

STOCK STOCK
AVG. INVENTORY
YEAR C.G.S PERIOD PERIOD
INVENTORY T/O RATIO
(DAYS) (MONTHS)
2014-2015 2527329 77789905 3.25 112.30 3.69
2015-2016 2799979 778063.5 3.59 101.6 3.34
2016-2017 3522745 793998 4.44 52.20 2.10
2017-2018 4316484 775811 5.56 65.64 2.15
2018-2019 5580484 979958 5.69 64.14 2.10
Source: Secondary Data

INTERPRETATION:

Stock turnover ratio = Cost of goods sold

Average inventory
Where, average inventories = Opening stock + closing stock
2
The ratio indicates the efficiency of the firm in selling its products.
Generally a high turnover is indicative of good inventory management. Even though it
averages up to 3.5 it has to redesign some method. There by indicating efficiency. The stock
period is calculated at 3.69 months.

4.2.2.CHART SHOWING INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

6
5
4
3
TIMES TIMES
2
1
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

YEAR

49
4.2.3. A.STOCK PERIOD (DAYS)

4.2.3. A.TABLE SHOWING STOCK PERIOD IN DAYS

YEAR STOCK PERIOD

2014-2015 112.30
2015-2016 101.60
2016-2017 82.20
2017-2018 65.64
2018-2019 64.14
Source: Secondary Data

INTERPRETATION:
From the above table it can be seen that the stock period in days for
the year 2014-2015 is 112.30, for 2015-2016 101.60, for 2016-2017 it is 82.20, for the year
2017-2018 it is 65.64 and for the year 2018-2019 it is 64.14

4.2.3. A.CHART SHOWING STOCK PERIOD IN DAYS

120

100

80 2014-2015
2015-2016
60
2016-2017
40 2017-2018

20 2018-2019

0
STOCK PERIOD

50
4.2.3. B.STOCK PERIOD (MONTHS)

5.2.3. B.TABLE SHOWING STOCK PERIOD IN MONTHS

Table
YEAR MONTHS
2014-2015 3.69
2015-2016 3.34
2016-2017 2.70
2017-2018 2.15
2018-2019 2.10

INTERPRETATION:
From the above table it can be seen that the stock period in months
for the year 2014-2015 is 3.69, for the year 2015-2016 is 3.34, for the year 2016-2017 is 2.70,
for the year 2017-2018 is 2.15 and for the year 2018-2019 is 2.10.

4.2.3. B.CHART SHOWING STOCK PERIOD IN MONTHS

3.5

3
2014-2015
2.5
2015-2016
2
2016-2017
1.5
2017-2018
1 2018-2019
0.5

0
Months

51
5.2.4 .WORKING CAPITAL TURNOVER RATIO:

5.2.4.TABLE SHOWING WORKING CAPITAL TURNOVER RATIO

NETSALES NETWORKING WORKING

YEAR
CAPITAL CAPITAL RATIO
2014-2015 3952423 1077682 3.67
2015-2016 3809250 1185942 3.21
2016-2017 4559573 1092643 4.17
2017-2018 5554969 1159214 4.79
2018-2019 7746628 1174592 6.59
Source: Secondary Data.

Sales (or) cost of sales

Working capital turnover ratio =
Net working Capital

Where, Net working capital = Current Assets – Current liabilities

INTERPRETATION:

Working Capital Ratio measures the effective utilization of working

capital. A higher ratio indicates lower investment and higher profits. From the above it can be
understood that in the year 2014 the working capital turnover ratio was 3.67%, considerably
it went down to3.21 in 2014-2015, but in the following 3 years i.e. from 2015 to 2017 it has
shown an increasing trend.

5.2.4.CHART SHOWING WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL TURNOVER RATIO

7
6
5
4
TIMES WC RATIO
3
2
1
0
2014-2015 2015-20167 2016-2017 2017-2018 2018-2019

YEAR

52
3. SOLVENCY OR FINANCIAL RATIOS:

4.2.5 .CURRENT RATIO

4.2.5. TABLE SHOWING CURRENT RATIO

CURRENT CURRENT
YEAR CURRENT RATIO
ASSET LIABILITIES
2014-2015 2670980 1593298 1.67
2015-2016 2984325 1798383 1.65
2016-2017 2989189 1896546 1.57
2017-2018 3552120 2392906 1.48
2018-2019 4805813 3631221 1.32
Source: Secondary Data.

Current Ratio = Current Assets / Current Liabilities

INTERPRETATION:

This ratio shows the relationship between current assets and current liabilities.
The ideal ratio is 2:1. From the above table it is understood that the company’s current ratio
was better in the years 00-01 and 01-02 with 1.67 & 1.65 respectively. But after that a
considerable decrease can be seen reaching almost the lowest in 04-05 with 1.32.Hence the
Company should take measure to either increase current assets or decrease current liabilities
to achieve short-term financial stability.

4.2.5.CHART SHOWING CURRENT RATIO

CURRENT RATIO
2
1.5
CURRENT…
TIMES1
0.5
0
2014-20152015-20162016-20172017-20182018-2019

YEAR

53
4.2.6 ACID TEST RATIO

4.2.6.TABLE SHOWING ACID TEST RATIO

CURRENT QUICK
YEAR QUICK ASSETS
LIABILITIES RATIO
2014-2015 1603984 1593298 1.00
2015-2016 1799206 1798383 1.00
2016-2017 1887586 1896456 0.99
2017-2018 2374101 2392906 0.99
2018-2019 3097916 3631221 0.85
Source: Secondary Data.

INTERPRETATION:

Acid Test Ratio = Quick asset

Current liability

It is calculated by comparing the quick assets with the current

liabilities.
This ratio establishes a relationship between quick or liquid assets and current liabilities.
Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial
condition. It can be seen that the company has maintained the required ratio for the years 00-
01 & 01-02.It was standard in the years 02-03 and 03-04 with 0.99. It slightly went down to
0.85 in 04-05. But it has maintained a standard position either way.

5.2.6.CHART SHOWING ACID TEST RATIO

ACID TEST RATIO

1.05
1
0.95 ACID TEST RATIO
TIMES 0.9
0.85
0.8
0.75
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

YEAR

54
4.2.7 CURRENT ASSET INTENSITY RATIO

4.2.7. TABLE SHOWING CURRENT INTENSITY RATIO

YEAR INVENTORY CURRENT CURRENT

(Rs) ASSET (Rs) ASSET
INTENSITY
RATIO (%)

2014-2015 752618 2670980 28.18

2015-2016 803509 2984325 26.92
2016-2017 784487 2989189 26.25
2017-2018 767135 3552120 21.59
2018-2019 1192781 4805813 24.81
Source: Secondary Data.

Inventory
Current Asset Intensity = -------------------------------- X 100
Current Asset

INTERPRETATION:
This ratio shows the relationship between inventory and Current
Assets. From the table it can be inferred that the Company has maintained a standard
ratio from the year 2017 with 28.17%. It only slightly went down in the year 2018 to
21.59. But it was increased to 24.81 in 2019 higher the ratio, higher the investment in
inventories.

4.2.7.CHART SHOWING CURRENT INTENSITY RATIO

30

25

20
2014-2015
15 2015-2016

10 2016-2017
2017-2018
5
2018-2019
0
CURRENT ASSET INTENSITY RATIO

55
4.2.8 ROPORTION OF INVENTORY TO NETWORING CAPITAL:

4.2.8.TABLE SHOWING PROPORTION OF INVENTORY TO NETWORKING

CAPITAL

NETWORKING INVENTORY TO
INVENTORY
YEAR CAPITAL NETWORKING
CAPITAL (%)
2014-2015 752618 1077682 69.84
2015-2016 803509 1185942 67.75
2016-2017 784487 1092643 71.79
2017-2018 767135 1159214 66.18
2018-2019 1192781 1174572 101.55
Source: Secondary Data

INTERPRETATION:
This ratio shows the ability of the company to pay its Current Liabilities. In the
years 16-17 and 17-18the average is 68.8% i.e. Inventories constitute 68.8% of Net working
Capital. In the following years there has been a considerable increase reaching an all time
high in 2018-2019 with 101.5%.

4.2.8.CHART SHOWING PROPORTION OF INVENTORY TO NETWORKING

CAPITAL

INVENTORY TO NETWORKING CAPITAL

120
TURNOVER RATIO
100

80

60
TIMES
40

20

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

YEAR

56
4.2.9 WORK -IN- PROGRESS TO INVENTORIES:

4.2.9.TABLE SHOWING PROPORTION OF WORK-IN-PROGRESS TO

INVENTORIES

WORK-IN-
INVENTORY WORK-IN-
YEAR PROGRESS TO
PROGRESS
INVENTORY (%)
2014-2015 752618 316968 2.37
2015-2016 803509 357136 2.24
2016-2017 784487 311517 2.51
2017-2018 767135 301212 2.54
2018-2019 1192781 581232 2.05
Source: Secondary Data

INTERPRETATION:
The Company’s work-in-progress to Inventories ratio was 2.37 in 14-15.
Henceforth it has steadily declined reaching an all time low in 18-19 with 2.05%. This
position is favorable since the company has to concentrate more on finished goods.

4.2.9. CHART SHOWING PROPORTION OF WORK-IN-PROGRESS TO

INVENTORIES

3
2.5 WORK-IN-PROGRESS TO
2 INVENTORY

1.5
1
0.5
0
2014- 2015- 2016- 2017- 2018-
2015 2016 2017 2018 2019

57
4.2.10 FINISHED GOODS TO INVENTORIES:

4.2.10.TABLE SHOWING PROPORTION OF FINISHED GOODS INVENTORIES

FINISHED GOODS
INVENTORY
YEAR FINISHED GOODS TO INVENTORY
(%)
2014-2015 133243 752618 17.70
2015-2016 100756 803509 12.54
2016-2017 82078 784487 10.46
2017-2018 66870 767135 8.72
2018-2019 57004 1192781 4.78
Source: Secondary Data

INTERPRETATION:

The company had high finished goods to Inventory turnover in 14-

15with 17.70%. But it has decreased in subsequent years reaching 4.77% by 18-19. Such a
position is favorable for the company as work-in-progress is not blocked and therefore
bringing about an increase in Inventory turnover ratio.

4.2.10. CHART SHOWING PROPORTION OF FINISHED GOODS INVENTORIES

FINISHED GOODS TO INVENTORY

20

15
FINISHED GOODS TO
10 INVENTORIES

% 5

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

YEAR

58
 4.2.11 COST OF GOODS SOLD RATIO

4.2.11.CHART SHOWING RATIO OF COST OF GOODS SOLD

COST OF GOODS SALES RATIO

YEAR
SOLD (%)
2014-2015 2527329 3952423 63.94
2015-2016 2799979 3809250 73.50
2016-2017 3522745 4559573 77.26
2017-2018 4316484 5554969 77.70
2018-2019 5580484 7746628 72.03
Source: Secondary Data

INTERPRETATION:

Cost of goods Sold Ratio depicts the other operating and selling expenses
incurred. From the table it can be seen that the company’s Cost of Goods Sold ratio has been
steadily increasing 77.70% in 17-18. Such a situation is unfavorable for the company as it
decreases the gross profit. Hence the company has to take suitable measures to reduce cost of
goods sold.

4.2.11.CHART SHOWING RATIO OF COST OF GOODS SOLD

COST OF GOODS SOLD

100
80
60 COST OF GOODS SOLD RATIO
%
40
20
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

YEAR

59
4.3. STATISTICAL ANALYSIS

A.COEFFICIENT OF CORRELATION

4.3.1. (i)TABLE SHOWING COEFFICIENT OF CORRELATION BETWEEN

INVENTORY AND DEBTORS

INVENTORY(X) DEBTORS(Y) X2 Y2 XY
75.26 139.77 5664.07 19535.65 10519.09
80.35 163.25 6456.12 26650.56 13117.13
78.45 174.38 6154.40 30408.38 13680.11
76.71 216.25 5884.42 46764.06 16588.53
119.27 282.68 14225.33 79907.98 33715.24
430.04 976.33 38384.34 203266.63 876201
Source: Secondary Dat

Where X = value of inventories Y = value of debtors

√XY
r=
√∑X2. √∑Y2
r = 0.01

INTERPRETATION:
The above calculations reveal that debtors and inventories are
positively related in AAVIN. It indicates that when the value of inventories increase, the
debtors do increase and vice-versa.

60
4.3.1.TABLE SHOWING COEFFICIENT OF CORRELATION BETWEEN
INVENTORY AND CREDITORS

INVENTORY CREDITORS
X2 Y2 XY
(X) (Y)
75.26 130.10 5664.06 16926.01 9791.32
80.35 137.31 6456.12 18854.03 11032.85
78.45 147.48 6152.40 21750.35 11569.80
76.71 169.25 5884.42 28645.56 12983.16
119.27 234.14 14225.32 54821.53 27925.84
38384033 140997.48 73303
Source: Audited Annual Reports

Where, X= value of inventories Y= value of purchase

√XY
r=
√∑X2. √∑X2
r = 0.003

INTERPRETATION:

The inventories and creditors are positively (Directly) related to one another.
It shows that when there is an increase or decrease in inventories there will be an increase or
decrease in creditors. The raise or falls of inventories depends on the demand and production
of products of AAVIN.

61
4.3.1.TABLE SHOWING COEFFICIENT OF CORRELATION BETWEEN
INVENTORY AND SALES.

INVENTORY SALES (Y) X2 Y2 XY

(X)
75.26 395024 5664.06 156214.56 29745.76
80.35 380.92 6456.12 145100.04 30606.92
78.45 455.95 6152.40 207890.40 35769.27
76.71 555.95 5884.42 308569.14 42611.63
119.27 774.66 14225.32 600098.11 92393.69
38384.33 1417872.25 231127.27
Source: Secondary Data

Where, X= value of inventories Y= value of purchase

√XY
r=
√∑X2. √∑X2
r = 0.002

INTERPRETATION:

The Sales in AAVIN, related to inventories shows a positive correlation. Hence

it indicates increase in Sales will result in increase in inventories and vice – versa.

62
B.INDEX NUMBERS

4.3.2.CHAIN BASE INDEX NUMBER FOR STEEL

4.3.3.TABLE SHOWING CHAIN BASE INDEX NUMBER FOR STEEL

YEAR PRICE LINK RELATIVES CHAIN INDICES

2014-2015 28.99 100 100

2015-2016 29.15 29.15/28.99*100=100.55 100.55/100*100=100.55
2016-2017 31.44 31.44/29.15*100=107.85 107.85/100.55*100=107.26
2017-2018 40.31 40.31/31.44*100=128.21 128.21/107.85*100=118.87
2018-2019 50.51 50.51/40.31*100=125.30 125.30/128.21*100=97.73
Source: Secondary Data

INTERPRETATION:
The above table shows the short-term variation in price for steel. The base
year is always assumed as 100. There is a gradual increase in steel price by 18.87%, during
the year 14-015 as compared to the base year. There is a decrease in steel price during the
year 2015-2016. The change in price depends upon the changes in demand for the product,
agreement made with the suppliers, quantity of products to be manufactured.

63
4.3.2.CHAIN BASE INDEX NUMBER FOR COPPER

4.3.2.TABLE SHOWING CHAIN BASE INDEX NUMBER FOR COPPER

YEAR PRICE LINK RELATIVES CHAIN INDICES
2014-2015 146 100 100
2015-2016 139 139/146*100=95.20 95.20/100*100=95.20
2016-2017 139 139/139*100=100 100/95.20*100=105.04
2017-2018 149 149/139*100=107.19 107.19/100*100=107.19
2018-2019 195 195/149*100=130.87 130.87/107.19*100=122.09
Source: Secondary Data

INTERPRETATION:
The base year is always assumed ad 100. The table shows the changes in
the price of the copper during the last five years. There is a gradual increase in the prices for
every year. The changes in price depends upon the demand for the items, production quantity
variation, and duties imposed on the item etc.

64
4.3.2.CHAIN BASE INDEX NUMBER FOR ALUMINIUM

4.3.2.TABLE SHOWING CHAIN BASE INDEX NUMBER FOR ALUMINIUM

YEAR PRICE LINK RELATIVES CHAIN INDICES

2014-2015 95.21 100 100
2015-2016 96.70 96.70/95.21*100=101.56 101.56/100*100=101.56

2016-2017 110.16 110.16/96.70*100=113.91 113.91/101.56*100=112.16

2017-2018 102.21 102.21/110.16*100=92.78 92.78/113.91*100=81.45

2018-2019 108.78 108.78/102.21*100=106.42 106.42/92.78*100=114.70
Source: Secondary Data

INTERPRETATION:
The above table shows that the price of Aluminum has undergone a wide
fluctuation over the past five years. The price index of the first year is always assumed as
100. The table shows that the price of Aluminum has been raised in the year 16-17.The
change in the price is related to the change in the quantity demanded, quantity produced,
contract price with the suppliers, management decisions, fluctuations in the market price.

65
C.TREND ANALYSIS

4.3.3 ESTIMATION OF INVENTORIES FOR THE YEAR 2018-2019

YEARS INVENTORIES U = x-X UY U2

(X) (Y)
2014-2015 752618 -2 -1505236 4
2015-2016 803509 -1 -803509 1
2016-2017 784487 0 0 0
2017-2018 767135 1 767135 1
2018-2019 1192781 2 2385562 4
TOTAL ∑Y=4300530 ∑UY=843952 ∑ U2= 10
Source: Audited Annual Reports

The equation of straight line is:

Y= a + b X where, a = ∑Y / N ; b = ∑UY / U2 ;

The normal equations are

∑Y = n a + b ∑ X
∑ XY = a ∑X + b ∑ X2
Y = a + b (X-2003) = Rs 1197686

INTERPRETATION:

When other factors remain the same, the value of inventories in AAVIN, is estimated
to be Rs.1197686 for the year 2017. The trend shows the increase in the inventory values,
which indicates the decrease in the cost of inventories.

66
4.3.3 CHART SHOWING THE ESTIMATION OF INVENTORIES FOR THE YEAR
2018-2019

Estimation of Inventories

1400

1200

1000 2014-2015,
75200%

800 2015-2016,
80300%

600 2016-2017
18%
400 2017-2018
18%

200 2018-2019,
119200%

0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

67
D.TREND ANALYSIS FOR SALES
TABLE.4.3.4.ESTIMATION OF SALES FOR THE YEAR 2018-2019

YEARS NETSALES U =x-X UY U2

(X) (Rs)
(Y)
2014-2015 3952423 -2 -7904846 4
2015-2016 3809250 -1 -3809250 1
2016-2017 4559573 0 0 0
2017-2018 5554969 1 5554969 1
2018-2019 7746628 2 15493256 4
TOTAL ∑Y=25622843 ∑ UY=9334129 ∑ U2= 10

The equation of straight line is:

Y= a + b X where, a = ∑Y / N ; b = ∑UY / U2 ;

The normal equations are

∑Y = n a + b ∑ X
∑ XY = a ∑X + b ∑ X2
Y = a + b (X-2003) = Rs8858221
INTERPRETATION:
The estimated sales for the year 2017 is Rs 8858221
For AAVIN, when other thing remain the same.

68
 4.3.4 CHART SHOWING ESTIMATION OF SALES FOR THE YEAR 2018-2019

Estimation of Sales
900
2018-2019
800
700
600 2017-2018
500 2016-2017
2014-2015 2015-2016
400
300
200
Inventories
100
0
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019

69
 CHAPTER – V

5.1. FINDINGS
The major findings of the analysis on inventories in AAVIN are:

 Relays, Control Panel forms the major part of finished goods inventory in AAVIN.

 The codification of raw materials and components (based on the locality of supplier)
are RMC 1, RMC 2, RMC 3 and RMC 4. RMC 1 & 2 indicates local supplier, RMC 3
& 4 represents the imported stock.

 Operating Ratio in the initial years i.e. in 2015 and 2016 was high.

 But subsequently in the following years has reduced its operating ratios to 98.15,
97.9 and 94.70 in the years 2017, 2018 and 2019 respectively.

 The stock period is calculated at 3.69 months for the year 2015 and considerably
decreased to 3.34, 2.70, 2.15 & 2.10 in the subsequent years respectively.

 Even though it averages up to 3.5 it has to redesign some method.

 Working Capital ratio the year 2016 was 3.67%, considerably it went down to3.21 in
2015-2016.

 But in the following 3 years i.e. from 2017 to 2019 it has shown an increasing trend.

 Current ratio was better in the years 15-16 and 16-17 with 1.67 & 1.65 respectively.
 But after that a considerable decrease can be seen reaching almost the lowest in 14-
15 with 1.32.

 Acid test ratio for the years 16-17 & 17-18.It was standard in the years 15-16 and 16-
17 with 0.99. It slightly went down to 0.85 in 14-15.

70
 Current asset intensiveness ratio for the year 2015 with 28.17%.

 It only slightly went down in the year 2016 to 21.59. But it was increased to 24.81 in
2018 higher the ratio, Higher the investment in inventories.

 In the years 15-16 and 17-18 the average is 68.8% i.e.

 Inventories constitute 68.8% of Net working Capital. In the following years there has
been a considerable increase reaching an all time high in 2015 with 101.5%.

 The company had high finished goods to Inventory turnover in 00-01 with 17.70%.

 But it has decreased in subsequent years reaching 4.77% by 04-05.

 The Company’s work-in-progress to Inventories ratio was 2.37 in 00-01.

 Henceforth it has steadily declined reaching an all time law in 04-05 with 2.05%

 The Company’s Cost of Goods Sold ratio has been steadily increasing 77.70% in 03-
04

 Copper, steel, and aluminum are the major raw materials in the firm.

 There is a short-term oscillation in the unit price of these items during the period of
study concerned

71
5.2. SUGGESTIONS

 The Inventory turnover ratio can be increased by quickening the production process
and sales to earn more profit, to increase the productivity of the firm.

 The local suppliers (85-90%) are prompt in their supplier. It will be better if AAVIN.
follows just-in-time (JIT) system for its local items being purchased.
 This will enable the firm to reduce its cost on inventories and to avoid unnecessary
storage of materials.
 JIT also increases the productivity of labour, reduces the production lot sizes, and
enables to meet the customers’ requirements of quality, cost and delivery time.
 It shows an effective system of manufacturing. It is referred as “Zero Inventory
System”.
 Conducting pilot programmers at initial stage will be a good beginning to more about
this system.

 Adopting the combination of carious inventory control techniques like ABC, XYZ,
SED, FSND, etc., will enable the firm to frame a more efficient inventory policy.

 Quickening the production process and sales to earn more profit, to increase the
productivity of the firm, can increase the inventory turnover ratio.

 The inventory on an average should be some percentage of total assets as per norms.

 The AAVIN has more than the norms specified for inventory to total assets.

 Though the firm has reduced it in recent past 2 years, further reduction will enable
the firm to reduce the cost and increase the profit.

 On the basis of changes in price, contracted price with supplier, product’s demand and
production, economic changes, international market fluctuations, wages hike in other
service costs etc., the storage level of copper, steel and aluminum must be decided.

72
5.3 CONCLUSION

Based on the project it is concluded that even though the present

inventory control management is implemented efficiently, the JIT and KANBAN system has
also to be implemented for the further reduction in inventory. Hypothetically more aptitude
measures have to be worked out to reduce the storage time of the components which are
expensive.

73
BIOBILOGRAPHY

 AAVIN Annual reports (2014 – 2019) for five years.

 I.M. Pandey, financial management. 9th edition Viveks Publishing House Private Ltd,

New Delhi , 2002

 Prasanna Chandra, Financial Management-Theory and Practices, 4th ed. New Delhi: Tata

Mc Graw Hill Publishing Company Ltd, 2002.

74
 REFERENCES

BOOKS REFERRED:

 AAVIN Annual reports (2014 – 2019) for five years.

 I.M. Pandey, financial management. 9th edition Viveks Publishing House Private Ltd,

New Delhi , 2002

 Prasanna Chandra, Financial Management-Theory and Practices, 4th ed. New Delhi: Tata

Mc Graw Hill Publishing Company Ltd, 2002.

75