Professional Documents
Culture Documents
CERTIFICATE
TABLE OF CONTENTS
Preface
Acknowledgement
Declaration
Executive Summary
SR. NO.
PARTICULAR
PAGE
NO.
INTRODUCTION
FUNCTIONAL DEPARTMENTS
1
2
PRODUCTION DEPARTMENT
HUMANRESOURCE DEPARTMENT
FINANCE DEPARTMENT
MARKETING DEPARTMENT
INFORMATION TECHNOLOGY
PART II INDUSTRY INFORMATION
3.
RESEARCH METHODOLOGY
4.
5.
6.
7.
8.
9.
10.
SWOT ANALYSIS
INDUSTRY PROFILE
COMPANY PROFILE
THEORIES OF INVENTORY MANAGEMENT
DATA INTERPRETATION AND ANALYSIS
LIMITATIONS OF STUDY
FINDINGS
CONCLUSIONS
LIST OF GRAPHS
5
6
7
12
39
59
70
71
72
Sr. No.
1
2
3
4
5
6
7
8
9
PARTICULARS
RAW MATERIAL CONVERSION
WORK-IN-PROCESS CONVERSION
FINISHED GOODS CONVERSION
INVENTORY CONVERSION
TOTAL INVENTORY INVESTMENT
INV ENTORY TURNOVER RATIO
RAW MATERIAL TURNOVER RATIO
WORK-IN-PROCESS TURNOVER
RATIO
FINISHED GOODS TRUNOVER
RATIO
69
LIST OF DIAGRAMS
Sr. No.
1
PARTICULAR
DIAGRAM NO.
PAGE NO.
SHARE HOLDING PATTERNS OF
1
14
GNFC LTD.
2
3
4
5
6
7
2
3
28
38
4
5
6
7
46
50
50
61
PREFACE
Experience is the best teacher. This saying plays a guiding line in
our lives and also in project reports that are an integral part of the MBA
programmed in Gujarat University.
Hence, to attain this objective and to have the outlook of all intricacies
of corporate world I have undertaken the Summer Training at GUJARAT
NARMADA VALLEY FERTILIZERS COMPANY LTD. Its all about
INVENTORY MANAGEMENT AND ITS ANALYSIS.
ACKNOWLEDGEMENT
how to work in the industry and how all works are undertaken in the industry.
It was a great pleasure working on analysis of inventory management.
First of all I am thankful to Mr. N.K. Patadia (A.G.M. HRD) GNFC for
allowing me to take training under his shelter in the company.
DECLARATION
1.EXECUTIVE SUMMARY
During the Summer Training at Gujarat Narmada Valley Fertilizers
Company Ltd. I have tried to cover the glimpse of overall working of the
This report talks about the company first, and then further it talks
about the financial aspects of the company.
Afterward it proceeds towards the theoretical aspects of the project
report and about various research methods used for the data
collection.
Further is discusses about the various aspects and techniques used
in inventory management.
Further it talks about various data analysis and interpretation of
various inventories ratio.
Lastly at the end of the report it talks about various strengths and
weakness and the limitations of the project report.
GNFC wants to give full services as well as education about crop,
soil, seeds, and fertilizer etc. to the farmers.
A
PROJECT REPORT
ON
GENERAL INFORMATION ABOUT THE COMPANY
IN THE AREA OF
FINANCE
FOR
GUJARAT NARMADA VALLEY FERTILIZERS COMPANY LTD.
BHARUCH
SUBMITTED TO
ANAND INSTITUTE OF MANAGEMENT
M.B.A. PROGRAMME
PRESENTED BY
JAYNAND PATALIA
M.B.A. SEMESTER-II
INTRODUCTION
Production Department
GNFC has drawn on the worlds leading technologies and systems for its
various production culmination of enterprise and initiative, resourcefulness and
resolve, technology at GNFC common vision for continuous growth.
GNFC has always shown a dedication to standards of production and
environment safeguards, qualified research acumen, and 100% capacity utilisation for
more than two decades.
Finance Department
G.N.F.C has a very active finance department, which looks for finance
management of company. Division of work plays an important role in every
organization for smooth working.
Financial management is that managerial activity which is concern with
the planning and controlling of the companys financial resources so finance is
life blood for every organization, without efficient financial management,
company cant survive for long time.
Marketing Department
Vadodara
Meerut
Surat
Agra
Ratlam
Jodhpur
Indore
Udaipur
Raipur
Mehsana
Nasik
Bhavnagar
Chennai
Rajkot
Kochi
Information Technology
It has promoted a portal called www.nprocure.com offering end-toend electronic procurement services provider. (n)Code also designs and
builds world class data center infrastructures.
(n)Code also offers a wide range of Security Services which include Managed
IT Services & Secure Infrastructure design & building Services.
RESEARCH METHODOLOGY
Study or Research Objectives:
To learn how the company keeps all the data of inventory perfectly.
To study how finance department of the company work.
To find out the composition of inventory.
To study the various inventory ratio.
To analyze the inventory management techniques used in the
company.
f. To study the Inventory Control Techniques of the company.
Secondary Data:
The data was analyzed from the balance sheet, various tables, graphs,
charts, referred some of the reports and other companies report.
Data Analysis Techniques:
For the purpose of analysis of the data and the report I have kept in
mind the objective and analyzed each and every data I got at each
stage of the report. I have used many tools for analyzing the data and
the different ratios used for it are as follows:
i.
ii.
iii.
iv.
v.
SWOT Analysis
It focuses on the companys financial as well as overall performance
and future.
STRENGTHS
Environment consciousness.
WEAKNESS
OPPORTUNITIES
THREATS
Few plants are in operation for more than twenty year and may
also require replacement of high value equipment and higher
maintenance expenditures.
INDUSTRY PROFILE
Introduction:
Fertilizers sector is a very crucial for the Indian economy because it
provides a very important input to agriculture. The fertilizer industry in India
has played a pivotal role in achieving self-sufficiency in food grains as well as
in rapid and sustained agriculture growth. India is the third largest procedures
and consumer of fertilizer in the world after China and the United States.
The Indian fertilizer industry has succeeded in meeting almost fully the
demand of all chemical fertilizers except for MOP. The industry had a very
humble beginning in 1906, when the first manufacturing unit of Single Super
Phosphate (SSP) was set up in Ranipet near Chennai with an annual capacity
of 6000 MT. The Fertilizer & Chemicals Travancore of India Ltd. (FACT) at
Cochin in Kerala and the Fertilizers Corporation of India (FCI) in Sindri in
Bihar were the first large sized -fertilizer plants set up in the forties and fifties
with a view to establish an industrial base to achieve self-sufficiency in
foodgrains. Subsequently, green revolution in the late sixties gave an impetus
to the growth of fertilizer industry in India. The seventies and eighties then
witnessed a significant addition to the fertilizer production capacity.
The installed capacity as on 30.01.2003 has reached a level of 121.10
lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of
urea after reassessment of capacity) and 53.60 lakh MT of phosphatic
nutrient, making India the 3rd largest fertilizer producer in the world. The rapid
build-up of fertilizer production capacity in the country has been achieved as a
result of a favourable policy environment facilitating large investments in the
public, co-operative and private sectors. Presently, there are 57 large sized
fertilizer plants in the country manufacturing a wide range of nitrogenous,
phosphatic and complex fertilizers. Out of these, 29 unit produce urea, 20
units produce DAP and complex fertilizers 13 plants manufacture Ammonium
Sulphate (AS), Calcium Ammonium Nitrate (CAN) and other low analysis
nitrogenous fertilizers. Besides, there are about 64 medium and small-scale
units in operation producing SSP.
Natural gas, Naphtha, LSL/fuel oil are used as feedstock for producing urea.
Specific energy consumption of sample plants covered under this study varies
between 5.53 goal/MT of urea and 10.2 Goal/MT.
10
COMPANY PROFILE
GNFC at Glance:
Gujarat Narmada Valley Fertilizers Company Ltd. (GNFC) is a joint sector
enterprise promoted by the Government of Gujarat and the Gujarat State Fertilizer
Company Ltd. (GSFC). It was set in 1976, at Bharuch located in Gujarat in an
extremely prosperous industrial belt, GNFC draws on the resources of the natural
wealth of the land as well as the industry rich heavens of the areas.
GNFC started its manufacturing and marketing operation by setting up in
1982, one of the worlds largest single-steam ammonia-urea fertilizer complexes.
Over the next few years, GNFC successfully commissioned different projects in
fields as diverse as chemicals, fertilizers and electronics.
Since inception, GNFC has worked towards an extensive growth as a
corporation. A growth which respects the environment and springs from the
progressive vision of GNFC.
General Information:
Name: - Gujarat Narmada Valley Fertilizers Company Limited.
Type: - Joint Sector
Scale: - Large Scale
Date of Established: - 10th May, 1976
Website: - www.gnfc.in
Promoters: - Govt. of Gujarat
GSFC
12
IAS
Director
Shri R. K. Tripathy
IAS
Director
Shri G. C. Murmu
IAS
Director
Director
Shri D. C. Anjaria
Director
Director
Executive Directors
Executive Director IT
Shri J. S. Kochar
Executive Director and
Shri K. C. Jatania
Chief Finance Officer
Bankers: - Bank of Baroda (Leader)
State Bank of India
Canara Bank
State Bank of Saurashtra
HDFC, ICICI
Head Office: - Bharuch
Regional Offices: - Ahmedabad, Bhopal, Hyderabad, Jaipur, Lucknow, New
Delhi, Pune, Mohali.
13
Historical Development
14
Awards and Achievements
Jawaharlal
Nehru
Memorial
National
Award:
Effective
Energy
Conservation Award.
National Suggestion Scheme: Two awards for the company, one for the
employee.
Set up the world's largest single stream, fuel oil based Ammonia - Urea
plant.
All fertilizers under the brand name of Narmada, along with extensive
support activities, have been well accepted by the country's farmer
community.
India's only manufacturer of Glacial Acetic Acid through the cuttingedge Methanol route.
Vision statement:
o To be a technology driven, environmentally responsible Joint Sector
Company manufacturing Fertilizers, Commodity and Specialty
Chemicals maintaining highest standards of operational excellence
and innovation for creating sustainable value for all stakeholders.
Mission Statement:
We shall
o Be the leading provider of Chemicals and Agricultural inputs
through adoption of State of the Art Technologies and Business
Processes;
o Have a firm commitment to quality, environment, health and safety;
o Enrich human resources and promote teamwork, innovativeness
and integrity;
16
o Achieve
sustainable
economic
growth
based
on
corporate
Fertilizers Division:
GNFC started fertilizer manufacturing and marketing operations
by setting up in 1982, one of the worlds largest single-stream
ammonia-urea fertilizer complexes.
Chemical Division:
GNFC has kept pace with changing times and its vision is always focused
on growth. Even as the Company was implementing its fertilizer complex, plans
were underway for expansion and diversification in related areas. This resulted in
the setting up of core chemical and petrochemical plants such as Methanol,
Formic Acid, Nitric Acid and Acetic Acid.
GNFC has kept pace with changing times and its vision is always focused
on growth. Even as the Company was implementing its fertilizer complex, plans
were underway for expansion and diversification in related areas. This resulted in
the setting up of core chemical and petrochemical plants such as Methanol,
Formic Acid, Nitric Acid and Acetic Acid.
17
Organizational Structure
type. There is a clear line of authority and responsibility, i.e. authority flows
from top to bottom level.
Raw Materials Used
Basic Raw Materials Used
Fuel Oil.
Natural Gas.
Rock Phosphate.
Utilities are
Water.
Coal.
Electricity.
Catalysts are
HCL.
Aluminum.
18
Fertilizers are
Urea.
Ammonia.
Methanol.
Acetic Acid.
Formic Acid.
Methyl formate.
Fertilizer Product
1. UREA[NARMADA Urea]
Technology: Snamprogetti-Italy.
Capacity: 6, 36,000 MTA.
Uses
50 kg HDPE bags.
Supply through rail or road.
2. Calcium Ammonium Nitrate
Technology: UHDE Germany
Capacity: 1, 42,500 MTA
Uses
Narmada CAN granules are white in colour and are free flowing, which
ensures easy uniform distribution.
Narmada CAN contains 25 % double power N (half in ammoniac and half
in nitrate form).
Narmada CAN also contains 8.1% calcium- an essential secondary
nutrient for normal growth of plants.
Narmada CAN is excellent fertilizer for entire upland crops. Being neutral
in reaction, continuous use of Narmada CAN does not create any acidity
and alkalinity in the soil and soil productivity is maintained on sustained
basis.
20
Uses
Narmada phos granules are uniform, grey in colour and free flowing.
Technology: The Technology for Formic Acid Plant has been supplied by
Kemira OY, Finland. GNFC produces high quality Formic Acid through
Methyl Formate Route.
Packing:
Formic Acid is available in 35 kg (net) HDPE carboys and in Stainless
Steel tankers.
Available in 35 kg HDPE carboys and 250 kg HDPE drums.
Uses: A coagulant for obtaining rubber from latex, fixing of dyes in
leather Industry Preservation of silage and grams.
22
4. Acetic acid
Capacity: 100000 MTPA (approx)
Technology: British Petroleums Technology.
Packing: In Stainless Steel tankers. In 30kg. HDPE Carboys.
Uses: acetic anhydride, Vinyl Acetate Monomer (VAM) Purified
Terephthalic Acid (PTA).
5. Methyl Formate:
Capacity: 3000 MTPA
Technology: By Kemira OY, Finland.
Packing: In 200 Litres drums with epoxy lining or in suitable road tanker.
Uses: Used as a Fumigant and larvicides for tobacco, used in organic
Synthesis and in Formulation of Synthetic Flavours.
6. Weak Nitric Acid:
Capacity: 247500 MTPA
Technology: UHDE Germany.
Uses: Ammonium Nitrate and other explosive, Sodium Nitrate,
Potassium Nitrate, Calcium Nitrate and other Nitro Derivatives.
7. Weak Nitric Acid:
Capacity: 70000 MTPA.
Technology: UHDE Germany.
Packing: Stainless Steel Tankers.
Uses: Widely used in the manufacturer of fertilizers like calcium,
Ammonium
Nitrate,
Ammonium
Pharmaceuticals, as Absorbent.
Nitrate
Phosphate,
explosives,
23
TABLE NO: 1
Production Performance of GNFC Plants For the Year 2010-11
PLANTS
PRODUCTION
Ammonia
Urea
Methanol-I
Methanol-II
MSU
Methyl Formate
Formic Acid
Acetic Acid
WNA
CAN-I
CAN-II
ANP
474868
643228
39172
163372
5266
24937
19382
153295
284307
35870
37870
166235
106.592
101.136
78.34
86.854
17.209
109.373
193.82
153.295
114.87
108.698
114.759
116.656
24
ACTUAL (MT)
636900
Methanol
Methyl Formate
Formic Acid
Acetic Acid
WNA
CAN
ANP
CAN
AN Melt
Cal. Carbonate
Aniline
TDI
NB
HCL
Dry Fly Ash
126059
1237
18969
151420
63278
23873
164076
98619
42404
63709
39687
17477
1440
50804
111106
25
Finance Department
Introduction
Financial management is that managerial activity, which is concerned
with the planning and controlling of the companys financial resources. So,
finance is the blood or every organization. Without effective finance
management company cannot survive for the long time.
Finance management has to sell financial assets or securities such as
share and bonds debentures; to investors in capital market to raise necessary
funds. Finance management also raises funds by borrowing from bank,
financial institutions and other resources. The exist and inseparable relation
Financial Budgeting.
Bank section.
Bill payment section.
Central accounting section.
Marketing accounting section.
Stores accounting section.
Concurrence section.
Establishment section.
27
1. BANKING SECTION
Bank section is related to the day-to-day operation of cash & bank of
the company. Bank section mainly arranges the fund in the company and
reduces the cost of the companys product.
There are mainly three types of funds at GNFC:
1. Short term fund
2. Medium term fund
3. Long term fund
Following are the main banks of the company:
TABLE NO: 3
Name of the Bank
% share
35%
25%
Canada Bank
10%
Bank of India
10%
5%
HDFC Bank
5%
ICICI Bank
6%
DIAGRAM NO.:2
28
The Bank Section has been divided in to two categories:
I. Fund Management
II. Operation Management
FUND MANAGEMENT:
Management of the fund is very crucial activity for GNFC because of its
very vast business operations. This section every year prepares Credit
Monetary Authority Data which is substantiated to respective banker of the
company. Based on this, data recording agencies like CRISIL, ICRA & Fitch
etc. provide credit rating. There are several ratings such as AAA, AA, and B+
etc. GNFC got AAA rating; it becomes very easy for the company to get cash
credit on loans.
OPERATION MANAGEMENT:
Operation Management covers all daily payment. Payments are made
through cheques, if the amount is more than Rs.20, 000.
The payment rules in GNFC is that, any section can take the decision
for the transaction up to Rs.50, 000. Then after if the transaction is above
Rs.50, 000 than the concern department has to contact the finance
department and after the legal procedure, payment is made.
WORKS/PROJECT PAYMENT.
SERVICE PAYMENT.
the parties etc. All the accounting is done by the various sections are
consolidated here in Central Accounting Section.
1. Fertilizer Product
2. Industrial Products
31
5. STORES ACCOUNTING SECTION
Inventory section is responsible for making all accounting entry related
to stores and valuation of inventories. Stores department when receives any
material they send Material Receiving Report (MRR) to stores section.
6. CONCURRENCE SECTION
Concurrence means pre audit.
The tenders which are opened, are signed by the representatives so that
no cheating is done.
7. ESTABLISHMENT SECTION
In GNFC, Establishment section is also known as Employee Oriented
Section, it deals with the transaction of employees remuneration.
Master data is prepared which includes all the details of entire history
Of the employee.
32
8. BUDGET & COSTING SECTION
Budget section
Budget is process of estimating the future expenses incurred to
achieve decided goals and comparing actual cost with the predetermined one
with a view to take corrective action so that decided goal can be achieved in
time with least cost and least time.
control
is
controlling
of the
expenses
by controlling
34
Payment to Government
30 days are given to file the returns and if the dealer fails to make the
payment then they have to pay Rs.100 per month for each delay in filing
the return.
Assessment
Demand to pay
Refund
Appeal to Departments
Appeal to Tribunal
Appeal to High Court
Appeal to Supreme Court
35
II. CENTRAL SALES TAX (CST)
The central sales tax is controlled by the Central government and the
revenue is given to the State government. As the dealers are from different
states, there are chances of disputes on tax payment. Thus, to avoid this
competition among the states, central government comes into picture. Form
C is issued by the local authorities to the dealer for the purchase of goods at
chipper VAT rate. INPUT TAX CREDIT is not applicable. Form H is for the
International Marketing.
III. SERVICE TAX
3. Liability Policy
public.
4. Cash Insurance Policy
5. Erection Policy
Civil work.
Surrounding property.
37
TABLE NO: 4
Insurance Company
Iffco Tokyo ( lead company)
New India Insurance Company
ICICI Lombard
Reliance General Insurance Company Ltd
United India Insurance
Govt. of Gujarat Insurance fund ( sleeping member)
% share
30 %
20 %
15 %
15 %
10 %
10 %
DIAGRAM NO: 3
39
Nature of Inventories
Inventories are classified according to uses and point of entry in the
alteration is as follows:
Raw material
Raw Materials
Raw materials are those units that are converted in to finished
production through manufacturing process. Raw material inventories are
those units which have been purchased and stored for future. Under head of
raw materials GNFC are maintained rock phosphates, liquid ammonia etc.
Finished goods
Finished goods consist of final products that are ready for sale.
Finished goods are those completely manufacturing products which are ready
for sale. Stock of material and work in process facilitate production, while
stock of finished goods is required for smooth marketing operation. Thus
inventories serves as a link between production and consumption of goods.
40
The basic responsibility of the financial is to make sure the firms cash
flows are managed efficiently. Efficient management of inventory should
ultimately result in the maximization of the owners wealth. It was indicated
that in order to minimizes cash requirements, inventory should be turned over
as quickly as possible, avoiding stock-outs that might result in closing down
the production line or lead to a loss of sales.
The main objective of inventory management consists of two parts.
1. To minimize investment in inventory.
2. To meet demand for the product by efficiently organizing the
production and sales operations.
The firm should minimize investment in inventory implies that maintaining
inventory involves costs, such that the smaller the inventory, the lower is the
cost to the firm. But inventory also provide benefits to the extent that facilitate
the smooth functioning of the firms.
41
Why Inventory Management?
An increased emphasis on liquidity has lead businessman to hold cash
and securities in performance to inventories. Inventories are now often
referred to as the grave yard of the business.
The surplus of the stock has been a principal guide of failure thus lead
to change their view regarding holding of inventories and adopt scientific way
of inventory holding. Following are factor that are following the view of
scientific inventory control.
1. Size of Business
42
Factors Influencing Inventory Management Decision
There two types of factors. They are external and internal factor which
influence decision making for inventory in an organization. The external factor
arises from market conditions, credit availability and government regulation.
The external factors are not controllable easily while internal factor are
controllable with effective inventory management.
Following are the factors influence the inventory decision of an organization
2. Lead Time
Lead time can be defined as the period that elapses between the
reorganization of a need and its fulfillment. Inventories have to take care of
normal consumption during lead time because it increases the inventories and
it will have to be increased correspondingly.
The time spent on each of these four stages will vary from item to item.
Out of these administrative and inspection lead time are under control of
purchase. Procurement lead time is the largest time. This should be
taken care of while negotiating the order and supply detail.
3. Relevant Cost
The inventory problem is one of the balancing costs, so that total cost
is minimized. Their costs are:
A. Cost of Ordering
The activities that are carried out for fulfilling the need for material,
which consume executive time, stationary and communication charges,
these are the cost of ordering.
43
B. Cost of Carrying out Inventories:
The moving factor to control inventory is the cost incurred by holding.
It is the cost that is expressed as percentage of the average investment
i.e. capital investment, spoilage insurance cost.
.
1. Purchase Control
2. Storage Control
3. Warehouse Accounting
1. Purchase Control
45
Inventory Management In GNFC:
57 %
12 %
11 %
10 %
10 %
In 57% Mechanical Spare, there are some insured items which are
essential and cannot produce immediately. These items are not come into use
daily. These items are very costly and carrying cost is also high.
Bifurcation of Inventories:
DIAGRAM NO: 4
46
47
Material Control Techniques in GNFC
To know the practical use of various inventory control techniques in GNFC
following inventory control techniques were studied and evaluated which are:
1. Codification System
2. Classification of Inventory:
(a) ABC Classification
(b) Determination of E.O.Q
(c) FSN Classification
(d) HML Classification
(e) Zero Inventories
3. Determination of Inventories Level:
(a) Minimum Stock Level
(b) Maximum Stock Level
(c) Re-Order Level
4. Importance Substitution.
5. Supply Chain Management & Inventory Control.
48
1. Codification System:
Codification system means assigning a unique code or name to each
item based on its use, characteristics, importance and other features. It is the
Classification of Inventory
49
TABLE NO: 6
Class
A Class
B Class
C Class
Items value
Number of items
70%
10%
20%
20%
10%
70%
DIAGRAM NO: 6
50
Determination of EOQ:
The economic order quantity can be determined with the help of the
following formula:
EOQ=\|2AB/CI
Where,
A= annual usage in units.
B= buying cost/ordering cost.
C= carrying cost.
I= inventory carrying cost.
Disposal of Non Moving Items
Inventory Control Review Meeting
Alternative Material Use
Circulation of Non Moving / Slow Moving Items list.
(C) FSN Analysis
In GNFC FSN analysis carried for consumable items, which are
used by multi users, FSN means fast moving (F), slow moving (S), non
moving (N) items analysis. The norms established by GNFC for each items
are as follows:
Fast Moving Items:
GNFC has norms that fast moving items have the following:
1. It should have more than 5 issue transactions in a year.
2. There should be multi user.
Slow Moving Items:
GNFC has norms that slow moving items have the following;
1. Items should have transaction between 1 to 5 time in a year
2. There should be multi user.
51
Non Moving Items:
GNFC has norms that are non moving items have the following:
Items have no issue transaction for last 3 years
Items should have some quantity available in all the past three
years.
This is the Level above which the stock should not be permitted
to
rise.
Eighteen
months
consumption
of
stocks
taken
into
pipes. So company now requires only 300 pipes and they purchase it. So
in this way company arrange space and plan to maintain it.
58
B. At Field:
Finished Goods = At Lower of Cost or Net Realizable Value. Annual
cost is computed on full absorption costing method including material
cost and conversion costs. Costs of field stocks include freight to the
destination.
Fertilizers of Sub-standard Quality = At Lower Costs or Net Realizable
Value as estimated by the Company.
Note:
Net realizable value is the estimated selling price in the ordinary
course of business, less estimated costs of completion and estimated
costs necessary to make the sale.
59
Analysis of Inventory Management
The total inventory management of the company includes the raw
materials inventory, work in process inventory, finished goods inventory. The
total inventory of the company in 2009-2010 is Rs. 40503.38 lacks. GNFC has
total of approx. 214683 different types of inventories.
TABLE NO: 7
(in lakhs)
Particulars
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
Total
26957.87
38846.52
38599.79
43075.71
40503.38
The above graph shows the total inventory management of the company
various parts
GRAPH NO: 1
60
Analysis of inventory management
Inventory conversion period is very closely related to the inventory
management.
Inventory conversion is the part of the net operating cycle.
1.
2.
3.
61
Raw Material Conversion Period:
Average Raw material Inventory
______________________________
Raw material consumption period
TABLE NO: 8
Particulars
20052006
Average R.M. Inventory
4041.72
R.M. Consumption per 214.72
20062007
5274.76
294.78
20072008
5522.4
341.99
(in lakhs)
20082009-2010
2009
6090.595 8270.05
343.39
346.56
day
R.M. Conversion Period
19 days
18 days
16 days
18 days
24 days
GRAPH NO: 2
Interpretation:
Raw material conversion period is the time period between receiving the raw
material and sending them for production. It is the period of stocking the raw
materials for usage. So higher the ratio lower will be the profit. In the above
chart raw material conversion period lies between 15 to 19 days for the last
five years. In 2004-2005 it is 15 days which is lowest and so it is good for the
company. But in 2005-2006 it is 19 times which is not good for the company
because higher the ratio the lower will be the profit. In 2008-2009 the ratio is
18 times which is also very high and so not good for the company. So
company should try to reduce it.
62
Work in Process Conversion Period:
Average WIP Inventory
____________________
Cost of Production
TABLE NO: 9
(in lakhs)
Particulars
2005-06
2006-07
2007-08
2008-09
2009-10
2422.75
1793.74
2031.60
2707.93
1110.41
319.38
398.08
461.47
507.88
498.04
8 days
5 days
4 days
5 days
2 days
GRAPH NO: 3
Interpretation:
Work-in-progress conversion period is the time period when the raw
materials are received for production and the time for their dispatch. The
higher the ratio the lower will be the profitability. In 2007-2008 the ratio is 4
days which is too low and so it is good for the company. But in 2005-2006 the
ratio is 8 days which is too high. But in 2008-2009 the ratio is 5 days which is
low and so good for the company. But as we have not compared it with other
companies any decision cant be taken.
63
Finished Goods Conversion Period:
Average
finished
goods
Inventory
______________________________
Costs of goods sold
TABLE NO: 10
(In lakhs)
Particulars
2005-06
2006-07
2007-08
2008-09
2009-10
4351.265 8795.65
70.81
84.71
188.63
81.05
39.632
61 days
103 days
61 days
127 days
182 days
GRAPH NO: 4
Interpretation:
Finished goods conversion period is the time of storage of finished
goods in the warehouse until they are sold. The higher the ratio the low will be
the profit. If we store the huge stock in warehouse then we are losing the
opportunity cost. In 2004-2005 the ratio is 35 days which increased by 6 days
i.e. 41 days in 2005-2006 which is not good. But in 2006-2007 the ratio is 114
days which indicates that huge stock in laying at the godown and so the
company is losing its profit and so the profit in that year is very low. But in
2008-2009 it is 86 days which is too high and not good for the company. But
as we are not aware about other companies in this industry any comment
about it is not appropriate.
64
Inventory Conversion Period
TABLE NO: 11
Particulars
2005-06
2006-07
2007-08
2008-09
2009-10
19 days
18 days
16 days
18 days
24 days
8 days
5 days
4 days
5 days
2 days
61 days
103 days
61 days
127 days
182 days
Conversion 88 days
126 days
81 days
150 days
208 days
Inventory
Period
GRAPH NO: 5
Interpretation:
Inventory conversion period indicates in how much days our inventory
gets converted. In this ratio we will consider the entire inventory ratio. We will
consider all type of inventories i.e. raw materials, work in process and finished
goods. The higher the ratio the higher will be the profitability. In 2006-2007 the
ratio is 137 days which shows that in this year huge amount of profit the
company has earned. So in this year the profit is very high as compared to
other year. But in 2008-2009 the ratio is 109 days which is very huge because
the finished goods conversion period is huge. And so the profit also increased
by approx Rs. 15000 (in lacks).
65
2005-2006
26957.87
2006-2007
38846.52
2007-2008
38599.79
2008-2009
2009-2010
43075.71
40503.38
TABLE NO: 12
(in lakhs)
GRAPH NO: 6
Interpretation:
The above chart indicates the amount of inventory with the company.
The lower the amount the higher will be the profit but higher the amount the
lower will be profit. There is inverse relation between profit and inventory.
From the above chart it can be seen that in 2008-2009 the amount of
inventory is Rs. 43089 (in lakhs) due to which the profit also reduced and so
the profit is low in 208-2009.
66
B. Total Inventory Turnover Ratio:
Total inventory turnover ratio is concerned with the cost of goods sold
and average inventory. Total inventory turnover ratio is shows how many times
inventory is replaced during the year symbolically,
Costs of goods sold (sales)
________________________
Average Inventory
TABLE NO: 13
Particulars
Inventory Turnover Ratio
20052006
6.92 times
20062007
7.5 times
20072008
7.95 times
20082009
6.63 times
(in lakhs)
GRAPH NO: 7
Interpretation:
Inventories represent stocks of readymade goods or raw materials that
are needed to be kept in order to be able to meet the orders of clients. The
higher the ratio the higher will be the profit and lower the ratio lower will be the
profit. In GNFC the inventory turnover ratio for the year 2008-2009 is 6.63
times which is lowest and resulted into low profitability. The highest ratio is
found in 2007-2008 which is 7.95 times and it is very good for the company.
But any decision cant be taken for it because we have just compared the data
of past five years of GNFC only and not of four to five other companies ratios
which are coming under this industry.
67
C. Work in Process Turnover Ratio:
Work in process turnover ratio is concerned with the cost of goods sold
and average work in process inventory. Work in process turnover ratio shows
how many times work in process inventory is replaced during the year.
Symbolically,
Cost of production
___________________
Average WIP Inventory
20092010
5.96 times
TABLE NO: 14
Particulars
2005-2006
75 times
20062007
137 times
2007-2008
2008-2009
2009-201
152 times
99 times
224 times
(in lakhs)
GRAPH NO: 8
Interpretation:
Work in process indicates the stock withdrawn from warehouse and are
yet to get converted into finished stock. The higher the ratio the higher will be
the management efficiency. In 2007-2008 the ratio is approx 152 times which
shows good profitability for the company. But it reduced to 99 times in 20082009 which shows decrease in profitability, company is taking more time to
produce finished goods which is not good for the company.
68
D. Finished Goods Turnover Ratio:
Finished goods turnover ratio is concerned with the cost of goods sold and
average finished goods inventory. Finished goods turnover ratio indicates how
many times finished goods are replaced during the year. Symbolically,
Costs of goods sold
____________________________
Average finished goods inventory
TABLE NO: 15
Particulars
Finished Goods Turnover
Ratio
20052006
42 times
20062007
28 times
20072008
26 times
(in lakhs)
20082009-2010
2009
26 times
34 times
GRAPH NO: 9
Interpretation:
Finished goods turnover ratio indicates how much time finished goods
gets turnover. The higher the ratio the more will be the sales and vice versa.
But after it subsequently reduces and lasts to 26 times in 2008-2009 which is
not a good sign for the company. It shows that company is holding huge stock
at warehouse.
69
LIMITATION OF STUDY
the study.
All the data are collected was secondary in nature so loopholes if any would
carried forward in the study.
70
FINDINGS
Research Findings:
71
CONCLUSION
72
ANNEXURES
BALANCE SHEET AND PROFIT AND LOSS A/C
Income
Sales Turnover
Excise Duty
Net Sales
Other Income
Stock Adjustments
Total Income
Expenditure
Raw Materials
Power & Fuel Cost
Employee Cost
Other Manufacturing Expenses
Selling and Admin Expenses
Miscellaneous Expenses
Preoperative Exp Capitalised
Total Expenses
Operating Profit
PBDIT
Interest
PBDT
Depreciation
Other Written Off
Profit Before Tax
Extra-ordinary items
PBT (Post Extra-ord Items)
Tax
Reported Net Profit
Total Value Addition
Preference Dividend
Equity Dividend
Corporate Dividend Tax
Per share data (annualised)
Shares in issue (lakhs)
Earning Per Share (Rs)
Equity Dividend (%)
Book Value (Rs)
Mar '10
Mar '09
Mar '08
Mar '07
Mar '06
12 mths
12 mths
12 mths
12 mths
12 mths
2,712.78
98.41
2,614.37
-1.39
-97.20
2,515.78
3,062.28
140.50
2,921.78
35.05
3.63
2,960.46
3,653.44
220.19
3,433.25
44.02
-13.75
3,463.52
2,956.67
217.40
2,739.27
35.90
50.77
2,825.94
2,281.33
133.76
2,147.57
34.98
3.42
2,185.97
1,379.56
359.25
196.83
73.95
119.66
26.31
0.00
2,155.56
Mar '10
1,634.15
376.32
221.31
93.26
114.37
20.09
0.00
2,459.50
Mar '09
1,986.76
341.60
189.29
79.15
146.84
21.95
0.00
2,765.59
Mar '08
1,530.60
268.96
168.87
71.14
148.63
21.45
0.00
2,209.65
Mar '07
1,075.95
263.04
133.05
52.82
125.52
12.15
0.00
1,662.53
Mar '06
12 mths
12 mths
12 mths
12 mths
12 mths
361.61
360.22
25.46
334.76
116.96
0.00
217.80
2.09
219.89
96.05
123.84
776.00
0.00
50.51
8.39
465.91
500.96
28.46
472.50
119.73
0.00
352.77
0.91
353.68
126.19
227.52
825.34
0.00
50.51
8.58
653.91
697.93
14.15
683.78
110.52
0.00
573.26
2.99
576.25
203.37
372.88
778.83
0.00
66.05
11.23
580.39
616.29
18.12
598.17
109.57
1.30
487.30
9.88
497.18
170.72
326.47
679.04
0.00
66.05
11.23
488.46
523.44
37.10
486.34
88.59
1.43
396.32
50.24
446.56
151.85
294.72
586.58
0.00
62.25
8.73
1,554.19
7.97
32.50
133.77
1,554.19
14.64
32.50
129.59
1,554.19
23.99
42.50
118.76
1,554.19
21.01
42.50
101.06
1,464.76
20.12
42.50
80.37
Sources Of Funds
Total Share Capital
Equity Share Capital
Share Application Money
Preference Share Capital
Reserves
Revaluation Reserves
Networth
Secured Loans
Unsecured Loans
Total Debt
Total Liabilities
Application Of Funds
Gross Block
Less: Accum. Depreciation
Net Block
Capital Work in Progress
Investments
Inventories
Sundry Debtors
Cash and Bank Balance
Total Current Assets
Loans and Advances
Fixed Deposits
Total CA, Loans & Advances
Deffered Credit
Current Liabilities
Provisions
Total CL & Provisions
Net Current Assets
Miscellaneous Expenses
Total Assets
Mar '09
Mar '08
Mar '07
Mar '06
12 mths
12 mths
12 mths
12 mths
12 mths
155.42
155.42
0.00
0.00
1,923.63
0.00
2,079.05
290.01
265.05
555.06
2,634.11
Mar '10
155.44
155.44
0.00
0.00
1,858.68
0.00
2,014.12
102.85
253.05
355.90
2,370.02
Mar '09
155.44
155.44
0.00
0.00
1,690.26
0.00
1,845.70
310.46
3.05
313.51
2,159.21
Mar '08
155.44
155.44
0.00
0.00
1,415.19
0.00
1,570.63
348.36
3.22
351.58
1,922.21
Mar '07
146.48
146.48
0.00
0.00
1,030.81
0.00
1,177.29
267.61
4.75
272.36
1,449.65
Mar '06
12 mths
12 mths
12 mths
12 mths
12 mths
3,084.25
1,914.90
1,169.35
1,029.80
89.51
405.03
16.68
40.61
462.32
1,379.21
282.78
2,124.31
0.00
536.73
1,242.15
1,778.88
345.43
0.00
2,634.09
3,028.00
1,798.51
1,229.49
419.67
332.63
430.76
288.72
52.02
771.50
1,246.18
3.40
2,021.08
0.00
500.66
1,132.19
1,632.85
388.23
0.00
2,370.02
2,750.53
1,680.30
1,070.23
259.21
330.44
386.00
389.68
75.38
851.06
296.90
76.04
1,224.00
0.00
588.71
135.95
724.66
499.34
0.00
2,159.22
2,677.29
1,570.96
1,106.33
28.75
148.50
388.47
605.28
29.35
1,023.10
294.43
101.13
1,418.66
0.00
682.79
97.24
780.03
638.63
0.00
1,922.21
2,137.89
1,286.79
851.10
48.63
218.20
269.58
430.12
30.00
729.70
621.18
25.02
1,375.90
0.00
450.61
594.56
1,045.17
330.73
0.99
1,449.65
Contingent Liabilities
Book Value (Rs)
1,102.17
133.77
440.04
129.59
73.98
118.76
98.94
101.06
111.15
80.37
20052006
2803.82
5279.61
77297.37
20062007
5279.61
5269.92
105123.23
2007-2008 2008-2009
2009-2010
5269.92
5774.87
123118.41
5774.87
6406.32
123605.5
6406.32
10133.78
124761.39
1838.22
3007.29
116146.61
4764.67
3937.86
24667.73
3007.29
580.18
148964.9
3937.86
13653.44
40212.52
580.18
3447.03
177802.22
13653.44
9411.58
65054.77
3447.03
1968.82
181360
9411.58
11252.97
30641.17
1968.82
252.00
177580.75
11252.97
3250.04
6264.59
12870.76
15313.18
17751.56
17427.51
23140.49
Particulars
Cost of goods sold
Average Inventory
Sales
Gross Profit
Opening Inventory
20052006
183477.88
26516.65
228133.38
44655.5
26957.87
20062007
246727.93
32902.2
295666.61
48938.68
38846.52
20072008
308082.7
38723.16
365344.17
57621.47
38599.79
20082009
270857.57
40837.75
306228.02
35370.45
43075.71
20092010
249289.07
41789.545
271277.75
21988.68
40503.38
Particulars
2005-2006
Sales
228133.38
20062007-2008
2007
295666.61 365344.17
2008-2009
2009-201
306228.02
271277.7
Gross Profit
Opening Work in Process
Closing Work in Process
Particulars
44655.5
1838.22
3007.29
2005-2006
183477.88
2422.75
48938.68
3007.29
580.18
20062007
246727.93
1793.74
57621.47
580.18
3447.03
2007-2008
35370.45
3447.03
1968.82
2008-2009
21988.68
1968.82
252.00
2009-201
308082.7
2013.6
270857.57
2722.93
249289.0
1110.41
20052006
228133.38
44655.5
4764.67
3937.86
20052006
183477.88
4351.27
20062007
295666.61
48938.68
3937.86
13653.44
20062007
246727.93
8795.65
20072008
365344.17
57621.47
13653.44
9411.58
20072008
308082.7
11532.51
BIBLIOGRAPHY
Books
20082009
306228.02
35370.45
9411.58
11252.97
20082009
270857.57
10332.28
2009-2010
271277.75
21988.68
11252.97
3250.04
2009-2010
249289.07
7251.505
Websites
http://www.gnfc.in/aboutus/finance.html
http://www.google.com
http://www.gnvfc.com
http://www.fertilizers1.com/institutions.html
http://www.moneycontrol.com/gnfc/financials.html
Other Materials
Annual report of the company
Balance Sheet