A STUDY ON INVENTORY MANAGEMENT AT INDOSPANISH TASTY FOODS PVT.LTD, KUNIGAL.

INTRODUCTION

FINANCE:
Finance is regarded as the life blood of business enterprises. This is because in the modern
money oriented economy, Finance is one of the basic foundations of all economics activities. It is
the master key which provides access to all sources for being employed in the manufacturing and .
It has rigidly been said that money begets money, only which it is properly managed. Hence we
realize the importance and need of finance in the modern economy.

In general may be defined as the provision of money at the time and place where it is wanted.
Corporate finance emerged as a distinct field at the time of the century. Its evolution may be
divided into Approaches they are:

Traditional approach
Traditional approach is constituted only about raising and administration of funds, but not on
allocation of funds.
Modern approach
Modern approach is concerned with both acquisition of funds and as well as their allocation and
also their views the term financial management in a broad sense. It means the central issue of
finance, is the wide use of funds, the rational and potential uses against act, so as to achieve the
broad financial goals which an enterprises sets for itself.

FINANCIAL MANAGEMENT
Financial management refers to that part of the management activity which is concerned with the
planning and controlling of the firm’s financial resources. Hence it is applicable to every type of
organization, irrespective of its size, kind or nature. Therefore it has a universal applicability and is
indispensable to an organization. It is broadly concerned with the efficient acquisition and
optimum use of funds by a business firm.

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Long term funds are required to great extent for meeting the fixed capital requirement of the
business. These funds are raised by in an uninterrupted way the use of funds for long period.
Short term funds are required to meet the needs of day-to-day operation. These are required in a
sense to meet the working requirement. They are required for period for one year.

Cost management:
Cost management is a process of planning and controlling the budget of the business. It helps in
predicting the expenses of the business so that one can avoid going over budget, thereby being an
integral part of business management. Cost management involves different cost accounting
methods that have the goal of improving business cost efficiency by reducing costs or at least
having measures in place to restrict the growth of costs.
Cost management techniques:
Managing a business has containing cost of utmost importance. Below are mentioned some of the
techniques through which the overall cost of the business can be controlled and maintained within
the required limits.
 Capitalize on technology
 Time management
 Inventory management
 Outsourcing
 Update market sense
 Control of headcount

Capitalize on technology:
This is one of the methods that help in streamlining the business. The latest of technology helps in
getting quality of higher standards, less time consumption with higher productivity and keeps the
employee count within the desirable range all of this very strongly reflects in the overall cost of the
business.

Time management:

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The one who owns the business definitely knows the value of time for his / her business. However,
it is important to pass down the relevance across the hierarchy of business to view the desired the
results. It is very essential to make the employees understand the value of time and how to be
efficient to do more work in the same time span. This is one of the methods that will help increase
the productive without adding to the labour cost.
Inventory management:
One of the major cost as well as ways of generating revenues is through inventories. First and
foremost one needs to chalk out the inventory requirements, the quantity check that needs to be
stored, vendor costs etc., as all of this helps in knowing the requirements of the business and helps
avoid stocking excess inventory and deploy the capital elsewhere rather than tying up in the
inventory stocks.
Outsourcing:
Outsourcing is one way that helps take employees on third part roles especially when it is for one
time projects. This saves the employer from talking the cost onto is books. This is defiantly done
keeping in mind that the outsourcing partners are of the standards that do not hamper the quality of
services to the customers of the business. Besides the employees, certain projects also can be
outsourced which helps in saving the additional employee costs onboard as well as get access to
outside talent and technology, helping in optimizing the resources.
Update market sense:
It is very important to be updated with the trends in the market as it is game of survival of the
fittest. One has to be constantly in touch with the vendors and see that renewal of the contracts
keep happening with the trend in prices.
Control of head count:
The second most important cost to a business is the employee cost. Although we take
employees as a asset or the backbone of the business, one needs to keep in mind that they also
have cost associated with them.

INTRODUCTION OF INVENTORY MANAGEMENT

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Inventory management is very important to improve the business at the same time to improve
the profits effectively. The purpose of inventory management is to ensure availability of materials
in sufficient quality and capacity as and when required and to minimize investment in inventory.
Thus, it is very vital to have proper control and management of inventory.
Inventory is generally considered to comprise in three main areas which are raw materials,
work in progress and finished goods. Where these are held and in what quantities, and how they
are managed will vary significantly from one organization to another. The activities of inventory
management involves are identifying inventory requirements, setting targets, providing
replenishment techniques and options, monitoring item usages, reconciling the inventory balances,
and reporting inventory status in order.
The project mainly focuses on understand the strength and weakness of the company, working
pattern of the industry &how can apply hypothetical concept in to practical. We study the
inventory management of the Kanva Fashion Ltd. To understands the all day to day operations and
relating inventory management. And how inventory is playing the role of source of fund to
company.
The word inventory refers to the goods or materials used by the firm for the purpose of
production and sale. It is also includes the items which are used as supportive materials to facilitate
production.
“Inventory” too many small business owners is one of the more visible and tangible aspects of
doing business. Raw materials, goods in Process and finished goods all represent various forms of
inventory. Each type represents money tied up until the inventory leaves the company as purchased
products. Likewise, merchandise stocks in a retail store contribute to profits only when their sale
puts money into the cash register. In a literal sense, inventory refers to stocks anything necessary
to do business. These stocks represent a large portion of the business investment and must be well
managed in order to maximize profits. Many small businesses cannot absorb the types of losses
arising from poor inventory management. Unless inventories are controlled, they are unreliable,
Inefficient and costly.
Inventory constitutes most significant part of the current assets of large majority of companies
in India. Inventory is the physical stock of foods kept for the purpose of future affairs.
Ex: Raw materials, Work – in Progress. Finished products, Spares and there stock in order to
meet expected demand or distribution in the future, inventory is actually money” kept in the store

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room in the form of raw materials, finished goods etc. An inventory can be defined as the stock of
goods held for the purpose of production or sale.

MEANING OF INVENTORY MANAGEMENT

Inventory management has been defines as “The development and administration of policies,
systems and procedures which will minimize total coat relative to inventory decision and related
function”.

Definition of Inventory Management

According to Chase, Jacobs and Aquila no, “Inventory is the stock of any item or resources
used n organization. An inventory system is the set of policies and control that monitor levels of
inventory and determine what levels should be maintained, when stock should be replenished and
how large orders should be”.

TYPS OF INVENTORIES:

Raw materials of Inventory:

This consists of basic materials that have not yet been committed to production in a
manufacturing firm. Raw materials that are purchased from firms to be used in the firm’s
production operations range from iron or a waiting processing into steel to electronic components
to be incorporated into st are usually bought from outside or sometimes they are manufactured in
the company also.
Work-in-Process Inventory
This category includes those materials that have been committed to the production
process but have not been completed. The more complex and lengthy the production process, the
larger will be the investment in work-in-process inventory. Its purpose is to uncouple the various
operations in the production process so that machine failures and work stoppages in one operation
will not affect the other operations.

Finished Goods Inventory:

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These are completed products awaiting sale. The purpose of finished goods inventory is
to uncouple the productions and sales functions so that it no longer is necessary to produce the
goods before a sale can occur.
Suppliers:
It includes office and plant-cleaning in materials oils fuel light. Bulbs and like. These
materials do not directly enter production. But are essential for production process. They are small
part of inventory and do not involve any significant investment.
MOTIVES OF HOLD INVENTORIES:
The question of managing inventories arises only when the company holds inventories.
Maintaining inventories involves up of the company’s finds and incurrence of storage and handling
costs. If it is expensive to maintain inventories, why do companies bold inventories? There are
three general motives for holding inventories.’
 Transactions motive: emphasis the need to maintain inventories to facilitate
smooth production and sales operations.
 Precautionary motive: necessitates holding of inventories to guard against the
risk of unpredictable changes in demand and supply forces and other factors.
 Speculative motive: influences the decision to increase or reduce inventory levels
to take advantage of price fluctuation.

FACTORS INFLUENCING SIZE OF INVENTORY

Lead time: it is the gap between the date of placing an order the date of actual receipt of
materials.
Cost of holding inventory: inventories tie up of funds. The different costs of holding
inventory are:
 Material cost
 Ordering cost
 Carrying cost
 Cost of under stocking
 Cost of over stocking

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Reorder point: it indicates when an order should be placed and depends upon the
consumption rate and the duration of lead time.
Stock: in inventory control, different terms are used, such as safety stock, reserve stock,
buffer stock and so on. The buffer stock provides for normal consumption during an average lead
time.

Other factors:
 Variety reduction
 Material planning

 Service level
 Quantity discount

COSTS ASSOCIATED WITH HOLDING INVENTORY

The continuous flow of inventory is most essential to carry out smooth productive
activities. The success and finely supply of finished goods mainly depends on uninterrupted supply
of raw materials to the production department.
To ensure to this flow of raw materials, the company has to maintain adequate quantity of
inventory. Storing of these components involve many type of east and uncertainties. As the value
of rupee. It should be maintained judiciously. Some of the costs associated in managing the
inventories are given below.

 Financial Costs
It is also known as capital cost. The finance requires purchasing the inventory and the costs.
The company bears for mobilizing. It is known as financial cost.

 Cost of Storage
Inventory is to be stored properly by protecting the quality. The space required for storing the
inventory must be adequately provided. The cost consists of the rent payable for storing and cost of
insurance.

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 Price Fluctuation
Inventories are exposed to wide fluctuation in the prices. Many times The prices of materials
may be reduced. If the prices paid for procuring the materials are higher than the price that is
prevailing it is a loss to the business firm.
 Risk of obsolescence
Due to the increased research and innovative and creative mind of technologies new materials
and products will enter into the market. Under such circumstances the product manufactured today
becomes obsolete.

 Theft, Damage and Accident

The materials are stored in the warehouses It is not properly taken care of it is exposed to
different types of uncertainty through theft, damage arid fire accident etc.

 Order placing cost

Order placing cost is a permanent cost, which is incurred by the business firm to place
the order for materials, the salary of clerk, manager and established charges will also be considered
in to managing.
 Inventory carrying cost
It includes the expenses of maintenance of stores, bins and salary to the staff that are in
change at warehouses of storage.

 Cost of Storage of Stock

Many time’s business firms may not be able to arrange the adequate supply of materials
regularly for various reasons.
As a result production work may not be continued. Therefore, sufficient care should be taken
not to have this cost in running the business
Inventory means Tangible process which
 Are held for sale in the ordinary course of business.
 Are in the process of production for such sale.
 Are to be currently consumed the production to goods or Services.

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Inventory constitute on an average of approximately 60% of current assets in public

limited companies in India. 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 important to manage inventories efficiently and effectively to avoid
unnecessary investment. An undertaking neglecting management of inventories will be reducing
its long run profitably this ultimately.
It is possible for a company to reduce its levels of inventories to a considerable degree of 10-
2000 without any adverse effect on production and sales. By using simple inventory planning and
control technique. The reduction in excessive inventories carries an Invariable impact on
companies’ profitability.

INVENTORY MANAGEMENT:
It is defined as the systematic location, storage and recording of materials in such a way
that the desired degree of services can be made to the operating shops at an ultimate minimum
cost.
Inventory management is the systematic control over the planning purchase, storage use and
accounting of inventories to insure that the inventory is adequate for the requirement of the
business and of the same time. There is no excessive investment on inventory and the wastage or
loss of inventory is reduced to minimum due to inflation and the concept of time value of money.
Inventory management has gained important recognition in the day-to-day management of
business unit.
An inventory problem exists when it is necessary to stock physical goods or commodities
for the purpose of satisfying demand over a specified period. Any production organization must
carry stock of goods in order to ensure smooth and efficient running of its operations. Discussions
regarding how much should be order at a time and when. Should the orders be placed are Very
important in inventory problems. The scientific process of implementing inventory management
provide at tight time from right source and at right prices.
It also involves the steps that are to be undertaken with shortage and supervision of these
materials. The main objective of inventory management is to reduce the order placing and
receiving and inventory carrying costs. This not ensures continues flow of materials but also
reduces the cost of production.

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There may be two situations

 Over stock situation.
 Under situation.
Over stock situation would require higher capital investment but less frequent occurrences of
shortages and placement of order also. Bulk purchasing reduces the unit cost of items.
Under stock situation would decrease the capital investment but would increase the frequency
of ordering as used as the risk of the running out of stock. . The two extreme or costly and not
desirable. The decisions regarding the quantity to be ordered and the time of ordering must be
based on the minimization of total cost of inventory.

OBJECTIVES OF INVENTORY MANAGEMENT:

Important objectives of inventory management
 To provide continues supply of raw materials to carry uninterrupted production.
 To reduce the wastage and to avoid loss of pilferage, Breakages and deterioration.
 To exploit the opportunities available to reduce the cost of purchase.
 To reduce the scientific inventory management technique.
 To provide right materials at right time, at right source and at right prices.
 To protect quality of materials.
 To reduce the order pricing and receiving cost to the minimum
 To meet the demand for goods by ultimate consumers on time.

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 To provide the management with promote and update information about the inventory
position for proper planning of production and sale.
 To minimize the wastage damage and loss of inventory during storage. Handling and
use.
 To create a buffer between input and output.
 To ensure against delays in deliveries.
 To take advantage of quantity discounts.
 To utilize the advantage of price fluctuations.
 To ensure against scarcity of materials in the market.
Usually, the company is faced with the following conflicting objectives in the area of inventory
management:
1. To carry maximum inventory in order to facilitate efficient and smooth production and sales
operations.
2. To minimize investment in inventory for maximize the profitability.
Both over-investment and under investment in inventories is undesirable as both involve the
consequences. The over-investment involves the consequences like:
 Unnecessary blocking of funds in inventory and hence loss of profit.
 Excessive storage and Insurance Cost.
 Risk of liquidity. The inventories once purchased and stored are normally difficult to dispose off
at the same value.
The under-investment involves the consequences like:
i. If sufficient stock of raw material and work in process is not available, it may result into frequent
interruptions in production.
ii. If sufficient stock of finished goods is not available it may not be possible for the company to
serve the customers properly and they may shift to the competitors.

Thus, it can be said that the objective of inventory management is to minimize the investment in
inventory without affecting production or sales operations.
Inventory as a current asset, differs from the other current assets because only financial managers are not
involved. Rather, all the functional areas, finance, Marketing, Product & Purchasing are involved.

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The job of the financial manager is to reconcile the conflicting viewpoints of the various functional areas
regarding the appropriate inventory levels in order to fulfill the overall objective of maximizing of owner’s
wealth.

PHYSICAL INVENTORY MANAGEMENT

MEANING:
“Keeping of goods is also a type of management. Whenever requirements comes from the production
department, providing of those required materials in a proper manner & providing those at the specified
period, is the main motto of Physical Inventory Management.”
Benefits for Holding Inventory:
 Benefits in Purchasing
 Benefits in Production
 Benefits in Work-in-Process
 Benefits in Sales

FINANCIAL INVENTORY MANAGEMENT

MEANING:
“Recording, maintaining and evaluating of stocks in a value terms is known as Financial Inventory
Management.”

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In other words valuation of stocks and controlling of ordering and holding costs and also maintaining of
sufficient valued stocks in Inventory is known as Financial Inventory Management.”
Financial Inventory Management is again divided into three different categories.
 Based on Valuation
 Based on Cost Analysis
 Based on Financial Statement

LOGISTICS INVENTORY MANAGEMENT

Meaning of Logistics:
Is to maintain all documents of those that are related to the exporting of their Logistics are the
Organization of Services and Supplies. In other words, logistics is making and taking the permission for
sell/exporting the company’s products in foreign countries.
In fully export-oriented business this is one of the main departments, where this department gets an
approval to sell their goods in foreign countries and also their main intention products.
Yes, already we have observed about the meaning of Inventory Management in the Organization. But in
fully export oriented business; Inventory Management is a very important concept. Because every exporter or
importer, they do not know about each other who are staying in other countries.
So every company, which are exporting or importing of materials, they should communicate each other
through banks only.
These banks are listed by Central Bank of that Nation. In our Country RBI is lists some banks for
intermediating purpose and every year RBI declare some listed Banks as a mediator.
For producing of materials and selling of those materials, every company/business should need a
Working Capital. This Working Capital can also financed by Banks. While in export oriented business it is
slightly different task. Here Banks can acts as financial assistance for Pre-Shipment and for Post Shipment of
Goods.

TOOLS OF INVETORY MANAGEMENT

 Fixation of levels
 ABC Analysis

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 Perceptual inventory system

 VED Analysis
 FSN Analysis
 Periodical inventory evaluation

FIXATION OF LEVELS
It is a tool through which the inventories are maintained by fixing different levels
namely Dept.
 Maximum level
 Re-Order level
 Minimum level
 Danger level
 Maximum level

 Maximum level
It is a level set for materials beyond which it should not he stored Considering the various
factors namely availability of raw materials, lead-time storage space etc A material stored beyond
maximum level creates several financial and managerial problems to the firm sets maximum level.
The following formula is used to fix the maximum level.
Maximum level = Re-order level - Re-order Quantity (Minimum consumption * Minimum
time required for delivery)

 Re-order level
It is that level fixed for the materials to indicate the urgency at procuring them from the
market. This level is fixed by considering the rate of consumption of materials .Lead-time and the
availability of raw materials. Once the material reach this level store controller place has request to
purchase the material.
Re-Order level =Maximum consumption * Maximum consumption time

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 Minimum level
It is also known as safety stock below which the storing of materials leads to severe
consequences. In other word, it is a level at which stores controller takes immediate action in
procuring the materials. with negligence on the pail of the in charge of stores may lead to stoppage
of production Considering lead time, rate of consumption and the nature of materials set these
levels.
Minimum level= Re-order level (normal consumption * Normal consumption time)

 Danger level
It is the level beyond which storage materials should not till. It also indicates the
necessary to arrange for quick purchase of materials.
Otherwise, a firm as to adopt the production of major plants. The store in charge may procure
the materials even at the cost of extra expenses and strains.
Danger level =Normal consumption day/week/ month * Time required to obtain emergency
supplies.

ABC Analysis
Under this method, the materials are managed by giving importance to its value,
Classifications are made by grading the materials as A. B, and C Grade ‘A’ materials are costly
Grade ‘C’ materials are cheap in value hut more in quantity and least attention are given in
monitoring these items. Grade ‘B’ materials are moderate in value and moderate number of such
items are maintained with moderate control.

Economic order quantity

Economic order quantity is that quantity of materials to be ordered where it will have least
(or) minimum order placing and carrying cost. This can be calculated by following formula.
EOQ= (2AS/I)
A = Annual consumption in rupees. S=cost of placing an order inventory carrying cost of one
unit.

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Perceptual inventory system

Registers are maintained for materials, entries are made as and when the materials are
received and issued. The physical verification of materials conducted throughout the It is also
called as continuous stock checking. Under this system year.

VED Analysis
All the materials are classified into Vital, Essential .And Desirable materials. Vital parts for
the manufacturing of a product will be closely monitored. E” types of materials are essential, but
their levels of stocks are moderate low. Desirable item may or may not him maintenance.

FSN Analysis
Under this method, materials are grouping according to the movements. Fast moving items,
slow moving Items and non-moving items. Fast moving items are stored in large quantity and
close watches on the movements of such items are kept.
The production department does not frequently need slow moving items the production
department rarely requires non-moving items.
Periodical Inventory Evaluation
Under this system inventory evaluation with checking will be carried out at different intervals
generally twice or thrice in a year.

PROCESS INVENTORY MANAGEMENT

The techniques of inventory management, discussed above, are very useful in determining the
optimum level of inventory and finding answers to the problems of the economic order quantity,
the re-order point and the safety stock. These techniques are very essential to economies the use of
resources by minimizing the total inventory cost. Our discussion of inventory management
indicates the broad framework for managing inventories: More sophisticated techniques may be
used to handle inventory management problems more efficiently and effectively. It should,
however, be realized that inventory management. More than the use of techniques is a managerial
process of continuous planning, coordination, control and monitoring, motivation etc. It involves a
number of steps in these areas.

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CONCEPTUAL BACKGROUND

Inventory means “stock of goods”. It covers the stock of raw materials, components and
spare parts, work in progress or semi-finished goods and finished goods. Inventories constitute
the largest proportion of current assets in business organizations.

The term inventory means stocks that a business firm keeps to meet its future requirements of
production and sales. Inventory of industrial undertaking consists of:

 Stock of raw materials

 Work –in-progress.

 Stock of finished goods.

 Stores and spares.

NATURE OF INVENTORIES

Inventories are stocks of the company’s manufacturing for sale and components that make up
the product.

The various forms in which inventories exists in a manufacturing company are;

1. Raw materials

those units which have been purchased and stored of future productions. The factors like
the availability of raw materials and government regulations, etc. too affect the stock of
raw materials.

2. Work in progress

WIP inventories are semi-finished products. They represent that need more products.

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They represent products that need more work before they become finished products for
sale.

The quantum of work-in-progress depends upon the time taken in the manufacturing
process.

The greater the time taken in manufacturing, the more will be the amount of work-in-
progress.

3. Finished Goods

These are the final or completed products which are ready for sale. Stock of raw material
and WIP facilitate production, while stock of finished goods is required for smooth
marketing operations. The purpose of maintaining inventory is to ensure proper supply of
goods to customer. In some concerns the production is undertaken on order basis, in these
concerns there will not be a need for finished goods. The need of inventory will be more
when production is undertaken in general without waiting for specific order. Thus inventory
serve as a link between production and consumption.

4. Consumables stores and spares

These are the goods held for consumption by machines in manufacturing concern. They
include spare parts, lubricants, and plant cleaning materials, oil, fuel, light, bulbs etc.

They don’t enter into the final product but they are required for maintaining and running the
machines for production purpose.

EVOLUTION OF INVENTORY MANAGEMENT IN INDIA:

The evolution of inventory management starts with the US and world war I. before 1 st world
war, people were unaware about the importance of materials management, inventory control,
and supply chain management.

Root of evolution-US economy: US economy: World War I

Before World war I (before 1914): material availability is at large qty.

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From (1914-1918): threat of material availability is at large qty.

1920-21: Heavy inventorying during the business collapse

1926-29: profitless prosperity, prolonged depression, all contributed to a better

understanding of the inventory problems.

TISCO was the 1st company to establish “central purchase dept.” in corporate.

1922: An Indian stores department established.

The Indian scenario of adopting material management techniques is even slower cost
consciousness is absent in majority of Indian industry. The armed force was the first to
adopt material management by the name of “logistics management”. Over the years
material management has been restricted to routine purchasing stores etc. An Indian
stores department established in 1922.

IMPORTANCE OF INVENTORY MANAGEMENT

Inventory management is importance from the views point that it enables to address two
importance issues:

1. The firm has to maintain adequate inventory for smooth production and selling
activities.

2. It has to minimize the investment in inventory to firm’s profitability. Maintaining

optimum level of inventory is the main aim of inventory management.

The importance of inventory management could be specified as

below:

i. Inventory management helps in maintaining a trade off between carrying cost and
ordering costs which results into minimizing the total cost of inventory.

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ii. Inventory management facilitates maintaining adequate inventory for smooth

production and sales operations.

iii. Inventory management avoids the stock-out problem that a firm otherwise would
face in the lack of proper inventory management.

iv. Inventory management suggests the proper inventory control system to be applied
by a firm to avoid losses, damages and misuses.

OBJECTIVES OF INVENTORY MANAGEMENT

Important objectives of inventory management are:

1. To provide continuous supply of raw materials to carry out the uninterrupted

production.

2. To reduce the wastage and to avoid loss of pilferage, breakage deterioration.

3. To exploit the opportunities available to reduce the cost of purchase.

4. To introduce scientific inventory management techniques.

5. To meet the demand for goods by ultimate consumer on time.

6. To avoid excess and inadequate storing of materials.

7. To protect quality of materials.

8. To reduce the order placing and receiving cost to the minimum.

9. To ensure effective utilization of the floor space.

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10. To provide right materials at right time, at right sources and right prices.

11. To minimize the wastage, damage and loss of inventory during memory, handling and
use.

12. To provide the management with prompt and up-to-date information about the
inventory position for proper planning of production and sale.

NEED FOR HOLDING INVENTORIES

Every business enterprise has to maintain a certain level of inventories to facilitate

uninterrupted production and smooth running of business. There are three main purposes
of motives of holding inventories. They are as under.

1. The transaction motive

This facilitates continuous production and timely execution of sales orders.

2. The precautionary motive

This necessitates the holding of inventories permitting the unpredictable changes in

demand and supplies of materials.

3. Speculative motive

This includes keeping inventories for talking advantages of price fluctuations, saving in
re-ordering costs and quantity discounts, etc...

Costs Associated with holding inventory:

The continuous flow of inventory is essential to carry out smooth productive activities,
the success and kindly supply of finished goods mainly depends on uninterrupted supply
of raw materials to the production department to ensure to this flow of raw materials, the

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company has adequate quality of inventory, storing of these components in value many
types of cost and uncertainties’, As the value of the materials increases then the value of
rupee, it should be maintained judiciously.

Some of the costs associated in managing the inventories are given below:

1. Financial costs

It is also known as capital cost, the finance required to purchase the inventory and the
costs, the company bears for mobilizing. It is known as financial cost.

2. Cost of storage

Inventory is to be stored properly by protecting the quality, the space required for storing
the inventory must be adequately provided. This cost consists of the rent payable for
memory and cost of insurance.

3. Price fluctuation

Inventories are exposed to vide fluctuation in the prices, many a time, the prices of
materials may be reduced if the prices paid for procuring the materials are higher than the
price i.e. prevailing it is a loss to business firm.

4. Inventory carrying cost

It includes the expenses for maintenance of stores-bins, and salary to the staff that are in
change of warehouses of memory.

5. Risk of Obsolescence

Due to increased research and innovative and creative minds of technologist. New

Materials and product with enter into the market. Under such circumstances the product
manufactured today becomes obsolete.

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6. Theft, damage and accident

The materials are stored in the warehouse if it is not properly taken care of, if is exposed
to different type of uncertainties viz, theft, damage and fire accident etc......

7. Order placing cost

Order placing cost for materials. The salary of clerk, manager and establishment charges
will also be considered in to managing the inventories.

8. Cost of storage of stock

Many a times business firms may not be able to arrange the adequate supply of materials
regarding for various reasons as a result, production work may not be cost in running the
business.

OBJECTIVES OF HOLDING INVENTORY MANAGEMENT AT

INDO-SPANISH TASTY FOODS PVT.LTD

 The tally software is used for the purpose of inventory management in the plant.
This software gives the full details about the inventories of ISTF’S.

 Supply of raw materials as and when required by the production department.

 Optimization of profit and minimization of cost.

 Minimization of raw materials storage cost.

 Minimize wastage and losses of materials.

 To provide Quality of raw materials.

TYPES OF INVENTORY

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Management of inventory in the organization is very much beneficial to the company.

Maintains of the different types of the inventories are having different uses. The main
uses of the inventories are as follows;

A. Movement inventories

It is also called transit or pipeline inventories. Their existence owes to the fact that
transportation time is

Involved in transferring substantial amounts of resources.

B. Buffer inventories

These inventories are held to protect against the uncertainties of demand and supply.An
organization average demand for various items that it needs. And its delivery time (i.e.
the time elapsed between placing an order and having t he goods in stock ready for use, is
called as lead time). However the actual demand may be held excess of the average for
expected demand similarly the average delivery time can be more than average. This
excess stock can be kept in order to meet the demand during the time for which delivery
is delayed.

C. Anticipation inventories

It is held for the reason that a future demand for the product is anticipated.

E.g.:- production of specialized times like crackers well before Diwali.

D. Decoupling inventories

The idea is to decouple or disengage, different parts of the production system. As we can
observe different machines/equipment and people normally work at different rates: some
slower some faster. A machine for example, might be producing half the output of the
machine on which the item being handled is to be processed next. Inventories in between
the machines are held in order to disengage the processing on those machines. In the
absence of such inventories, different machines and people cannot work. Simultaneously

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on continuous basis when such inventories are held, then even if a machines breaks
down, the work on others would not stop.

E. Cycle inventories

These are held for a reason that purchase is usually made in lots rather than for the exact
amount which may be needed at a point of time. If purchases are made frequently and in
small numbers, then the costs involved in obtaining the item would be very large.

F. Independent demand inventory

Inventory item whose demand is not related to (or dependent upon) some higher level
item. Demand for such items is usually thought of as forecasted demand. Independent
demand inventory items are usually thought of as finished products.

G. Dependent demand inventory

Inventory item whose demand is related to (or dependent upon ) some higher level items.
Demand for such items is usually thought of as derived demand. Dependent demand
inventory item are usually thought of as the materials, parts, components, and assemblies
that make up the finished product.

INVENTORY MANAGEMENT LEVELS:

The general concept of management namely, planning, decision making and controlling
are equally apply to inventory management.

1. Maximum level

This is that level above which stock should not normally be allowed to raise. The
maximum level may, however be exceed in certain cases e.g. when unusually favourable
purchasing condition arise. It is computed by following formula.

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Maximum level= (Reorder level) + (Reorder quantity) - (minimum

consumption*minimum delivery time)

2. Minimum level

Inventories are not allowed to fall below the level. These are otherwise called safety
stock in event of emergency. If the inventory levels falls below this level there is a
greater chance of shock out. This generally happens when consumption increases the
standard requirements.

Min level = (Re-order level) – (average rate of consumption * average delivery period)

3. Re-order quantity

This refers to the order which gives maximum economy in purchasing any material. It is
also referred as optimum or standard ordering quantity. The re-order level is fixed taking
into consideration lead-time and unusual delay or interruptions. This level is calculated as

Re-order level= (maximum consumption)*(maximum re-order period)

4. Danger level

This level at which normal issues are stopped and materials are issued for important jobs.
This is level is generally fixed somewhat below minimum level. When stock reaches
danger level, urgent action is needed for the replenishment of stock so that stoppage in
production can be avoided. This is completed as follows:

Danger level = (normal consumption)*(maximum re-order period under Emergency

condition)

5. Average stock level

This level indicates the average stock held by the concern. It is calculated as follows:

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Average stock level = (maximum level + minimum level)/2

TOOLS AND TECHNIQUES OF INVENTORY MANAGEMENT

Inventory control techniques represent the operational aspect of inventory management

and help realize the objectives of inventory management and control.

Several techniques of inventory control are in use and it depends on the convenience of
the firm to adopt any of the technique. The techniques most commonly used are the
following.

A. ABC Analysis (Always better control)

B. HML classification (High Medium and low)

C.EOQ Techniques (Economic order quantity)

D. Max-minimum system

E. Two Bin system

F. Materials requirement planning (MRP)

G. Just-in-time (JIT)

A. ABC (Always better control) Classification:-

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One of the widely used techniques for control of inventories is ABC analysis. The
objectives of ABC control is to vary the expenses associated with maintaining
appropriate control according to the potential saving associated with a proper level of
such control.

ABC analysis consists of the classification of materials into categories, A, B&C on the
basic of their value. Items of ’A’ category are subject to strict control with regard to
purchase, storage and use. Items of ‘B’ category are not subject to much control. The
objective of this analysis is to reduce the investment of inventory, the cost of inventory
control and also loss of inventory.

B. HML (High medium and low) classification:-

The HML classification follows the same procedure as adopted in ABC classification.
Only difference is that in HML classification, the unit values is the criterion and not the
consumption value. The item of inventory should be listed in descending order of unit
value and it is up to the management to fix limits for the three categories.

The HML analysis is useful for keeping control over consumption at departmental
levels, for deciding frequently of physical verification and for controlling purchases.

C. Economic order Quantity (EOQ):-

It can be described as the basis for how much to buy. It is the oldest and most widely
known inventory model. It dates back to 1915. The purpose of using EOQ model is to
find that particular quantity of order with minimum total inventory costs. EOQ is the
technique which

Solves the problem of the materials manager. EOQ is the order size at which the total
cost, comprising ordering cost and carrying cost, is the least.EOQ will be fixed at a level
where the total of ordering cost will be minimum.

EOQ can be calculated by a mathematical formula:-

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EOQ=2AC*C

Where, A= annual consumption of units

O= ordering cost per order

C=carrying cost per units per annum

D. Two-bin system:-

It is mainly adopted to control ‘O’ group inventories. In the two-bin system, stock of each
item is separated into bins. One bin contains stock to last till the date of placing a new
order. The other bin contains a certain quantity of stocks that will be sufficient to satisfy
probable demand during the period of replenishment stock first issued from the 1 st bin.
When the 1st is empty, an order of replenishment is made and the stock in the 2 nd bin
utilized until the order material is received.

E. Just-in-time (JIT):-

The concept JIT means that, virtually no inventories are held at any stage of production
and the exact numbers of units are brought to each successive stages of production at the
right time. It is also called, ’Zero inventory’. The concept JIT was started in the ‘Motto
Machi’ plant of Toyota Corporation, Japan, where the system has been perfected and
results achieved. The plant has a long line of Trucks waiting outside with full load of
automobile parts for the assembly line. As soon as one truck comes out from one end of
the plant, another truck gets inside. There is no warehouse for the parts. In India, the
Maruti Udyog ltd. has adopted JIT.

F. Bin cards and stores ledger:-

a) Bin card:-

Bin is a place, rack or cupboard where materials are stored. Each bin has a card to show
the position of the stock in the bin. It is known as ’Bin card’. It has bin number, materials
issue, material requisition numbers, balance of stock and remarks.

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b) Stores ledger:-

Stores ledger contains the same columns which a bin card has but, in addition the, the
amount of columns for pricing receipts and issues of materials are provided. Stores ledger
shows at any time, the value on band...

VALUATION OF INVENTORIES

The value of material has a direct bearing on the income of a concern, so it is necessary
that a method of pricing materials should be such that it gives a realistic value of stocks.

The following methods for pricing material issues are generally used

1. First in first out method [FIFO]

2. Last in first out method [LIFO]

3. Average price method

a) Simple average price method

b) Weighted average price method

4. Standard price method

5. Current price method

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1. First in first out method [FIFO]

In FIFO method the materials received first are issued first. The materials are issued in
chronological order. The recently received materials remain in stock. Whenever a
requisition for material issue is presented to the store-keeper he will use the price of the
first lot and then of the second and third lot, etc. When the quantity of the first, second lot
is exhausted. When price are fluctuating then the cost of different batches of production
will be different because issue prices of various lots will be different. This method is
suitable when prices are rising then materials will be issued at lower prices (earlier
prices) and replacement costs will be higher. This Method is useful for materials which
are subject to obsolescence or deterioration.

2. Last in first out [LIFO]

This method is the opposite of the FIFO method. It assumes that the material which is
acquired last is issued first. Hence material issues are priced on the basis of the cost of the
recent purchases.

3. Average price method

a. Simple average price method

Under this method, materials issues are valued at average price. It is calculated by
dividing the total prices of the materials in the stock, from which the materials to be
priced could drawn by the number of prices used in the total.

The issue price is determined as follows

Issued price= Unit prices of materials in stock/Number of purchases

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B. Weighted average cost method

Under this issues are priced at the weighted average cost of materials in stock [The
weights being proportional to quantities].In this method the total cost of all the materials
is divided by the total number in stock. The price calculated in this way will be used for
issue of materials up to the time a fresh purchase has not been made. After a fresh
purchase, the quantity will be added to the earlier balanced quantity and material cost will
be added to the earlier cost. A fresh price is calculated by dividing the changed total cost
by the number of units in stock after the purchase. A new price is calculated where even a
fresh purchase is made.

4. Standard price method

Under this method a standard price is pre-determined when materials are purchased the
stock account is debited with the standard price. The difference between the actual price
and standard price is carried to a variance account. The standard price is based on market
condition, usages rate, handling facilities, storages facilities, etc. materials issues is
charged as per the standard price.

This study provides a valuable tool for identifying the key factors in inventory
management which can be applied to similar problems encountered in actual
manufactories.

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CHAPTER-2

RESEARCH DESIGN

2.1 Statement of the problem:

Managing the inventory level is An important task in the organization because there
many factor affecting on inventory level from ordering the inventory to receiving the
inventory at the factory of the organization holds excess inventory it may incur the huge
holding cost and if their is less stock it also effect on production process.

2.2 LITERATURE REVIEW:

This study provides clear meaning of terms and concepts and also reviews of the findings
of the previous researchers. This helps to clearly identify the gap therefore justify the
need of doing the study on the impact of inventory management on kanva. Empirical
literature review management of inventory conversion period (ICP) was found to have a
significant impact on profitability in studies from different countries.

1
CHOWDRY (1971): in his article suggested various inventory control techniques
for efficient inventory control i.e. minimum stock level, EOQ, standard costing,
budgetary control and material as a limiting factor. Which help in betterment of profit.
ITR, work-in-progress turnover ratio, finished goods turnover ratio and ITCAR were
suggested for efficient control of inventories through ratio analysis.

2
KUMAR.P (1996): conducted a detailed analysis of inventory management
functions on Punjab state electricity board by administering a questionnaire and found
that stores control was carried out strictly and inventory control techniques like Economic
1
Chowdry (1971)

2
Kumar.p (1996)

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Order Quantity (EOQ), Always Better Control Analysis (ABC), IRT Were used for
inventory management.

3
RABIULALAM and HOSSAIN (2001): conducted a study on inventory
management in a Khulna shipyards Limited (KSL) in Bangladesh through ratio and
correlation analysis for a period of ten years from 1987-1988 to 1996-1997. A high
degree of statistically significant positive association existed between inventory and
current assets as well as total assets. Inventory was found to have occupied highest share
in current Assets as well as total assets. The work-in-progress conversion period was very
high and the financial data analysis revealed poor inventory management at KSL.

4
PARMAR (2003): attempted to evaluate the performance of inventory management
of GSFS & GNFC for a period of 7 years from 1994-1995 to 2000-2001. The overall
performance regarding inventory management at GNFC was better in terms of efficient
utilization of inventories whereas GSFC was not able to do so as it had larger amount
invested in inventories in relation to total which was further confirmed by a statistically
significant relationship between sales & inventory in case of GNFC & insignificant
relationship for GSFC. It was concluded that overall performance of GNFC was
encouraging and that of GSFC was alarming.

5
SCOLL GRANT ECKERT (2007): Study focused on finding out customer
satisfaction through Inventory management. They suggested that the company or
organization should understand the customer expectations and requirements. The study
used both qualitative and quantitative methods to apply the inventory techniques to
minimize the inventory cost of the organization.

6
TRAVIS TOKAR ET AL (2008): Conducted a detailed literature review on
inventory management in USA. The researchers have focused considerable attention on

3
Rabiulalam and hossan (2001)

4
Parmar (2003)
5
Scoll grant Eckert (2007)
6
Travis Tokar et al (2008)

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integrating traditional logistics decision, such as transportation and warehousing with

inventory management decision. The purpose of this paper is to provide a review of
inventory management articles published in major logistics outlets, identify themes from
the literature and provide future directions for inventory management research to be
published in logistics journal.

7
SINGH.P (2008): In his comparative study in Indian farmers Fertilizers co-
operatives Limited and National Fertilizer Limited (NFT), two fertilizer companies,
evaluated the effect of the size of inventory and its impact on working capital through
inventory ratios and trends in inventory and working capital. Inventory ratios of both the
companies have improved over the study period but NFL’s position was better than
IFFCO. Trend of inventory and working capital followed the same pattern in both the
companies. However in NFL, the portion of inventory in gross working capital regularly
decreased specially in the last six years, which positively affected the liquidity position of
the company during the study period. It was found that the size of inventory directly
affects working capital and its management. Overall a need for improvement in inventory
in case of IFFCO was suggested as it was not found to be properly utilized and
maintained.

8
RAJEEV(2010) : Conducted a study on inventory management for small and
medium sized manufacturing companies in India his study was aimed at machine tool
industries sector in India which was an extremely inventory intensive. The results
showed that inventory management had really some impact on labour productivity capital
productivity and returns to scale in respondent companies.

9
SONI (2012): Examined the inventory management practices of Engineering Goods
Industry in Punjab taking a sample of 150 companies over the period 2004 to 2009

7
Singh (2008)
8
Rajeev (2010)
9
Sony (2012)

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through primary data collection as well as Ratio Analysis. The study revealed that size of
Inventory has increased marginally over the study period with half of the GWC being
used for meeting out Inventory requirements which has resulted to high IHP & lower
ITR. Major part of inventory was found of raw material followed by work-in-process,
stores parts and semi finished goods. Moreover a significant impact of sales on inventory
was found through regression analysis.

10
BASAVARAJAPPA. M.T (2002): Conducted a study on “Empirical
investigation of inventory management practices of Mysore paper mills limited at
Bhadravathi. Researcher used analytical method. The researcher uses the sample sizes for
the purpose of improving the basement of the inventory control. This studies shown that
the company should invest more on research.

11
COOK et al (2012): Used a large sample of manufacturing companies to study
how production cost structure and inventory valuation method affect this strategy.
Researcher reported the following results companies with high fixed-costs ratios were
more likely to manipulate inventory but made smaller abnormal inventory changes than
companipanigrahi (2013) has examined the relationship between inventory conversion
period & firm’s profitability & the results indicate that there is a significant negative
linear relationship between inventory conversion period and profitability.

12
TOM JOSE V. (2013): Examined a study on ‘analysis of inventory control
techniques’ in Kochi. Researchers used comparative study method to ensure availability
of materials in sufficient quantity when it is required and also helps to minimize
investment in inventories. The author used economic order quantity, safety, stocks, ABC
analysis and also FSN analysis for conducting a analysis of inventory control techniques.

10
Basavarajappa.MT (2002)
11
cook et al (2012)
12
Tom Jose V.(2013)

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13
PANIGRAHI (2013): Has examined the relationship between inventory
conversion period & firm’s profitability & the results indicate that there is a significant
negative linear relationship between inventory conversion period and profitability.

14
DR.ANGEL RAPHELLA .S. et al (2014): Conducted a study on inventory
management. The researcher used case study method to find out the company’s current
forecasting model and recommending an inventory control model to help them to solve
their current issues. The researcher used ABC analysis technique to find out the most
important multiple products in a company and EOQ helps to find out the most important
multiple products in a company and EOQ helps to find out the inventory model equation
individually.

15
ELEONORA KONTUS (2014): Examined a study on management of inventory
in a company. The main objective of the study is to analyze the inventory balances of
surveyed companies and also explore the dependence between companies level of
inventory and profitability expressed in terms of return on assets. The researcher used
EOQ model in his study to mark the optimum size of the delivery and choose the
cheapest deliverer which guarantees minimization of total costs of investment of
inventories.

16
NANDINI RAVICHANDRAN (2014): “A study on Inventory management
with reference to leading Automobile Industry.” Nandini Ravichandran did this project to
analyze the inventory management of Ashok Leyland Ltd. It included the complete study
to conduct Ratio Analysis, ABC and VED Analysis for inventory. This deals about the
entire activities of purchase and stores department to suggest the suitable technique to the
company to have improved control over the inventory. It was found that in the firm,
master data was not maintained properly on SAP which was the major reason for the

13
Panigrahi (2013)
14
Dr.angel raphella.s.et al (2014)
15
Eleonora kontus (2014)
16
Nandini ravichandran (2014)

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unmatched sets of parts and excess buying of materials. Also it was found that due to this
the production process was affected in the company.

17
SERHII ZIUKOV (2015): Conducted a study on “A Literature review on
models of inventory management under uncertainty” in Ukraine. The main object of this
paper is to get a broad review of more than 30 research paper &classify the models into
groups and helps to identify future research directors.

18
KAMAU LUCY WANGARI et al (2015): Conducted a study on influence of
inventory management practices on organizational competitiveness in a safaricom Kenya
ltd, in Kenya. The main objective of the study is to determine the effects of inventory
shrinkage inventory investment and inventory turnover on competitiveness of safaricom
ltd. The researcher used descriptive research design was used in this study.

19
NURUL NADIA SURAIDI et al (2016): Conducted a study on relationship
between Inventory Management and Company performances in a textile chain store
company in Malaysia. Researcher used case study method to find out applied research on
inventory management at a textile chain store in Malaysia. And also this case study helps
to find out the relationship between inventory management and company’s performance.
The main purpose is to identify the best method of inventory management and control
their losses and profit of this company.

20
HONG SHEN et al (2017): Conducted a study on Inventory management in a
Manufacturing company in China. Researchers used case study method to find out key
factors which have a bearing on Inventory management procedure and also to identify
effective Inventory management approaches.

2.3 Need for the study

To know inventory controlling policies & techniques followed in the organization. The
policies followed are able to meet the organization objectives and predetermined goals.

17
Serhii ziukov (2015)
18
Kamau Lucy wangari et al (2015)
19
Nurul nadia suraidi et al (2016)
20
Hong shen et al (2017)

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The study has been conducted for gaining knowledge about the inventory management in
ISTFPL.

2.4 Objectives of the study

 To understand the inventory management practices adopted by ISTFPL.

 To identify the factors influencing on inventory cost at ISTFPL.

 To study the liquidity position of the company.

 To make suitable suggestion based on findings.

2.5 Scope of the study

This study is completely depends on the information gives by different staff and
managers in the organization, and in the company has not have sufficient information
regarding inventory. Under this situation we consider the company’s annual reports like
balance sheet and profit and loss account of 2013 to 2017.

2.6 Research Methodology

Research methodology is a systematic way to solve any research problem.

a) Type of research-Descriptive in nature

b) Source of data- my study based on secondary data. The source o f

secondary data are 5 years financial statement.

Secondary data

The data which have been collected from someone else and which have already been
passed through satisfied process.
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The secondary data sources are:

A. Financial statements like annual reports and records of INDOSPANISH TASTY

FOODS PVT.LTD KUNIGAL.

B. Records of the companies

C. Textbooks data published by”Indo-Spanish tasty food pvt.ltd “at kunigal plant.

D. Inventory manuals.

E .websites

a) Plan of analysis-collected data analysed and presented in tables and charts

2.7 Limitation of the study

a. Study duration is short.

b. The analysis is limited to just 5 year’s data study.

c. Limited interaction with managers due to their busy schedule.

d. Difficulty in obtaining data from the managers.

CHAPTER SCHEME

Chapter scheme of the project report is classifieds

Chaper-1-Introduction

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This chapter deals with theoretical overview of the inventory Management.

Chapter-2-Research design

This chapter explains the research design.Objects of the study, tools and Techniques for
data collection and limitations of the study.

Chapter-3-Company profile

This chapter gives the company profile of Indo Spanish tasty foods Pvt ltd.

Chapter-4-Data analysis and Interpretation

This chapter analysis and interprets the data collected with the help of ratio, ratio analysis
used to analyse the data. This data was collected by secondary data of the company.

Chapter-5-Summary of findings and conclusion.

This chapter contents summary of findings and concussion gives out of the analysis done
during the study.

Chapter-6-Suggestions

Bibliography

Annexure

CHAPTER-3

COMPANY PROFI

3.1 INDUSTRIAL PROFILE

INTRODUCTION TO FOOD PROCESSING INDUSTRY

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The food processing industry in India is a one of the largest in terms of production,
consumption and exports and growth prospectus. Beyond by a favourable policy
environment and the demand push impact of a young consuming class with growing
disposable incomes, India offers significant investment opportunities in this business. The
Indian economy is agrarian in nature, with contributing to approximately 20% of the
country’s GDP and providing livelihood to almost 67% of the population with a
leadership position in the production of several key agriculture commodities including
cereals, fruits and vegetables and dairy productions, India’s supply strength in agriculture
is immense, with a potential to emerge as the leading agro economy of the world. India is
making an important mark in the global food arena-both as a larger producer and
exporters of agricultural products and as a very larger and growing market for processed
foods. The favourable policy environment and increasing interest of corporate in
agriculture and agaric-food business augurs well for India. Considering the growth
witness by the sector in the last decade and future improvements in future growth rate
expected in the years to come, this sector in the last decade and future improvements in
future growth rate expected in the entire agaric value chain. India is an agaric-rich
country and world’s second largest producer of fruits and vegetables. According to
industry estimates, the processed food market accounts for 32% of the total food markets
which is valued at EUR 67.9 BILLION IN 2002-03 to EUR 13.8BN in 2006-07 the
industry of food processing industries aims to increase India’s where in the global
processing food trade to 39% in the next 8 years from 1.69% at present. India is well
placed to take advantage of growing food trade due to the strong agriculture base and
becoming at sourcing hub for food products. The food industry is a complex, global
collectives of the diverse businesses that supply most of the food consumed by word
population. Only subsistence farmers, those who survive on what they grow can be
considered outside of the scope of the modern food industry.

THE FOOD INDUSTRY INCLUDES:

 Agriculture:- raising of the crops and livestock, and seafood

 Manufacturing:- agrichemicals, agricultural construction, farm machinery and

supplies, seed, etc...

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 Food processing:- preparation of fresh products(milk board), new products,

advertising, marketing

 Marketing:- promotion of generic products(milk board), new products,

advertising, marketing

 Campaigns, packaging, public relation, etc.

 Wholesale and distribution: logistics, transportation, warehousing

 Food service(which includes catering)

 Grocery, farmers market, public markets and other retailing

 Regulation:- local, regional, national, & international rules and regulation for food
production and sale, including food quality , food safety, and industry lobbying
activites

 Education :- academic, consultancy, vocational

 Research and development:- food technology

 Financial service :- credit, insurance

INDIAN FOOD PROCESSING INDUSTRY:

The food processing industry is one of the largest industries in India & ranks fifth in size.
The Indian food processing industry has an estimated size of $70 bn. The industry’s
contribution to the country’s GDP in 2008 was about 7.3% & had a share of 7% in the
total industrial production. It employs 1.6 million workers directly. India is endowed with
the second larger arable land, second largest irrigated land under cultivation in the
world& advantage of diverse agro-climatic zones across its geographical spread.

India can become the leading food supplier to the world & at the same time it has vast
growing domestic market with over a billion people and population growing at a rate of

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1.6% per annum with food being the single largest component of private consumption
expenditure accounting for 53% of the total expenditure. Changing life styles create
incredible market opportunities for food producers, food processors, machinery markets,
and food technology and service providers.

HISTORY OF GHERKIN

The word ‘Gherkin’ may have come from the Swedish word ‘gurka’ or German word
‘gurka’ both meaning ‘Cucumber’. Gherkin is cucumber pickled or preserved in vinegar.
There are two type of cucumber: those with smooth epidermis and those with spiny
epidermis and those with spiny epidermis. Only the type with spiny epidermis and is
made into gherkin. It is a cucurbitaceous vegetable crop of 90 days duration whose raw
young fruits are harvested and pickled immediately after harvesting in brine, natural
vinegar.

Though gherkin originated in India, the first ever mention of it, in the recorded history,
pickled gherkin is mentioned in English in the 17 th century. Virginia Gazette of 1792
carries an advertisement for sale of gherkin to the American public, thus introducing it to
the Americans. It conquered the American palate so quickly that it became ‘the pickle’ to
the American within a country. Gherkin pickle in glass jar became a commercial product
in France in the 1820s.

The global production of gherkin is estimated to be around two and half million metric
tons per annum. Out of this, the US produces 40%, but has to depend on some imports as
its consumption is 50% of the total global production. With a demand of 100,000 MT,
Russia is a major potential market for the Indian gherkin industry. India is exporting
100,000 MT at present to several nations, including Russia. The income from this export
is around Rs.3 billion . This is expected to rise Rs.5 billon within the next two years, with
steady increase in the quantity exported.

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India is currently the world’s second largest producer of gherkins, after china. The
country produces 200,000 metric tons of baby cucumbers each years, which accounts for
20% of total gherkin exports. This means that it is quite likely that your jar of gherkins
originated in India, in one the three gherkin-producing states: Karnataka (70%), Andhra
Pradesh or Tamilnadu.

3.3 ORGANIZATION PROFILE

INTRODUCTION TO INDO-SPANIUSH TASTY FOOD PRIVATE

LIMIT

Indo-Spanish tasty foods are in process of consolidating its presence in the business of
gherkins export along with chilly and baby corn versions in jars barrels. The scent
percent export oriented unit is of part of RAFAEL GONZALEZ LAZARO, a Spanish
group of companies. The Indian operation was setup at Kunigal in Tumkur district in
Karnataka in 2003. The parent company In Spain has been working in gherkin space for
the last 50 years. The six year old ISTF also export vegetables including gherkin in
barrels and jars to USA and CANADA.

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“The main reason for setting up of ISTFPL was that India is the 1 st producers of gherkins
in the world & our group wanted to be present in all the chain of gherkins production,
from Indian fields to the European markets,” Rafael Gonzalez lazaro, chairman Indo-
Spanish foods told F&B news. The objective of the domestic operation was to capitalize
on the Indian advantage of being major producers of high quality gherkins globally. ISTF
Plan to market Indian grown gherkins for the European markets.

ORIGIN OF THE COMPANY:

ISTFPL is a private company incorporated on 07 October 2003 in Kunigal, Karnataka, is

Rafael Gonzalez group’s subsidiary company in India, 100% held by conserves Franco-
riojanas limited. It is classified as Indian non-Government Company and is registered at
Registrar of companies, Bangalore. Its authorized share capital is Rs 273.000,000 and its
paid up capital is Rs. 249,206,096 Indo- Spanish tasty foods private Limited’s corporate
Identification Number is (CIN) U0153KA2003PTCO32686 and its registration number is
32686.

The company is limited by shares and is incorporated under”The India companies’ act
1956” and also under the FDI (foreign direct investment) of government of India. The
company is also registered under the K-VAT (Karnataka value added tax). In 2005 it was
also registered under (central sales tax act of 1957)

ISTF IS 100% export oriented unit approved by the ministry of commerce, govt. of India,
engaged in processing vegetables. It does not have any local trading or selling in India.
The company receives olives fruits from Spain. Machineries, barrels and jars are
provided by its parent company. The company is producing only the food products. The
products are consumed as pickles by the consumer. These food products are helpful to the
old aged and for young aged people because it reduce indigestion.

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CUSTOMERS OF INDO-SPANISH TASTY FOOD PRIVATE

LIMITED

As Indo Spanish tasty food private limited Manufactures preserved vegetables tasty food
products. These products have high demand in abroad, as there is ever –increasing. It has
customers in international market.

 Customer:- domestic-No customers

 Customer:-Internationally-Spain and other European countries.

COMPANY AT GLANCE:

 Name of the company: Indo-Spanish tasty food private limited

 Year of establishment:7th October 2003

 Director: Mr. P. Shiva ram

 Parent company: M/S conserves Franco rjojana Spain

 Promoters: M.S. sathyabhamapandey, A.C. murulidharan

 Raw materials: baby corn, chillies, olives, black pepper, capsicum.

 Main products: gherkins, baby corn, mixed vegetables

 Sales: 100% export oriented]

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 Project cost: 24 crores

 Importers: Spain and other European countries

 Size of the company: medium scale industry

 Nature of the company: processing vegetables.

 Main branch: Kunigal

 Capacity: 22.000 Tn/year

 Employees:350

 Promoter’s contribution:100%

 Payback period:7years

 Activity: sale of pickles in bulk products in barrels for industry and glass jars
and cans for distribution.

 Agricultural relations: 1400 farmers, 2500 hectares of land.

3.4 PROMOTERS OF THE COMPANY:

ISTFPL is registered Pvt Ltd. With the share held closely. The present and first directors
of the company are:

 Mr. Rafael cipriano Gonzalez lazaro

 Mr.Venkatashivaram krishnaiahpannasava

 M.S Sathyabhama Reddy

 A.C Murulidhar

No qualification share is necessary for a director in the company. The contribution of

promoters is 100%.

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3.5 VISION AND MISSION STATEMENT

Vision

A world-class supplier, satisfying customers, shareholders and employment.

Mission

We are committed to continuously improving our process, products, service,

Relationship to delight of our customers through innovation enhanced competencies

And employee motivation with due regard to the society.

3.6 QUALITY POLICY

Indo Spanish tasty food company encourage the quality in well we do philosophy to
make stronger connections with our business partner.

Indo Spanish tasty food products go through accurate quality controls, from their origin
to the final product. These controls are carried out not only by our quality departments in
the different production unit but also by external laboratories, which allows us to obtain
the greatest quality and the total control of the traceability of our products.

Indo Spanish tasty food worry and concern about the environment is shown in the
treatment and water control system located in our premises.

3.7 PRODUCT PROFILE

Indo-Spanish products:

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Indo-Spanish product are commercializes the products under the brand “IS”. Offering
wide range of products from pickles to vegetables salad all them pasteurized and in
vinegar. Their formats are presented in a wide range. This makes their products very easy
to adapt the consumer’s necessity. They are offered in jars: detail format and industrial
format, metal bowl, plastic bucket.

Classics:

Traditional pickles as gherkins in different grades and cut, seasoned with bittersweet
aroma or with spice, spring onion and assorted pickles.

Delicacies:

Capers, baby carrot, vinegar garlic and baby sweet corn.

Appetizers:

Sweet and chilly banderilla, gordal olives with gherkins or chilly and pickle cocktail.

Salads:

Grated carrot and celery, grated or sliced beetroot and Chinese salad

ISTF products are simple and healthy. They are very useful to prepare salads and Russian
salad, canapés; they go with meat and fish, stew, ingredients for pizzas& sandwich etc.

TYPES OF PRODUCTS ARE:

1) Gherkin products:

It can be classified into two types. They are:

 Bitter sweet gherkins for jar products:

It includes 120-140 pieces per kg. Jar products are very profitable to the company.

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 Bitter sweet gherkins for bulk products

It includes 40-50 pieces per kg.

2. Banderilla products:

There are the products which have all the mixture of vegetable pieces in a jar.

Types:

 Sweet Banderilla products:

It includes Ingredients like gherkins + white onion + red pepper

+capsicum + olivefriutes + vinegar without mixture of chilly.

 Chilly banderilla products:

It includes ingredients like gherkins + white onion red pepper +

capsicum + olivefruits + veniger with mixture of chilly.

3). Baby corn product:

It can be classified into two groups

 Bulk products and

 Jar products

4) Chilly product:

 For jar products:

Chilly, citric acid, ascorbic acid, aroma sugar, salt, vinegar and
spices.

 For bulk products:

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Acetic acid, salt, chilly, calcium chloride, potassium Meta by

sulphate.

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PRODUCTION

The production processes not only a regards canning and barrel preservation but also
regards the jar production, are performed by means of the most updated existing
technology in the market. The company is undergoing constant increase and innovation
with respect to training and technology which are supported by a strong investment
process makes it head the market.

Major broad line of production

Barrels

 Gherkin

 Chilly

 Baby corn

Jars

 Chilly

 Baby corn

 Bitter-sweet gherkin

 Gherkins in vinegar

 Sweet and spicy “banderialla” ( savoury snacks [with onion, olives, gherkins, etc.
on a stick])

Crop

 The company work with the farmer with whom it establish a long-term
relationship, ensuring, therefore the correct functioning and the quality of the
fields by means of a close collaboration.

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 The company provides the farmers with seeds and fertilizers, which are selected
and chosen by ourselves, with the aim of guaranteeing the quality that sets us
apart.

3.8 AREA OF OPERATION

Indo Spanish tasty food pvt, ltd is purely export oriented company. The area of
operation of Indo Spanish in Russia, USA, Spain, and European countries. The
supply of product is processing, packing and exporting food. Such as gherkins,
baby corn, chillies, there in bottles and barrels.

3.9 INFRASTRUCTURE FACILITY:

1. Office total space rented by the corporate is 2200 sq. Feet.

2. With excelling good technology support is accessible.

3. Cleanliness is given greatest importance within the company.

4. There are a unit air-conditioners, correct lighting and ventilation and

telecommunication facilities.

5. The company additionally provides travel allowances and medical facilities to

the staff and parking facility is allowances additionally obtainable.

6. There could be a relationship manager cabin, a conference hall, a coaching

area, a dealing area, back workplace department, a reception hall and enormous
systematic industrial plant.

7. The company having smart transportation facility.

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3.10 COMPETITORS

1. Reitzal India private limited

2. Inter garden

3. Global grane

3.11 SWOT ANALYSIS

Strengths

1. ISTF is a subsidiary company of Spanish company which is in existence from

more than 50 years. So it has got an effective brand image in the European
Countries.

2. The company gives more importance to the managerial aspects with regard to
existing and potential customers.

3. The company helps the poor formers by providing them seeds and fertilizers to
grow the crops and return the vegetables to the company.

4. The formers are paid fixed amount of money for their work.

5. Through the company occupies is a seasonal company it has all the

preservation facility in order to store the manufactures products for a period of
one month or more.

6. The company occupies eight positions in the top twenty exporters list of India.

7. The company takes effective measure to protect the environment from

pollution.

Weaknesses

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1. The marketing territory is restricted to foreign countries mainly European

Countries.

2. The main raw material olive fruits have to be obtained from Spain which
increases the transportation cost.

3. There is no local trading in India.

Opportunities

1. The company can establish few more branches all over India in order to
increase the production and capture international market.

2. The company can develop more varieties of products according to the taste of
Indian customers.

3. They can also carryout trading in India.

Threats

1. The most important raw material olive fruits have to be obtained from the
parent company. Since, it is available only in the Spain.

2. Procurement of raw material from other states incurs an additional cost in the
total cost.

3. There are various competitors in India. So the company has to take effective
measure to retain its position.

BENEFITS TO THE FARMERS AND INDIA

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There are some advantages for the farmers and to our country by Indo Spanish-
tasty food private, ltd. They are as follows:

 ISTPL brings foreign exchange to our formers.

 ISTPL provides occupation to our formers.

 ISTPL contributes economic development of India

3.12 FUTURE GROWTH AND PROSPECTUS:

CONSERVES FRANCO RIOJANAS, S,A. Extend its within the industrial state within
the house been running the new assembly line for manufacturing jars of gherkin and
alternative pickles merchandise within the Spanish in Kunigal.

In the month of Gregorian calendar month, the role building a replacement warehouse for
storing finished merchandised finishes and with this investment, the corporate will
increases his capacity of storing.

RAFAEL GONZALES LAZARO, gherkin and pickles, extends its facilities.

Formed within the investment set up 2008-2009 the works were bestowed for the
development of recent building finished product storage, in addition because the lining of
the building homes the producing.

CHAPTER-4

ANALYSIS AND INTERPRETATION

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4.1 TABLE SHOWING CURRENT RATIO

A current ratio is a money-measuring ratio that an investors and analyst make use to
examine the liquidity of an organization and determine the ability to pay short term
obligations with its short term assets.

Current assets= current asset

Current liability

Year Current Asset Current Ratio

Liability
2014-2015 20, 03, 94, 429 6, 89, 34, 228 2.90%

2015-2016 26, 38, 11, 865 13, 42, 06, 102 1.96%

2016-2017 33 ,88 ,54 ,296 24, 46, 59, 817 1.38%

2017-2018 35, 58, 30 ,810 22, 05, 33, 170 1.61%

2018-2019 24, 49,64, 49, 885 12, 48, 42, 384 1.96%

INTERPRETATION:

The table shows that current ratio of the company and highest liquidity recorded in the
year in 2014-15 i.e., 2.90 then, ratio is found stable for remaining financial years i.e.,
2015-16 to 2018-19 1.96, 1.38, b1.61 & 1.96 respectively. The current liquidity position
of the company is sound enough to meet the requirements.

4.1 GRAPH SHOWING ON CURRENT RATIO

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Ratio
Ratio

2.9

1.96000000000001 1.96000000000001
1.61
1.38

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

INFERPRETATION

Chart shows that the current ratio of the company and recorded highly liquid in nature.

4.2 TABLE SHOWING ON QUICK RATIO

The quick ratio is a measure of how well a company can meet its short-term financial
liabilities when they come due with only quick assets like cash, cash equivalents, short
term investments or marketable securities
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Quick ratio =Quick asset

Current liability

Year Quick asset Current Liability Ratio

2014-2015 9,20,07,463 6,89,34, 228 1.3%

2015-2016 17,55,80,682 13,42,06,102 1.3%

2016-2017 17,76,41,701 24,46,59, 817 0.73%

2017-2018 17,74,14,287 22, 05,33,170 0.80%

2018-2019 13,96,09,783 12,48,42,384 1.12%

INTERPRETATION

The table shows that quick ratio of the company found stable for financial years 2014-15
to 2015-16 i.e. 1.3 and decreased to 0.73, 0.80 in 2016-17, 2017-2018 and again it is
increased to 1.12 in 2018-2019 respectively. It represent that the liquidity position of the
company is satisfactory.

4.2 GRAPH SHOWING ON QUICK RATIO

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Ratio
Ratio

1.3 1.3
1.12

0.8
0.730000000000001

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

INTERENCE

The graph shows the quick ratio of the company reflects increasing trend for the given financial
year i,e from 2014-2015 to 2018-2019 which means the company can meet its short-term
financial liabilities.

4.3 TABLE SHOWING ON INVENTORY TURNOVER RATIO

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The inventory turnover ratio is an efficiency ratio that shows how effectively inventory is
managed by comparing cost of goods sold with average inventory for a period.

Inventory turnover ratio= Cost of goods sold

Average inventory

Year Cost of goods Average inventory Ratio

sold
2014-2015 50,97,09,032 10,49,90,917 4.9%

2015-2016 -1,47,88,58,006 98,30,90,745 -1.5%

2016-2017 70,15,80,893 12,47,21,889 5.6%

2017-2018 66,17,14,116 16,98,14,559 3.9%

2018-2019 59,66,50,778 14,16,28,313 4.2%

INTERPRETATION

The table shows that inventory turnover ratio of the company are 4.9, -1.5, 5.6, 3.9, and 4.2 for
the period 2014-15,2015-16,2016-17,2017-18,2018-19 respectively. The ratio has increasing
trend.

4.3 GRAPH SHOWING ON INVENTORY TURNOVER RATIO

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Ratio
Ratio

5.6
4.9
3.9

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

-1.5

INFERENCE

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The graph indicates inventory turnover ratio of the company for five financial years. The
company’s ratio had negative trend and eventually has positive trend.

4.4 TABLE SHOWING ON DEBTORS TURNOVER RATIO

Debtor’s turnover ratio is an activity ratio, which measures how many times company can
turns its account receivable into cash during the period.

Debtor turnover ratio= Total sales

Debtors

Year Total sales Debtors Ratios

2014-2015 51,37,26,609 5,45,54,062 9.41%

2015-2016 58,26,34,064 9,46,24,540 6.15%

2016-2017 70,94,14,926 9,25,18,062 7.66%

2017-2018 66,37, 88, 063 7,28,93,908 9.10%

2018-2019 60,00,00,000 6,49,04,010 9.24%

INTERPRETATION

The table shows that the company debtor turnover ratios are 9.41, 6.15, 7.66, 9.10 and
9.24 for the period 2014-15, 2015-16, 2016-17, 2017-18, 2018-19 respectively. The
debtor turnover ratio have increased and sound enough to meet the requirements.

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4.4 GRAPH SHOWING DEBTOR TURNOVER RATIO

Ratio
Ratio
9.41 9.24
9.1

7.66

6.15

2014-2015 2015-2016 2016-2017 2017-2018

INFERENCE

The graph shows that debtor’s turnover ratio is increased, it indicates that the company
collecting its debtors credit sales effective.

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4.5 TABLE SHOWING ON ASSET TURNOVER RATIO

Assets turnover ratio measures the value of a company’s sales revenue generated relative
to the value of its assets. In other words the ratio shows how efficiently a company can
use its assets to generate sales.

Asset turnover ratio = Net sales

Average total asset

Year Net sales Average total Ratio

asset
2014-2015 51,37,26,609 39,21,57,707 1.31%

2015-2016 58,26,34,034 44,16,06,150 1.32%

2016-2017 70,94,14,926 50,71,81,625 1.40%

2017-2018 66,37,88,063 56,07,97,764 1.18%

2018-2019 60,00,00,000 53,15,94,102 1.13%

INTERPRETATION:

The table shows that asset turnover ratio of the company are 1.31, 1.32, 1.40, 1.18, and
1.13 for the period 2014-15, 2015-16, 2016-2017, 2017-18, and 2018-19 respectively.
The company asset turnover ratio has decreased 1.13 in 2018-19.

4.5 GRAPH SHOWING ON ASSET TURNOVER RATIO

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Ratio
Ratio

1.4
1.31 1.32

1.18000000000001
1.12999999999998

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

INFERENCE

The graph shows that assets turnover ratio of the company has decreased 1.13 in the year
2018-19. Which shows the company is not efficiently use its assets to generate sales.

4.6 TABLE SHOWING ON NET PROFIT RATIO

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Net profit ratio is a percentage ratio of after tax profit to net sales. It tells about the
outstanding profits after all the deductions of monetary, administrative and selling
expenses from sales and standard income tax.

Net profit ratio = Net profits

Net sales

Year Net profits Net sales Ratio

2014-2015 27,85,275 51,37,26,609 0.0054%

2015-2016 1,86,47,661 58,26,34,064 0.032%

2016-2017 -78,34,033 70,94,14,926 -0.011%

2017-2018 1,86,47,661 66,37,88,063 0.028%

2018-2019 -30,00,694 60,00,00,000 0.005%

INTERPRETATION

The table shows that net profit ratio of the company are 0.0054, 0.032, -00.011, 0.028
and 0.005 for the period 2014-15, 2015-16, 2016-17, 2017-18, and 2018-19 respectively.
The ratios have fluctuated among the financial years and net profit ratio of the concern is
very much negligible.

4.6 GRAPH SHOWING ON NET PROFIT RATIO

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Ratio
Ratio

0.032

0.028

0.00540000000000001 0.00500000000000001

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

-0.011

INFERENCE

The graph shows the net profit ratio of the company for five financial years. Overall the
company’s net profit ratio has decreased.

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4.7 TABLE SHOWING ON FIXED ASSET TURNOVER RATIO

The fixed assets turnover ratio is economic ratio which deals with company’s result on
their investments in machinery, equipments, plant and property by comparing fixed assets
with the net sales.

Fixed asset turnover ratio= Net sale

Net fixed assets

Year Net Sales Net fixed asset Ratios

2014-2015 51,37,26,609 20,23,44,316 2.25%

2015-2016 58,26,34,034 206,75,44,250 2.81%

2016-2017 70,94,14,926 22,36,s,483 3.17%

2017-2018 66,37,88,063 22,35,96,968 2.96%

2018-2019 60,00,00,000 21,87,83,473 2.74%

INTERPRETATION:

The table shows that fixed assets turnover ratio of the company are 2.25, 2.81, 3.17, 2.96,
and 2.74, for the period 2014-15, 2015-16,2016-17, 2017-18 and 2018-19 respectively.
The fixed assets turnover ratio has decreased in 2018-19.

4.7 GRAPH SHOWING ON FIXED ASSET TURNOVER

RATIO

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Ratio
Ratio
3.17
2.96
2.81 2.74

2.25

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

INFERENCE

The graph indicates that fixed assets turnover ratio of the company has been decreased
which indicates that the company is not utilizing its fixed assets properly in generating
revenue so it is not satisfactory for the company.

4.8 TABLE SHOWING ON INVENTORY TO TOTAL ASSET RATIO

Inventory to total assets ratio shows the portion of assets tied up in inventory. Generally,
a lower ratio is considered better.

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Inventory to total asset ratio= Inventory

Total asset

Year Inventory Total asset Ratio

2014-2015 10,83,86,966 40,42,53,181 0.27%

2015-2016 8,82,31,183 47,89,59,118 0.18%

2016-2017 16,12,12,595 53,54,04,131 0.30%

2017-2018 17,84,16,523 58,61,91,396 0.30%

2018-2019 1,04,84,01,102 47,69,96,808 0.22%

INTERPRETATION

The table shows the inventory to total assets ratio for five financial years. The company’s
inventory to total assets ratio are 0.27, 0.18, 0.30, 0.30 and 0.22 for the period 2014-15,
2015-16, 2016-17, 2017-18, and 2018-19 respectively. There is a fluctuation in the ratio
in each year.

4.8 GRAPH SHOWING ON INVENTORY TO TOTAL ASSET

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Ratio
Ratio

0.3 0.3

0.27

0.22

0.18

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

INFERENCE

The graph shows the inventory to total assets ratio of the company have decreased hence
this ratio considered better in the company.

4.9 TABLE SHOWING ON INVENTORY TO FIXED ASSETS RATIO

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The inventory to fixed assets ratio is, in general, used by analysts to measure operating
performance, this ratio specifically measures how able a company is to generate
inventory to fixed assets.

Inventory to fixed asset=Inventory

Fixed asset

Year Inventory Net fixed asset Ratio

2014-2015 10,83,86,996 20,23,44,316 0.54%

2015-2016 8,82,31,183 2,06,75,44,250 0.043%

2016-2017 16,12,12,595 22,36,33,483 0.72%

2017-2018 17,84,16,523 2,23,596,968 0.80%

2018-2019 1,04,84,01,102 21,87,83,473 0.48%

INTERPRETATION

The table shows that inventory to fixed asset ratio of the company. The inventory to fixed
asset ratio of the company are 0.54, 0.043, 0.72, 0.80 and 0.48 for the period 2014-15,
2015-16,2016-17,2017-18, 2018-19 respectively. There is a fluctuation in ratio year by
year.

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4.9 GRAPH SHOWING ON INVENTORY TO FIXED ASSET RATI0

Ratio
Ratio

0.8

0.720000000000001

0.54
0.48

0.043

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

INFERANCE

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The graph shows that the company’s inventory to fixed asset ratio has decreased in 2018-
19. Which indicates company is failure to generate inventory to fixed assets.

4.10 TABLE SHOWING ON CURRENT LIABILITY TO

INVENTORY

A ratio calculated by dividing current liabilities by inventory. This ratio yields an

indication of the extent to which a company relies on funds from disposal of unsold
inventories to meet its debts.

Current liability to inventory = Current liability

Inventory

Year Current Inventory Ratio

Liability
2014-2015 6,89,34,228 10,83,86,966 0.64%

2015-2016 13,42,06,102 8,82,31,183 1.52%

2016-2017 24,46,59,817 16,12,12,595 1.52%

2017-2018 22,05,33,170 17,84,16,523 1.24%

2018-2019 12,48,42,384 1,04,84,01,102 1.19%

INTERPRETATION

The table shows that inventory to total asset ratio of the company in the year2014-
15, i.e., 0.64 then, ratio is found stable for remaining financial years i.e., 2015-16

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to 2018-19 1.52, 1.24, 1.19 respectively. Because the usage of inventory is low in
the company.

4.10 GRAPH SHOWING ON INVENTORY TO TOTAL ASSET

RATIO

Ratio
Ratio
1.52 1.52

1.24
1.19000000000001

0.640000000000008

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

INFERENCE

The graph shows current liability to total asset ratio have decreased 1.19 in 2018-19.
Because the usage of inventory is low in the company.

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4.11 TABLE SHOWING ON INVENTORY TO WORKING CAPITAL

Inventory to working capital ratio is defined as a method to show what portion of a

company’s inventories is financed from its available cash. This is essential to businesses
which hold inventory and survive on cash supplies.

Inventory to working capital=Inventory

Working capital

Year Inventory Working capital Ratio

2014-2015 10,83,86,966 13,14,60,201 0.82%

2015-2016 8,82,31,183 12,96,05,763 0.68%

2016-2017 16,12,12,595 9,41,94,479 1.71%

2017-2018 17,84,16,523 13,52,97,640 1.32%

2018-2019 1,04,84,01,102 11,96,07,501 0.88%

INTERPRETATION

The table shows the inventory to working capital ratio of the company for five financial
years. The ratio of the company are 0.82, 0.68, 1.71, 1.32 and 0.88 for the period 2014-

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15, 2015-16, 2016-17, 2017-18,and 2018-19 respectively. The ratio has been decreased to
0.88 in 2018-19.

4.11 GRAPH SHOWING ON INVENTORY TO WORKING

CAPITAL RATIO

Ratio
Ratio
1.71

1.32

0.88
0.820000000000001

0.68

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

INFFERENCE

The graph shows the inventory to working capital ratio of the company is decreased to
0.88 in 2018-19 which means the company having higher liquidity position.

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CHAPTER - 5

FINDINGS AND CONCLUSIONS

FINDINGS:

 The current ratio of the company has increased during the year 2018-19 was 1.96
and recorded highly liquid in nature.

 The quick ratio of the reflects decreasing trend for the given financial years i.e.,
2018-2019 was 1.12

 Debtor’s turnover ratio has increasing trend i,e. 1.13 during the year 2018-19 it
indicates the company collecting its debtors credit sales effective.

 Asset turnover ratio in the year 2018-2019 was 1.13 which is more than 1 that
indicates the company make use assets efficiently.

 The net profit ratio has been decreased i.e., -0.011 which shows the company has
incurred loss during the year 2016-2017.

 Asset turnover ratio is more than 1 in all 5 financial years which indicates the
company used is fixed assets effectively in generating the required sales.

 Inventory to fixed asset ratio has decreased 0.48 during the year 2018-19. Which
indicates company is failure to generate inventory to fixed assets

 The inventory to total assets ratio are less than 1 which is favourable to the
company, as lower the ratio is benefit to the company.

 The inventory to current liability ratio is high which shows that the company
difficulty in meeting its obligation.

 The inventory to working capital ratio of te company is decreasing to 0.88 during

the year 2018-19 which indicates the company having higher liquidity position.

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CONCLUSIONS

The study on inventory management in Indo-Spanish Tasty foods ltd, is done to know the
inventory status of the company, basically this is one of the well-known foreign industry
fully export oriented. The company enabled with well equipments and good infrastructure
facilities.

Inventory management is an activity engaged in managing the inventories right from

procurement to production of final output of the company. The main goal of the
inventory management in the company is to reduce the cost and maximize the profit
which can be done through effective utilization of inventory by applying various
inventory control techniques to control the flow of goods and production purpose within
the company.

I conclude that the overall inventory position of the company currently is in a better
position. The company mainly focused on minimizing the investment on inventory with
zero defective products

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CHAPTER- 6

SUGGESTIONS

SUGGESTIONS

 The current ratio of the company has witnessed increasing in trend which
describes that the liquidity status is sound so, recommending the company
is maintain standard ideal ratio of 2:1 to meet its obligations.

 The quick ratio of the company has witnessed increasing in trend which
describe the liquidity status is sound so, recommending the company is
maintain standard ideal ratio of 1:1 to meets its obligations.

 The company inventory turnover ratio has increasing in trend. As the

financial statement reveals that company must try to improve sales in
order to earn profits and bring down cost of goods sold.

 The company debtor turnover ratio has increase, the operation of the
business company can raise further capital in the form of debt.

 Company has to utilize fixed assets resources properly for the better
operations.

 Company current holding of inventory is excess so they have to minimize

the excess of inventory to minimize holding cost.

 Company has to make optimum utilization of total assets for the better
operation.

 To reduce the stocking in the finished goods components of inventory, the

sales department should be activated. Some new sale techniques should be
injected to increase sales.

 Company should avoid over stocking inventory or running the risk of

inventory stock outs.

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 Company should not keep too much inventory on hand.

 Company they have to utilize the inventory effectively for the better
operation.

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