A project report on the inventory management at ranna sugar ltd

A STUDY THE INVENTORY MANAGEMENT AT RANNA SUGAR LTD

TABLE OF CONTENTS

CHAPTER 1 INTRODUCTION AND 1-4
EXECUTIVE SUMMARY

CHAPTER 2 COMPANY PROFILE 5-8

CHAPTER 3 OBJECTIVE OF THE COMPANY 9-30

CHAPTER 4 PERFORMANCE HIGHLIGHTS AND 30- 33
PROCESS FLOW CHART

CHAPTER 5 INVENTORY MANAGEMENT 34-45
CHAPTERS 6 ABC ANALYSIS AND RATIO’S 46-60

CHAPTER 6 FINDINGS AND SUGGESTION 61-63

CHAPTER 7 CONCLUSION 64-64

BIBILOGRAPHY 65-65

ANNEXURE 66-98

BABASABPATILFREEPPTMBA.COM Page 1


INTRODUCTION TO SUGAR INDUSTRY

The sugar industry occupies a prominent place among the organized industries in
India. Sugar industry hold second rank next to cotton textiles industry in importance.
It provides employment to nearly 5 lakhs of people directly. Sugar is essential
product in India. Considerable quantity of sugar is produced since old days. India produces
white sugar, Khandasari, and Jaggery.There are about 450 industries working through out the
country. Among them 120 are in private sector 235 in cooperative sector and 95 are in public
sector. In Karnataka state there are about 40 sugar industries established. Out of 40, 20 are in
private sector, 18 are in cooperative sector, and remaining 2 are in public sector. The sugar
industries are located in rural areas and have an in intrinsic symbiotic relationship with rural
masses. Some units are also in position to supply surplus power to the grid thru Bagass based
co-generation system.

Type of sectors In India In Karnataka
Cooperative sector 235 18
Private sector 120 20
Public sector 95 02
Total 450 40

EXECUTIVE SUMMARY

Inventory control is the process whereby investment in materials and parts carried in stock is
regulated within predetermined limits set in accordance with inventory policy established by the
management.
In modern competitive one of the burning problem of every business and industries that of cost
control and cost reduction. An all pervasive effort for cost control and cost reduction is of
paramount, importance for survival and growth of every industrial enterprises. This is why
inventory management as a scientific device for controlling inventory cost and eliminating
wastage, is now regarded as an integral part of industrial management. Inventory management
does not involve any human factor, as it concerns itself not with men but with inventory.



It is one the widely used techniques for the control of inventory. Objective of ABC control is to
vary the expenses associated with maintaining appropriate control according to the potential
savings associated with the proper level of such a control. A may account for more than half the
total value usage in the inventory. These items required very careful management and special
careful estimates of future usually class C items which in total account for only a few percent of
the total value of usage very little effort should be devoted to forecast the requirement of items.
The inter mediate class B items justify a reasonable but routine effort in forecasting demands
and managing inventory.

The basis for my study is the theory related to inventory. The theory collected is as follows,
Meaning and definition of inventory, objectives & significant of inventory and techniques of
inventory and also what are the Benefits derived to Company by holding inventory.
FINDINGS:

* The A items carry nearly about 7 to 8% of the total items similarly B items 11% and C
items 81%
* In the inventory A items very strict control because having high volume of the inventory
management B items are moderate.

SUGGESTION:

From the study Ranna sugar found that is non professional in approach to be made to
professional the systems in ranna sugars.

Methodology:
• primary source
• secondary source



BACKGROUND AND INCEPTION OF THE RSSK RANNANAGAR

Chairman of factory is Mr. R. S. TALEWAD. Company is situated in Timmapur
village near by Lokapur, Mudhol taluka, Bagalkot district and its registered office is in Factory
sight
The Factory has more than 500 employees on its roll including some officers and
technical experts. Human resources being the most important assets of the company all the
efforts are made to enhance the motivational level and efficiency of the employees.

NATURE OF BUSINESS CARRIED

SUGAR PRODUCTION (RANN SUGAR)

The plant is capable of crushing about 2,500 Tons Cane per Day (T.C.D.) and would be
producing export quality crystal white sugar using the latest techniques in the country. The
factory one of the most advanced in India. Robust and reliable equipment of latest design, high
efficiency, and low power consumption have been installed continuous operation all around the
year. Due to abundant cane available in the area of operation, a minimum duration of season of
7 to 8 months is assured i.e. to say about 5 lacs tones of sugarcane will be crushed during the
season to produce around 6.2 lacs quintals of sugar. When this is done, the turnover of the
company right from beginning would be Rs.100 corers and after meeting all the obligations,
there will be sizable surplus per year.

POWER GENERATION (RSSK POWER)

The company has undertaken to establish a mega project to generate power using non
conventional energy fuel i.e. bagasse which is a byproduct coming out of sugarcane and
available in plenty at the location employing very high pressure (67ata) and high efficiency
boilers and turbo generator sets. Out of 12.5 megawatts of power generated, 4.2 mgt will be
used for captive consumption, living a balance of 8.5 mgt to be sold to Karnataka Power
Transmission Corporation Ltd, K.P.T.C.L (Formerly Karnataka Electricity Board) all around the
year.



Under the 10 year power purchase agreement entered into between the factory and
KPTCL. The power to be exported to grid at 110kv would be paid for through an assured letter
of credit at Rs.3.02per unit initially with an escalation of 5%.
Every year i.e. to say 8.5 MW of exported power will generate a revenue of about Rs.16
crores per year and after meeting incidental expenses for generation, there will be a sizable
surplus per year, which makes it a highly attractive preposition.
M/s. Indian Renewable Energy Development Agency Ltd.(IREDA), New Delhi, the
Govt. of India undertaking has rightly considered this project as a “ First Co-generation Plant in
Co-op sector” in Karnataka and has financed the project in a big way towards establishment of
this project

BY-PRODUCTS

The company has ambitious plans to utilize various by-products in a systematic way as
fallows.

BAGASSE

1. Power Generation
2. Paper production
3. Particle Board
4. Cattle Feed & Furfural
MOLASSES:

1. Butanol
2. Yeast
3. Industrial Alcohol
4. High Protein Molasses

FILTER CAKE:

1. Manure
2. Refined Wax



PRODUCT PROFILE
SUGAR PRODUCTION (RANN SUGAR)

The plant is capable of crushing about 2,500 Tons Cane per Day (T.C.D.) and would be
producing export quality crystal white sugar using the latest techniques in the country. The
factory one of the most advanced in India. Robust and reliable equipment of latest design, high
efficiency, and low power consumption have been installed continuous operation all around the
year. Due to abundant cane available in the area of operation, a minimum duration of season of
7 to 8 months is assured i.e. to say about 5 lacs tones of sugarcane will be crushed during the
season to produce around 6.2 lacs quintals of sugar. When this is done, the turnover of the
company right from beginning would be Rs.100 corers and after meeting all the obligations,
there will be sizable surplus per year.

POWER GENERATION (RSSK POWER)

The company has undertaken to establish a mega project to generate power using non
conventional energy fuel i.e. bagase which is a byproduct coming out of sugarcane and available
in plenty at the location employing very high pressure (67ata) and high efficiency boilers and
turbo generator sets. Out of 12.5 megawatts of power generated, 4.2 mgt will be used for captive
consumption, living a balance of 8.5 mgt to be sold to Karnataka Power Transmission
Corporation Ltd, K.P.T.C.L (Formerly Karnataka Electricity Board) all around the year.
Under the 10 year power purchase agreement entered into between the factory and
KPTCL. The power to be exported to grid at 110kv would be paid for through an assured letter
of credit at Rs.3.02per unit initially with an escalation of 5%.
Every year i.e. to say 8.5 MW of exported power will generate a revenue of about Rs.16
cr per year and after meeting incidental expenses for generation, there will be a sizable surplus
per year, which makes it a highly attractive preposition.
M/s. Indian Renewable Energy Development Agency Ltd.(IREDA), New Delhi, the
Govt. of India undertaking has rightly considered this project as a “ First Co-generation Plant in



Co-op sector” in Karnataka and has financed the project in a big way towards establishment of
this project.

2. COMPANY PROFILE:

LOCATION : The RAYATAR SAHAKARI SAKKRE KARKHANE
NYIYAMIT (R.S.S.K.N)
Factory: Timmapur Mudhol, Tq: Mudhol
District: Bagalkot

ESTABLISHED IN : 25/11/1999

REGESTERED NO : DSK/REG/182-83

WEEKLY HOLIDAY : SUNDAY

WORKING SHIFT : 4 am to 12 pm, 12 pm to 8 pm, 8 pm to 4 am

CHAIRMAN : R.S.Talewad

M.D : S.S. Pujari

FINANCIAL : The Karnataka State Co-operative sugar Factories
INSTITUTION Ltd, Bangalore
OF THE COMPANY



Shri Ryatar Sahakari Sakkare Karakhane N, Rannanagar Timmapur

Tq: Mudhol.

Board of Directors

Shri. Ramann .S. Talewad Chairman
Shri. A.B.Gorphade Vice Chairman
Shri. S.S.pujari Managing Director
Shri. D.S.Patil Director
Shri. R.A.Tungal Director
Shri. K .N. Paraddi Director
Shri. U.V.Sarawad Director
Shri. A.M.Patil Director
Shri. G.P.Patil Director
Shri. A.P.Patil Director
Shri. R.T.Patil Director

At every Annual General Meeting one third of the total number of Directors, whose period of
office is liable to retire by rotation shall retire in accordance with the provisions of section 255
and 256 of the company Act. 1956 and they are eligible for reappointment.



Financial Institutions

 HUDCO New Delhi
 BDCC Bank Bagalkot
 BDCC Bank Bijapur.
 SKDCC Bank SIRSI.
 CANARA Bank Lokapur.

Auditors M/s. Biradar Assistant Co-op Audit Jamakhandi

Management Team

 Shri R. N. Patil, Chief Engineer
 Shri M. M. Shendri, Chief Chemist
 Shri M. T. Patil, Cane Manager
 Shri V.V. Tulasigeri, Off Suptd
 Shri S. K. Kulkarni Accounts officer

Engineers and Consultants

 M/s. Amminabhavi and Hegde Architects & Engineers (P) Ltd., Dharwad
 M/s. Avant Grade Engineers & Consultants (P) Ltd., Chennai
 M/s. Walachandanagar Industrial Ltd, Pune



Objective of the Company

1. To carry on the business of manufacturers, refiners, producers, importers, exporters and
dealers in cane sugar, bet Sugar, starch sugar, khandasari sugar and jaggery of all kinds and
varieties and their bye products.

2. To carry on the business of manufacturers refiners, producers, importers, exporters and
dealers in all kinds of sugars products, molasses, combustible fuel, Yeast and other
fermentation, organic and inorganic chemicals, starch, syrups all alcoholic substances, acetone,
spirits, sugar candy, glucose, confectionery and canned fruits.

3. To carry on the business of distillers. Brewers molesters, compound, rectifiers and
dealers in all kinds of spirits and alcohol, liquors, like rum, gin, whisky, brandy and beer,
special syrups, aerated waters, tinctures, essences, pharmaceutical and other chemical
preparations, chemical fertilizers, manures, boot polish, wax, power alcohol and the like.

4. To carry on the business of manufacturers and dealers in melada, bagasse, bagasse
boards, papers, paper pulp carbon dioxide, hydrogen, potash cane wax, fertilizers and cattle
feed.
5. To carry on the business of agriculturist’s horticulturists and planters of all kinds and
description.

6. To employ or pay experts, foreign consultants and other in connection with the
prospecting planning, execution and development of all or any of the business which the
company is entitled to carry on.

7. To carry on the business of transport operators of all kinds and description.


8. To set-up an Institute for training people in sugar technology sugar plants power
generation, paper plants etc. and give implant training to the successful personal India and
Abroad.
9. To carry on the business of cultivating growing, buying, selling, manufacturing or
otherwise dealing in agriculture and its products including sugar cane, bagasse products, beet
sugar, raw sugar and to acquire purchase sell manufacture construct, sugar mills, and khandasari
mills, distillery and laboratory mills, paper mills co-generation of power, particle boards etc.

10. To buy sell, import, export prepare and to carry on the business of canners, preservers
and dealers in fruits, honey-fresh and per servable products and generally to carry on the
manufacture and trading in jams, jelly, pickles, chutney, vinegar, ketchup, juices, squashes,
syrups, drinks, beverages, essences, ice-creams, milk preparations and other preparation where
the sugar is used .

Administration Department
Administration department is the main department in the organization. They are total number of
38 employees working in this department. is divided into 6 sections and they are as below :

1. Share section.

2. Purchase section.

3. Stores section.

4. Sales Section.

5. Time office section.

6. Computer section.



7. Security section.

8. Telephone operating section.

SHARE SECTION :

The Share section is one of the important sections because more than half of the total
authorized capital is collected from shareholders. In this factory the share are class

1.Grower shares A class

2.Non Grower Shares D class

3. Society share B Class

4. Out of Area Share E class

5. Govt share C Class

The person who wants to become a member has to follow the procedure / rules. He has to fulfill
appropriate application given by the share section authority. If the board of directors approve the
application in body meeting, then only he is treated as shareholder of the factory. After the
approval he has to pay the amount equivalent to face value of the share.

There is no transferability of share. If at all he wants to transfer his shares, he has to
transfer to such a person who is the member of the factory. If he transfer to another person it is
not valid and such shares get cancelled. For the identification of its members, the factory issues
share certificate and identity cards to such share holders.

PURCHASE SECTION :

Purchase officer



Clarks

Attainders

Hear this section will get the requisitions from different departments of company.
According to the requirements it arranges to purchase materials and supplies to each and every
departments required materials in time.

Steps involved in purchasing the materials:

A. Raising requisition :
It is the first step and necessity for particular can be used only by the user of the
material.

B. Scrutinizing requisition :
The manager scrutinizes the demand of materials. He examines whether the item
mentioned in the requisition note is necessary or not.

C. Vendor selection :
After scrutinizing, if a material is necessary then tender advertisement is given or if they
have permanent vendors. The manager chooses the power vendor. The BOD does selection of
vendors.

D. Enquiry :
After selecting a proper vendor enquiry is sent to the vendor.

E.Receiving Quotation :



The purchase manager receives the quotations from vendors to whom the enquiries are sent.
Through there quotations a right vendor is choosen.

E. Sending purchase order :
Lastly the purchase order is placed to the selected venders. In this way purchase of material
takes place.

STORES SECTION
Stores keeper

Clarks Tool room Clark Diesel room Clark

Attainders Tool room attainders Clarks

Daily wage labours Attainders

Store section is also important section in the administrative department. All types of materials
are kept in this section. Which are required for the factory smooth running. The section works
day and night. Shift is changing every 8 hours. This section is maintained by the stores keeper.
The main work of this section is providing the materials to the required departments.

Those stores section maintains some books like :

a. Transport.
b. Bin card
c. Daily issued.
d. Monthly issued.



It is also one of the section under Administration department, there are total of 7 employees
working in this section.

PROCEDURE OF WORKING AT PRESENT:

STORES:

Handling of materials: First, they receive the stores purchase indents from concerned
section heads for requisition to purchase item needed for the crushing or off season work. Then
they mention the present stock of item in the purchase indents, after verifying the stores. Then
only they forward the purchase indents.

After receiving the materials from suppliers they seek the quality approval of the same
materials. After getting the approval materials are placed to the respective to the racks they issue
the materials by adapting FIFO method.
They issue the materials to the workers of the factory on loan and retainable basis on daily loan
or personal loan.

STORES ACCOUNT:

After receiving the materials from suppliers quantity will be verified. The details of the
materials will be entered in to transport registered and approved memo will be sent to the
concerned departments for getting quality approval. They keep bin cards for each different items
receipt from the suppliers with details.

DIESEL BANK:

They issue diesel to the party against indents brought by the parties and issued is entered
in the daily issue register.



TOOL ROOM:

Tool room is personnel issue the materials to the workers on temporary loan and retainable
basis entering in the register.

List of the registers:

1. Transport register.

2. Approval memo book.

3. Bin card files.

4. Purchase order.

5. Stores purchase indent

TIME OFFICE :

Supendent

Clerks

Time office is one of the important sections of administration department. There are 5
employees working in this department.

Functions:

1. Showing the absent report to the HOD’s

2. To receive the attendance cards from the workers

3. To put attendance of the workers in the master role

4. It arranges the duty to the workers, maintains working bell



5. It maintains salary register book.

Types of Leaves:

1. Sick leaves :

Sick leave provided to employees 15 days Per year

2. Casual leaves :

Casual leave provided to employees 12 days Per year

3. Earn leaves :
Shift Time
I 4 am to 12 pm
II 12 pm to 8 pm
III 8 pm to 4 am
General Shift 8-30 am to 5-30 pm

If employee attends 30 days in a month then he is eligible for 3 days Earn leave

Shift working :

In a shift of 8 hours the factory is providing 4 types of shifts.

TELEPHONE OPERATING SECTION:



In this section EPABX system is i.e. “Electronic Private Automotive Branch Exchange”.
Hear only one person is operating in this section. He is the person who connects the
incoming calls to different departments of the factory and also out going calls.
SALES SECTION:

Sales officer

Godoun clerk

Consultant Clarks

In this section sales of the following products produced takes place are sugar, molasses,
bagasses and power. This factory is producing three types of sugars they are M-30, S1-30
and S2-30 grades. And also it producing by products like molasses, bagasses, pressmud.
These are used by factory it self only like molasses and press mud are used in distillery /
Ethanol production, and bagasses is used in production of power. And power is exported to
KPTCL

.
This section will take care of all the sales transactions. The sale of sugar is done
according to the notification by the central government and has such factories follows
certain government rules in sales of sugar. Accordingly, Karnataka state federation of co-
operative sugar factories limited will give figures of bags to sell within a month.

PROCEDURE FOR SALE:

The organization undertakes selling activities in three methods;

1. Free sale: Free sale is done within the country. Hear company will invite tenders from
different buyers at a 10 days notice. The sugar is sold to that buyer who quotes or bids
highest price. Tenders are called periodically. If the rate is not satisfactory the tender will



be cancelled. In free sale sugar is being done to bulk purchases on the bases of tenders,
these bulk purchases then sell the purchased sugar to retailers.

2. Levy sale: It is also done within the state of Karnataka and being sold to the government
of Karnataka on levy bases. The government then distributes outlets at predetermined,
reasonable pric

3. Export: Sugar is sold outside the country on the contract bases. According to the rules
and regulation of the contract it will be done.

MARKATING DEPARTMENT

The marketing department is also comes under sales section. The factory does not have
separate marketing department but it is controlled by the sales section.

INTRODUCTION ABOUT THE MARKETING:

The term marketing has been derived from the word market. Market is generally
understood as a place or geographical area where buyers and sellers meet and enter in to
transactions involving transfer of ownership of goods, services and securities.

“ Marketing ” is a social and managerial process by which individual and group obtain
what they need and want through creating, offers and exchanging the products of values with
others.

FEATURES OF MARKETING:

It is consumer oriented.



It starts and ends with consumer.
Marketing is a system.
It is goal oriented.
It is a continue process.
It is a guiding element of business.

COMPUTER SECTION:

The total number of employees working in this department is 4. This section is to
maintain all types of records that are very important for the organization and the
following departments are computerized in the factory,

a) Weigh bridge department

b) Cane accounts department

c) Time office department

d) Laboratory department

e) Stores department

f) Sales department

g) Purchase department

h) General accounts department

i) Sales accounts section



SECURITY SECTION:

Security officer

Assistant security officer

Security guard

The security section is operating under the administrative department. It is also working in three
shifts as mentioned under time office section. Hear in this department the employees are
recruited on the yearly contract basis. There are total 42 guards working in this section.

The main works of this section are as follows:

• They are maintaining peace and discipline within the factory area.

• Time maintenance of worker.

• They check the incoming materials as per the vouchers, if they are right, they
will records inwards and seal the bill and leave inside.

• If outgoing material from the industry that person must and should have gate pass
and it will be entered in outwards.

FINANCE DEPARTMENT

Accounts of finance department are the main and the hart of every department of the
company or industry. Hear in this factory, the accounts section maintains all the transactions



related to the factory dealings. The sale accounts, purchase accounts, etc are maintained and this
department prepares P&L account, Balance sheet, etc.

In RSSK is divided finance department or accounts department in two sections.

General account section

Cane account section

In the above chart 50% of the labour is working in the general account section and
50% are in the cane accounts section.

1. GENERAL ACCOUNTS SECTION:

In general accounts section book keeping is followed. General account transactions
like receipts and payments registers are maintained. Receipts include sales process of sugar,
molasses, share amount, etc. Payments include salary, tax, etc. maintaining audit and audit
rectification is done, annual account and monthly account are prepared and maintained.

Some other types of registers are maintained by this section are :

a. Advance register

b. Contractors register

c. Contra register

d. Fixed assets register

e. Bank register

f. Expense register

2. CANE ACCOUNTS SECTION:



This section maintains the cane accounts and cane bills. This section purchases the cane
on daily basis and prepares accounts of forthrightly basis. In addition, will take care of all cane
suppliers accounts and department manager separates accounts for cane suppliers.

The section will provide cane bill once in a month desired by the higher authority. While
giving cane bill, department will debut all the expenses and advances which is given to the cane
suppliers in terms of seeds, fertilizers and transportation facilities and also harvesting of the
cane that all the expenses are given by the factory.

The registers maintained in this section are :

a) Self harvesting payment register
b) Harvesting bills
c) Cultivator payment register

Finance:

Our company was able to get working capital finance to the extent of Rs. 42.52 crores.
The bankers of the company have extended their fullest co-operation in sanctioning and
releasing working requirement, which enabled our company to make payments of cane bills of
the farmers. The company has paid Rs. 1000 per MT as first installment for the cane supplied
during the year.

CANE DEVELOPMENT DEPARTMENT

Cane Manager

Office manager Cane Cane Procurement Manager Cane Dev Manager

Cane Officers Cane Officers



Field Assisnants Field Assisnants

Objectives of the CDD:

• To get best quality of cane at a right time

• To improve the variety of the cane

• To provide all facilities like seeds, fertilizers, unloading and loading charges

• Main objectives are to receiving exactly 2500 TCD

• To undertake seeds development program
Varieties of Sugar cane:

1.COC671 {Early Maturity}
2.CO8011 {Middle Maturity}
3.CO86032 {Early Maturity}

PRODUCTION DEPARTMENT

The production department is one of the core parts in every process based industry. In
addition, it plays a vital role in the organization for smooth going in every sugar industries;
Production department is divided in to two sections.

1. Engineering department

2. Manufacturing department



Chief Engineer

Mechanical Electrical section Workshop Stores
Section section

Cane Boiler
Weighment section

Cane unloading Power
Arrangements generatio

1.Mechanical section :

This includes all the mechanical process that is right from the cane weighment till milling
( obtaining of sugar juice ) for further processing. This section includes 4 main steps they are…..

a. Cane unloading arrangement

b. Cane preparation

c. Milling

Cane weighment arrangements :

Cane weighment is totally computerized process. Hear the cane weightment is
carried through electronic platform called “ weigh bridge ”. This electronic platform is of two
types. One with the capacity of 40 tons for lorry and tractors and other with a capacity of 10
tones for only cart.

Hear after weighing the cane a slip is provided so that particular farmer which has the
details of total weight of the cane, total trips, timing, vehicle number, variety of sugarcane and



other details. And after this when the vehicle comes back after unloading the sugar cane, empty
vehicle weight all their data stored in the computer and final copies
listed for further actions.
Cane unloading arrangements :

Hear the weighed sugar cane is unloaded and sent further for cane preparation. Further
unloading cane there are 2 unloaders with the help of sling attached instruments cane is loading
on the feeding table.

Cane preparation :

After feeding the sugar cane on feeding tables with the help of levelers which avoid
overloading of sugar cane is sent to primary cutter, which cut the sugar canes in to small pieces,
further fine fibers are obtained from there process by passing them in the fibrizer.

Milling :

After fibrizering the cane passing the prepared fiber cane through a set of mills carries on
milling weighted hot water is also added in the course of crushing for better extraction of juice.
After crushing the juice is sent for further processing.

Electrical section :

This section has two other sub sections. They are …
i) Boiler section
ii) Power section

Boiler section :

40 tons / hrs capacity 2 boilers of 66 kg / cm2 pressure mainly use fuel as waste of
cane called bagasses. This waste of cane (bagasses) is used in generation steam for production
of electricity.

Power generation :



Process chart of Co-generation

Water treatement

Make up water

Feed water tank

Deareator tank

Pumping

Stream drum

Turbine

Generator [ electricity ]

Functions of power generation department are given below.

• To generate power at high quantity.

• To distribute it to different areas, as KPTCL.

• To provide better working conditions to their workers for safety.

• 4 MW, 11 KV turbo alternator using for home consumption.

• Around 8.5 MW is exported to KPTCL.

• Power production 12.5 MW per hour.

3. Workshop :

In this workshop machinery work is done. The spares, materials are fabricated using lathe
machines in the workshop shaping like square cutting and other etc. are also done in the
workshop. Following machines are used in the workshops.

• Lathe machines for round job.



• Radial drilling machine for drilling work.

• One Hacksaw machine for cutting.

• One grinding machine for tool grindings.

Workshop is the main section in the engineering section.

Stores :

Various section spare parts are stored in stall system and all the units are computerized and
given a code number. Bin card and other system are followed hear. These stores materials are
normally required for preventive maintenance during seasons and off seasons for servicing and
overalling.

MANUFACTURING DEPARTMENT

Manufacturing section is again divided in to 3 sub sections.

• Laboratory

• Manufacturing process

• Godown
Laboratory :



The factory is having well equipped lab, and the main activity of the lab is to check the content
of sugar in the sugar cane and fixing the correct shape and size of the sugar. The lab prepares
hourly reports which advise on the addition of the other chemicals in production.

Other concerned activities of the laboratory :

• It determines the percentage of water contents in the dilution of the juice.

• It determines as well as managing the temperature of boiling juice.

• Choices of colors and size of sugar.

• To manage time and quality.

• It decides the percentage and contents of chemicals to be added during
production.

• It finds the pH of water through universal indicator.

• Chemicals used in the production of sugar.

• Burnt-lime bleaching agent and pH controls (juice clarification)

• Sulphur major bleaching agent.

• Orthophosphoric acid-bleaching agent.

• Flocculent - setting aid.

• Caustic soda - clearing.

• Washing soda - clearing.

• Phosphoric acid - setting.

• Hydros a pan bleaching agent ( color ).

• Ammonium biflouride formalin-quality maintain and preservative.

• Mill sanitation chemical to prevent generation of bacteria and increases the rate
of boiling.



• Mesopropile alcohol.

• Commercial HCL. Bleaching powder – for cleaning purpose.

PRODUCTS :

Finished products :

The finished product is sugar, which is produced from the sugar cane. There are 3 varieties of
sugar produced. They are,

S1-30

S2-30

M2-30

By products :

There are three types of by products produced during the manufacturing of sugar from sugar
cane. They are,

• Molasses

• Bagasses

• Fresh mud

• Power
Molasses is used as major content in production of wines and other alcoholic products. So it is
sold to liquor industry of income 0.50 crores is earned per month.

Bagasses is also used as one of the by product obtained during the process. It is used as fuel
for boilers to produce steam through which electricity is obtained. The electricity obtained is
used for the factory itself and surplus is sold to KPTCL.

Fresh mud is yet another by product produced during the process. It is sold to farmer
during the process. Which they in turn use it as fertilizer to grow sugar cane. It is also sold to
fertilizer units and also feed to the cattle.



PERFORMANCE OF THE FACTORY :

Sl. No. Details 2003- 2004-2005 2005- 2006- 2007-2008
2004 2006 2007
1 Starting date of 5-11-2003 21-10-2004 02-11- 28-10- 20-11-
crushing 2005 2006 2007
2 Closing date of 13-1-2004 18-1-2005 21-4-2006 9-6-2007 26-5-2008
crushing
3 Total crushing 1,15,321 1,05,687 3,51,953 5,20,288 3,79,020
( MT )
4 Total sugar 1,27,300 1,15,850 4,00,150 6,08,549 4,46,699
produced (Qts)
5 Recovery (%) 10.68% 10.88% 11.39% 11.69% 11.65%



PROCESS FLOW CHART



Cane Yard

Unloading

Feeder Table

Cane Carrier
Process Flow Chart
Cane Kicker

Leveller

Fibrizer
Meceration water/Imbibition

Bagasse
Mills

Juice Boiler No 1 Boiler No2 Excess Bagasse

Juice weighing scale

PRD Station

Weighed Juice
Distributed to
SO2 Gas Lime Steam power various
J H PRI Heaters Turbine stations

Juice sulphiter Exhaust steam for process

Clarrifier or
JH sec Heaters Settler
Clear Juice
Disposal filter cake
Muddy Juice Oliver
Evaporator
SO2 Gas filters

Super heated wash water/Steam

syrup Syrup Sulphitor

A mols

B m/c

Syrup Tanks
Crystllizer

Vaccum pan B Centrifugal
A Boiling

A m/c Crystilliser
B Sugar B Mols

A Centrifugal
C m/c

White sugar Crystallizer

Grading
To Tanks
C- Sugar Final Mols
Weighing & Godown
packing B and C sugar melted & used to Boil A m/c

FUTURE GROWTH AND PROSPECTUS



1. Expansion of company’s business
2. Distillery and Ethanol project

1. Expansion of company’s business
Our directors are pleased to inform that the company has been permitted for the
enhancement in cane crushing capacity from 2500 T.C.D. to 3500 T.C.D. From govt. of
Karnataka in its global investors meeting held during Sept 2006.

Distillery/Ethanol Project:
Our board of directors has received a letter of intent from Govt. of Karnataka to take up
distillery unit. Further our decision and approval given in the 9th annual general meeting to
establish a distillery/ethanol project, implementation of distillery project commenced by
appointing M/s. Vasantdada Sugar Institute, Pune, as a consultant for the said project. However
this decision had to be dropped as no financial institutions/bankers come forwarding for
financing the project, due to loss is incurred by the company during 2002-03 and depressing
sugar scenario.

SWOT Analysis of the company



1. STRENGTH

a. It is located in the place where good infrastructure is available.
b. The company’s concentration towards the quality of the product.
c. The technological standard of the company.
d. Modern equipments.
e. High production efficiency.
f. Good sources of raw material.
g. Power generation.
2. WEAKNESS

a. The company needs improvements and should concentrate on timely customer
Service.
b. The company must improve labour payments
c. Labors turnover.
d. The promotion procedure in the organization is too rigid.
e. No specific dept. such as HRD.
f. Large number of sugar factories within 25-30 kilometers.
g. No scheme offers are given.
3. OPPORTUNITIES

a. Expansion of projects like paper unit, ethanol production, bio-fertilizers, and power
generation.
b. All these above projects will give the company maximum profits.

4. THREATS
Stiff competition by brands like Prabhu sugars, Nandi, Godhavari sugars, Nirani sugars and
other.

IMPORTANCE OF INVENTORY MANAGEMENT:-



Investment in inventory normally accounts for about 1/3 value of the total assets and for
an average manufacturing concern, cost of inventory represents about one half of the product
cost. Because inventory constitutes such a significant part of product cost since the cost is
controllable, proper planning, purchasing, handling, accounting and control of inventories is of
great significance.
Inventory management is now great significance in a view of imperative need for
productivity growth. Optimal utilization of all available resources and avoidance of all types of
waste especially in case of raw materials is required for an ambitious programmer of economic
growth.

The importance of inventory management lies in the fact that many significant effort for
the reducing the materials cost will go along way in improving the profitability and rate return
on investment.

Following are the benefits of optimum inventory management:
 It provides a check against the loss of materials through carelessness or pilferage.
Inventory management ensures an adequate supply of materials, stores, spares etc.
Minimizes the stock out and shortages an avoids a costly interruption in operations.
 It reduce length of manufacturing cycle to the minimum.
 It enables the management make cost and consumption between operations and periods.

SCOPE OF THE STUDY :-
Inventory management being a very important concept in all the company’s having a void
coverage often calls for the managerial attention. In the modern times inventory management
has become the integral part of the all companies. So all the firm give special importance for
inventory management. The major objective of the study is to examine the effectiveness of
inventory management system adopted by R .S. S. K.N. The study mainly focuses on the
techniques used by this company to control the inventory.



INVENTORY MANAGEMENT:
In modern competitive one of the burning problem of every business and industries that
of cost control and cost reduction. An all pervasive effort for cost control and cost reduction is
of paramount, importance for survival and growth of every industrial enterprises. This is why
inventory management as a scientific device for controlling inventory cost and eliminating
wastage, is now regarded as an integral part of industrial management. Inventory management
does not involve any human factor, as it concerns itself not with men but with inventory.

Meaning of Inventory:
The dictionary meaning of inventory is stock of goods, of a list of
goods; various authors understand the word inventory differently. In accounting language it
may mean stock of initial goods only. In a manufacturing concern, it may include raw
materials; work in process and stores etc. To understand the exact meaning of the word
‘inventory’ we May study it from the usage side or from the side point of entry in the
operations. Inventory includes the following things.

1. RAW MATERIALS
Raw material form a major input into the organization. They are required to carry out
production activities uninterruptedly. The liquidity of raw materials required will be
determined by the rate of consumption and the time required for replenishing the supplies.
The factors like the availability of our materials and the government regulations, etc. to
affect the stock of raw materials.

2.WORK IN PROGRESS
The work in progress is that stage of stocks, which are in between the materials and
initial goods. The raw materials enter the process of manufacture but them yet party in a
final shape of initial goods. The quantum of work in progress depends upon the time taken
in the manufacturing process. The greater the time taken in a manufacturing the more will
be the amount of work in progress.



3.CONSUMABLES:
These are the materials, which are needed to smoothen the process of production. These
materials were not directly enter production but they act as catalysts etc.. Consumables may
be classified according to their consumption and criticality. Generally, consumables stores
to not create any supply problem and form a small part of production costs. They can
instances where these materials may account for much value than the materials. The fuel oil
may form a substantial part of cost.

4.FINISHED GOODS
There are the goods, which are ready for the consumers. The stock of initial goods
provides a buffer between production and market. The purpose of maintaining inventories to
ensure proper supply of goods to customers. In some concerns the production is undertaken
on order basis, in these concerns they will not be need for finished goods the need for
finished goods inventory will be more when production is undertaken in general without
waiting for specific orders.

5.SPARES
Spares also form of part of inventory. The consumption pattern from materials,
consumables, finished goods are different from that of spares. The stocking policies of
spares for different from industry to industry. Some industries like transport will require
more space than the other concerns. The costly spare parts like engines, maintenance spares
etc. are not discarded after use, rather they are kept in ready position for further use. All
decisions about spares are based on the financial cost of inventory on such and the cast that
may arise due to their non-availability.

PURPOSE-BENEFITS OF HOLDING INVENTORIES:

Although holding inventories involves blocking of firms funds and the cost of storage
and handling, every business enterprise has to maintain a certain level of inventories to facilitate
uninterrupted production and smooth running of business. In the absence of inventories a firm
will have to make purchases as soon as it receives orders. It will mean loss of time and delays



in execution of orders, which sometimes may cause loss of customers and business (stock out).
Therefore also needs to maintain inventories to reduce ordering costs and avail liquidity
discounts etc.. Generally speaking, there are three main purposes or motives of holding
inventories.

1. THE TRANSACTION MOTIVE: Which facilitates continuous production and timely
execution of sales orders.

2. THE PRECAUTIONARY MOTIVE : Which necessitates the holding of inventories for
meeting the unpredictable changes in demand and supplies of materials.

3. THE SPECULATIVE MOTIVE: Which induces to keep inventories for taking advantage
of price fluctuations, saving in the ordering costs and quantity discounts etc.

RISK AND COST OF HOLDING INVENTORIES:
The holding of inventories involves blocking of a firm’s funds and incurrence of capital
and other costs. It also exposes the firm to certain risks; the various parts risks involved in
holding inventories are as below

1. CAPITAL COSTS
Maintaining of inventories result in blocking of the firm's financial resources. The firm
has therefore to arrange for add both the cases the firm incurs a cost. In the former case,
there is an opportunity cost of investment while in the latter case; the firm has to interest to
the outsiders.

2. STORAGE AND HANDLING COSTS
Holding of inventory is also involves costs on storage as well as handling of materials.
The storage costs include the rental of the godown, insurance initial funds to meet the cost of
inventories. The funds may be arranged from own resources or from outsider. But in
charges etc



3. RISK OF PRICE DECLINE
There is always a risk of reduction in the prices of inventories by the suppliers in
holding inventories. This may be due to increased market supplies, competition or general
depression in the market.
4. RISK OF OBSOLESCENCE
The inventories may become obsolete due to improve technology, changes in
requirements, change in customers taste etc.
5. RISK DETERIORATION IN QUALITY
The quality of the materials may also deteriorate while in the inventories are kept in
stores.

INVENTORY MANAGEMENT:

The investment in inventory is very high in most of the undertakings increased in a
manufacturing wholesale and retail trade. The amount of investment is sometimes more in
inventory than in other assets. In India, a study of 29 major industries has revealed that the
average cost of materials is 64 paise and the cost of labour and overhead is 36 paise in a rupee.
In industries like Sugar, the materials cost is as high as 68.75% of the total cost. About 90% of
part of working capital is invested in inventories. It is necessary for every management to give
proper attention to inventory management. The proper planning of purchasing handling, storing
and accounting should form a part of inventory management. An efficient system of inventory
management will determine (a) what to purchase (b) how much to purchase (c) from where to
purchase (d) where to store etc.
There are conflicting interests of different departmental heads over the issue of inventory. The
finance manager will try to invest less in inventory because for him it is an idle investment,
whereas production manager will emphasis to acquire more and more inventories as he does not
want any interruption in production due to shortage of inventory. The purpose of inventory
management is to keep the stocks in such that neither there is over stocking nor under-stocking.
The over stocking will mean a reduction of liquidity and targeting off other production
processed: under stocking on the other hand will result in stoppage of work on the investment in
inventory should be kept in reasonable limits.



OBJECTS OF INVENTORY MANAGEMENT:

The main objectives of inventory management or operational and finances the
operational objectives mean that the materials and the spares should be Honorable in the
sufficient liquidity is so that work is not disrupted for want of infantry. The finance object
means that investments in inventories should be remain idle and minimum working capital
should be locked in it the following are the objectives of inventory management.

1. To ensure continuous supply of materials spares and finished goods so that production
should not suffered at any time and the customers demand should also be met.

2. To avoid both over stocking and under-stocking inventory.

3. To maintain investments in inventory is at the optimum level as required by the
operational and sales activities.

4. To keep material cost and control so that they contribute in reducing cost of production
and overall costs.

5. To eliminate duplication in ordering or replenishing stocks. This is possible with the
help of centralizing purchases.

6. To minimize losses through deterioration, pilferage, wastages and damages.

1. To design proper organization for inventory management. A clear-cut accountability

2. should be fixed at various levels of the organization.

8. To ensure perpetually inventory control so that materials shown in stock ledgers should
be actually lying in the stores.

Responsibility of inventory specialists:
 Controlling and authorizing finding for material so that the proper kind, quality
and quantity is available at the correct time and place.
 Maintaining records and controls over material in stock, planned for distribution
system.



 They decide upon inventory level
Kinds and fixation of inventory level:
The various levels fixed for effective inventory control are as follows

MINIMUM LEVEL:
It represents the quantity below which the inventory of any item should not be allow to
fall, in other words an enterprise must maintain minimum quantity of stocks. The following
factors should be considered in order to fix minimum stock level
• Reorder level
• Lead time
• Average rate of consumption of material

Where,
Minimun level =Reordr level-Aerage consumption*lead time
Maximum level
It represents the level beyond, which the stock in hand is not allowed to
exceed .This is because of the cost involved in holding more than required stock.

RE ORDER LEVEL:
When the quantity of materials reaches at a certain figure the fresh order is tended to get
materials again. The order is sent before the materials reaches minimum stock level. The
reordering level or ordering level is fixed at between the minimum level and maximum level.
The rate of consumption, number of days required replacing the stocks and maximum quantity
of materials required on any day are taken into account while fixing the reordering level. The
ordering level is fixed with the following formula.

Re order level = maximum consumption X maximum Re-order period.



MAXIMUM LEVEL:

It is the quantity of materials beyond which the firm should not exceed its stocks if the
quantity exceeds maximum level limit then it will be over stocking. Your firm should avoid
over stocking because it will result in high material costs. Over stocking will mean blockading
of more working capital, more space for storing the materials, more wastages of materials and
more chances of losses from obsolescence. Maximum stock level will depend upon the
following factors.
1. The availability of capital for the purchase of materials.
2. The maximum requirements of materials at any point of time.
3. The availability of space for storing the materials.
4. The rate of consumption of materials storing lead-time.
5. The cast of maintaining the store.
6. The possibility of fluctuation in prices.
7. The nature of materials. If the materials or perishable in nature then they cannot
miss told for long.
8. Availability of materials. If the materials are available only during seasons then they
will have two bestowed for the rest of the period.

Maximum stock level = reordering level + reordering quantity - (minimum consumption X
minimum reordering period)
SAFETY LEVEL:
The consumption rate of materials and lead time don’t remain constant and therefore to
guard against the uncertainty, an extra stock is always maintained which is known as safety
stock.
A safety stock of materials is maintained as insurance against stock depletion due to
increase usage or unusually long delivery times, which cause the stock to fall below minimum
level. The main objective behind keeping safety stock is minimizing stock out cost.



OBJECTIVES OF THE STUDY:
• To study the inventory management in the organization.
• To identify the loop holes if any in the inventory management system.
• To apply the modern inventory management techniques like

• ABC
• HML
• VED
• SDE
• EOQ
• JIT
Based on the above to give suggestion

INVENTORY CONTROL TECHNIQUES:
Inventory control techniques are employed by the inventory control. Organization within
the frame work of one of the basic inventory model, viz., fixed order quantity systems or fixed
order period system.
Inventory techniques represent the operations aspects of inventory management and help to
realize the objective of inventory management and its control.
Several techniques of inventory control are in use and it depends on the policy of
the firm product, the techniques most commonly used are

1. Always Better Control (ABC) Classification
2. High, Medium and Low (HML) Classification
3. Vital, Essential and Desirable (VED) Classification
4. Scare, Difficult and Easy to obtain (SDE)



5. Fast moving, Slow moving, and Non moving (FSN)
6. Economic Order Quantity (EOQ)
7. Max – minimum System
8. Two bin System
9. Material Requirement Planning (MRP)
10. Just In Time (JIT)
11. Distribution Logistics (DL)

a) ABC Analysis: It is one the widely used techniques for the control of inventory. Objective of
ABC control is to vary the expenses associated with maintaining appropriate control according
to the potential savings associated with the proper level of such a control. A may account for
more than half the total value usage in the inventory. These items required very careful
management and special careful estimates of future usually class C items which in total account
for only a few percent of the total value of usage very little effort should be devoted to forecast
the requirement of items. The inter mediate class B items justify a reasonable but routine effort
in forecasting demands and managing inventory.

b) HML Analysis: Since the total annual usage is considered in case of ABC Analysis, quite a
few items which fall in B category although the unit cost (cost per unit) is quite high. If controls
are exercised on the basis of ABC only, the importance of these items will be much less than A
or B items even though the inventory or transaction of one unit of these items will mean quite a
lot money. Therefore, it is necessary that the unit cost is also considered in order to find out the
importance of items on the basis of unit cost. Limits of units costs are fixed for high costs items
(H), medium costs items (M) and low cost units (L) and all items are segregated into H, M and
L categories depending on there unit cost.

This analysis is quite useful in deciding the safety stock in relation to the availability of
the material.

c) VED Analysis:



The materials classification on the items is called VED analysis. VED stands for vita,
Essential and Desirable.
Vital items which render the requirement or the whole line operation in the process
totally and immediately inoperative, unsafe and if these items go out of stock or not readily
available, results in losses of whole production of whole period.

E-Essential items which reduce the equipment’s, performance but not render it
inoperative, results or unsafe, non-availability of items may result in temporary loss of
production or dislocation of production work replacement can be done without any delayed,
without affecting the equipment’s performance seriously, temporary repairs sometime possible.
D-Desirable items which are mostly non –functional and don’t effect the performance of the
equipment.

d) FSN Classification :
Materials can be classified on the basis of movement as fast moving slow moving and
non moving –FSN according to their consumption patterns. FSN analysis is specially useful to
combat obsolete items whether spare parts, raw material or component. Cut –off points of three
classes are usually in items of number of issues in previous few years depends on the
peculiarities of an individual concern.

e) SDE Analysis:
SDE stands for scarce, difficult and easily available items in the local market. Scarce
items are generally in short supply; usually these are raw material, spare parts and imported
items. Difficult items are not available in local markets, and have to be produced from for off
cities or items for which there are a limited a number of supplies or items for which quantity
suppliers are difficult to get.

The SDE analysis proves to be very useful, in industrial situations where certain
materials are in scare supply, and gives proper guidelines for deciding inventory policies.

f) XYZ Analysis:



For the effective management of stores, the stock can be split as high valued, middle
value or low valued – XYZ classification. This technique helps in identifying the items, which
are being extensively stocked. ‘X’ items are those whose inventory values are high while ‘Z’
items are those whose values are low. Understandably ‘Y’ items fall in between these tow
categories. XYZ classification may be used in the conjunction for the better results.

g) Minimum-Maximum Techniques :
The Minimum –maximum system is often used in connation with manual inventory
control system.
The minimum quantities is established in the same way as any re-order point.
The effectiveness of minimum-maximum system is determined by the method and
precision with which the minimum.

h) Two Bin Technique:
One of the oldest system of inventory control is the two bin system, stock of each item is
separated into two bins.
One bin contains stock, just enough to last from the data a new order is placed until it is
received in inventors.

The other bin contains quantities of stock, enough to satisfy probable demand during the
period of replenishment

i) Material Requirement Planning (MRP):
MRP is a new solution to an old problem having stock of materials a lowers on hand
when heeded without carrying excess inventory.
j) E.O.Q. Model : There are two basic questions relating to inventory management
1. What should be the size of the order
2. At what level should the order be placed.
To answer this question the economic order quantity model is helpful. General E.O.Q.
includes 3 types of costs, that are carrying cost, ordering cost & shortage cost.



i) Just in Time : The management of inventory has become very sophisticated in recent years.
In certain industry the production process it self lends to just in time (J I T) inventory control.
As the name implies, the idea is that the inventories are acquired and inserted in the production
at the exact time they are needed. This requires efficient purchasing, very reliable and an
efficient purchasing, very reliable and an efficient inventory handling system. One thing that has
made this possible is advent of instant information through sophisticated computer networks.
The coordination of varies suppliers in an efficient manner is known as supply chain
management.

j) Distribution Logistics: An exciting and profit promising way of using systems logistics in
planning and control is the expansion of inventory control to include other factors. This system
is referred to here as distribution logistics. In its advance form. It treats the entire logistics of
business – ranging from sales forecasting through purchasing and processing materials and
inventorying to shipping the finished goods as a single system.
The goal is usually to optimize the total cost of the system in operation while furnishing
a desire to level of customer service meeting certain constrains such as financially limited
inventory levels.

ABC Analysis : These important items usually designated as class A may account for more
than half the total value usage in the inventory. These items require very careful management
and special careful estimates of future usually class C items which in total account for only a
few percent of the total value of usage very little effort should be devoted to forecast the
requirement of items. The inter mediate class B items justify a reasonable but routine effort in
forecasting demands and managing inventory.

The ABC approach means of category inventory items into three class, A, B and C
according to potential amount to be controlled.

A - Items, which are the 10%



B - Items, which are the 20%
C - Items, which are the 70%

A.B.C. Analysis

A.B.C. analysis is a selective technique of controlling different items of inventory. In
actual practice, thousands of items are included in business as inventories. But all these
items are not equally important. According to this technique, only those items of
inventory are paid more attention which are significant for business. According to this
technique, all items are classified into 3 categories A.B. and C. In ‘A’ category those
items are taken which are very precious and their quantity .

ABC ANALYSIS - 1
One of the most important considerations of control is the value of annual consumption of
inventory items in a year.
Only a small number of inventory items consume a very large share of inventory consumption
during the year.
A little larger number of inventory items covers a moderate share of annual inventory
consumption.
A very large number of items just cover a very small share of annual inventory consumption.
These facts gave birth to the concept of ABC analysis.

ABC ANALYSIS – 2
It has been observed that in an industrial unit only 10% of items have 70% of the annual
inventory consumption.

20% of the items have 20% of annual inventory consumption, and

70% of the items have only 10% of the annual inventory consumption.



Since 70% of the annual consumption of inventory is covered by only 10% of the items in the
inventory, these items deserve highest attention and are classified as ‘A’ items

Similarly 20% of the items covering 20 % of the inventory investment are B class items.

Balance 70% of the inventory items are termed as C class items.

STEPS IN ABC ANALYSIS:

The steps in computing ABC analysis are:

a .Determine the annual usage in units for each item for the past one-year.

b. Multiply the annual usage quantity with the average unit price of each item to calculate the
annual usage in for each item.

c. Item with highest volume usage annually is ranked first. Then the next lower annual usage
item is listed till the lowest item is listed in the last.

Arrange the items in the inventory by cumulative annual usage and by cumulative
percentage. Categorize the items in A, B , and C categories..



1. Current Ratio
Current ratio may be defined as the relationship between quick or liquid asset and
current liabilities. This is a measure of general liquidity & is most widely used to make analysis
of short-turn financial position or liquidity of firm. It is calculated by dividing the total current
assets by total current liabilities.

Current Ratio = Current Assets
Current Liabilities
TABLE-1.1 Current Ratio (in lakhs)
Year Current Current Ratio
Assets Liabilities
2006-2007 3363.89326 8028.62101 0.42
2007-2008 4178.11267 8685.3814 0.48
2008-2009 349.34576 7745.30918 0.45

CURRENT RATIO

0.6
0.5
0.4
RATIO

0.3 Ratio
0.48 0.45
0.2 0.42
0.1
0
2006-2007 2007-2008 2008-2009
YEAR



INTERPRETATION
An arbitrary standard of current ratio is 2:1 indicates that for every one rupee of current
liability two rupee of current assets is available. From the graph it is below the standard this
shows that there is no short term solvency of the company .

Quick Ratio/Acid Test Ratio
Quick ratio establishes relationship between quick or liquid assets & current
liabilities. It is also known as acid test ratio. An asset is said to be liquid if it can be
converted into case within short period of time without loss of value. The prepaid
expenses and stock were excluded.

Quick ratio = Quick asset
Current Liabilities

Year Quick Current Ratio
Assets Liabilities
2006-2007 1383.13276 8028.62101 0.17
2007-2008 1278.13793 8685.3814 0.15
2008-2009 1707.11841 7745.30918 0.22

QUICK RATIO

0.25

0.2

0.15
RATIO

Ratio
0.22
0.1
0.17
0.15
0.05

BABASABPATILFREEPPTMBA.COM
0 Page 52
2006-2007 2007-2008 2008-2009
YEAR


INTERPRETATION
Table 1.2 reveals that quick ratio of the company is not higher than standard 1:1. This
shows that the firm liquidity position is not so good.
Absolute Quick Ratio/cash Ratio
Cash ratio is the strongest measurement of liquidity. Since cash is the most liquid assets,
a financial analyze may examine cash ratio & its equivalent to current liabilities. Trade
investments or marketable securities are equivalent of cash therefore they may be included in
computation of cash ratio.
To calculate absolute quick ratio we consider cash in hand, cash at bank & marketable
securities.

Cash Ratio = Cash + Marketable securities
Current Liabilities

year quick asset current liablities Ratio

2006-07 228.30326 8028.62101 0.028
2007-08 67.86987 8685.3814 0.0078
2008-09 679.05859 7745.30918 0.087



CASH RATIO

0.1
0.08
RATIO

0.06
0.087 Ratio
0.04
0.02 0.028
0 0.0078
2006-07 2007-08 2008-09
YEAR

INTERPRETATION
Table 1.3 reveals that absolute quick ratio is below the standard ratio i.e. 0.5:1 indicates that 50
paisa worth of absolute liquidity assets are sufficient to meet one rupee worth of current
liabilities. In all 3 years it indicates that there is no sufficient liquidity in a firm.

Leverage Ratios Leverage ratios are also known as capital structure ratio. These ratios
indicate mix of funds provided by owners & lenders. As a general rule these should be
appropriate mix debt & owners equity in financing the firm’s assets.
Leverage ratios are calculated to judge the long long-term financial position of the
company. Some of the popular leverage ratios are:
a. Total Debt Ratio
Debt ratio may be used to analyze the debt ratio by dividing Total debt (T.D) by dividing
Capital employed (C.E) or net assets (N.A).
The total debt include short and long term borrowing from financial institutions, debentures,
bounds, deferred payments, arrangements for buying capital equipment’s bank borrowings,
public deposits etc.
Debt Ratio = Total Debt
Capital Employed



DEBT RATIO

2.85
2.8
2.75
2.7
RATIO

2.65 Ratio
2.8
2.6
2.55 2.61 2.59
2.5
2.45
2006-2007 2007-2008 2008-2009
YEAR

Year Total Debt Capital Ratio
Employed
2006-2007 5671.68647 2175.3 2.61
2007-2008 5650.92766 2180.18495 2.59
2008-2009 6273.97167 2239.83274 2.8



INTERPRETATION
Table reveals that ratio is decreasing in the year 2008 .this shows that debt capital is less
than own capital.in the year 2009 increasing.

Fixed Assets to Net Worth
This ratio establishes the relationship between fixed assets & Shareholders fund i.e.
Share Capital plus reserves & Surplus & retained earnings. The ratio can be calculated as
follows.
Fixed Assets to Net worth Ratio = Fixed Assets (After Depreciation) X100
Shareholder’s fund

Shareholder
Year Fixed Assets Fund Ratio
2006-07 5688.28076 2175.3 2.61
2007-08 5701.88858 2180.18495 2.62
2008-09 5712.66087 2239.83274 2.55

FIXED ASSETS TO NETWOTH RATIO

2.65

2.6
RATIO

Ratio
2.61 2.62
2.55
2.55
2.5
2006-07 2007-08 2008-09
YEAR



INTREPRETATION
Table reveals that percentage of fixed assets value contributed by its owners is
decreasing in the year2007-2008 . .in the year 2009 fixed assets value contributed by its owners
is increasing It implies that funds are not sufficient to finance the fixed assets & the firm has to
depends upon outside to finance fixed assets .
Current Assets to Proprietor’s funds ratio
This ratio is calculated by dividing total current assets by shareholders funds. It
indicates the extent to which proprietor funds are invested in current assets. There is no rule of
thumb for this ratio & depending upon the nature of the business there may be different ratios
for different firms.

CA to PF ratio = Current Assets
Proprietors Fund

Proprietors
Year Current Assets Fund Ratio
2006-07 3363.89326 2175.3 1.55
2007-08 4178.11264 2180.18495 1.92
2008-09 3493.45761 2239.83274 1.56

C/A TO PROPRIETORS FUND

2.5

2

1.5
RATIO

Ratio
1 1.92
1.55 1.56
0.5

0
2006-07 2007-08 2008-09
YEAR



INTREPRETATION

Table reveals that proprietors fund & investments are increasing. & Current assets are
decreasing .It was 1.56 in the year 2008-09.

Profitable Ratios
The primary objective of a business undertaking is to earn profits. Profit is the
difference between revenue & expenses over a period of time. Profit is output of a company &
company will have no further if it fails to make sufficient profit Profits are thus a useful measure
of overall efficiency of a firm.
These ratios are calculated to measure the operating efficiency of the company. Beside
management, creditors, owners are also interested in the profitability of the company. Generally
profitability ratios are calculated either in relation to sales or in relation to investment. The
various profitable ratios are:

1. In Relation to Sales
a. Gross Profit Ratio
G.P.Ratio measures the relationship between gross profits & sales; it is usually
represented in percentage. Thus Gross profit margin highlights the production efficiency at a
concern

G.P.Ratio = Gross Profit X 100
Sales
G.P.Ratio indicate the extent to which selling price of goods per unit may decline without
resulting in losses on operations of firm. It reflect efficiency with which firm produces the
product.

Year Gross Profit Sales Ratio
2006-07 817.51169 5925.32689 13.8
2007-08 981.56497 4534.35123 21.65
2008-09 795.31898 7362.06987 10.8


GROSS PROFIT RATIO

25
20
RATIO

15
21.65 Ratio
10
13.8 10.8
5
0
2006-07 2007-08 2008-09
YERR

INRTEPRETATION
Table reveals that gross profit of the company has increasing in 2006-07 gross profit
was 13.8, which was increased to 21.65 in 2007-08 but further gross profit was decreased 10.8
in 2008-09. The efficiency of firm is not satisfactory

Net profit ratio
Net profit ratio establishes the relationship between net profit & sales & indicates
efficiency of management in manufacturing. Selling, administrative & other activities of the
firm. This ratio is used as a measure of overall profitability & it helps in determining the
efficiency of the firm to carry on its business.

Net Profit Ratio= Net Profit after tax X 100
Sales
Year Net Profit Sales Ratio
2006-07 152.45938 5925.32689 2.57
2007-08 510.45764 4534.35123 11.26
2008-09 0.91423 7362.06987 0.01242



NET PROFIT RATIO

12
10
8
RATIO

6 11.26 Ratio
4
2
2.57
0 0.01242
2006-07 2007-08 2008-09
YEAR

Year Operating Cost Sales
Ratio
2006-07 5929.97583 5925.32689 100.8
2007-08 4472.00049 4534.35123 98.62
2008-09 5453.11535 7362.06987 74.04

INRTEPRETATION
This ratio indicates firms capacity to face the economic conditions, higher the ratio
better the profitability. From the table it is clear that in 2006-07,2007-08, profit was increasing
year by year marginally and in the 2008-2009 decreasing the profit.

.

Operating Ratio
It is the relation between cost of goods sold & operating expenses on one hand & the
sales on the other hand. It measures the cost of operations per rupee of sales.
Operating Ratio = Operating Cost X 100
Sales



OPERATING RATIO

120
100
80
RATIO

60 Ratio
100.8 98.62
40 74.04
20
0
2006-07 2007-08 2008-09
YEAR

INTREPRETATION
Table reveals that the operating ratio shows decreasing trend for the 3 years which
means there is an increase in the profit.

Expenses Ratio
It indicates the relationship of various expenses to net sales. Expenses ratio are
calculating by dividing each item of expenses or group of expenses with net sales to analyze the
causes for variation in operating ratio.

Administration, office, selling & other Expense Ratio:

This ratio indicates the relationship at administrative, selling & other Expenses to the sales of
the company. Here normally lower the expenses higher the profitability.

Administration, office, selling & other Expenses = Expenses X 100



Sales

EXPENSES RATIO

25.00%
20.00%
RATIO

15.00%
Ratio
10.00% 20.39%
14.71%
5.00% 11.53%
0.00%
2006-07 2007-08 2008-09
Year Expenses Sales Ratio
2006-07 683.21455 YEAR 5925.32689 11.53%
2007-08 924.74395 4534.35123 20.39%
2008-09 1082.76722 7362.06987 14.71%

INTREPRETATION
There is no role of thumb for this ratio, as it may differ from firm to firm depending
upon nature of business. Table shows the comparative expenses ratio is in fluctuating trend.

Profitability in relation to Investment
Return on shareholders Investment:
Return on shareholders investments, popularly known as ROI. It is the relationship
between net profit after tax & shareholders funds. Thus this ratio is considered as affective



indicator of the company’s profitability because it reflects the success of management in the
efficient utilization of the owner’s investment.
ROI=. Net Profit after Tax X 100
Shareholders fund

ROI

30.00%
20.00% Shareholder
RATIO

Year 10.00%
Net Profit Fund
23.41% Ratio Ratio
2006-07 7.01% 152.45938 2175.3 7.01%
2007-08 0.00% 510.45767 0.04%
2180.18495 23.41%
2006-07 2007-08 2008-09
2008-09 0.91423 2239.83274 0.04%
YEAR

INTREPRETATION
The table reveals how were the resources of a firm were being used. So higher the ratio better
will be the result The ratio of ROI has increased to 23.41% when compared to 2006-07 . There
is no return on shareholders fund because the company shows the profit

Activity Ratios:
Funds are invested in various assets in business to make sales & earn profit. The
efficiency with which assets are managed directly affects the volume of sales. The better the



management of assets, the larger is the amount of sales & the profit. Activity ratio measures the
efficiency or effectiveness with which a firm manages its resources or assets. These ratios are
also called turnover ratio because they indicate the speed with which assets are converted or
turned over into sales.
a. Inventory Turnover Ratio:
Inventory turnover ratio indicates the number of times stock has been turned over
during the period & evaluates efficiency with which a firm is able manage inventory.
The ratio is calculated by dividing the net sales divided by average inventory at cost.
ITR= Net Sales .
Average Inventory at Cost
Average inventory should be taken for calculating stock turnover ratio. Adding the stock in the
beginning & at the end of period & dividing it by 2 to calculate average inventory.

INTREPRETATION
Inventory Turnover ratio has decreased to 1.9 to.94 in the year 2007-08, in the
year 2008-09 incresing the ratio to1.94..which signifies the firms efficiency in producing and
selling is improving.

Average
Year Net Sales Inventory Ratio
2006-07 5925.32689 3126.4008 1.9
2007-08 4534.35123 4846.23044 0.94
2008-09 7362.06987 3793.14434 1.94
FINDINGS:

* The A items carry nearly about 7 to 8% of the total items similarly B items 11% and C
items 81%.
* In the inventory A items very strict control because having high volume of the inventory
management B items are moderate.


A project report on the inventory management at ranna sugar ltd

A project report on the inventory management at ranna sugar ltd

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A project report on the inventory management at ranna sugar ltd