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INTRODUCTION
In financial parlance, inventory is defined as the sum of the value of raw materials, fuel and lubricants, spare parts and semi-processed materials and finished goods stock at any given point of time. The operational definition of inventory would be: the amount of raw materials, fuel and lubricants, spare parts and semi-processed materials to be stocked for the smooth running of the plant. Since these resources are idle when kept in the stores, inventory is defined as an idle resource of any kind having an economic value. Inventories are maintained basically for the operational smoothness which they can affect by uncoupling successive stages of production, whereas the monetary value of inventory serves as a guide to indicate the size of the investment made to achieve this operational convenience. The material management department is expected to provide this operational with a minimum possible investment in inventories. The objectives of inventory operational and financial, needless to say, are conflicting. The material department is involved in both stocks outs as well as large investment in inventories. The solution lies in exercising a selective inventory control and application of inventory control techniques. 1.1 MEANING OF INVENTORY The term Inventory refers to the stock of raw materials, spare parts and finished products held by a business firms. It is aggregate quantity of materials, resources and goods that are idle at a given point of time. The resources may be of any type; for example men, materials, machines or money, when the resources involved in materials or goods in any stage of completion, inventory referred to as stocks. Hence, inventory refers to the stocks that a business firm keeps to meet its future requirement of production and sales.
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CLASSIFICATION OF INVENTORY
ANTICIPATION INVENTORY FLUCTUATION INVENTORY
LOT-SIZE INVENTORY
MOVEMENT INVENTORY
PRODUCTION INVENTORY
IN-PROCESS INVENTORY
M.R.O. INVENTORY
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2) If the finished goods inventories are sufficient to meet the demands of the customers regularly, the customers may shift to other competitors, which will amount to a permanent loss to the firm. An effective inventory management should avoid both these extreme situations namely over investment and under investment in inventories.
Norms for Inventory: The norms (limits) for inventory could be set by either the top management, or the materials management department. The top management usually sets monetary limits for investment in inventories. The materials department then has to allocate this investment to the various items and ensure the smooth operation of the company. It would be worthwhile if the inventory norms are set by the management by objectives concept. This concept accepts the top management to set the inventory norms in consultation with the materials department. The norms thus evolved should be specific and quantified. The achievement of the targets set is the responsibility of the material department. In the setting up of the norms, the involvement of persons who are directly responsible for maintaining the inventories is very desirable. Other departments involved in setting the norms are finance, production, marketing and materials control. The norms of inventory should be converted to specifically spell out parameters like the number of stock outs permitted, the sales to inventory ratio and inventory to consumption ratio.
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Weighted Average : Under the weighted average approach, both inventory and the cost of goods sold are based upon the average cost of all units currently in stock at the time of reporting. When inventory turns over rapidly this approach will more closely resemble FIFO than LIFO. Average : Under the average approach, both inventory and the cost of goods sold are based upon the average cost of all units received in stock.
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MINIMUM LEVEL = RE-ORDER LEVEL (NORMAL CONSUMPTION INTO NORMAL RE-ORDER PERIOD)
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MAXIMUM LEVEL = RE-ORDER LEVEL + RE-ORDER QUANTITY (EOQ) (MINIMUM CONSUMPTION x MINIMUM RE-ORDER PERIOD)
RE-ORDER LEVEL: It is the point fixed between maximum and minimum level at which the storekeeper has to initiate action to obtain fresh supplies of materials. This point will usually be slightly higher than the minimum stock to cover such emergencies is abnormal usage or un-expected delay in supply. Re-ordering level depend on lead time, rate of consumption and economic order quantity.
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DANGER LEVEL = MINIMUM CONSUMPTION x EMERGENCY RE-ORDER PERIOD AVERAGE STOCK LEVEL:
ECONOMIC ORDERING QUANTITY (EOQ): It can be described as the basic how much to buy model. It is shortened to EOQ and is the oldest and widely known inventory model. It dates back to 1915. The purpose of using EOQ model is to find that particular quantity of order which minimizes 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 plus carrying cost, is the least. EOQ will be fixed at a level where the total of ordering costs will be minimum. EOQ can be calculated by a mathematical formula:
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2.3 STATEMENT OF THE PROBLEM The Study has been done to analyze proper utilization of inventory resources in the company for last three years. Analysis of stock position of the company for three years. Liquidity of over-storage inventory Shortage due to under-storage inventory
2.4 OBJECTIVES OF THE STUDY The main objectives of the study are: To study the working of inventory control system. To identify and track all data processing assets in an Inventory System Repository. To define the process by which assets are identified and maintained in the Inventory System.
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2.5 DATA COLLECTION METHOD: Source of data: Both primary and secondary data are used to obtain the required information. Source of data can be classified as: PRIMARY DATA: Primary data is a data collected through gathering the information from different department managers and officers of the company to get information about the company and its activities. SECONDARY DATA: Secondary data is a data collected from different published sources. Collection of data through company annual reports, company manuals and other relevant documents. By textbooks, journals& websites. Collection of data through the literature provided by the company.
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workshops, inventory, and control procedures in various branches inside the department was obtained. 2. Accounts Department: Rest of the information was obtained from accounts and
marketing department through personal interviews with section officials. 2.7 SCOPE OF THE STUDY The study enables the company counter the concept of liquidity and enhances the efficiency of the organization. From the point view of individual it is a learning experience (knowledge) which would be helpful in analyzing and understanding financial aspects 2.8 LIMITATIONS OF THE STUDY: A financial analysis will have always a limited time. This study also has certain limitations. They are as follows: o Tools used for analysis are limited. o The subject study is purely for academic purpose. o The subject analysis is so vast and therefore analysis and interpretation are confined to the objectives. o Risk involved in carrying inventory o The major risk is that the market value of the specific inventories will be less than the value at which they were acquired. o Certain inventories are obsolescence, whether it is in technology or in consumer tastes.
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2.10 METHODOLOGY: o Data: Secondary Data like Inventory reports, Balance sheet, etc. o Statistical Tools: Tables, Graphs, Charts and other tools will be used.
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INDUSTRY PROFILE Retailing is the combination of activities involved in selling or renting consumer goods and services directly to ultimate consumers for their personal or household use. In addition to selling, retailing includes such diverse activities as, buying, advertising, data processing and maintaining inventory. According to Kotler: Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use 3.1 Wheel of Retailing: A better known theory of retailing wheel of retailing proposed by Maclcomb McNair says, 1. New retailers often enter the market place with low prices, margins, and status. The low prices are usually the result of some innovative cost-cutting procedures and soon attract competitors. 2. With the passage of time, these businesses strive to broaden their customer base and increase sales. Their operations and facilities increase and become more expensive. 3. They may move to better up market locations, start carrying higher quality products or add services and ultimately emerge as a high cost price service retailer. 4. By this time newer competitors as low price, low margin, low status emerge and these competitors too follow the same evolutionary process. 5. The wheel keeps on turning and department stories, supermarkets, and mass merchandise went through this cycles.
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3.2 Functions of a Retailer: Sorting Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to redu7ce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units. The above process is referred to as the sorting process. Through this process, retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are able to choose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers would have to visit several stores to complete their shopping. While all retailers offer an assortment, they specialize in types of assortment offered and the market to which the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers Stop targets the elite urban class, while Pantaloons is targeted at the middle class.
Breaking Bulk Breaking bulk is another function performed by retailing. The word retailing is derived from the French word retailer, meaning to cut a piece off. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.
Holding Stock Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Consumers can keep a small
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Additional Services Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.
Channel of Communication Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.
Transport and Advertising Functions Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits.
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"Growth has no limit at Reliance. I keep revising my vision. Only when you can dream It, you can do it." Dhirubhai H. Ambani Founder Chairman Reliance Group December 28, 1932 - July 6, 2002 Dhirubhai Ambani founded Reliance as a textile company and led its evolution as a global leader in the materials and energy value chain businesses.
Mukesh D. Ambani
Nikhil R. Meswani Executive Director Chairman & Managing Director Hital R. Meswani
Executive Director
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APKA FRESH APKA PADAOS ME Indias Fortune 500 private sector giant, Reliance Industries Ltd, has, in fact, been first off the blocks by launching its first Reliance Fresh outlets in Hyderabad, Reliance fresh is the retail chain division of reliance industries of India which is headed by Mukesh Ambani. Reliance has entered into this segment by opening new retail stores into almost every metropolitan and regional area of India. Reliance plans to invest rs 25000 crores in the next 4 years in their retail division and plans to begin retail stores in 784 cities across the country. The reliance fresh supermarket chain is rils rs 25,000 crore venture and it plans to add more stores across different g, and eventually have a pan-India footprint by year 2011. The super marts will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy products and also will sport a separate enclosure and supply-chain for non-vegetarian products. Besides, the stores would provide direct employment to 5 lakh young Indians and indirect job opportunities to a million people, according to the company. The company also has plans to train students and housewives in customer care and quality services for part-time jobs. Reliance Fresh will Forge strong and lasting bonds with millions of farmers and will transform the Relationship with customers to a new level Offer unmatched affordability, quality, convenience, service and choice Offer our customers the widest range of fruit and vegetables at the best prices in the neighborhood Provide for the daily needs of our customers by offering staples, grocery and household products at great prices Offer consistent high quality, unbeatable freshness and great service so that our Customers know that we can be trusted every day.
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S.NO 1 2 3 4 5 6 7 8
PRODUCT RANGE FRUITS & VEGETABLES STAPLES CONFECTIONARIES & SNACKS PROCESSED FOOD DAIRY PRODUCTS BEVERAGES REFRIGERATED PRODUCTS READY TO EAT ITEMS
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ANALYSIS:
From the table it is clear that the inventory turnover ratio for the year 2008 was 38.10 times and in the year 2009 it comes to 9.58.in the year 2010 it again decrease in to 7.82 times
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INVENTORY TURNOVER
2009-10
INTERPRETATION:
From the above graph it can be inferred that there is marginal decrease in inventory turnover ratio from 2008 to 2009 and then 2009 to 2010.this indicates that, there is a very low rate of conversion of stocks in to sales and then in to cash.
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2008 65862344
2009 78785327
2010 95864232
STORES AND SPARES STAPLES DAIRY PRODUCTS TOTAL 2085643 11475147 79423134 1987423 17597691 98370441 3518476 43845621 143228329
ANALYSIS:
This table showing the inventory ratio for the year 2008, 2009 and 2010. The inventories include stock in trade, staples and dairy products. We can observe that, each inventory is increasing year to year. In the year 2008 total inventory was 79423134 it increased up to 98370441 in the year 2009 And it again increases to 143228329 in the year 2010.
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100000000 90000000 80000000 70000000 60000000 50000000 40000000 30000000 20000000 10000000 0 STOCK IN TRADE STAPLES DAIRY PRODUCTS 2008 2009 2010
INTERPRETATION:
This graph clearly showing an increasing trend in case of inventories that is in stock in trade, staples and dairy products. This shows that the company can depend on its credibility in order to fulfill the demand for the products.
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ANALYSIS:
The above sales table shows that what rate the Reliance Fresh products are turned over every year. The sale of the 2007-08 is more as compared to 2009 and 2010. In the year 2008 the sales was high then it decrease in the year 2008-09 and again decrease in the year 2009-10.
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2009-10
INTERPRETATION:
From the above table the annual sales are clearly shown. In the year 2007-08 sales is Rs 170 crore and the year 2008-09 sales is Rs 70 crore, it is decreased because of low production due to flood and in the year 2009-10 sales again decreased to 60 because of quality of production became low.
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YEAR 2007-08
STAPLES
DAIRY PRODUCTS
2008-09 2009-10
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6962.15 7000 6000 5000 4000 3000 2000 1000 0 2007-08 2008-09 staples dairy products 2009-10 132.87 230.14 550.65 2089.53 5053.78
INTERPRETATION:
The above table shows purchases made by Reliance Fresh for last three years. The table indicates purchases of staples & dairy products. It is clear from the table that, the purchases of staples is lower in the year 2008. Then it increased in the year 2009 and again increases in the year 2010. But in case of dairy products it shows increasing order every year. In 2008 it was 132.87, in 2009 it increase up to 230.14 and again in the year 2010 it increased up to 550.65.
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RS. IN CRORES
7654 0.77 0.532
ANALYSIS: The W.I.P turnover ratio has been high in the year 2008 and it decreased in the year 2009 and 2010.
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WIP TURNOVER
2009-10
INTERPRETATION:
In the year 2008 to 2010 its work-in-progress turnover ratio has decreased because work-inprogress is converted into in to finished goods.
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YEAR
RS. IN CRORES
2007-2008
186.56
2008-2009
49.86
2009-2010
58.28
ANALYSIS:
The stock of raw materials in the 2008 is 175.71, and in the next year i.e. 2009 the companys raw material decreased and gradually. But in the year year 2010 it again increase up to 56.38.
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2009-10
INTERPRETATION
The above graph shows that in 2008 the company has maintained good stock. But in the next year the loss is reported because of that, the company has not been able to maintain the good stock i.e., 2009. The stock has been increased in 2010 compared to 2009 which shows the company maintaining good stock to avoid the shortage of raw material and to avoid wastages.
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ANALYSIS: The stock of work in progress has been increased from year to year in year 2008 it was Rs 66.98(lakhs), and in the year 2009 it was Rs 157.43(lakhs), and in the year 2010 it was Rs 192.73( lakhs).
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WORK IN PROGRESS
200 WIP TURNOVER 150 100 50 0 2007-08 2008-09 YEARS 66.98 157.43 192.73
2009-10
INTERPRETATION:
Reliance Fresh has good work force and hence, it will adopt good technology. So it will increase its work-in-progress and also it is earning good profit (2008 & 2009). There is decrease in the profit in 2010.
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INVENTORY IN 2010 PARTICULARS IN FIGURE STOCK IN TRADE STORES AND SPARES: STAPLES DAIRY PRODUCTS TOTAL 2065431 10765421 70700093 2.84% 14.90% 100% 57869241 IN %AGE 82.26%
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3%
INTERPRETATION
In this graph it is clear that stock in trade occupy high position that is 82% which has a turnover of Rs. 57869241 where as staples occupy 3% i.e. turnover of Rs 2065431 and dairy products occupy 15 % that has turnover of Rs 10765421.
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INVENTORY IN 2009 PARTICULARS IN FIGURE STOCK IN TRADE STORES AND SPARES: STAPLES DAIRY PRODUCTS TOTAL 3718876 46885541 145572164 2.02 20% 100% 73923204 IN %AGE 78.88%
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GRAPH- 9
INTERPRETATION In this graph it is clear that stock in trade occupy high position that is 78% which has a turnover of Rs. 73923204 where as staples occupy 2% i.e. turnover of Rs 3718876 and dairy products occupy 20% that has turnover of Rs. 46885541
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INVENTORY IN 2008 PARTICULARS IN FIGURE STOCK IN TRADE STORES AND SPARES: STAPLES DAIRY PRODUCTS TOTAL 3718876 46885541 145572164 2.56% 32.20% 100% 94967747 IN %AGE 65.24%
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INTERPRETATION In this graph it is clear that stock in trade occupy high position that is 65% which has a turnover of Rs.94967747 where as staples occupy 3% i.e. turnover of Rs 3718876 and dairy products occupy 32% that has turnover of Rs. 46885541.
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Particular Always Better Control Technique Just-In-Time Technique Two Bin Technique Total inventory CONCEPT ANALYSIS:
Percentage 50 30 20 100
ABC: A system of inventory management which divides the inventory into three categories. 1. A: Includes items that involve the largest investment. 2. B: Items requiring the second largest investment. 3. C: Category involving the smallest investment. Accordingly appropriate inventory control technique can be applied. JIT: It is a complete reengineering of production process that emphasizes continuous improvement, quality management, reduced set up times, improved maintenance procedures and co-operation with suppliers. Two-Bin-Technique: One to stock the inventory required satisfying the probable demand during the period of replenishment and the other to stock the inventory required from the date of placement of new order to the date of receipt of inventory.
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GRAPH-11 Graph showing technique adopted by the organization for inventory control
YEARS
INTERPRETATION:
From the above table and graph we can know the techniques adopted by the organization for inventory control. The organization is been using the three methods of control which going to give them optimum utilization. They are ABC, JIT and Two-Bin-Technique. We can see that the organization is using the ABC method effectively i.e., for up to 50%, they are also using JIT on the basis of schedule i.e., for up to 30% and also two-bin-technique for up to 20% of inventory.
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CHAPTER- 5
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5.1 FINDINGS
1. RELIANCE FRESH uses standard norms for Inventory Management for all the materials as been maintained.
2 Material planning is done based on orders obtained from different customers. The material requirement plan is processed is to give exact requirements of materials to be produced. 3 Vendors are related based on their performance with respect to delivery, a quality price standard. 4 The received material are inspected as per standard plan is finished products are tested on 100% basis no material is released is handled properly. 5 Physical verification of high value materials in holding store is conducted in accordance with predetermined programmers. 6 All material is stored in right condition at respective locations and The Company has items, which are slowing moving and non-moving, which are disposed off at regular intervals. 7. The scrap obtained in the process is comparatively very low.
8.
As the production cycle is very high, and leads to accumulation of WIP, in turn increase the cost, the company should flow the sub-contracting method where some part of the work is done by other contracts and only assembling and furnishing of the product is done. This leads to systematic and distributed work.
9.
The production layout may be changed to cellular manufacturing concept. I.e. Raw materials fed in one end and finished products are received in another end where every step is automatic and mechanized.
10. FIFO method is being adopted to issue the materials to production department
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5.2 SUGGESTIONS
1. To follow just in time (JIT) technique The concept of JIT means that virtually no inventories are held at any stage of production and that exact number of units is bought to each successive stage of production at the right time is also called zero inventories.
2. It is found that in every ward there is A, B, C items. It is suggested keep the materials a class items in some ward and C class items in some wards, so that it is easy to keep attention on every ward according to their importance.
3. Method of analysis; It is found that ABC analysis is followed to a large extent; hence it is suggested to follow the different methods.
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CHAPTER- 6
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CONCLUSION
The research topic inventory management and control, has a greater implication on Indian industries. From the analysis of inventory management and control in Reliance Fresh, it is very clear that, it has achieved greater importance in production control to a large extent, it also enhance the arising need of the organization, in respect of inventory management and control. The inventory management and control in Reliance Fresh is very complex function. The functions of stores depot, its inventory control technique to achieve the effective production program, necessitates the importance of inventory management and difficult task in todays business world in spite of complex function, Reliance Fresh has maintained a very good system of inventory management and control has achieved great progress in production program year to year.
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CHAPTER- 7
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Magazines:
1. Manuals used in the company 2. Annual report for the period 2007-08 , 2008-09 & 2009-10.
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20,104.73
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Schedule
Deferred Tax Assets Current Assets Loans & Advances Current Assets F
11,912.17
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Schedule
528.83
Current Assets Loans & Advances Current Assets Inventories Sundry Debtors Cash & Bank Balances E 4,976.53 1,002.99 342.28
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