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CHAPTER 01 INTRODUCTION
1.1 INTRODUCTION TO MATERIALS
Materials are one of the important basic items in production. Materials cost constitutes the first and the most important elements of cost. It is used in any manufacturing industry. The word material cover raw-materials, semi-finished materials, spare parts and components consumable store and packing materials. As materials constitute a very significant of total cost of finished project in most of the manufacturing industries. Hence, a proper recording and control over the material costs is essentials. Material represents large investment of capital and a substantial percentage of cost of production. Therefore, there exists on obvious need for effective material management in a organization. Material management considers both the theory of costing materials and inventories and machines of cost calculations and record keeping.
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Specific purpose: Material passing from one process to another requires a specific material. Therefore materials are used for a specific job or a production order. Production process: Material passing from one process to another process where in the finished materials of one process becomes raw materials for next process. The materials passes through the entire production process upto the end product obtained. Acquisition expenses: Charges incurred for acquiring the materials for production purposes charges as freight, taxes and acquisition charges. B. Indirect materials: Indirect materials are material traceable to finished product. Examples are oils greases, waste materials, blooms, rags, cleaning materials. Sometimes the cost of materials is difficult to assign therefore it is treated as indirect materials.
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Prevent from interruption: There should be no interruption in the product process for want of materials and stores including oil for a machine. Sometimes there will be out of stock situation may lead to stoppage of machines. Fixation of levels: Based on the type and requirement materials are valued and level are fixed this is mainly to control materials as per the usage and amount invested. Avoid unnecessary locked up to funds: There should be no over stocking of materials because that would result in lost of interest charges, higher godown charges, determination in quality and losses.
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1.7 Objectives:
activities of materials management function for effective functioning of quality system. The objective of materials management may be subdivided into primary and secondary objective.
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1. Material cost reduction through simplification, standardization, value analysis inventory control etc., 2. Co-coordinating the functions of planning, scheduling, storage, materials handling traffic etc., 3. Development of personnel relating to materials management.
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5. Vendor performance evaluation 6. Insurance coverage 7. Licensing for imported items 8. Clearance of imported consignments C. Receiving and inspection of materials: The activities involved in inspection process are as follows: 1. Quality checking 2. Checking sample in laboratory 3. Comparing samples with actual specification in purchase order 4. Checking the required utility for consumption purpose 5. Inspecting quality of materials before placing bulk orders 6. Rejecting samples if the does not match with the specification D. Stores: Stores function consists of the following activities: 1. Materials receipt and identification 2. Recording in related documents 3. Insurance coverage 4. Storage, preservation and issue of materials 5. Classification and codification of materials 6. Physical verification 7. Inventory control E. Materials handling: Materials handling function consists of following activities: 1. Procurement of materials 2. Delivery of materials at plant 3. Finished products handled at the time of packing 4. Dispatch of finished products
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D. Dispatch of finished products: The activities included are: 1. Selection of transport carriers 2. Disposal of scrap 3. Dispatch of goods at warehouse 4. Proper storage and handling of finished goods channel of distribution
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MANAGING DIRECTOR
Director Personnel
Director Material
Director Production
Director Finance
Director Marketing
Purchasing
Receiving
Stores
Inventory Control
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Material control is the regulation of the function of organization, relations to the procurements, storage and usage and of materials in such a way as to maintain in such a way as to maintain an even flow of production without excessive investment in material stock.
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Preparation of detailed of products and materials required to be purchased in order to realize linked production programs or sales forecast approved by the top management. Control of loading and other activities to be carried out concurrently to avoid holdups in production.
Storage exercises: Control of physical materials exercising control over materials in stock to prevent physical deterioration of theft etc., Inventory planning and control: Control over policies and procedures to regulate systematically the materials kept in stock. External transport: Control of efficient usage of external transport activities. These activities are concerned with the movement of materials from suppliers to the manufactures and from the manufactures to customers. Internal transport and materials handling: Control over the efficient use of materials transport and materials instruments. The internal transport and material handling tools are used for movement of materials from one point to another within factory premises.
Conclusion Therefore proper materials control results in continuous production activities which is all supported by other activities such as purchasing, stores, accounting, control and
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consumption. Proper delivery and usage of materials can make the production activities a successful completion.
1.15 FINANCE
Financial Management is nothing but management of the limited financial resource the organization has, to its utmost advantage. Resources are always limited, compared to its demands or needs. This is the case with every type of organization. Proprietorship or limited company, be it public or private, profit
oriented or even non-profitable organization. It was a branch of economics till 1890, and as a separate discipline, it is of recent origin. Still, it has no unique body of knowledge of its own, even today. and draws heavily on economics for its theoretical concepts
Efficient Utilization More Important: The efficient management of business enterprise is closely linked with the efficient management of its finances. The need of finance starts with the setting up of business. Its growth and expansion require more funds. Needless to say, profitability of any firm is dependent on its as well as its efficient utilization.
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management, acquisition of funds and in all aspects of raising and allocating capital. As far as business organizations are concerned, the objective of financial management is to maximize the value of business. Financial Management deals with procurement of funds and their effective
utilization in the business- S.C. Kuchhal. From his definition, two basic aspects emerge: Procurement of funds. Effective and judicious utilization of funds. Financial management has become so important that is has given birth to financial Management as a separate subject.
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following aspects are taken up in detail under the study of financial management: Determination of size of the enterprise and determination of rate of growth. Determining the composition of assets of the enterprise. Determining the mix of enterprises financing I, e. consideration of level of debt to equity, etc. Analyze planning and control of financial affairs of the enterprise.
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which funds are to be invested by the firm. Resources are scarce and limited. Assets can be classified, under two broad categories: Long term Investment Decisions-Long-term assets: The long-term
capital decision are referred to as capital budgeting decision, which relate to fixed assets. The fixed assets are long term, in nature. Basically, fixed
assets create earnings to the firm. Short-term Investment Decisions-Short- term assets: investment decisions are, generally, referred as The short-term working capital
equivalents, receivables and inventories. 2. Finance decision: Finance decision is concerned with the mix or
composition of the sources of raising the funds required by the firm. In other words, it is related to the pattern of financing. In finance decision , the finance manager is required to determine the proportion of equity and debt, which is know as capital structure. There are two main sources of funds, shareholders funds (variable in the dividend) and borrowed funds (fixed interestbearing). 3. Liquidity Decision: Liquidity decision is concerned wit the management of
current assets. Basically, this is working capital management. Working capital Management concerned with the management of current assets. It is concerned with short-term survival. Short term- survival is a prerequisite for long-term survival. 4. Dividend Decision: The term dividend relates to the portion of profit,
which is distributed to shareholders of the company. It is a reward or compensation to them for their investment made in the firm. The dividend can be declared from the current profit or accumulated profits.
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The role of finance manager, in a modern business, is pervasive in all the activities of business firm, including production and marketing. To sum up, finance function or decisions include the following important areas, where the finance manager has to contribute: Investment decision or long term assets-mix decision Finance decision or capital-mix decision Liquidity decision or short-term assets mix decision Dividend decision or profit allocation decision
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To maintain a minimum investment in inventories to maximize profitability. Both excessive and inadequate inventories are not desirable. These are two danger points within which the firm should avoid. The objective of inventory management should be to determine and maintain optimum level of inventory investment. The optimum level of inventory will lie between the two danger point of excessive and inadequate inventories. The firm should always avoid a situation of over investment or under-investment in inventories. The major dangers of over investment are: (a)unnecessary tie-up of the firms funds and loss of profit, (b) excessive carrying costs, and (c) risk of liquidity.
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Materials requirements should be properly planned. The perpetual inventory system should be operated so that up-to-date information is available about the quantity of materials in stock. Adequate records should be introduced to control materials during production and quantities manufactured for stock. The storage of all materials should be well-planned subject to adequate safeguards and supervision. The various stocks levels like minimum, maximum, etc., should be fixed for each item of material. Purchase of materials should be controlled through budgets. An efficient system of internal audit and internal check should be operated so that all transactions involving materials are checked by reliable and independent persons. There should be regular reporting to management regarding purchases, issues and stock of materials. Special reports should be prepared for obsolete items, spoilage, returns to suppliers, abnormal losses, etc.
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Precautionary motive necessitates holding of inventories to guard against the risk of unpredictable changes in demand and supply forces and other factors. Speculative motive influences the decision to increase or reduce inventory levels to take advantage of price fluctuations. A company should maintain adequate stock of material for continuous supply to the factory for an uninterrupted production. If is not possible for a company to procure raw materials whenever it is needed.
disengage, different parts of the production system. As we can observe easily, different machines or equipment and people normally work at different rates-some slower and some faster. Cycle inventories: cycle inventories are held for the reason that purchases are usually made in lots rather than for the exact amounts which may be needed at a point of time. Of course if all purchases are made exactly as and when the item is required, there
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would be no cycle inventories. But, practically, then the cost involved in obtaining the items would be very large.
3. Carrying costs: costs incurred for maintaining a given level of inventory are called carrying costs. They include storage, insurance, taxes, deterioration and obsolescence. The storage costs comprise cost of storage space (warehousing), stores handling costs and clerical and staff service costs (administrative costs) incurred in recording and providing special facilities such as fencing, lines, racks etc.
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Requisitioning Order placing Transporting Receiving, inspecting and storing Clerical and staff
5. Stock out costs: stock out cost means the cost associated with not serving the
customers. Stock outs imply shortages. If the stock out is internal it would imply that some production is lost. While if the stock out is external, it would result in a loss of potential sales and/or loss of customer goodwill.
1. Rate of consumption of the material, 2. Storage space available, 3. Amount of capital needed, materials, 4. Risk of obsolescence and deterioration, material.
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Formula: = Re-order level + Re-order quantity (minimum consumption * minimum re-order period) Minimum level: minimum level is that below which stock should not normally be allowed to fall. In case any item of materials fall below this level, there is a danger of stoppage in production and top priority should be given tot the purchase of new materials. I setting this level, the following factors must be taken into account. 1. Rate of consumption of material, 2. Time required obtaining delivery of the new materials, 3. Re-order level. Formula: = Re-order level (Normal consumption* Normal re-order period) Re-order level: this is that level of material at which a new order for material is placed. It is at this level that purchase requisition is made out. This level is above minimum level but below maximum level. It is after a consideration of the following factors: 1. Rate of consumption of material, 2. Minimum level, Lead time or delivery time, i.e., the normally taken from the time of raising purchase requisition to receipt of materials. Formula: = (Maximum consumption * Maximum re-order period) Danger level: this is a level at which normal issue of material are stopped and urgent action is taken for purchase of materials so that production is not interrupted due to shortage of materials. Formula: =Average or normal consumption * Maximum re-order period for emergency purchases Average stock level: average stock level is calculated by the following formula:
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Average stock level = minimum level + maximum level 2 Average stock level may also be computed by the following formula: Average stock level = minimum level + (Re-order quantity)
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S = Storage and carrying cost percentage of cost Alternatively, EOQ = 2.A.B/S Where S = Storage cost per unit per annum
2. ABC Inventory Control System: The firm should be selective in its approach to control investment in various types of inventories. This analytical approach is called the ABC analysis and tends to measure the significance of each item of inventories in terms of its value. The high-value items are classified as A items and would be under simple control. C items represent relatively least value and would be under simple control. B items fall in between these two categories and require reasonable attention of management. The ABC analysis concentrates on important items and is also known as control by importance and exception (CIE). As the items are classified in the importance of their relative value, this approach is also known as proportional value analysis (PVA). The following steps are involved in implementing the ABC analysis: Classify the items of inventories, determining the expected use in units and the price per unit for each items. Determine the total value of each item by multiplying the expected units by its units price. Rank the items in accordance with the total value, giving first rank to the item with highest total value and so on. Compute the ratios (percentage) of number of units of each item to total units of all items and the ratio of total value of each item to total value of all items. Combine items on the basis of their relative value to form three categories- A, B & C. 3. Just in-time (JIT) Systems: Japanese firms popularized the just-in-time system in the world. In a JIT system material or the manufactured components and parts arrive to the manufacturing sites
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or stores just few hours before they are put to use. The delivery of material is synchronized with the manufacturing cycle and speed. JIT system eliminates the necessity or carrying large inventories and thus, saves eliminates the necessity of carrying large inventories. The system requires perfect understanding and coordination between the manufacturer and suppliers in items of the timing of delivery and quantity of the material. Poor quality materials or components could halt the production. The JIT inventory system complements the total management (TQM). The success of the system depends on how well a company manages its suppliers. The system puts tremendous pressure on suppliers. They will have to develop adequate systems and procedures to satisfactory meet the needs of manufactures 4. out sourcing: A few years ago there was a tendency on the parts of many companies to manufacture all components in-house. Now more and more companies are adopting the practice out-sourcing. Out-sourcing is a system of buying parts and components from outside rather than manufacturing them internally. Many companies develop a single source of supply, and many others help developing small and middle size suppliers of components that they require. 5. Computerized inventory control systems: More and more companies, small or large size, are adopting the computerized system of controlling inventories A computerized inventory control system enables a company to easily track large items of inventories. It is an automatic system of counting inventories, recording withdrawals and revising balance. There is an in-
built system of placing order as the computer notices that the reorder point has been reached. The computerized inventory system is inevitable for large retail stores, which carry thousands of items. The computer information of the buyers and suppliers are link to each other. as soon as the suppliers computer receives an order from the buyers system, the supply process is activated. 6. VED Analysis:
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In VED analysis, the items are classified on the basis of their critically to the production processor other services. In the VED classification of materials, V stands for vital items without which the production would come to a stand still. E in the system denotes essential item whose stock out adversely affect the efficiency of the production system. Although the system would not altogether stop for want of these items, yet their non availability might cause temporary losses in, or location of, production. The D items are the desirable items which are required but not immediately cause a loss of production. The VED analysis is done mainly in respect of spare part. 7. HML analysis: This is similar to the ABC analysis except that, in this analysis, the items are classified on the basis of unit cost rather than their usage value. The items are classified accordingly as their cost for unit is H-high, M-medium, or L-low. This type of analysis is useful for keeping control over materials consumption at the departmental level. 8. SDE ANALYSIS: This uses the criterion of the availability of items. In this analysis, S stands for scarce item which are In short supply. D refers to the difficult items-meaning the items might be available in the indigenous market but cannot be procured easily; while E represents Easily available items, from the local markets may be. 9. S-OS analysis: S-OS analysis is base on the nature of suppliers, wherein S represents the seasonable items and OS represents the Off-seasonable items. This classification of item is done with the aim of determining proper procurement strategies. 10. FSN Analysis: Based on the consumption pattern of the items, the FSN classification calls for classification of items, as Fast-moving, Slow-moving, non-moving. Some analysts classify the items as FNSD; Fast moving, Normal-moving, Slow-moving, and Dead
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(or non-moving). This speed classification helps in the arrangement of starts in the stores and in determining the distribution and handling patterns. 11. XYZ Analysis: XYZ analysis is based on the closing inventory value of different items. Items, whose inventory values are high, are classed as X items while those with low investment in them are termed as Z items. Other items are the Y items whose inventory value is neither too high not too low.
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The following advantages are claimed for FIFO method: This method is based on a realistic assumption that materials which are received first are issued first. Materials are issued at actual cost. Thus, no unrealized profit or loss results from the use of this method. Closing stock valuation is at cost as well as at the latest market prices. This method is quite simple to operate and easy to understand.
DISADVANTAGES Materials are not changed at the current market prices. Therefore, in times of rising prices, charge to production is unduly low. This method sometimes produces unfair results as between one job and another. For example, materials purchased @ Rs. 10 may be issued to job A, but materials issued t similar hog B may be from a later supply which is @ Rs. 12. This makes comparisons difficult because two similar jobs started at the same time may show different costs. When transactions are large in number and the price fluctuates very frequently, the method involves more calculations and increases the possibility of errors. 2. LAST-IN-FIRST-OUT(LIFO) The method is just reverse of FIFO. It is based on the assumption that last purchases of materials are issued first and earlier receipts are issued in the last. LIFO method uses the price of the last batch received for all issues until all units from this batch have been issued. After that, price of the previous batch received is used.
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The students should note that in actual practices materials issued to production may not be from the latest lot purchase. This is only a book-keeping method and must not be confused with physical method of issue used by the storekeeper who always tries to issue the oldest stock first. Two important points of this method are: Issues are pieced at actual cost and latest prices paid. Closing stock is valued at the old prices and is completely out of line with current prices. ADVANTAGES This method has following advantages: The value of materials issued is closely related to current market prices. As materials are issued at actual cost, it does not result in any unrealized profit or loss. When prices are rising, the higher prices of the lost recent purchases are charged to production. This reduces profit figure and results in income- tax saving.
DISADVANTAGES Although stock is valued at cost, the price is that of the earliest purchased, so that stock value does not represent its current value. This method is not realistic as it does not conform to the physical flow of materials. Like FIFO, in this method also, the materials cost of similar jobs may differ simply because the prior job exhausted the supply of lower prices stock. This renders comparisons between jobs difficult. When prices fluctuate very often, the calculation complicates the stores account and increases the possibility of clerical errors.
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These methods are based on the assumption that when materials purchased in different lots are stored together, their identity is lots, and therefore, these should be changed at an average price. Basically, average prices are of two types- simple average and weighted average. 4. SIMPLE AVERAGE METHOD Simple average price is calculating by adding all the different prices and dividing by the number of such prices. It does not account quantities of materials while computing average price. For instance, when 100 units are purchase @ Rs. 9 per unit and 900 units are purchased @ Rs. 7 per unit, the simple average price will be = (9+7)/2 = Rs. 8. The only advantage of this method is that it is simple to understand and easy to operate. DISADVANTAGES Materials are not charged out at actual cost. Thus, unrealized profit or loss will usually arise out of pricing. This method is unscientific and usually produces unsatisfactory results. The value of closing stock may be a negative figure which is quite absurd.
5. WEIGHED AVERAGE METHOD This method gives due weight to the qualities held at each price when calculating the average price. The weighted average price is calculated by dividing the total cost of material in stock from which the material to be priced could have been drawn, by that total quantity of material in that stock. The simple formula is that weighted average price at any time is the balance value figure divided by the balance units figure. ADVANTAGES This method evens out the effect of widely varying prices of different purchases.
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The new issue price is calculated only at the time of each new purchase and not at the time of each. This reduces the work of making calculations. No unrealized profit or loss arises. DISADVANTAGES Its main disadvantages are: Where receipts are numerous, this method requires a good deal of calculations. Issue prices generally run to a number of decimal points. Materials are not issued at the current market prices.
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The stores are of two types: Perpetual Inventory records and Documents 1. Perpetual Inventory Records: These records show the movement of stores, i.e. the receipt of materials, issues of materials to production departments and also current in stock. Bin card and store ledgers are the two basic perpetual inventory records. A. Bin Card (Stock Card): A bin is a container in which materials is kept. A bin card is a quantitative record of receipts, issues and closing balances of material items in store but it does not contain information about the prices of materials.
B. TWO BIN SYSYTEMS: In this system two bins are maintained for each item of store. One bin constitute the main or the regular bin from which materials are issued and the other bin contain the minimum stock from which issues are made when stock in the regular bin is exhausted.
C. STORES LEDGER: This ledger is maintained in the cost accounting department. Like bin cards, the stores ledger records all receipt and issue transactions in respect of materials. But the difference is that stores ledger keeps records of the quantities as well as prices of materials. Separate ledger folios are maintained in the stores ledger for each items of material. The stores ledger is one of the basic records for material accounting in the cost system. There are mainly three sections in the ledger, i.e., receipts, issues and balance, each of these with appropriate sub-divisions showing Ref. No., Quantity, Unit price and Total Cost. The entries in the receipt and issues columns are made from the same documents which are used for posting in bincard, i.e., goods received Note and Stores Requisition Note, etc. Difference between bin card and stores ledger are:
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Bin Card is a record of quantity only where as Store ledger records both quantity and money value Bin Card is maintained by the store keeper where as stores ledger is kept in the cost office. Posting in BinCard normally takes place before the transaction takesplace while in stores ledger, it is posted after the transaction.
Authorizing the storekeeper to issue material, and Providing a written record of usage of materials
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It is a mater requisition which lists all the materials required for the completion of job. So, a bill of materials is a special form of stores requisition note which is generally used by departments having standard material requirements are a comparatively fixed list of materials. The main advantages of using bill of materials are: It eliminates the need for preparing separate material requisition notes for various types of materials required for a particular job. This saves time and promotes efficiency. The storekeeper can be given advance warning of requirements of materials usually not available in store. It thus avoids delay in production. When pre-printed forms of bill of materials are used in standard type of output, it serves a lot for clerical labour and risk of errors is reduced. 4. Material return Note When materials issued are in excess of requirements, the unused materials are returned to stores together with a Material Return Note. This note is similar to Material Requisition Note, but normally printed in a different colour for a easy identification. When materials are received back in the stores, these should be placed in an appropriate bins and entries made in the bincard. 5. Materials Transfer note: Materials note have to be sometimes transferred from one job to another. This may be both because excess materials were issued to a job and surplus materials are directly transferred to another job or because materials issued to a less urgent job are transferred to a more urgent job. When such transfers are not permitted, the surplus materials are returned to the stores and then re-issued to another job. This results in extra transport costs. Thus, when materials are bulky, such transport costs may be heavy which can be avoided if direct transfers are permitted. 6. Material Abstract ( Material Issue Analysis Sheet):
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Material abstract is defined by CIMA, UK as a document which is classified record of materials issues, returns and transfers. In other words, all Material Requisitions, Material Return Note and Material Transfer Notes are analyzed periodically by the Cost accounting department to ascertain the material cost of each job.
Stock Turnover Ratio = Cost of materials consumed during the period Average Stock of materials during the period Stock of turnover ratio is an indicator of the rate of consumption i.e., the fast moving and slow moving materials. A high stock turnover ratio indicates fast moving materials and a low ratio indicates slow moving materials. The turnover of different materials may be compared to detect those items which do not move regularly. This will enable the management to avoid keeping capital locked up in undesirable items of materials.
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A STUDY ON MATERIAL MANAGEMENT AND CONTROL CONDUCTED AT Karnataka Soaps and Detergents Limited, Bangalore.
The methodology was used for wide and varied and the methods adopted were descriptive and analytical type of research. Personal Interviews were undertaken and there after the data have been analyzed and interpreted keeping in mind the Objective of the study.
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Since the topic has a wide scope in every manufacturing sector, the research was undertaken at Karnataka Soaps and Detergents Limited., Bangalore.
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Text books and other case studies The secondary data is obtained by referring to few books in relation to the inventory reports, annual reports etc. Gathering information from the past records and exhibits of products of KS&DL and from Internet
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Stock audit: This implies the physical verification of stock with the inventory records. Lead time: Lead time refers to the gap between the placing of the order to procure material and control delivering of material from the supplies. Inventory control techniques: Inventory control techniques refers to the techniques employed by the inventory organization with in the frame of one of the basic inventory model. Inventory cost: Inventory cost refers to the cost connected directly with the procurement of the raw materials. Components: this refers to finished part entering in to a product. These may be classifying in to those which are manufactured by the firm and those which are purchase from outside.
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The chapter includes the subject background of the research topic. It covers the topics such as introduction of materials, types of materials, requisites for maintaining records for material control, introduction to material management, definition, scope, objectives, functions, organization chart of material management, products group, material control, meaning and definition, finance, importance of finance, concept of financial management, scope, aims, functions of finance, inventory valuation and its also through light on the inventory system and stock levels,it also concentrates on the inventory system existing at KS&DL.
CHAPTER-02 RESEARCH DESIGN This chapter gives an insight into the introduction of research design, topic of the study and statement of the study and objectives framed for the study and it also contains the operational definitions with respect to KS&DL, tools used for the collect the data for the study types of data represented by the company for the study. It also includes the period of the study conducted in the company this chapter concluded by limitations of the study and chapter scheme.
CHAPTER-03 COMPANY PROFILE This chapter presents the profile of the company. This chapter consists of history of the company, branches, personnel and industrial relation, range of products, policy of the company, its objectives, its competitors, and SWOT analysis. CHAPTER-04 ANALYSIS AND INTERPRETATIONS This chapter deals with tabulation of the collected data in the form of graphs, charts, and diagrams leading to the findings on the topics. CHAPTER-05 SUMMARY OF FINDINGS AND SUGGESTIONS
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This chapter presents a summary of all the findings made, conclusion drawn and the suggestions made. The suggestions include a revised cost model. It thus deals with the last two objectives stated under the research design chapter.
BIBLIOGRAPHY. In this source of information collected to conduct the research study like various journals and websites and text books which are related to the topic of the study. ANNEXURES In the various statistical statement are presented which are provided by the company for research purpose.
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eminent scientist in the field working at the Tata Institute, Bangalore. He was sent to England to master the fine aspects of soap manufacturing. The Maharaja of Mysore & Diwan Sir. M.Visvesvaraya established the Government Soap factory during the year 1918. The factory was started as a very small unit near K.R.Circle, Bangalore with the capacity of 100 tons P.A. In
November 1918 the Mysore sandal soap was put into the market after sincere effort and experiments were undertaken to evolve a soap perfume blend using sandalwood oil as the main base to manufacture toilet soap. The factory shifted its operation to Rajajinagar industrial area, Bangalore in July 1957, where the present plant is located. The plant occupies an area of 39 acres (covering Soaps, Detergents and Fatty Acid divisions), on the Bangalore Pune Highway, easily accessible by transport services and communication. Another sandal wood oil division was established during the year 1944 at Shimoga, which stopped its operations in the year 2000 for want of Natural Sandalwood. This factory started at a moderate scale in year 1916. The first product was washing soap in addition to the toilet soap in the year 1918. The toilet soap of the company was made up of sandal wood oil.
In 1950 Government decided to expand the factory in two stages. The first stage of expansion was done to increase the output to 700 tons per year and was completed in the year 1952 in the old premises. The next stage of expansion was implemented in 1954 to meet growing demand for Mysore sandal soap and for this purpose Government of India sanctioned license to manufacture 1500 tons of Soaps and 75 tons of glycerin per year.
The expansion project worth of Rs.21 lakhs includes the shifting of the factory to a newly laid industrial suburban of Bangalore.
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The factory started functioning in this new premise [i.e., present one] from 1st July 1957. From this year onwards till date the factory had never looked back, it has achieved growth and development in production scales and profits. The industry has 2 more divisions one at Shimoga and another at Mysore where sandal wood oil is extracted. The Mysore division started functioning from 1917 and only during 1984 manufacturing of perfumed and premiere quality Agarbathies at was started. Right from the first log of sandalwood that rolled into the boiler room in 1916, the company has been single minded pursuit of excellence. The project took shape with the engineering skills and expertise of top-level team under the leadership of Sir. M.Visvesvaraya, Prof. Watson and Dr.Sudbrough. Like this soap factory was started as a small unit and now it has grown up to a giant size. On 1st October 1980, the Government Soap Factory was renamed as Karnataka Soaps and Detergent Limited The Company was registered as a public limited company. Today Company produces varieties of products in the toilet soaps, detergent, Agarbathies and Cosmetics.
BUSINESS:
As of march 2006,the Mysore sandal soap held a 6500 tonne share among the 450 thousand tonnes of soap produced and marketed annually in India .The KSDLs soap factory in Bangalore that manufactures the Mysore sandal soap is one of the largest of its kind in India having an installed capacity to produce 26,000 tonnes of soap per annum.KSDL had sales od rs.1.15billon(about $28.75millon)in the year 2004 -2005 with Mysore Sandal Soap having an average monthly sale about re 75million($1.87million).Traditionally ,the soap has not been marketed in a high profile manner and only during the year 2006 M.S.dhoni, the Indian cricketer was selected as the first brand ambassador of them Mysore sandal soap. Other marketing strategies being employed to market this soap in to the scheme were the distributories who meet the targeted sales could enter a lucky draw were there could win silver or gold coins. About 85% of sales of this soap are from the south Indian states of
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Karnataka, Andhra Pradesh and Tamil nadu. Majority of the users of this soap are above forty years of age and it is yet to gain more acceptance by the youth in India. Apart from the regular, Mysore sandal soap, KSDL has also introduced the Mysore sandal baby soap to target this share of the market. However, KSDL is facing issues like shortage of sandal wood which has resulted in the company using only 25% of the manufacturing capacity of its factory leading to a lesser production of soaps. The main reason for this is the depletion of sandal wood reserves in the state of Karnataka. To overcome this, KSDL has also started producing sandalwood by bidding in the open market and is also considering importing the wood from other countries. The absence of a sustained sandal wood regeneration programme has a taken a big toll of sandal wood reserves in Karnataka. This is a great irony in a state that once set up factory to use up its excessive reserves and wears two GI tags on its sleeve on accounts of its historic association with the precious wood.
RENAMING:
On 1st October 1980, the Government Soap Factory was renamed as Karnataka Soaps and Detergent Limited The Company was registered as a public limite d
company. Today Company produces varieties of products in the toilet soaps, detergent, Agarbathis and Cosmetics.
KS&DL AT GLANCE:Incorporated Name Address Karnataka soaps and Detergents limited. Karnataka soaps and detergents limited Bangalore Pune High Way Post Box No.5531 Rajajinagar, Bangalore 560 055 Ph: 080-3377691/3370469/23371103 to 06
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1918 Wholly owned by Govt. of Karnataka Govt. of Karnataka nominates/appoints Board of directors, chairman & MD
Rename Trademark
1980 The trademark is SHARABHA. It is the Body of lion with the head of an elephant Means blending the majesty of lion with Strength of an elephant.
Production range
Toilet soaps, bar soaps, Detergents Cakes Powders, Agarbathies, Cosmetics, Sandalwood oi
The facility is a pioneer in the manufactures Of various soaps and technology Imports from Italy.
Licensed capacity is 26,000 metric tons Of Soaps & 10,000 M.Tons of Detergent Per
annum
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. Plants
Bangalore
Soap Plant Detergent Plant Fatty Acid Plant Mysore Sandal wood Oil Agarbathies
TRADEMARK OF KS & DL:The SHARABHA The carving on the cover is the SHARABHA, the trademark of KS & DL.
The SHARABHA is a mythological creation from the Puranas which has a body of a lion and head of elephant, which embodies the combined virtues of wisdom
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and strength. It is adopted as an official emblem of KS& DL to symbolize the philosophy of the company.
The SHARABHA, thus symbolized a power that removes imperfections and impurities. The maharaja of Mysore as his official emblem adopted it. And soon took its pride of place as the symbol of the Government Soap Factory of quality that reflects a standard of excellence of Karnataka Soaps and Detergent Limited.
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OWNERSHIP PATTERN: Wholly owned by Government of Karnataka BIRDS EYE VIEW OF KS&DL:1918 Government Soap Factory was started by Maharaja of Mysore And the Mysore Sandal Soap was introduced into the market For the first time. 1950 - The factory output rose to 500 M.Tons with the following Modifications. 1. Renovating the whole premises. 2. Installing new boiler soap building plant and drying Chamber. 1954 Received license from Government to manufacture 1500 tons Of soap and 75 tons of glycerine per year.
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1957 Factory shifted its operation to Rajajinagar industrial area. 1974 Mysore sales international limited was appointed as the sole Selling agent, for marketing its products. 1975 Rs.4 Crores synthetic detergent plant was installed Based on Italian technology by Ballestra SPA. 1980 - On 1st October 1980 the Government Soap Factory was converted into a public sector enterprise and renamed as Karnataka Soaps & Detergents Limited. 1981 a) Production capacity increased to 6000 tons, b) Rs.5 Crores Fatty Acid Plant was installed. 1984 Manufacturing of premium quality of Agarbathies at Mysore Division 1985 Production capacity was raised to 26,000 M.Tons Per Annum. A large variety of toilet soaps at attractive shapes, colors and Fragrances introduced to meet the varieties & tastes of Consumers 1992 The company was registered with the Board for Industries and Financial Reconstruction (BIFR), New Delhi in December for rehabilitation, as the company suffered losses continuously since 1980 at its net worth fully eroded. 1996 The BIFR approved the rehabilitation scheme in September &
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the Company stated making Profits. 1999 ISO-9002 Certificate for quality assurance in production, Installation and Servicing. 2000 ISO-14001 certificate pertaining to environmental Management system. 2003 The entire carried forward loss of Rs.98 Crores wiped out and in May BIFR, declared the company to be out of its Purview. The Company is making profit continuously, It is only State Public Sector unit that has come out of BIFR. 2004 The ISO-9002 was upgraded to ISO-9001-2004, Quality Systems. 2005 a)Launched new herbal care soap of 100gm contain 19 herbs and leaves extracted perfumes. b) Geographical indication registry for 1) Mysore sandal soap 2) Mysore sandal wood oil 2007 ICWAI national award for excellence 2008 KSDL prime products, Mysore Sandal Wood Soap and Oil are Accredited with Geographical Indications as the Intellectual Property of India as per the Geographical Indication of goods Act 1999. 2008 The ISO-9001 was upgraded to ISO-9001-2008 Quality
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Accreditations & ISO 14001 2004, EMS accreditation. 2009 KSDL upgraded the ISO 9001-2008 policy for Quality Management System and ISO-14001-2004 Environmental Management System. 2010 Won Karnataka Chief Ministry Ratna Award for profited govt company.
availability in retail outlets particularly for Mysore sandal soap is almost comparable to any other similar industries products in the premium segment in the south. Whereas in other parts like Eastern & Northern markets penetration of KSDL product is relatively poor, which depends on the companys distribution structure, stockiest and field personnel strength. With increased trust on distribution, the company does not foresee any problems to achieve the projected sales through the redistribution package. Further, the policy of Indian Government also sees the public sector enterprises enter the industry in a large way there by making the products available to the consumers at reasonable prices. Being located in the centre of southern part of India the Government Soap Factory claims preferential treatment for expansion programmed in view of availability of exotic natural Sandalwood oil.
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March 1999. Accordingly action plan was drawn and a committee was set up for the purpose during October 1998 with a mission statement. The company gives initial training including conducting employees awareness programme, document quality manual and quality system procurement. In this direction company obtained the guidance from Consultancies, Bangalore and Bureau of Indian Standards, Bangalore. Accordingly, company standards registered for ISO 9002 by the end of March to the Bureau of Indian Standards. Obtained the certificate by the end of March 1999 itself. This is to project in the national and international market and also to improve quality of products offered to the consumers with the assurance of quality in the message. The Company got itself upgraded to ISO-9001-2004, Quality Systems in the year 2004-05. The company is located in the heart of the Bangalore city. The management of the company took a decision to get the ISO-14001 and become model to other public sector for the techniques used and also to other Government units to spread the message of maintenance of environment. ISO-14001 and ISO-9001 will facilitate to improve the corporate brands in the global market and it will help the company to improve the profits, year after year on longterm basis. The environment management system adopted in the company through this motive as follows: Conservation of energy Conservation of Surrounding Conservation of resources.
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VISION STATEMENT:
Keeping pace with globalization, global trends & the states policy for using technology in every aspect of governance. Ensuring global presence of Mysore Sandal products while leveraging its unique strengths to take advantage of the current technology scenario by intelligent and selective diversification. Secure all assistance and prime states from government of India all technology alliances. Further, ensure Karnatakas pre-eminent status as a proponent and provider of technology services to the world, nation, other states public and private sectors. Making available technology product and services at the most affordable price to the people at large, in keeping with the policy of a welfare state. Making all out efforts to achieve unimaginable profits. Most importantly to earn the invaluable foreign exchange, both to the state and to the country.
MISSION STATEMENT
To serve the National economy. To attain self-reliance. To promote purity & quality products To maintain the Brand loyalty of its customers. To build upon the reputation of Mysore sandal soap based on pure sandal oil.
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To promote purity and quality products and thus enhance age old charm of Sandalwood Oil To attain self reliance To promote and uphold its image as symbol of traditional products To build upon the reputation of Mysore Sandal soap based on pure sandal oil. To maintain the brand loyalty of its customer. To supply the products mentioned above at most reasonable and competitive rate.
ACHIEVEMENTS/AWARDS :
Government of Karnataka Dept of Industries and commerce State Export Promotion Advisory Board. EXPORT AWARD 1974-75 Detergent Plant M/s Chemical Bombay have given 1st price for the year 1980-81 Geographical Indication GI-2005 ISO 9001-2000 in the year 1999 ISO 14001-2004 in the year 2000
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Introduction of anti-bacteria, herbal transparent soap, made out of 33 essential oil based perfume, Aloe Vera, Vitamin-E etc as additive and suitable for all types of skin and all seasons. Improvement in existing products Mysore Sandal classic improved moisturizers & skin conditions. Introduction of sandalwood powder in 50gms, 100gms to meet the growing demand for religious purpose. Introduction of new higher powered detergent powder for institutional sales in bulk packaging. To attain market leadership. Introduction of new trade schemes to increase sales. Aggressive advertisement and publicity as part of sales promotion. Reduction in distribution expenses. Cost-reduction in all areas. Instant decision making in certain procurement activities. Timely introduction and implementation of market driven decisions. Ensuring effective internal control.
PRODUCT PROFILE
KS&DL is the true inheritor of golden legacy of India. It is continuing the tradition of excellence for over eight decades, using only the best East Indian grade Sandalwood oil & Sandalwood soaps in the world. The products produced at KS&DL are the Soaps, Detergents, Agarbathies and Sandalwood oil.
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TOILET SOAPS
NAME OF THE PRODUCT Mysore Sandal Soap Mysore Sandal Classic Soap Mysore Sandal Gold Soap Mysore Sandal Baby Soap Mysore Special Sandal Soap Mysore Rose Soap Mysore Sandal Herbal Care Soap Mysore Jasmine Soap Wave Soap Mysore lavender Soap Mysore Sandal bath tablet Mysore Sandal classic bath tablet Mysore Jasmine bath tablet Mysore Special Sandal tablet Mysore Sandal rose tablet Mysore Sandal Guest tablet UNITS OF GRAMS 75, 125 75 75, 125 75 75 100 100, 125 100 100 150 150 150 150 150 150 17
GIFT RANGE
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DETERGENTS
NAME OF THE PRODUCT Mysore detergent powder Mysore detergent powder Mysore detergent Cake Mysore detergent cake UNITS IN GRAMS 1000 500 125 250
TALCUM POWDERS
NAME OF THE PRODUCT Mysore Sandal Talc Mysore Sandal Baby Talc
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AGARBATHIES
NAME OF THE PRODUCT Mysore Sandal Premium Mysore Sandal Regular Mysore Rose Nagachampa Suprabhatha Mysore Jasmine Parijata Sir M.V.100 Bodhisattva Venkateshwara Durga Ayyappa Alif Laila Meditation
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(75gm)
(75gm)
(150gm Each)
(125gm)
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(100gm)
(150gm Each)
(125gm Each)
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(75gm)
(75gm) (100gm)
"Indias Most Expensive Mysore Sandal Millennium Soap Launched on Jan 25 2012 : Mysore Sandal Millennium, a super premium soap, priced at Rs 720 per piece of 150
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gram was launched by the State-owned Karnataka Soaps & Detergents Limited (KS&DL) by Chief Minister D V Sadananda Gowda on Wednesday. This will be Indias most expensive soap. Apart from the Chief Minister, Energy and Food and Civil Supplies Minister Shobha Karandlaje, Ports and Fisheries Minister Krishna Palemar and other senior officials were present at the function for the launch of the soap. KS&DL Chairman Shivananda Naik said ''Mysore Sandal Millennium is the first most expensive soap manufactured and sold in India. The Millennium soap is produced from exclusive vegetable oils mixed with special conditioners, moisturizers, Vitamin-E, Jojoba-Mimosa and natural sandalwood oil. The sandalwood oil in the soap improves complexion, moisturizes skin and retains the glow. Hydrolysed Milk Protein, which is high in amino acid helps the skin in hydration and maintaining elasticity. It also contains Glycerin, which helps to prevent skin dehydration and maintain even structure . The pure sandalwood oil is the essence of this product, which helps in relaxation and contains anti-ageing properties. KS&DL plans to sell the soap through five-star hotels, hyper malls, super bazaars , lifestyle stores and other major stores. The company is also planning to export the soap to the UK, US, Malaysia, West Asia among others, where there is a demand for super premium soaps.
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DETERGENTS
KS&DL also manufactures high quality detergents applying the latest spray drying technology with well balanced formulation of active matters & other builders; they provide the ultimate washing powder. 1. Sensor Detergent Powder (1kg/2kg)
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AGARBATHIS
1. Mysore Sandal premium 2. Mysore Rose 3. Suprabath 4. Parijata 5. Venkateshwar 6. Ayyappa 7. Chandhana 8. Mysore sandal 9.Nagachampa 10.Mysore Jasmine 11.Meditation 12.Durga
SANDALWOOD OIL
In 5ml, 10ml,20ml, 100ml,500ml,2kg,5kg,20kg,and 25kg packing.
POWDERS
1. Mysore Sandal Talc: Cooling & Healing, Fragrant freshness, Net. Wt 20gm, 60gm, 300gm and 1kg. 2. Mysore Sandal Baby Powder: Tender loving care for baby& Mummy. Net wt 100-400gms.
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5. 6.
NIRMA OTHERS
20% 11.80%
Detergents Industry
Companies 1. 2. 3. 4. HUL NIRMA P&G OTHERS Market Share 30% 38% 12% 20%
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Diversified product range keeps the company stable. Abundant availability of raw materials. Two sandalwood oil factories in Shimoga and Mysore, which produce 75% of worlds sandalwood oil.
WEAKNESS
Slow growth rate 6.2 growths over 40 years against the product of 80%. High oriented cause due to excessive Labour force. Low turn over resulting in low profits. Defective marketing strategy lacks effective advertising and publicity. Needs updating with times in terms of plant and machinery. R&D is not effective in as much as it has not made any break through in new products. The large proportion of the target area is upper middle class and upper class people, it has very few offer to lower middle class. It has only 8% of the total detergent market share. Due to lack of direct sales, debts with many dealers turning bad. Unskilled labor coupled with excess labor hampers profitability.
OPPORTUNITIES SAMS
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1. The toilet soap and the detergents market is an over expanding industry and a major company likes KS& DL with its manufacturing expertise can call the shots if it reaches peak manufacturing capacity. 2. Good export market should tap foreign market vigorously. 3. At present it has Good raw material sources to enhance production.
THREATS
1. Competition from other global leaders like HUL. 2. Government interference may reduce growth potential. 3. As the company depends on forests for its main raw materials makes the company to find chemical alternative to sandalwood. 4. To protect the financial interest of the company.
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The analysis of financial statement is the process of evaluating relationships between component part of financial statement to obtain a better understanding of the firms position and performance. The financial analysis is one of key figures in the financial statements and the significant relationships that exist between them. The financial and interpretation of financial statement is to judge their meaning and significance. An opinion is formed in respect of the final statements are recognized and divided in to suitable forms. The interpretation involves the explanation of financial facts in a simplified manner. It also involves the comparisons for similar figures on different periods. Interpretation which follow analysis of final statement is an attempt to reach a logical conclusion regarding the position and progress of business on the basis of analysis. The analysis and interpretation of financial data given in the financial statements are necessary to draw conclusions or to form an opinion about certain facts. Inventory turnover ratio which is also called stock turnover ration or stock velocity establishes the relationship between the cost of goods sold during a given period and the average of the costs of opening and closing stocks. As the computational procedure of the ratio differs from trading concerns to manufacturing concerns, from seasonal industries to other industries, it is necessary to deal with it exhaustively and separately as far as possible. Manufacturing concerns acquire raw-materials and use them for the purpose of producing goods and services which are finally sold to customers. As a result, the inventory of a manufacturing company companies of not only the finished goods but also the raw-materials and the work-in-progress. It is therefore useful to break-up the inventory turnover ratio (which is equal to the cost of goods sold divided by the average inventory) into its main constituent Parts so that light may be through on the level of efficiency or otherwise at its various points. The ratios which can be used are presented below: Inventory Turnover Ratio(Raw-material)= Cost or raw-materials Consumed during the year
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Average stock of raw-materials Where, Cost of raw-materials consumed during the year =(Opening stock of raw-materials + Purchase of raw-material made during the period)-(Closing stock of raw-material) Average stock of raw-material=Opening stock of + Closing stock of raw-materials 2 raw-material
TABLE 1 Table showing the changes in stock turnover Ratio of the Karnataka soaps and Detergent Limited. (Rs. In lakhs)
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Ratio
1.4654 1.6740 2.2799 1.6764 1.5689
2.0000 1.6740 1.4654 1.5000 stock turnover ratio 1.0000 1.6764 1.5689
0.5000
0.0000 2007
2008
2009
2010
2011
ANALYSIS
The above table and chart shows that the stock Turnover Ratio for five years of the Karnataka Soap And Detergent Limited. When analysis the above table and chart, it has been absorbed that the stock turnover ratios of the company have been increased
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gradually, that is in the year 2006-07, the stock turnover Ratio of the company was 1.4654 and in the year 2007-08 the Ratio has doubled up drastically to 1.6740 but in the next year that is in 2008-09 the stock Turnover Ratio of the company has increased slightly and ended up at 2.2799. But in the year the 2009-10, the stock Turnover Ratio at has a pointed 1.6764. At the last year of the analysis that is in 201011 the stock Turnover Ratio of the company has slightly decreased and pointed at 1.5689.
INTERPRETATION
In the context of interpretation of Stock Turnover Ration, it may be noted that a high stock Turnover Ratio may also be taken to mean that the concern buys in small lots, and so its goods are turned over or sold out many a times during the year. And the low Stock Turnover Ratio may be taken to mean that the concern buys in bulk, and so, its goods are turned over or sold only a few times during the year. Thus too high and too low inventory turnover ratio may not be good and should be investigated further. A company should have a proper inventory turnover ratio so that it is able to earn a reasonable margin of profit. It is possible to find out whether the inventory comprises of obsolete stock of rawmaterials or fast moving raw-materials. A proper understanding of the pattern of consumption of raw-materials can be ascertaining the following: The average cost of raw-materials consumed daily. The number of days for which the organization can continue its production activities with the help of the raw-materials held by it, and The average number of days for which raw-materials have been kept in the stores department before they are being issued to the production departments.
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The following two parameters are used to get an idea about the above aspects which are being used to analyse the data of the Karnataka Soaps and Detergent Limited.
Formula: Average material Holding (i.e., turnover period)= 365 days Raw material turnover ratio
TABLE 2 Table showing the changes in average Material Holding period of the Karnataka soaps and Detergents Limited. Days in the period
365 365
(Rs. In lakhs)
Year
2007 2008
Ratio
249.08 218.04
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50.00
ANALYSIS
The above table and graph shows that the Average Material Holding period or turnover period for the five years of the Karnataka Soaps and Detergents Limited. When analysis the above table and graph it has been absorbed that he Average Material Holding Period of the company has been reduced consistently that is in the year 2006-07, the Average Material Holding period of the company was 249.08 days, whereas in the year 2007-08, it was 218.04 days. And in the coming year that in 2008-09 it was increased stood at 160.09. But, in the years that are in 2009-10 and last
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year 2010-11 the average Material Holding Period of the company has increased and pointed at 217.73 and 232.65 days respectively.
INTERPRETATION
Materials which is of the year 2008-09 is fast moving as compared to the materials of any other respected years as it takes only 160.09 days to consume the average stock of the years material, whereas the consumption of average inventory of the other years have high Average Material Holding period.
TABLE 3 Table showing the changes in Rupee value of a days consumption of rawmaterials of the Karnataka Soaps and Detergents Limited. (Rs. In lakhs) Cost of raw material consumed
5070.94
Year
2007
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ANALYSIS
The above table and chart shows that the worth of raw-materials per day for the five years of the Karnataka Soaps and Detergents Limited. When analysis the above table and graph it has been absorbed that the worth of raw- materials per day of using materials has been increased gradually. In the year 2006-07 the worth of raw-materials
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per day was Rs.13.89 lakhs. In the next year that is in 2007-08 it has increased to Rs.14.83 lakhs per day. And in the coming year that in 2008-09 and in 2009-10, it have been increased to Rs.21.97 lakhs and Rs.21.24 lakhs gradually respectively. But, in the last year of analysis that in in 2010-11 the worth of raw-material usage per day has increased to Rs.22.41 lakhs.
INTERPRETATION
As there is a high usage of raw-materials per day for production there is a high rate of sales as well as profit in the respected years above which states the improvements in the production process.
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TABLE 4 Table showing the the changes in working capital turnover ratio of the Karnataka Soaps and Detergents Limited. (Rs. In lakhs)
Year Sales
2007 2008 2009 2010 2011 11958.03 14552.84 16939.19 17890.59 18106.81
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ANALYSIS
The above table and chart shows the Working Capital Turnover for the five years of the Karnataka Soaps and Detergents Limited. When analyzing the above table and chart it has been absorded that the Working Capital Turnover ratios of the five years have been varied each year. In the year 2006-07 the Working Capital Turnover ratio was 2.9305. In the next year that is in 2007-08 it has increased to 3.5830. And in the coming years that are in 2008-09 and in 2009-10, it have been decreased to 2.6477 and 2.386 gradually respectively. And, in the last year of analysis that is in 2010-11 the Working Turnover Ratio has increased to 2.8394.
INTERPRETATION
The above analysis indicates that the company is using excess of net working capital as it shows the decrease figures from the 2008-09 to 2009-10. But, in the year 2007-08
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the companys utilization of working capital in generating sales has recovered and it is in a high ratio as it shows the ratio of 3.5830 which is good for the company.
TABLE 5 Table showing changes in Inventory to Current asset ratio of the Karnataka Soaps and Detergents Limited. (Rs. In lakhs)
Year
2007 2008 2009 2010 2011
Inventory
3508.55 2960.12 4074.52 5176.05 5252.34
Current asset
8166.21 8816.89 10913.72 12395.6 12011.4
Percentage
0.4296 0.3357 0.3733 0.4176 0.4373
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ANALYSIS
The above table and chart shows the Inventory to Current asset Ratio for five years of the Karnataka Soaps and Detergents Limited. When analyzing the above table and chart, it has been absorbed that the Inventory to current asset ratio of the company have been varied from year to year, that is in the year 2006-07, the Inventory to current asset ratio of the company was 0.4296 and in the year 2007-08 the ratio has decreased to 0.3357 but in the next year that is in 2008-09 the inventory to current asset ratio of the company has increased at at 0.3733. In the year the 2009-10, the inventory to current asset ratio has increased and stood up to 0.4176. And once again at the year of the analysis that is in 2010-11 the ratio of the company has slightly increased to 0.4373.
INTERPRETATION
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This ratio indicates the inventory components in the current assets. The inventory component in 2007-08 was least which shows fewer funds blocked in current assets in the form of stock and in the next year it has increased.
TABLE 6 Table showing changes in inventory to working capital ratio of the Karnataka Soaps and Detergents Limited. (Rs. In lakhs)
Year
2007 2008 2009 2010 2011
Inventory
3508.55 2960.12 4074.52 5176.05 5252.34
Ratio
0.8598 0.7288 0.6369 0.7634 0.8236
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ANALYSIS
The inventory to working capital ratio has decreased in these periods which indicates the company maintain low working capital during the following years 2006-07 is 0.8598. In 2007-08 it has slight change that it has decreased to 0.7288. in 2008-09 it has decreased to 0.6369, and in 2009-10 the working capital has decreased at a large extent compare to previous year that is 0.7634. And, in the last year that is in 2010-11, the inventory to working capital ratio has increase to the rate of 0.8236 which is good to the company.
INTERPRETATION
It tells that the company is maintaining lack of working capital for the above following years except the first year that is 2006-07. Lower the working capital turnover ratio indicates the inefficiency of the management in the utilization of working capital.
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7. CURRENT RATIO
Current ratio is a more dependable indication of solvency than working capital. It is the difference between current assets and current liabilities. Current ratio indicates the liquidity of the concern that is the capacity of the concernto pay off its current liabilities. In this context, it may be noted that current ratio is a crude measure of the financial liquidity of a concern. This is because all current assets do not have the same degree of liquidity, but they are all treated alike. It indicates the ability of the concern to carry on its operations effectively. This ratio is most commonly used to perform the short-term financial analysis. Also known as the working capital ratio, this ratio matches the current assets of the firm to its current liabilities.
TABLE 7 Table showing changes in the current ratio of the Karnataka Soaps and Detergents Limited. (Rs. In lakhs)
Year
2007 2008 2009 2010 2011
Ratio
1.9987 1.8541 2.4166 2.2075 2.1318
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Current Ratio
2.5000 1.9987 2.0000 1.5000 Current Ratio 1.0000 0.5000 0.0000 2007 2008 2009 2010 2011 1.8541 2.4166 2.2075 2.1318
ANALYSIS The above table shows the current ratios for years of the Karnataka Soaps and Detergents Limited. When analysis the above table and graph it doesnt show the liquidity and doesnt have the ability to pay its current obligations in time as and when they become due. In the Karnataka Soaps and Detergents Limited, it has faced only the situation of having high current liabilities rather than the current assets,but in the last year it could be in the position of liquidity. That is in the year 2006-07 the current ratio of the company is 1.9987 and once again the ratio has reduction in the year 200708, that is at 1.8541. In the next year that is in 2008-09, the current ratio of the company has slightly increased and landed up to 2.4166. And in the years 2009-10 and 2010-11, the current ratios of the company have been increased at the level of 2.2075 and 2.1318 gradually respectively.
INTERPRETATION
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It indicates that the improvements have been taken place in the liquidity position of the Karnataka Soaps and Detergents Limited, till the year 2008-09. Through the companys liquidity position has been increased gradually, the company is not able to pay its liabilities as and when it requires because the liquidity position is not sufficient as far as seen.
TABLE 8 Table showing changes in inventory to sales ratio of the Karnataka Soaps and Detergents Limited. (Rs. In lakhs)
Year
2007 2008 2009 2010 2011
Inventory
3508.55 2960.12 4074.52 5176.05 5252.34
Sales
11958.03 14552.84 16939.19 17890.59 18106.81
Ratio
29.34 20.34 24.05 28.93 29.01
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ANALYSIS
The above table and chart shows the Inventory to sales ratios for five years of the Karnataka Soaps and Detergents Limited. Here it is the increasing of inventory to sales because of increase in inventory. It is better for more inventory, more sales and a high will be the return. In the year 2006-07 the sales ratio was 02934. In the next year that is 2007-08 sales ratio has decreased to 0.2034. In the year 2008-09 the sales ratio has increased at 0.2405 and in 2009-10 the ratio has increased to 0.2893. In the last year that is in 2010-11 the ratio has increased to 0.2903.
INTERPRETATION
In the context of interpretation it can be said that the company is not selling more quantities of its products as the inventories are being increased at a high rate, so that it could minimize its profit and undergone for some loss.
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1. .materials are purchased by placing orders from registered suppiers. Materials are issued from stores department on receipt of authorized requirement. 2. Centralized purchasing is adopted in KS&DL. 3. Physical verification of stock will be conducted periodically.
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4. Stores department will make sure for the continuous flow of materials to production department. Raw materials are issued based on FIFO method (First in First out method). 5. Stores department has adopted ABC analysis and FNS technique for inventory control of raw materials. ABC analysis is adopted for raw materials like oils, fats, perfumery materials, chemical materials, packing materials. FNS technique is adopted especially for chemical raw materials like sodium sulphate, silicon zeal, oil red AB, sulphate, potassium. 6. The company is not a dealer or trader in shares, securities, debentures and other investments. As funds are invested by the Government. 7. Stock of raw materials, chemicals, perfumeries, packing materials, fuels, stores and spares are valued at weighted average cost. 8. Cost of work-in-progress includes materials, labour and overhead incurred in bringing the inventories to their present condition. 9. Finished goods are valued at cost including excise duty for goods lying at factory. Damaged goods will be valued at 50% of the cost of production of finished goods of the current year. 10. Scrap, pitch and sandal wood power are valued at realizable value. 11. Sales are recognized at the point of time of dispatch of finished goods to customes in case of domestic sales and in case of exports sales are reckoned on the date of bill of lading.
SUGGESTIONS
The following suggestions may help the organization to turn around. 1. Even through the company has teamwork, every member of team should be motivated to do the work more efficiently. 2. KS&DL should maintain co-ordination between labour and top
management.
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3. The company should look forward to enhance the effectiveness of research and development activities. 4. The resources of the factory should be utilized for effectiveness of performance mainly oils and fats which are costly and they exceed Rs.2,00,000 for each barrel and varies according to the type of oils required. Even sandalwood power, pitch received in metric tons must be utilized properly because of its scarce supply to the factory. 5. It is better to adopt an open buying system to all competitive suppliers and select the best among them who can supply better quantity of materials at lower price. 6. Stores department should be computerized so that other departments namely production department and materials department will come to know about the availability of the materials in the stores. 7. A record card of each materials showing name of supplier, cost, date of issue, next date of replacement and quantity of order are required to be maintained. 8. The stores department should assess the re-order level regularly. 9. If they follow Just-in-time approach in their organization, there is a possibility that they can reduce their cost. 10. KS&DL should replace their obsolete technologies adopted during production process in order to bring down their cost of production. 11. Time limit should be fixed for every batch so that wasting of time can be reduced. 12. Separate reports should be maintained and examined for the control of scrap and wastes. 13. KS&DL can increase its sales by maintaining its quality by adopted Total Quality Management (TQM) approach. 14. KS&DL should concentrate on improving the current marketing strategies for their products.
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Chapter - 1
15. KS&DL has not shown attention towards advertisements. Therefore, it is suggested for the company to adopt a suitable media to advertise its products. 16. The advertisement regarding different types of products to be published in magazines and newspapers. 17. Wrappers must consist of instructions for usage, ingredients, the effectiveness obtained from its usage. Even samples are required to be distributed among customers inorder to again confidence from the customer.
CONCLUSION
From the analysis made it can be concluded that materials management is very essential for all the manufacturing concerns because materials in one of the important of a product. The cost of production is affected by affected by many elements among them materials also forms to be one of the element. The study has extended to other departments wherein certain drawbacks have been noticed poor marketing services, misunderstanding between workers and
management, idle capacity, delay in passing of bills for payment, manual records of accounting are maintained, delay during dispatch of finished products, manual recording of receipt and issue of raw materials which consumes more time. It is concluded that to do better KS&DL should take necessary steps to overcome these drawbacks. This can be achieved through cost reduction, effective labour time, proper utilization of capital and effective materials management.
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Chapter - 1
ANNEXURE KARNATAKA SOAPS AND DETERGENTS LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2010 AND 2011. PARTICULARS
INCOME Sales Less : Excise Duty Net Sales Other Income 1,810,681,627 160,958,395 1,649,723,232 24,378,057 1,674,101,289 Increase / (-) decrease in stock 1,789,059,796 141,285,059 1,647,774,737 22,288,309 1,670,063,047
-24,703,198 16,493,091
53,286,174 1,723,349,221
EXPENDITURE
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Provision for Taxation Current tax FBT Deferred Tax Dividend Tax PROFIT AFTER TAX Prior Period Income/ Expenditure Tax of earlier years Proposed Dividend Tax of earlier years Profit/ loss brought forward from Previous year Profit /loss carried to Balance Sheet 34,000,000 3,300,000 1,136,000 2,642,627 53,938,942 48,000,000 8,930,375 2,704,083 93,112,149
10,013,655
1,441,082
15,911,050 48,041,547
15,911,050 75,760,017
343,479,146
267,719,129
391,520,693
343,479,146
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Chapter - 1
AMOUNT AS ON 31-3-2011 PARTICULARS Rs SOURCES OF FUND 1. Shareholders fund a. Share Capital b. Reserve & Surplus 2. Loan Funds a. Secured Loans b. Unsecured Loans TOTAL APPLICATION OF FUNDS: 1. Fixed Assets a. Gross Block Less : Depreciation b. Net Block 2. Investment 3. Deferred Tax Assets 4. Current Assets, Loans & Advances a. Inventories b. Sundry Debtors c. Cash & Bank Balance d. Loans & advance e. Investment in 525,234,558 165,859,183 240,314,138 18,932,241 80,000,000 1,201,140,120 336,488,843 243,504,890 92,983,953 100 62,571,241 83,506,504 83,506,504 793,248,197 318,221,000 391,520,693 Rs
AMOUNT AS AN 31-3-2010 Rs Rs
318,221,000 343,479,146
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Chapter - 1
Gratuity trust Less : Current Liabilities & Provisions a. Liabilities b. Provisions Net Current Assets 5. a. Miscellaneous expenditure (to the extent not written off adjusted) b. Profit and loss TOTAL 273,532,995 289,914,262 563,447,217 637,692,903 292,361,773 269,166,068 561,527,841 678,032,752
793,248,197
825,299,050
KARNATAKA SOAPS AND DETERGENT LIMITED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2009 AND 2010 Amount for the year ending 31-03-10 Amount for the year ending 31-0309
PARTICULARS
INCOME Sales Less : Excise Duty Net Sales Other Income 1,789,059,796 141,285,059 1,647,774,737 22,288,309 1,723,349,221 Increase / (-) decrease in stock 53,286,174 1,723,349,221 EXPENDITURE 1,693,919,368 160,215,837 1,533,703,531 60,623,797 1,664,701,541 70,374,213 1,664,701,541
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Chapter - 1
Operating Profit Interest & Finance Charges PROFIT BEFORE TAX Provision for Taxation Current tax FBT Deferred Tax Dividend Tax PROFIT AFTER TAX Prior Period Income/ Expenditure Tax of earlier years Proposed Dividend Tax of earlier years Profit/ loss brought forward from Previous year Profit /loss carried to Balance Sheet
267,719,129 343,479,146
136,826,041 267,719,129
AMOUNT AS AN 31-3-2009
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Chapter - 1
b. Reserve & Surplus c. Exchange reserve 2. Loan Funds a. Secured Loans b. Unsecured Loans TOTAL 80,092,400 83,506,504
343,479,146
267,719,129 1,769,358
APPLICATION OF FUNDS: 1. Fixed Assets a. Gross Block Less : Depreciation b. Net Block 2. Investment 3. Deferred Tax Assets 4. Current Assets, Loans & Advances a. Inventories b. Sundry Debtors c. Cash & Bank Balance d. Loans & advance e. Investment in Gratuity trust Less : Current Liabilities & Provisions a. Liabilities 292,361,773 246,650,794 517,605,839 172,641,760 285,359,727 212,953,267 50,000,000 1,239,560,593 407,452,487 163,529,618 255,132,910 215,257,572 50,000,000 1,091,372,587 327,262,896 241,431,939 85,830,957 100 61,435,241 309,623,620 239,847,860 69,775,760 100 52,504,866
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Chapter - 1
b. Provisions Net Current Assets 5. a. Miscellaneous expenditure (to the extent not written off adjusted) b. Profit and loss
269,166,068
451,607,354 639,765,233
16,374,640
TOTAL
825,299,050
778,420,599
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2008 AND 2009 PARTICULARS INCOME Sales Less : Excise Duty Net Sales Other Income 1,693,919,368 160,215,837 1,533,703,531 60,623,797 1,664,701,541 Increase / (-) decrease in stock 1,455,284,544 168,822,536 1,286,462,008 20,985,305 1,307,447,313 Amount for the year ending 31-03-09 Amount for the year ending 31-03-08
70,374,213 1,664,701,541
-26,466,726 1,280,980,587
Operating Profit
124,361,250
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Chapter - 1
7,276,261 117,084,988
4,508,734 117,935,440
Provision for Taxation Current tax FBT Deferred Tax Dividend Tax PROFIT AFTER TAX Prior Period Income/ Expenditure Tax of earlier years Proposed Dividend 18,500,000 2,128,828 20,358,318 116,814,478 18,000,000 7,098,690 32,146,548 4,596,941 120,386,357
14,078,609
14,687,533
-27,048,785 13,730,643
Tax of earlier years Profit/ loss brought forward from Previous year Profit /loss carried to Balance Sheet
130,893,087
121,755,748
136,826,041
15,070,293
267,719,129
136,826,041
BALANCE SHEET AS ON 2008 AND 2009 AMOUNT AS ON 31-3-2009 PARTICULARS Rs SOURCES OF FUND 1. Shareholders fund a. Share Capital b. Reserve & Surplus c. Exchange Reserve 318,221,000 267,719,129 1,769,358 318,221,000 136,826,041 Rs Rs Rs AMOUNT AS AN 31-3-2008
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Chapter - 1
2. Loan Funds a. Secured Loans b. Unsecured Loans TOTAL 107,204,608 83,506,504 190,711,112 778,420,599 10,365,536 89,995,436 100,360,972 555,408,013
APPLICATION OF FUNDS: 1. Fixed Assets a. Gross Block Less : Depreciation b. Net Block 2. Investment 3. Deferred Tax Assets 4. Current Assets, Loans & Advances a. Inventories b. Sundry Debtors c. Cash & Bank Balance d. Loans & advance e. Investment in Gratuity trust Less : Current Liabilities & Provisions a. Liabilities b. Provisions Net Current Assets 246,650,794 204,956,560 308,752,365 451,607,354 166,770,640 639,765,233 475,523,005 406,166,550 407,452,487 163,529,618 255,132,910 215,257,572 50,000,000 1,091,372,587 296,012,822 146,346,670 334,385,423 104,944,640 881,689,555 309,623,620 239,847,860 69,775,760 100 52,504,866 296,106,154 237,050,829 59,055,235 30,000,100 32,146,548
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Chapter - 1
5. a. Miscellaneous expenditure (to the extent not written off adjusted) b. Profit and loss
16,374,640
28,039,490
TOTAL
825,299,050
5,554,080,113
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2007 AND 2008
PARTICULARS
INCOME Sales Less : Excise Duty Net Sales Other Income 1,455,284,544 168,822,536 1,286,462,008 20,985,305 1,307,447,313 Increase / (-) decrease in stock 1,195,803,294 151,428,824 1,044,374,470 19,004,300 1,063,378,770
-26,466,726 1,280,980,587
47,309,343 1,110,688,113
122,444,174 4,508,734
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Chapter - 1
117,935,440
43,357,146
Provision for Taxation Current tax FBT Deferred Tax Dividend Tax PROFIT AFTER TAX Prior Period Income/ Expenditure Tax of earlier years Proposed Dividend 18,000,000 7,098,690 32,146,548 4,596,941 120,386,357 5,200,000 2,301,452 35,855,694
14,687,533
6,640,866
-27,048,785 13,730,643
22,099,763 20,396,763
Tax of earlier years Profit/ loss brought forward from Previous year Profit /loss carried to Balance Sheet
121,755,748
15,070,293
-5,326,504
136,826,041
15,070,293
BALANCE SHEET AS ON 2007 AND 2008 AMOUNT AS ON 31-3-2008 PARTICULARS Rs SOURCES OF FUND 1. Shareholders fund a. Share Capital b. Reserve & Surplus 318,221,000 136,826,041 318,221,000 15,070,293 Rs AMOUNT AS AN 31-32007 Rs Rs
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c. Exchange Reserve 2. Loan Funds a. Secured Loans b. Unsecured Loans TOTAL 10,365,536 89,995,436
APPLICATION OF FUNDS: 1. Fixed Assets a. Gross Block Less : Depreciation b. Net Block 2. Investment 3. Deferred Tax Assets 4. Current Assets, Loans & Advances a. Inventories b. Sundry Debtors c. Cash & Bank Balance d. Loans & advance e. Investment in Gratuity trust Less : Current Liabilities & Provisions a. Liabilities b. Provisions Net Current Assets 308,752,365 166,770,640 292,624,243 475,523,005 115,943,508 408,567,751 406,166,550 408,053,719 296,012,822 146,346,670 334,385,423 104,944,640 881,689,555 350,588,273 80,873,641 312,345,581 72,546,525 816,621,470 296,106,154 237,050,829 59,055,235 30,000,100 32,146,548 292,406,486 233,475,517 58,930,969 100 -
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Chapter - 1
5. a. Miscellaneous expenditure (to the extent not written off adjusted) b. Profit and loss
28,039,490
12,931,061
TOTAL
5,554,080,113
479,915,849
PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2006 AND 2007
PARTICULARS
INCOME Sales Less : Excise Duty Net Sales Other Income
Amount for the year Amount for the year ending 31-03-07 ending 31-03-06
47,309,343 1,110,688,113
-116,807,421 888,524,086
48,005,540
4,648,394
5,388,868
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Chapter - 1
43,357,146
23,678,619
Provision for Taxation Current tax FBT Deferred Tax Dividend Tax PROFIT AFTER TAX Prior Period Income/ Expenditure Tax of earlier years Proposed Dividend 5,200,000 2,301,452 35,855,694 3,180,000 2,619,805 17,878,814
6,640,866
2,367,245
22,099,763 -
20,246,059
Tax of earlier years Profit/ loss brought forward from Previous year Profit /loss carried to Balance Sheet
20,396,763
-5,326,504
-25,572,563
-5,626,504
PARTICULARS Rs SOURCES OF FUND 1. Shareholders fund a. Share Capital b. Reserve & Surplus c. Exchange Reserve 318,221,000 15,070,293 Rs
AMOUNT AS AN 31-32006 Rs Rs
318,221,000
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Chapter - 1
2. Loan Funds a. Secured Loans b. Unsecured Loans TOTAL 16,629,120 129,995,436 146,624,556 199,911,435 199,911,435 479,915,849 518,132,435
APPLICATION OF FUNDS: 1. Fixed Assets a. Gross Block Less : Depreciation b. Net Block 2. Investment 3. Deferred Tax Assets 4. Current Assets, Loans & Advances a. Inventories b. Sundry Debtors c. Cash & Bank Balance d. Loans & advance e. Investment in Gratuity trust Less : Current Liabilities & Provisions a. Liabilities b. Provisions Net Current Assets 292,624,243 115,943,508 408,567,751 408,053,719 170,706,357 98,239,572 268,945,929 431,279,630 350,588,273 80,873,641 312,345,581 72,546,525 816,621,470 341,214,224 68,837,157 195,715,651 94,458,527 700,225,559 292,406,486 233,475,517 58,930,969 100 302,808,002 242,447,847 60,360,155 100 -
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Chapter - 1
5. a. Miscellaneous expenditure (to the extent not written off adjusted) b. Profit and loss
12,931,061
21,166,046
5,326,504
TOTAL
479,915,849
518,132,435
Webaite
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