CHAPTER IV V.docx IMPORTANT

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DATA ANALYSIS AND INTERPRETATIONThe investment on raw materials over a period of 5 years from 2008 to 2012 is

presented in the following table.

1. Investment on Raw Materials

YEARINVESTMENT ON RAW

MATERIAL (IN CRORES)

2007-08 112796.87

2008-09 134785.23

2009-10 123578.23

2010-11 178520.10

2011-12 198740.10


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INTERPRETATION:

1. From the above table it can be understood that the inventory of KesoramCement was recorded at 112796.87 during the year 2007 08 and it is

increased to 198740.10 during the year 201112.

2. It shows that there is an increase in the inventory to the extent of 85943.23.3. The average inventory of Kesoram Cement was recorded at Rs.149684.1.4. The highest investment in inventory was recorded in the years 2011-12.

112796.87

134785.23

123578.23

178520.1

198740.1

0

50000

100000

150000

200000

250000

2007-08 2008-09 2009-10 2010-11 2011-12

investmentonraw

material

Axis Title

Investment on Raw Material (in crores)


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2. TREND ANALYSIS:

Trend analysis technique is applied to know the growth rate in investment of

raw material of Kesoram Cement over the review period which is shown in the

following table.

YearRaw Material (in

Lacks)Trend %

2007-08 112796.87 17.65%

2008-09 124785.20 19.52%

2009-10 127894.10 20.01%

2010-11 135784.20 21.25%

2011-12 137852.20 21.57%

TOTAL 639112.6 100%


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INTERPRETATION:

1. The investment on investment has increased in the year 200708. And the lastyear investment has increased continuously. The percentage in 200708 was

17.65% as compared to years 200506 to 200405.

2. The trends in inventories show that inventory have been more in the year200708 and then it has shown a downward trend and again it increased to

some extent.

3. The investment in inventories has shown increasing trend is initial years andthen it raised to 51.57% in the year 2011-12.

17.65%

19.52% 20.01%21.25% 21.57%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2007-08 2008-09 2009-10 2010-11 2011-12

trend

date

TREND


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3. Inventory Turnover Ratio:

This ratio indicates the number of times the stock has been turned over during

the period & evaluates the efficiency with which a firm is able to manage its

inventory. This ration is calculated by applying the following formula.

Cost of goods sold

Inventor turnover ratio =

Average inventory

Inventory turnover ratio:

YearCost of goods

soldAvg. Inventory Ratio

2007-08 344032.10 47203.03 7.29%

2008-09 312471.50 67854.05 4.61%

2009-10 345784.20 55125.50 6.27%

2010-11 302478.10 41785.20 7.24%

2011-12 389520.01 37891.30 10.28%


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INTERPRETATION:

From the above table it can be observed that

1. Inventory turnover ratio is 7.29% during 2007 2008 and it graduallydecreased to 4.61% during 20082009.

2. In the year 200910 it is clear that the ratio is less i.e., 6.27% the stock Is notturned into sales quickly.

3. In the year 2010-11, the ratio is increased to 7.24%4. As compared to all the years the ratio is very high in 201112 i.e., 10.28.

7.29%

4.61%

6.27%

7.24%

10.28%

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2007-08 2008-09 2009-10 2010-11 2011-12

RATIO

YEAR

INVENTORY TURNOVER RATIO


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4. Inventory conversion period:

It may also be of interest to see average time taken for clearing the stocks. This

can be possible by calculating inventory conversion period. This period is calculated

by dividing the number of the days by inventory turns over.

This formula may be as:

Days in a year (360 days)

Inventory conversion period = _____________________

Inventory turnover ratio

Inventory conversion period: (in cores)

YearCost of goods

sold

Avg.

inventoryRatio ICP (Days)

2007-08 344032.10 47203.03 7.29 49

2008-09 312471.50 67854.05 4.61 78

2009-10 345784.20 55125.50 6.27 57

2010-11 302478.10 41785.20 7.24 49

2011-12 389520.01 37891.30 10.28 35


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INTERPRETATION:

From the above table it can be identified the following observations:

1) The inventory conversion period was 49 days during the year 200708 but it

increased to 78 during 200809

2) The lowest inventory conversion period was recorded at 35 days in the year

201112 and the highest inventory conversion was recorded at 78 days in the

year 2008-09 which indicates that the stock has been very quickly converted

into sales which mean the company is managing the inventory efficiently.

49.39

78.17

57.39

49.73

35.02

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

2007-08 2008-09 2009-10 2010-11 2011-12

DAYS

YEAR

ICP (Days)


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5. Percentage of Inventory over current assets:

In order to know the percentage of inventory over current assets the

Ratio of inventory to current assets is calculated and which is presented in the

following table.

Inventory

Inventory over current assets ratio = ______________ X 100

Current assets

Percentage of Inventory Over current assets:

Year Inventory Current Assets Ratio (%)

2007-08 112796.87 120627.29 94

2008-09 145872.50 122485.23 119

2009-10 158740.20 145874.60 109

2010-11 187410.20 168740.52 111

2011-12 168741.50 175985.20 96


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INTERPRETATION:

1) From the above table it can be understand that the 94% of inventory over

current assets ratio was showing a increasing trend for next years 2008-09 and

2010-11.

2) The lowest inventory over current assets ratio was recorded at 94% during the

year 200708 and the highest inventory over current assets ratio we recorded

at 119% during 200809.

94

119

109 111

96

0

20

40

60

80

100

120

140

2007- 2008 2008-09 2009-10 2010-11 2011-12

RATIO

YEAR

RATIO


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6. Percent of Inventory Over total current assets & fixed assets:

Inventory / Current + Fixed assets

Year InventoryCurrent Assets +

Fixed assetsRatio (%)

2007- 2008 112796.87 278451.20 0.41%

2008-09 145872.50 341587.20 0.43%

2009-10 158740.20 421874.20 0.38%

2010-11 187410.20 527841.50 0.36%

2011-12 168741.50 578521.50 0.29%


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INTERPRETATION:

1) During the year 2007-08 the ratio was 0.41% on it inclined to 0.43% in the

year 200809.

2) From the year 200910, it is showing decreasing trend.

3) The lowest inventory over total assets ratio was recorded at 0.29% during the

year 2011 12 and the highest inventory ratio was recorded at 0.43% during

the year 200809.

0.41%0.43%

0.38%0.36%

0.29%

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.35%

0.40%

0.45%

0.50%

2007- 2008 2008-09 2009-10 2010-11 2011-12

RATIO

YEAR

RATIO


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7. Percentage of Inventory over current liabilities:

In order to know the percentage of inventory over current liabilities the ration

of inventory to current liabilities is calculated and which is presented in the

following table.

Inventory

Inventory over current liabilities ratio = ______________ X 100

Current liabilities

Percentage of Inventory Over current liabilities:

Year InventoryCurrent

liabilities Ratio (%)

2007- 08 112796.87 67852 166.24%

2008-09 145872.50 69784 209.03%

2009-10 158740.20 71574 221.78%

2010-11 187410.20 78250 239.50%

2011-12 168741.50 81540 206.94%


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INTERPRETATION:

1. From the above table it can be understand that the 164.24% of inventory overcurrent liabilities ratio was showing a inclining trend for the next four years.

2. During the year 2008 09, the ratio was it gradually increased to 209.03 andthere is a net increase to the extent of 206.94.

3. The lowest inventory over total amounts ratio was recorded at 166.24 duringthe year 2007-08.

4. The highest inventory to current liabilities ratio was recorded at 239.50 duringthe year 201011.

166.24%

209.03%221.78%

239.50%

206.94%

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

2007- 08 2008-09 2009-10 2010-11 2011-12

RATIO

YEAR

RATIO


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8. Current Ratio:

In order to know the current ratio the percentage of current assets to current

liabilities is calculated and which is presented in the following table.

Current assets

Current Ratio = _____________________

Current liabilities

Calculation of Current Ratios:

Year Current assetsCurrent

liabilitiesRatio (%)

2007- 08 120627.29 67852 1.78%

2008-09 122485.23 69784 1.76%

2009-10 145874.60 71574 2.04%

2010-11 168740.52 78250 2.16%

2011-12 175985.20 81540 2.16%

1.78% 1.76%

2.04%2.16% 2.16%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

2007- 08 2008-09 2009-10 2010-11 2011-12

RATIO

DATE

RATIO


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Interpretation:

1) From the above table it can be interpreted that the 1.78% of current assetsover current liabilities ratio i.e., current ratio was showing a increasing

trend from year 200809.2) In the year 2007 08, the ratio was 1.78% and has increased to 2.16% in

the year 201112.

3) The lowest current ratio was recorded at 200809 which is 1.76% and thehighest current ratio was recorded at 2.16% during the years 2010 11 and

2011-12.

4) The average current ratio was recorded at 9.90% during the review period.


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9. Quick Ratio:

The quick ratio is the relationship between quick to current liabilities quick

assets is more rigorous test of liability position of a firm it is computed by applying the

following formula.

Quick ratio = Quick assets / Current Liabilities

Where Quick assets = Current AssetsInventory

Year InventoryCurrent

liabilitiesRatio (%)

2007-08 112796.87 67852 1.66

2008-09 145872.50 69784 2.09

2009-10 158740.20 71574 2.22

2010-11 187410.20 78250 2.40

2011-12 168741.50 81540 2.07


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INTERPRETATION:

1. From the above table it can be understand as that the % of quick assets tocurrent liabilities i.e., the quick ratio was 1.06% in 2007 08 and from that

year it is showing increasing trend.

2. The highest quick ratio was recorded at 2.22% during the year 2009 10 andthe lowest quick ratio was recorded at 1.66% during the year 200708.

1.66

2.092.22

2.4

2.07

0

0.5

1

1.5

2

2.5

3

2007-08 2008-09 2009-10 2010-11 2011-12

RATIO

YEAR

Series1


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FINDINGS:

1) Over all the inventory of Kesoram Cements is up to the mark.2) The production of clinker and cement during 2002 2003 was 7,47,436

and 7,77,092 respectively which is higher as compared to 2007 20089

which is 10,47,210 and 11,99,445.

3) Investment on raw material is 198740.10 lakhs which very high ascompared to 200708 which is only 112796.87 lakhs.

4) The inventory turn over ratio shows that the stock has been converted intosales is 10.28 times.

5) In the year 200708 the stock was cleared within 49 days whereas it took35 days in the year 20112012 which took more days for clearing stock.

6) The current ratio is 1.78 in the year 2007-08. It increased to 2.16 in the year2011-12.

7) Quick ratio is 1.66 in the year 2007-08. The ratio increased to 2.07 in theyear 2011-12.


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CONCLUSIONS

1. In purchase department for want of any item it should go through severalprocesses. This may include receiving indents, floating enquiries, preparation

of order processing form, preparation of purchase order and order follow up

inform the supplier. Most of the time was spent in accounts payable.

2. In this type of process, it requires more number of employees and suppliershould also wait for until the accounts are matched.

3. This process takes an input, adds value to it and provides an output to aninternal or external customer.


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SUGGESTIONS:

1) Though the production is higher is the year 2003 04 and the sales werevery high i.e., as per inventory conversion period it took 272 days. This

shows that there is demand for cement and the funds unnecessarily tied up.

So, proper demand forecasting should be done and according to that it may

be manufactured.

2) The investment on raw material should be made as per the requirement.Unnecessary investment may block up the funds.

3) Neither too high nor too low inventory turnover ratios may reduce profitand liquidity position of the industry. So, proper balance should be made to

increase profits and to ensure liquidity.

4) The raw material should be acquired from the right source at right qualityand at right cost.

5) The process that was being used by Kesoram Cements with the purchasingdepartment should undergo changes, so that, it seeks enhance the celerity of

the delivery of a product without compromising its quality by improving

the utilization of materials, labour and equipment.

6) To reduce the work, the purchasing department may enter the purchasing orderinto database and did not send a copy to any one. When the merchandise

arrived, the receiving clerk would enter the database and determine whether the

order agreed with the electronic purchase order.

7) If it did, payment was authorized to be made at the appropriate time. If it didntmatch, the order would be returned until if it is agreed by the Kesoram

Cement.If it institutes Invoice less purchasing where the supplier did not

need to send an invoice to be paid.

8) This generally simplifies the process for all concerned. As a result, it wouldable to reduce the work of its accounts payable department.


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BIBLIOGRAPHY

1. FINANCIAL MANAGEMENT ByIM Pandey

Vikas Publishing Houses pvt ltd

2006, 9th Edition.

2. FINANCIAL MANAGEMENT By Prasanna Chandra

Tata McGraw Hill Publishing company ltd

2005, 5th Edition.

3. TOTAL QUALITY MANAGEMENT ByPN Mukherjee

PrenticeHallindia.

2006,5th Edition.

4. FINANCIALACCOUNTING&ANALYSIS S.P.Jain&K.L.Narang

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