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Research methodology simply refers to a methodical study in order to prove a

hypothesis or answer a specific question. Finding a definitive answer is the central goal

of any experimental process.

RESEARCH DESIGN

Research design means a search of facts, answers to question and solution to the

problems. It is a prospective investigation. Research is a systematical logical study of

an issue or problem through scientific method. It is a systematic and objective analysis

and recording of controlled observation that may lead to the development of

generalization, principles, resulting in prediction ultimate control of events.

Research design is the arrangement of conditions for the collection and analysis of data

in manner that aims to combine relevance to the research purpose with relevance to

economy. There are various designs, which are descriptive and helpful for analyticalresearch.

In brief a research design contains

A clear statement of the research problem.

A specification of data required

Procedure and techniques to be adopted for data collection.

A method of processing and analysis of data.

Identifying the statement of the problem.

Collection of the companys specific literature i.e., annual reports for the study

period and the profile of the company.

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Scanning through standard books to understand the theory behind the financial

performance evaluation

Collection of information from various journals to understand the industrial

background of the study.

Sources of data:

There are two sources of data. They are as follows

1. Primary data

2. Secondary data

Primary data

This data was collected through discussion with concerned officers by sitting with them

in free time.

Secondary data

It is reviewing of relevant information, which is already collected and making inferences

based on the information collected

The secondary data used in the study are

1. Annual Report of the company

2. Financial records of the company

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3. By viewing how they place order

Tools and Techniques:

A financial analyst can adopt the following tools for analysis of the financial

statements. These are also termed as methods of Financial Analysis. The tool and

techniques used in the study are following

1. Inventory analysis and interpretation.

2. current ratio and quick ratio analysis.

3. statistical techniques.

1.10 LIMITATIONS OF THE STUDY

1. Time constraint.

2. All the informations required could not be made public by the organization.

3. A thorough discussion with all officials was not possible due to their busy

schedules.

4. The study covered a wide concept and owing to the above constraints, wide

collection and coverage of information was not possible.

5. Financial statements are essentially interim reports:

6. Influence of personal judgment:

CHAPTER-2

ANALYSIS AND INTERPRETATION

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Plan of Analysis

The data collected through primary and secondary sources were processed andpresented in the chapter. Data analysis by charts in respect of stock of raw materials,

sales, inventory control procedures and thus to draw conclusion from the analysis done.

Data Analysis

Evolution of Primary Data: Data collected through discussion with top management and

other departments like, Accounts, stores etc. From the discussion, I came to know that

the Matts Corner has both types of inventories.ie, Physical and value based inventories.

The inventory system here is fully computerized. Purchasing department is supplying

the raw materials required by the production or service unit.

The company is following Determination of stock level inventory management

technique.

It Includes:

1. Maximum Level.

2. Minimum Level.

3. Re-order Level.

4. Danger Level.

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Inventory turn over ratio:

Concept:

This ratio indicates the speed at which the inventory is converted into sales, which

contributed, to the profit of the organization. Higher the ratio better will be the efficiency.

Inventory turn over ratio = cost of sales / Average inventory

Table showing cost of sales, average inventory and inventory turn over ratio.

Table-2.1 Inventory Turn Over Ratio.

Year Cost of Sales Average Inventory Inventory Turn Over Ratio

2005-2006 9689186 543222 17.83651251

2006-2007

7564020

478765

15.79902457

2007-2008 8041837 497557 16.16264468

Source: Annual Report

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Chart-2.1 Inventory Turn Over Ratio

Analysis

Inventory turn over ratio in 2005-06 is 17.83 and it decreased to 15.79 in 2006-07 and in

the year 2007-08 it increased to 16.16.

Interpretation

The inventory turn over ratio is 39.00 times on an average. This is because the cost of

sales increases more proportionately than the average inventory. The higher the ratio

better will be the efficiency; company should try to reduce average inventory and

increase sales.

Inventory Conversion Period

Concept:

This ratio indicates the number of days taken to convert the inventory. This ratio is veryuseful in deciding the organizations efficiency. This ratio helps the organization in

knowing its own efficiency to improve and also to show the financing institutions about

its capacity and its utilization, to obtain finance from the institutions mainly from banks.

Inventory Conversion Period = 365 days/Inventory turn over ratio.

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Table Showing the Inventory Conversion Period.

Table-2.2 Inventory Conversion Period

Year No Of Days Inventory Turn Over Ratio Inventory Conversion Period

2005-2006 365 17.83651251 20.46364163

2006-2007 365 15.79902457 23.10269209

2007-2008 365 16.16264468 22.5866337


Chart-2.2 Inventory Conversion Period

Analysis

Inventory conversion period during the year 2005-06 was 20 days while it increased to

23 days in 2006-07 and it decreased to 22days in 2007-08.

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Interpretation

The inventory conversion period increased because of less inventory turn over ratio in

the year 2006-07, which is favourable to the company.

Raw Material Turn Over Ratio:

Concept:

Raw material turn over ratio is the velocity at which the raw materials are converted in to

goods ready for sales. If the raw material turn over ratio is high then the company is

efficiently converting the raw materials in to finished goods.

[Raw material turn over ratio = Cost of goods sold / Average raw material]

Table showing cost of sales, average raw material and raw material turn over ratio.

Table-2.3 Raw Material Turn Over Ratio

YearCost ofSales Average Raw Material Raw Material Turn Over Ratio

2005-2006 9689186 736127 13.16238366

2006-2007 7564020 885069 8.546248937

2007-2008 8041837 1177717 6.828327179

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Chart-2.3 Raw Material Turn Over Ratio

Analysis:

Raw material turn over ratio in the year 2005-06, 13.16:1 Times, which decreased to

8.54:1 Times in the year 2006-07 and it decreased to 6.82:1 Times in the year 2007-08.

Interpretation

The raw material turn over ratio is high in initial year then it has gradually decreased in

the next year due to gradually increase in average raw material and decrease in the

cost of sales which indicates an unfavorable raw material turn over ratio.

Work In Progress Turn Over Ratio:

Concept

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Work-in-progress turn over ratio indicates the speed at which the work-in-progress is

converted into the finished goods. This helps the organization to know the working

capital requirement of the organization that helps in planning.

Work-in-progress turn over ratio = Cost of goods sold / Average work in progress.

Table-2.4 Work-In-Progress Turn Over Ratio

Year Cost of SalesAverage work -in-progress

Work in progressturn over ratio

2005-2006 9689186 475667 20.36968299

2006-2007 7564020 354355 21.34588195

2007-2008 8041837 343654 23.40097016


Chart-2.4 Work-In-Progress Turn Over Ratio

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Analysis:

Here it is revealed that work in progress turn over ratio in 2005-06 was 20.36 and isincreased to 21.34 in the next year,and again increased to 23.40 in the last year 2007-

08.

Interpretation:

Work in progress turn over ratio has increased gradually in all the years because of the

proportionate change in the cost of goods sold.

Duration Of Work-in-Progress Stage:

Concept:

This indicates the number of days taken to convert the work in progress stock intofinished goods; this helps the organization to know the current requirement of stock of

other items like consumable for the further process in the production.

Duration Of Work-in-Progress Stage = 365 / work in progress turn over ratio

The table showing work in progress turn over ratio and its duration.

Table-2.5 Duration Of Work-in-Progress Stage

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Year No Of Days in a yearWork in progress turn overratio Days

2005-2006 365 20.36968299 17.91879

2006-2007 365 21.34588195 17.09932

2007-2008 365 23.40097016 15.59764


Chart-2.5 Duration Of Work-in-Progress Stage

Analysis:

The duration of converting work in progress to finished in 2005-06 was 17days and in

next year also 17 days were in 2007-08 it decreased to 15 days.

Interpretation:

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There is a gradual decreased in work in progress turn over ratio conversion period

because of increase in work in progress turn over ratio

Inventory to Current Asset Ratio

Inventory to current assets ratio indicates the relationship between the inventory and

current assets; it shows the percentage of inventory to current assets, which helps the

organization in deciding the current asset policy, which also affect the liquidity position

of the organization.

Inventory to current asset ratio = Inventory/ current assets

Table showing current assets, inventory and percentage of inventory to current assets.

Table-2.6 Inventory to Current Asset Ratio.

Year Inventory Current Assets Percentage

2005-2006 2430704 5959565 0.40786601

2006-2007 3099915 8565154 0.361921689

2007-2008 8259400 14520339 0.568815921

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.

Chart-2.6 Inventory to Current Asset Ratio

Analysis

The inventory to current asset ratio in the year 2005-06 was 0.407% and it decreased to

0.361% in the year 2006-07.And in 2007-08 it is 0.568% and is high compare to

previous years.

Interpretation

This ratio indicates the inventory components in the current assets. The inventory

component in 2006-07 was least which shows less funds blocked in current assets inform of stock. But in next year it started increasing which clearly indicates that more

portion of the inventory has blocked in current asset, at present is much higher in these

period.

Inventory to Total Assets (Percentage of total assets):

Concept:

Inventory to total assets indicates the relationship between the inventory and total

assets. The significance of this ratio is it reflects the portion of the inventory as a

percentage of the total assets, which helps the management in deciding the utilization of

remaining resources profitably. Since the inventory will lock up the huge funds and

reduces the profitability of the organization.

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Inventory to total assets = (Inventory / total assets) x 100

Table showing inventory, Total assets and its percentages.

Table-2.7 Inventory To Total Assets

Year Inventory Total Assets Percentage

2005-2006 2430704 12265929 19.81671343

2006-2007 3099915 15840910 19.56904622

2007-

2008 8259400 22257003 37.10921906


Chart-2.7 Inventory To Total Assets

Analysis:

During the year 2005-06the ratio of inventory total assets was 1/5th

and a slight

decrease in the year 2006-07. In 2007-08 it increased to more than 1/3rd

which is a high

increase in total asset.

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Interpretation:

The inventory to total assets ratio indicates that what percentage of inventory is involved

in the total stock. It was least in the year 2006-07.And the high increase in 2007-08 is

because of increase in inventory in the total asset.

Inventory to total capital employed:

Concept

This ratio indicates the relationship between the total capital employed and inventories;

it shows how much capital utilized to invest in the inventories other than the other

assets.

Inventory to capital employed ratio = Inventory / capital employed.

Capital employed = share capital + preference shares + reserves and surplus + long

term debt.

Table-6

Table showing inventory and total capital employed and its ratio.

Table-2.8 Inventory to total capital employed:

Year Inventory Capital Employed(In lacs.) Ratio {In Times}

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2005-2006 2430704 1908333 1.273731576

2006-2007 3099915 2597732 1.193315939

2007-2008 8259400 4930399 1.675199107


Chart-2.8 Inventory to capital Employed Ratio

Analysis

In the year 2005-06 the inventory to capital employed was 1.27 times, the ratio is

decreased in next year and a high increase in the year 2007-08 to 1.67 times.

Interpretation

The increase in capital employed shows that capital utilised for the stocks have

increased. Hence more portion of capital employed is invested in inventory which be

clearly shown in the chart.

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Inventory to working capital Ratio

Concept:

The relationship between inventory to working capital indicates the amount of inventory

included in the working capital. And it also shows the efficiency of inventory

management.

Inventory to working capital ratio = Inventory / working Capital

Table Showing inventory, working capital and its ratio

.

Table-2.9 Inventory To Working Capital Ratio

Year Inventory Working Capital Ratio {In Times}

2005-2006 2430704 583607 4.164967178

2006-2007 3099915 1212814 2.555969011

2007-2008 8259400 7709709 1.071298541


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Chart-2.9 Inventory to working capital

Analysis

The companys inventory to working capital ratio was 4.16 times in the year 2005-06

then it decreased in the next two years respectively.

Interpretation

The inventory to working capital ratio has decreased in these periods which indicate that

working capital is involves less in inventory. So non-liquid assets are less than liquid

assets.

Current Ratio:

Concept:

Current ratio is a more dependable indication of solvency than working capital. It is the

difference between current assets and current liabilities.

Current Ratio = current asset / current liability

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Table showing current ratio of the company.

Table-2.10 Current Ratio

Year Current Assets Current Liabilities Ratio {In Times}

2005-2006 8959565 8375958 1.069676448

2006-2007 8565154 7352340 1.164956191

2007-2008 14520339 6810630 2.132011136


Chart-2.10 Current Ratio

Analysis

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The current ratio of the company has increased from 1.06 to 2.13 in the periods 2005 to

2008.

Interpretation

The current ratio of the company is high in these periods which mean that the current

position of the company is good with respect to current liabilities.

Inventory To Sales Ratio:

Concept

Inventory to Sales indicates the relationship between the inventory and sales. It shows

how much of the inventories should be sold in an year with regarding to total inventory,

it shows companies sales of inventory.

Inventory to sales ratio = (Inventory / Sales) x 100

Table Showing Inventory, Sales and Inventory to sales Ratio

Table-1.11 Inventory To Sales Ratio

Year Inventory Sales Inventory to sales ratio

2005-2006 2430704 5468867 44.44620796

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2006-2007 3099915 5858555 52.91262094

2007-2008 8259400 10774733 76.65526375


Chart-1.11 Inventory To Sales Ratio

Analysis:

In the above table it shows in 2005-06 the inventory to sales ratio was 44.44 % and in

the next two years it is increasing to 52.91% and 76.65% respectively.

Interpretation:

Here it is the increasing of inventory to sales because of increase in inventory.Its is best

for more inventory more sales and high will be the return.

Purchase to Inventory Ratio:

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Concept:

Purchase to inventory shows the relationship between purchase and inventory. The

formula to find purchase to inventory ratio is,

Purchase to inventory ratio = purchase / inventory

Table Showing purchase, Inventory and purchase to inventory ratio.

Table-2.12 Purchase To Inventory Ratio

year purchase Inventory Purchase to inventory ratio

2005-2006 7257446 2430704 2.985738288

2006-2007 7644266 3099915 2.465959873

2007-2008 8757648 8259400 1.060324963


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Chart-2.12 Purchase To Inventory Ratio

Analysis:

It is the purchase to inventory ratio in 2005-06 as 2.98%, which decreased to

2.46% in 2006-07, which again decreased to 1.06% in 2007-08.

Interpretation:

The decrease in the purchase to inventory ratio shows the decrease in profit.

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SUMMARY AND FINDINGS

1. It is noted that Inventory turn over ratio in 2005-06 is 17.83 and it decreased to

14.37 in 2006-07 and in the year 2007-08 it increased to 16.16.

2. Inventory conversion period during the year 2005-06 was 20 days while it

increased to 25 days in 2006-07 and it decreased to 22days in 2007-08.

3. About 3/4th

of the customers are thinks that processing time and processing cost

of the company is reasonable, but some customers hints that processing time is

high.

4. Here the raw material turn over ratio in the year 2005-06, 13.16:1 Times, which

decreased to 1.76:1 Times in the year 2006-07 and it increased to6.82:1 Times

in the year 2007-08.

5. It can be seen that majority feels that there is a friendly approach from the

employee towards the customers, but still considerable number of customers

feels that employee approach is unfriendly.

6. The inventory to current asset ratio in the year 2005-06 was 0.407% and it

decreased to 0.361% in the year 2006-07.And in 2007-08 it is 0.568% and is high

compare to previous years.

7. During the year 2005-06the ratio of inventory total assets was 19.81% and a

slight decrease to19.56% in the year 2006-07. In 2007-08 it increased to 37.10%

which is a high increase in total asset.

8. In the year 2005-06 the inventory to capital employed was 1.27 times, the ratio is

decreased in next year and a high increase in the year 2007-08 to 1.67 times.

9. Working capital turnover ratio indicates that the company does not have an

efficient control over the working capital.

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10.The companys inventory to working capital ratio was 4.16 times in the year

2005-06 then it decreased in the next two years respectively.

11.The current ratio of the company has increased from 1.06 to 2.13 in the periods

2005 to 2008.

12.For more than half of the respondents quality seems to be the factor that

attracted the public to purchase the brand they are experienced.

13.Majority of respondents holds the view that TV is an effective medium for

advertisements.

A sincere effort has been made by the researcher to know the position of

inventory. The inventory position thus known from this helps the manager to take good

decision in the organization. Suggestions have also been given for the betterment of the

company.

SUGGESTIONS

The major finding of the study paves a way for the researcher to provide the

following suggestions to improve and develop inventory management in Matts corner

India pvt ltd.

1. As the inventory turnover rate is low, the inventory is high. The efficiency of

utilizing the inventory can be enhancing by reducing the stock levels to the

required level only.

2. Inventory to total capital employed increased shows that much of the capital is

utilized in inventories. The company can try to maintain a low ratio in this regard.

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3. As the raw material turnover ratio is high it indicates excessive raw material stock

lying idle, this can be reduced by purchasing the raw material when it is required.

4. The material can be purchased from the suppliers as and when required to avoid

unnecessary blockage of funds in idle stock.

5. Proper training to be given to workers for increasing efficiency in production

process.

6. The bin card system should be monitored to ensure the availability of right

quantity materials at the right time.

7. Current ratio of the company is increasing and needs to maintain it that the

liquidity position of the firm can be maintained.

8. In order to improve the brand awareness various activities like sponsorships etc

should be undertaken or should be continued.

9. A frequent audit should be made with the team by the management.

10.Special consideration should be given for employees who work in extra time.

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3.1 CONCLUSION

Finally it can be concluded that on whole the inventory position in matts

corner India pvt ltd is improving over the years. But still it has to concentrate on

the reduction of raw material holding period and inventory conversion period

which is the main cause of blockage of funds. So apart from this the inventory

control techniques and procedures followed are satisfactory. A period of one

month is taken for the study. For the particular study a simple survey was

conducted at an initial stage. After analyzing the data the study has further

shown the significance of media advertisements as a factor influencing upon the

customer buying decisions. The study has brought out that any few improvement

steps on the part of management can bring a lot of benefits to the product in the

coming future, since the target market for the product is quite high.

3.2 ANNEXURES

Over the years, Matts corner realized that people are as different as they

are similar. Different needs, different lives, different needs. With the depth of

knowledge Matts corner, today, is poised to fulfill the hopes and aspirations of

people across the length and breadth of the economy.

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BIBLIOGRAPHY

1. Kothari. C.R. ,Research Methodology Methods and Techniques, Wishwa

Prakashan, 2e,2002

2. Khan. M. Y & Jain. P. K.,Financial Management, Tata McGraw Hill, 4e, 2004.

3. K.Aswathappa & K. Sridhar Bhatt,Production and Operations Management 9 th

Edition, 2007.

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WEBSITES

1. www.mattscorner.net

2. www.mattscorne.in

3. www.google.com

4. www.wikipedia.com

WEEKLY REPORT

First week

I got permission to do a project in Matts Corner Indiapvt ltd. Later I informed the research topic and wentthrough the overview of the company.

Second week

I referred the research methodology books forreference.

Third week

This week I collected secondary data related toinventory analysis. Collected company balance sheetand P&L a/c (for 3 years).

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Fourth week

This week I started analyzing data using financial toolssuch as tables graphs and chart of the analyzed dataand interpreting the data, with the help of tables andchart.

Fifth week

I approached my guide for his opinion and guidance fordrawing conclusion.

Sixth week

I took the soft copy and showed it to the external guide.

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