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© 2019 IJRAR June 2019, Volume 6, Issue 2 www.ijrar.org (E-ISSN 2348-1269, P- ISSN 2349-5138)

IJRAR1AQP068 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 396

A Study on Inventory Management of Ram Agencies

R.SHIJI1, P L.NACHAMMAI2

1. R. Shiji, Assistant professor, Dept of B.Com (AF) & B.Com (BA), PSGR Krishnammal College for

Women.

2. P L.Nachammai, III B.Com A&F, PSGR Krishnammal College for Women.

ABSTRACT

Inventory management refers to the process of ordering, storing, and using a company's inventory. These

include the management of raw materials, components, and finished products, as well as warehousing and

processing such items. This study aimed at investigating the inventory orders and inventory conversion period of

Ram Agencies. The research objectives were to establish if inventory conversion period has an influence on the

performance of manufacturing firms, to study the effect of optimal inventory orders on the performance of these

firms. The ABC analysis and inventory conversion period are calculated to ascertain the optimal inventory orders

and inventory conversion period respectively. This study we are analyzing the optimal inventory orders and

inventory conversion period of financial performance on ram agencies.

KEYWORDS : INVENTORY, STORING, PLACING ORDER.

I. Introduction

Inventory is the stock pile of products a firm is offering for sale in various components making up the

product which includes stock of raw material, goods in process, finished goods in stores and spares. Inventories

are the goods that are stocked and have a resale value in order to gain some profit. In this case the optimal

inventory orders and inventory conversion period is ascertained by using the ABC analysis and Inventory

conversion period formula. By using these formula the financial position can be ascertained, which will very much

useful for the company’s performance.

Objective of the study

To ascertain effect of optimal inventory orders on financial Performance of Ram agencies.

To assess the effect of inventory conversion period on the Performance of Ram agencies

II. Research methodology

In this study the financial position is obtained from the profit and loss Account and balance sheet of ram

agencies for the past five years.

http://www.ijrar.org/

https://www.investopedia.com/articles/investing/020116/how-analyze-companys-inventory.asp



Scope of the study

The study evaluates the financial position of ram agencies for both optimal inventory orders and inventory

conversion period.

Tools used

ABC analysis

Inventory conversion period

INVENTORY CONVERSION PERIOD=Days in year÷Inventory turnover ratio

OR

INVENTORY CONVERSION PERIOD=Inventory÷Cost of goods sold×365

Limitations of the study

This study has taken only the past five years balance sheet and profit and loss account of the firm.

III.REVIEW OF LITERATURE

MANASSEH(2013) tries to evaluate the inventory turnover ratio is a key measure for evaluating the efficient

management is at managing company inventory and generating sales from it. This is calculated by dividing a cost of

goods sold by the average inventory.

PANDEY(2013) has stated about the capital of a business which is utilized as a part of its everyday operations it

ensures whether or not a business organization has adequate cash flow to cater for its short term needs efficient

management of inventory increases the liquidity of a firm thus meeting its short term obligations quickly.

DAVE PIASECKI(2014) presents an inventory model for calculating the optimal order quantity that used the

Economic Order Quantity method. This points out that many companies are not using EOQ model because of poor

results resulted from inaccurate data input. The EOQ is an accounting formula that determines the point at which the

combination of order costs and inventory costs are the least. The EOQ formula elaborates the parameters such as

annual usage in unit, order cost and carrying cost. Finally the several steps to follow in implementing the EOQ

model.




IV.FINDINGS OF THE STUDY

INVENTORY TURNOVER RATIO

In accounting, the inventory turnover is a measure of the number of times inventory is sold or used in a

time period such as a year.

INVENTORY CONVERSION PERIOD=Inventory/Cost of goods sold*365

S.NO YEAR

INVENTORY

CONVERSION

PERIOD

1 2015 0.0001

2 2016 0.000072

3 2017 0.000003358

4 2018 0.000061

5 2019 0.00006




INTERPRETATION

While comparing to other years 2014-2015 is higher in the inventory conversion period. 2015-2016 is less

than the year 2014-2015.The inventory conversion period of 2017-2018 and 2018-2019 is in the same level. And

2016-2017 is lesser than the other years. The inventory conversion period is increasing and it is satisfactory.

Inventory Turnover Ratio

Inventory Turnover Ratio is showing how many times a company has sold and replaced inventory during a

given period.

Inventory Turnover Ratio = Sales / Average inventory.

INVENTORY TURNOVER RATIO

S. No Year SALES AVERAGE

INVENTORY

INVENTORY

TURNOVER

RATIO

1 2014 71047707 3602387 19.72

2 2015 94273490 55113757.5 18.43

3 2016 6086467 5990485.5 1.0160

4 2017 124678315 6037250 20.583

5 2018 109813982 6211766.5 17.678




INTERPRETATION:

The inventory turnover ratio shows a decreasing trend in their net sales from 2014-15 to 2016-17. And

then there is sudden increase in the year 2017-18 and has an slight decrease in the year 2018-19.The inventory is

slightly increasing and the sales of the concern is good and satisfactory.

ABC ANALYSIS

2014-2015

ITEMS DESCRIPTION

STOCK IN

VALUE(IN

RS)

CUMULATIVE

STOCK VALUE

CUMULATIVE STOCK

VALUE PERCENTAGE

ABC

ANALYSIS

BRITANNIA INDUSTRIES

LTD:

BISCUITS AND CAKES 274,586.50 274,586.50 6.30% C

TATA GLOBAL BEVERAGES

LTD:

TATA CHAKRA GOLD TEA 248,547.60

KANAN DEVAN TEA 165,475.60

AVNI TEA 90,214.80

GRAND COFFEE 42,555.90 821,380.30 12.50% B

KALESWARI REFINERY PVT

LTD:

GOLDWINNER SUNFLOWER

OIL 1,037,295.00

ELDIA COCUNUT OIL 190,354.90

DEEPAM LAMP OIL 96,584.50 2,145,614.70 30.20% A

CAVINKARE PVT LTD:

CHIK SHAMPOO 201,547.80

MEERA HERBAL POWDER 215,834.80

KARTHIKA HERBAL POWDER 121,865.70

FAREEVER FAIRNESS CREAM 215,847.60

INDICA HAIR OIL 109,578.60




SPINZ TALC AND DEO 128,654.60 3,138,943.80 22.70% A

SRI RAMAN ENTERPRISES:

GOKUL SANTAL TALC AND

SOAP 217,583.90 3,356,527.70 5.00% C

GENARAL MILLS PVT LTD:

PILLSBERRY AATA 198,547.30 3,555,075.00 4.50% C

ASWINI AND AYURVEDIC

PRODUCTS PVT LTD:

ASWINI HAIR OIL AND

SHAMPOO 89,547.50 3,644,622.50 2.00% C

N. RANGA RAO & SONS:

CYCLE BRAND AGARBATHI

AND POOJA MATERIALS 107,234.80 3,751,857.30 2.40% C

EVERREADY INDUSTRIES

LTD:

EVERREADY BATTERIES AND

TORCH LIGHTS 286,347.50


CFL BULBS 191,258.90 4,378,011.00 14.30% B

TOTAL 626,153.70

TOTAL VALUE OF

INVENTORIES 4,378,011.00

PARTICULARS UNITS PERCENTAGE

A TYPE(IN UNITS) 2 22

B TYPE(IN UNITS) 2 22

C TYPE(IN UNITS) 5 55

TOTAL 9




INTERPRETATION

The above table shows about the ABC analysis of stocks for the financial year 2014. The table shows that A

type units has 22% impact on inventory, b type product has 22% impact on inventory, c type product has 55%

impact on inventory. It shows that c type product has highest impact on inventory in the year 2015.

2015-2016

ITEMS DESCRIPTION

STOCK IN

VALUE(IN

RS)

CUMULATIVE

STOCK VALUE

CUMULATIVE STOCK

VALUE PERCENTAGE

ABC

ANALYSIS


LTD:



LTD:



AVNI TEA 126,755.90

GRAND COFFEE 55,751.20 1,170,656.10 13.40% B


LTD:


OIL 1,489,672.40


DEEPAM LAMP OIL 122,755.70 3,047,836.80 32.10% A

CAVINKARE PVT LTD:






KARTHIKA HERBAL

POWDER 128,675.80

FAREEVER FAIRNESS

CREAM 348,126.40





SOAP 268,574.90 4,615,170.10 4.60% C




PRODUCTS PVT LTD:

ASWINI HAIR OIL AND

SHAMPOO 102,548.90 4,955,217.50 1.80% C





LTD:

EVERREADY BATTERIES

AND TORCH LIGHTS 348,732.00


CFL BULBS 248,647.30 5,849,504.00 13.20% B

TOTAL 769,920.80

TOTAL VALUE OF









TOTAL 9

INTERPRETATION


type units 22% has impact on inventory, b type product has 22% impact on inventory, c type product has 55%


2016-2017

ITEMS DESCRIPTION

STOCK IN

VALUE(IN

RS)

CUMULATIVE

STOCK VALUE

CUMULATIVE STOCK

VALUE PERCENTAGE

ABC

ANALYSIS


LTD:



LTD:



AVNI TEA 115,364.60

GRAND COFFEE 65,248.90 1,146,995.10 13.10% B





LTD:


OIL 1,623,647.80


DEEPAM LAMP OIL 135,648.00 3,163,484.46 33.10% A

CAVINKARE PVT LTD:



KARTHIKA HERBAL

POWDER 115,697.50

FAREEVER FAIRNESS

CREAM 352,147.50





SOAP 274,985.90 4,739,689.40 4.50% C




PRODUCTS PVT LTD:

ASWINI HAIR OIL AND

SHAMPOO 132,458.50 5,140,605.40 2.20% C





LTD:

EVERREADY BATTERIES






CFL BULBS 265,874.50 6,086,467.00 13.30% B

TOTAL 807,206.80

TOTAL VALUE OF






TOTAL 9

INTERPRETATION







2017-2018

ITEMS DESCRIPTION

STOCK IN

VALUE(IN

RS)

CUMULATIVE

STOCK VALUE

CUMULATIVE STOCK

VALUE PERCENTAGE

ABC

ANALYSIS


LTD:



LTD:



AVNI TEA 118,654.50

GRAND COFFEE 72,548.60 1,181,059.70 13.50% B


LTD:


OIL 1,685,487.50


DEEPAM LAMP OIL 130,245.50 3,245,360.20 34.20% A

CAVINKARE PVT LTD:



KARTHIKA HERBAL

POWDER 124,857.50

FAREEVER FAIRNESS

CREAM 335,248.50





SOAP 268,548.90 4,772,078.40 4.50% C







PRODUCTS PVT LTD:

ASWINI HAIR OIL AND

SHAMPOO 128,548.50 5,159,591.70 2.10% C





LTD:

EVERREADY BATTERIES



CFL BULBS 215,358.70 6,028,033.00 12.30% B

TOTAL 738,782.60

TOTAL VALUE OF






TOTAL 9




INTERPRETATION




2018-2019

ITEMS DESCRIPTION

STOCK IN

VALUE(IN

RS)

CUMULATIVE

STOCK VALUE

CUMULATIVE STOCK

VALUE PERCENTAGE

ABC

ANALYSIS


LTD:



LTD:



AVNI TEA 120,567.50

GRAND COFFEE 69,548.70 1,193,916.50 13.10% B


LTD:


OIL 1,796,584.70


DEEPAM LAMP OIL 136,598.70 3,396,954.20 34.40% A

CAVINKARE PVT LTD:






KARTHIKA HERBAL

POWDER 136,547.20

FAREEVER FAIRNESS

CREAM 367,589.40





SOAP 295,647.50 5,071,219.50 4.60% C




PRODUCTS PVT LTD:

ASWINI HAIR OIL AND

SHAMPOO 145,286.70 5,532,186.00 2.30% C





LTD:

EVERREADY BATTERIES



CFL BULBS 236,549.80 6,395,500.00 11.30% B

TOTAL 723,766.50

TOTAL VALUE OF









TOTAL 9

INTERPRETATION




CONCLUSION

The study concluded that the inventory control and maintenance is a vital issue experienced by almost all

sectors of the economy and this issue becomes very important topic because all organizations handle inventory

every day. The ABC Analysis is the quantity of orders that minimize the total cost of containment.


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