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 analytical research.

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.

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

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

Plan of Analysis The data collected through primary and secondary sources were processed and presented 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.

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

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 very useful 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.

Table Showing the Inventory Conversion Period. Table-2.2 Inventory Conversion Period

Year

No Of Days

Inventory Turn Over Ratio

Inventory Conversion Period

20052006

365

17.83651251

20.46364163

20062007

365

15.79902457

23.10269209

20072008

365

16.16264468

22.5866337

Source: Annual Report

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.

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

Year

Cost Sales

of Average Raw Material Raw Material Turn Over Ratio

20052006

9689186

736127

13.16238366

20062007

7564020

885069

8.546248937

20072008

8041837

1177717

6.828327179

Source: Annual Report

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

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 Sales

Average work progress

-in- Work in progress turn over ratio

2005-2006

9689186

475667

20.36968299

2006-2007

7564020

354355

21.34588195

2007-2008

8041837

343654

23.40097016

Source: Annual Report

Chart-2.4 Work-In-Progress Turn Over Ratio

Analysis: Here it is revealed that work in progress turn over ratio in 2005-06 was 20.36 and is increased to 21.34 in the next year,and again increased to 23.40 in the last year 200708. 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 into finished 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

Year

No Of Days in a year

Work in progress turn over ratio

Days

20052006

365

20.36968299

17.91879

20062007

365

21.34588195

17.09932

20072008

365

23.40097016

15.59764

Source: Annual Report

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:

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

20052006

2430704

5959565

0.40786601

20062007

3099915

8565154

0.361921689

20072008

8259400

14520339

0.568815921

Source: Annual Report

. 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 in form 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.

Inventory to total assets = (Inventory / total assets) x 100 Table showing inventory, Total assets and its percentages.

Table2.7

Inventory To Total Assets

Year

Inventory

Total Assets

Percentage

20052006

2430704

12265929

19.81671343

20062007

3099915

15840910

19.56904622

20072008

8259400

22257003

37.10921906

Source: Annual Report 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.

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}

20052006

2430704

1908333

1.273731576

20062007

3099915

2597732

1.193315939

20072008

8259400

4930399

1.675199107

Source: Annual Report

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.

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}

20052006

2430704

583607

4.164967178

20062007

3099915

1212814

2.555969011

20072008

8259400

7709709

1.071298541

Source: Annual Report

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

Table showing current ratio of the company. Table-2.10 Current Ratio

Year

Current Assets

Current Liabilities

Ratio {In Times}

20052006

8959565

8375958

1.069676448

20062007

8565154

7352340

1.164956191

20072008

14520339

6810630

2.132011136

Source: Annual Report

Chart-2.10 Current Ratio

Analysis

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

20052006

2430704

5468867

44.44620796

20062007

3099915

5858555

52.91262094

20072008

8259400

10774733

76.65526375

Source: Annual Report

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:

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

Source: Annual Report

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.

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.

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.

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.

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.

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.

WEBSITES

1. www.mattscorner.net 2. www.mattscorne.in 3. www.google.com 4. www.wikipedia.com

WEEKLY REPORT

I got permission to do a project in Matts Corner India pvt ltd. Later I informed the research topic and went through the overview of the company. First week I referred the research methodology books for reference. Second week

This week I collected secondary data related to inventory analysis. Collected company balance sheet and P&L a/c (for 3 years). Third week

Fourth week

This week I started analyzing data using financial tools such as tables graphs and chart of the analyzed data and interpreting the data, with the help of tables and chart. I approached my guide for his opinion and guidance for drawing conclusion.

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

Sixth week