Inventory management

INTRODUCTION

Concept of Financial Management

Management which is concern mainly with rising funds in the most economic and
suitable manner, Using these funds as profitably as possible, planning future operations
and controlling current performances and future developments through financial
accounting budgeting, Statistics and other means

Financial Management guides investment where opportunity is the greatest producing

relatively uniform yardsticks for judging most of firms operations and projects and is
continually concerned with achieving an adequate rate of return on investment as this is
necessary for survival and attracting new capital. It is an excellent tool by means of
which and pay off capacities.

Financial Management provides the best guide for future resources allocation by a firm.
It implies the designing and implementation of certain plan. Plans aim at effective
utilization of funds.

Financial Management applies to an organization irrespective of its size, nature of

ownership and control whether it is a manufacturing or service organization. It implies
any activity of an organization which has financial implications.

Meaning & Definition of Financial Management

The term ‘Financial Management’ consists of two words – ‘Financial’ and

‘Management’ . In order to fully grasp the meaning of this term, one needs to understand
the meaning two words. “Financial” denotes the process of identifying, obtaining and
allocating sources of money. “Management” is the process of planning, organising,
coordinating and controlling various resources for the accomplishment of organisational
goal.

Therefore, Financial management is that branch of business management process which

deals with management of financial resources of the enterprise. Financial management is
the skilful and proper management of financial resources.

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Solomon defines “financial management is concerned with the efficient use of an
important economic resource, namely, Capital funds”.

Weston and Brigham define “Financial Management is an area of financial decision

making, harmonizing individual motives & enterprise goals”.

Howard and Upton define “Financial Management is the application of the planning
and control functions of the finance functions”.

Functions of Financial Management

1. Estimation of capital requirements: A finance manager has to make estimation

with regards to capital requirements of the company. This will depend upon
expected costs and profits and future programmes and policies of a concern.
Estimations have to be made in an adequate manner which increases earning
capacity of enterprise.
2. Determination of capital composition :Once the estimation have been made,
the capital structure have to be decided. This involves short- term and long- term
debt equity analysis. This will depend upon the proportion of equity capital a
company is possessing and additional funds which have to be raised from outside
parties.
3. Choice of sources of funds: For additional funds to be procured, a company has
many choices like-
a. Issue of shares and debentures
b. Loans to be taken from banks and financial institutions
c. Public deposits to be drawn like in form of bonds.

Choice of factor will depend on relative merits and demerits of each source and
period of financing.

4. Investment of funds: The finance manager has to decide to allocate funds into

profitable ventures so that there is safety on investment and regular returns is
possible.
5. Disposal of surplus: The net profits decision have to be made by the finance
manager. This can be done in two ways:
a. Dividend declaration - It includes identifying the rate of dividends and
other benefits like bonus.
b. Retained profits - The volume has to be decided which will depend upon
expansion, innovational, diversification plans of the company.
6. Management of cash: Finance manager has to make decisions with regards to
cash management. Cash is required for many purposes like payment of wages and
salaries, payment of electricity and water bills, payment to creditors, meeting
current liabilities, maintenance of enough stock, purchase of raw materials, etc.
7. Financial controls: The finance manager has not only to plan, procure and
utilize the funds but he also has to exercise control over finances. This can be

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done through many techniques like ratio analysis, financial forecasting, cost and
profit control, etc.

Objectives of Financial Management

The financial management is generally concerned with procurement, allocation and

control of financial resources of a concern. The objectives can be-

1. To ensure regular and adequate supply of funds to the concern.

2. To ensure adequate returns to the shareholders which will depend upon the
earning capacity, market price of the share, expectations of the shareholders.
3. To ensure optimum funds utilization. Once the funds are procured, they should be
utilized in maximum possible way at least cost.
4. To ensure safety on investment, ie funds should be invested in safe ventures so
that adequate rate of return can be achieved.
5. To plan a sound capital structure-There should be sound and fair composition of
capital so that a balance is maintained between debt and equity capital.

Investment Decision
Definition: The Investment Decision relates to the decision made by the investors or the
top level management with respect to the amount of funds to be deployed in the
investment opportunities.

Simply, selecting the type of assets in which the funds will be invested by the firm is
termed as the investment decision. These assets fall into two categories:

1. Long Term Assets

2. Short-Term Assets

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The decision of investing funds in the long term assets is known as Capital
Budgeting. Thus, Capital Budgeting is the process of selecting the asset or an investment
proposal that will yield returns over a long period.

The first step involved in Capital Budgeting is to select the asset, whether existing or
new on the basis of benefits that will be derived from it in the future.

The next step is to analyze the proposal’s uncertainty and risk involved in it. Since the
benefits are to be accrued in the future, the uncertainty is high with respect to its returns.

Finally, the minimum rate of return is to be set against which the performance of the
long-term project can be evaluated.

The investment made in the current assets or short term assets is termed as Working
Capital Management. The working capital management deals with the management of
current assets that are highly liquid in nature.

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The investment decision in short-term assets is crucial for an organization as a short term
survival is necessary for the long-term success. Through working capital management, a
firm tries to maintain a trade-off between the profitability and the liquidity.

In case a firm has an inadequate working capital i.e. less funds invested in the short term
assets, then the firm may not be able to pay off its current liabilities and may result in
bankruptcy. Or in case the firm has more current assets than required, it can have an
adverse effect on the profitability of the firm

Thus, a firm must have an optimum working capital that is necessary for the smooth
functioning of its day to day operations.

Financing Decision
Definition: The Financing Decision is yet another crucial decision made by the
financial manager relating to the financing-mix of an organization. It is concerned with
the borrowing and allocation of funds required for the investment decisions.

The financing decision involves two sources from where the funds can be raised: using a
company’s own money, such as share capital, retained earnings or borrowing funds from
the outside in the form debenture, loan, bond, etc. The objective of financial decision is
to maintain an optimum capital structure, i.e. a proper mix of debt and equity, to
ensure the trade-off between the risk and return to the shareholders.

Dividend Decision
Definition: The Dividend Decision is one of the crucial decisions made by the finance
manager relating to the payouts to the shareholders. The payout is the proportion
of Earning Per Share given to the shareholders in the form of dividends.

The companies can pay either dividend to the shareholders or retain the earnings within
the firm. The amount to be disbursed depends on the preference of the shareholders and
the investment opportunities prevailing within the firm.

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The optimal dividend decision is when the wealth of shareholders increases with the
increase in the value of shares of the company. Therefore, the finance department must
consider all the decisions viz. Investment, Financing and Dividend while computing the
payouts.

If attractive investment opportunities exist within the firm, then the shareholders must be
convinced to forego their share of dividend and reinvest in the firm for better future
returns. At the same time, the management must ensure that the value of the stock does
not get adversely affected due to less or no dividends paid out to the shareholders.

The objective of the financial management is the Maximization of Shareholder’s

Wealth. Therefore, the finance manager must ensure a win-win situation for both the
shareholders and the company.

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The Debt-
Equity Ratio helps in determining the effectiveness of the financing decision made by
the company. While taking the financial decisions, the finance manager has to take the
following points into consideration:

 The Risk involved in raising the funds. The risk is higher in the case of debt as
compared to the equity.
 The Cost involved in raising the funds. The manager chose the source with minimum
cost.
 The Level of Control, the shareholders, want in the organization also determines the
composition of capital structure. They usually prefer the borrowed funds since it does
not dilute the ownership.
 The Cash Flow from the operations of the business also determines the source from
where the funds shall be raised. High cash flow enables to borrow debt as interest can
be easily paid.
 The Floatation Cost such as broker’s commission, underwriters fee, involved in
raising the securities also determines the source of fund. Thus, securities with
minimum cost must be chosen.
Thus, a company should make a judicious decision regarding from where, when, how the
funds shall be raised, since, more use of equity will result in the dilution of ownership
and whereas, higher debt results in higher risk, as fixed cost in the form of interest is to
be paid on the borrowed funds.

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Working capital

Decisions relating to working capital and short-term financing are referred to as working
capital management. These involve managing the relationship between a firm's short-
term assets and its short-term liabilities. The goal of working capital management is to
ensure that the firm is able to continue its operations and that it has sufficient cash flow
to satisfy both maturing short-term debt and upcoming operational expenses.
A managerial accounting strategy focusing on maintaining efficient levels of both
components of working capital, current assets, and current liabilities, in respect to each
other. Working capital management ensures a company has sufficient cash flow in order
to meet its short-term debt obligations and operating expenses.
Management of working capital Working capital (abbreviated WC) is a financial metric
which represents operating liquidity available to a business, organisation or other entity,
including governmental entities. Along with fixed assets such as plant and equipment,
working capital is considered a part of operating capital. Gross working capital is equal
to current assets. Working capital is calculated as current assets minus current liabilities.
[1]
 If current assets are less than current liabilities, an entity has a working capital
deficiency, also called a working capital deficit.
A company can be endowed with assets and profitability but may fall short of liquidity if
its assets cannot be readily converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable and
payable, and cash.

Working capital management

Guided by the above criteria, management will use a combination of policies and
techniques for the management of working capital. The policies aim at managing
the current assets (generally cash and cash equivalents, inventories and debtors) and the
short-term financing, such that cash flows and returns are acceptable.

 Cash management. Identify the cash balance which allows for the business to meet
day to day expenses, but reduces cash holding costs.
 Inventory management. Identify the level of inventory which allows for
uninterrupted production but reduces the investment in raw materials—and
minimizes reordering costs—and hence increases cash flow. Besides this, the lead
times in production should be lowered to reduce Work in Process (WIP) and
similarly, the Finished Goods should be kept on as low level as possible to avoid
overproduction—see Supply chain management; Just In Time (JIT); Economic order
quantity (EOQ); Economic quantity
 Debtors management. Identify the appropriate credit policy, i.e. credit terms which
will attract customers, such that any impact on cash flows and the cash conversion

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cycle will be offset by increased revenue and hence Return on Capital (or vice
versa); see Discounts and allowances.
 Short-term financing. Identify the appropriate source of financing, given the cash
conversion cycle: the inventory is ideally financed by credit granted by the supplier;
however, it may be necessary to utilize a bank loan (or overdraft), or to "convert
debtors to cash" through "factoring".
In managing financial growth of company, Cash, receivables and inventory jointly form
working capital of a firm. It is imperative for experts to keep good balance of these
factors.

Management of Cash

Cash is considered as vital asset and its proper management support company
development and financial strength. An effective cash management program designed by
companies can help to realise this growth and strength. Cash is vital element of any
company needed to acquire supply resources, equipment and other assets used in
generating the products and services. Marketable securities also come under near cash,
serve as back pool of liquidity which provides quick cash when needed.

Cash management is the stewardship or proper use of an entity's cash resources. It assists
to keep an organization functioning by making the best use of cash or liquid resources of
the organization. Cash management is associated with management of cash in such a
way as to realise the generally accepted objectives of the firm, maximum productivity
with maximum liquidity. It is the management's capability to identify cash problems
before they ascend, to solve them when they arise and having made solution available to
delegate someone carry them out.

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The notion of cash management is not new and it has attained a greater significance in
the modern world of business due to change that took place in business operations and
ever increasing difficulties and the cost of borrowing" (Howard, 1953 ). It is the most
liquid current assets, cash is the common denominator to which all current assets can be
reduced because the other current assets i.e. receivables and inventory get eventually
converted into cash (Khan, 1983 ). This emphasises the importance of cash management.
The term cash management denotes to the management of cash resource in such a way
that generally accepted business objectives could be accomplished. In this perspective,
the objectives of a firm can be combined as bringing about consistency between
maximum possible effectiveness and liquidity of a firm. Cash management may be
defined as the ability of a management to identify the problems related with cash which
may come across in future course of action, finding appropriate solution to curb such
problems if they arise, and lastly delegating these solutions to the competent authority
for carrying them out. Cash management maintains sufficient quantity of cash in such a
way that the quantity denotes the lowest adequate cash figure to meet business
obligations. Cash management involves managing cash flows (into and out of the firm),
within the firm and the cash balances held by a concern at a point of time.
In financial literature, Cash management denotes to wide area of finance involving the
collection, handling, and usage of cash. It involves assessing market liquidity, cash flow,
and investments. The notion of cash management is not novel and it has gained more
significance in contemporary business world due to change that took place in the conduct
of business and ever increasing difficulties and the cost of borrowing.

Objective of Cash Management

1. To make Payment According to Payment Schedule: Firm needs cash to meet its
routine expenses including wages, salary, taxes etc.
2. To minimise Cash Balance: The second objective of cash management is to
reduce cash balance. Excessive amount of cash balance helps in quicker
payments, but excessive cash may remain unused & reduces profitability of
business. Contrarily, when cash available with firm is less, firm is unable to pay
its liabilities in time. Therefore optimum level of cash should be maintained
(Excel Books India, 2008).

An effective management is considered to be important for the following reasons:

1. Cash management guarantees that the firm has sufficient cash during peak times
for purchase and for other purposes.
2. Cash management supports to meet obligatory cash out flows when they fall due.
3. Cash management helps in planning capital expenditure projects.
4. Cash management helps to organize for outside financing at favourable terms and
conditions, if necessary.
5. Cash management helps to allow the firm to take advantage of discount, special
purchases and business opportunities.
6. Cash management helps to invest surplus cash for short or long-term periods to
keep the idle funds fully employed.

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General Principles of Cash Management

Harry Gross has recommended certain general principles of cash management.

1. Determinable Variations of Cash Needs: A reasonable amount of funds, in the

form of cash is required to be kept aside to overcome the period expected as the
period of cash shortage. This period may either be short and temporary or last for
a longer duration of time. Normal and regular payment of cash leads to small
cutbacks in the cash balance at periodic intervals. Making this payment to
different workers on different days of a week can balance these reductions.
Another practice for balancing the level of cash is to schedule cash disbursements
to creditors during the period when accounts receivables collected amounts to a
large sum but without putting the helpfulness at stake.
2. Contingency Cash Requirement: There may arise certain cases, which fall beyond
the forecast of the management. These establish unexpected calamities, which are
too difficult to be provided in the normal course of the business. Such
contingencies always demand for special cash requirements that was not assessed
and provided for in the cash budget. Denials of wholesale product, huge amount
of bad debts, strikes, and lockouts are some of these contingencies. Only a prior
experience and investigation of other similar companies prove supportive as a
customary practice. A useful procedure is to shield the business from such
calamities like bad-debt losses, fire by way of insurance coverage.
3. Availability of External Cash: This factor also has immense significance in the
cash management which refer to the availability of funds from outside sources.

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There resources help in providing credit facility to the firm, which materialized
the firm's objectives of holding minimum cash balance. As such if a firm
succeeds in obtaining sufficient funds from external sources such as banks or
private financers, shareholders, government agencies, the need to maintain cash
reserves lessens.
4. Maximizing Cash Receipts: Nearly, all financial managers have objective to
make the best possible use of cash receipts. Cash receipts if tackled carefully
results in minimizing cash requirements of a concern. For this purpose, the
comparative cost of granting cash discount to customer and the policy of
charging interest expense for borrowing must be appraised continually to
determine the ineffectiveness of either of the alternative or both of them during
that particular period for maximizing cash receipts. Some techniques proved
helpful in this context are mentioned below:

i. Concentration Banking: In this system, a company launches banking

centres for collection of cash in different areas. Thus, the company
instructs its customers of neighbouring areas to send their payments to
those centres. The collection amount is then deposited with the local bank
by these centres as early as possible. Whereby, the collected funds are
transferred to the company's central bank accounts operated by the head
office.
ii. Local Box System: Under this system, a company rents out the local post
offices boxes of different cities and the customers are asked to forward
their remittances to it. These remittances are picked by the approved lock
bank from these boxes to be transferred to the company's central bank
operated by the head office.
iii. Reviewing Credit Procedures: This type of technique assists to determine
the impact of slow payers and bad debtors on cash. The accounts of slow
paying customers should be revised to determine the volume of cash tied
up. Besides this, evaluation of credit policy must also be conducted for
introducing essential modifications. As a matter of fact, too strict a credit
policy involves rejections of sales. Thus, restricting the cash inflow. On
the other hand, too lenient, a credit policy would increase the number of
slow payments and bad debts again reducing the cash inflows.
iv. Minimizing Credit Period: Shortening the terms allowed to the customers
would definitely quicken the cash inflow side-by-side reviewing the
discount offered would prevent the customers from using the credit for
financing their own operations gainfully.
v. Others: There is a need to introduce various procedures for managing
large to very large remittances or foreign remittances such as, persona
pick up of large sum of cash using airmail, special delivery and similar
techniques to accelerate such collections.
5. Minimizing Cash Disbursements: The intention to minimize cash payments is the
ultimate benefit derived from maximizing cash receipts. Cash disbursement can
be brought under control by stopping deceitful practices, serving time draft to
creditors of large sum, making staggered payments to creditors and for payrolls.
6. Maximizing Cash Utilization: It is emphasized by financial experts that suitable
and optimum utilization leads to maximizing cash receipts and minimizing cash

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payments. At times, a concern finds itself with funds in excess of its requirement,
which lay idle without bringing any return to it. At the same time, the concern
finds it imprudent to dispose it, as the concern shall soon need it. In such
conditions, company must invest these funds in some interest bearing securities.
Gitman suggested some fundamental procedures, which helps in managing cash
if employed by the cash management. These include:

1. Pay accounts payables as late as possible without damaging the firm's

credit rating, but take advantage of the favourable cash discount, if any.
2. Turnover, the inventories as quickly as possible, avoiding stock outs that
might result in shutting down the productions line or loss of sales.
3. Collect accounts receivables as early as possible without losing future loss
sales because of high-pressure collections techniques. Cash discounts, if
they are economically justifiable, may be used to accomplish this
objective (Gitman, 1979.).

Function of Cash Management

It is well acknowledged in financial reports and various studies that cash management is
concerned with minimizing fruitless cash balances, investing temporarily excess cash
usefully and to make the best possible arrangements for meeting planned and unexpected
demands on the firm's cash (Hunt, 1966). Cash Management must have objective to
reduce the required level of cash but minimize the risk of being unable to discharge
claims against the company as they arise. There are five cash management functions:

1. Cash Planning: Experts emphases the wise planning of funds that can lead to
huge success. For any management decision, planning is the primary
requirement. According to theorists, "Planning is basically an intellectual process,
a mental pre-disposition to do things in an orderly way, to think before acting and
to act in the light of facts rather than of a guess." Cash planning is a practise,
which comprises of planning for and controlling of cash. It is a management
process of predicting the future need of cash, its available resources and various
uses for a specified period. Cash planning deals at length with formulation of
necessary cash policies and procedures in order to perform business process
constantly. A good cash planning aims at providing cash, not only for regular but
also for irregular and abnormal requirements.
2. Managing Cash Flows: Second function of cash management is to properly
manage cash flows. It means to manage efficiently the flow of cash coming
inside the business i.e. cash inflow and cash moving out of the business i.e. cash
outflow. These two can be effectively managed when a firm succeeds in
increasing the rate of cash inflow together with minimizing the cash outflow. As
observed accelerating collections, avoiding excessive inventories, improving
control over payments contribute to better management of cash. Whereby, a
business can protect cash and thereof would require lesser cash balance for its
operations.
3. Controlling the Cash Flows: It has been observed that prediction is not an exact
knowledge because it is based on certain conventions. Therefore, cash planning

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will unavoidably be at variance with the results actually obtained. Due to this,
control becomes an unavoidable function of cash management. Moreover, cash
controlling becomes indispensable as it increases the availability of usable cash
from within the enterprise. It is understandable that greater the speed of cash flow
cycle, greater would be the number of times a firm can convert its goods and
services into cash and so lesser will be the cash requirement to finance the
desired volume of business during that period. Additionally, every business is in
possession of some concealed cash, which if traced out significantly decreases
the cash requirement of the enterprise.
4. Optimizing the Cash Level: It is important that a financial manager must focus to
maintain sound liquidity position i.e. cash level. All his efforts relating to
planning, managing and controlling cash should be diverted towards maintaining
an optimum level of cash. The prime need of maintaining optimum level of cash
is to meet all requirements and to settle the obligations well in time. Optimization
of cash level may be related to establishing equilibrium between risk and the
related profit expected to be earned by the company.
5. Investing Idle Cash: Idle cash or surplus cash is described as the extra cash
inflows over cash outflows, which do not have any specific operations or any
other purpose to solve currently. Usually, a firm is required to hold cash for
meeting working needs facing contingencies and to maintain as well as develop
friendliness of bankers.
In banking area, cash management is a marketing term for some services related
to cash flow offered mainly to huge business customers. It may be used to
describe all bank accounts (such as checking accounts) provided to businesses of
a certain size, but it is more often used to describe specific services such as cash
concentration, zero balance accounting, and automated clearing house facilities.
Sometimes, private banking customers are given cash management services.
Financial instruments involved in cash management include money market funds,
treasury bills, and certificates of deposit.

Benefits of Cash Management System

In the period of technology progression, the Cash Management System provides

following Benefits to its customers: 

1. Funds availability as per need on day zero, day one, day two, day three etc. i.e.
Corporate can plan their cash flows.
2. Bank interest saved as instruments are collected faster.
3. Affordable and competitive rates.
4. Single point enquiry for all queries.
5. Pooling of funds at desired locations.

To summarize, Cash Management denotes to the concentration, collection and

disbursement of cash. The major role for managers is to maintain the flow of cash. Cash
Management include a series of activities aimed at competently handling the inflow and
outflow of cash. This mainly involves diverting cash from where it is to where it is
needed. It is established that cash management is the optimization of cash flows,
balances and short-term investments.

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Management of Receivable

Accounts receivable typically comprise more than 25 percent of a firm's assets. The term
receivables is described as debt owed to the firm by the customers resulting from the sale
of goods or services in the ordinary course of business. There are the funds blocked due
to credit sales. Receivables management denotes to the decision a business makes
regarding to the overall credit, collection policies and the evaluation of individual credit
applicants. Receivables Management is also known as trade credit management. Robert
N. Anthony, explained it as "Accounts receivables are amounts owed to the business
enterprise, usually by its customers. Sometimes it is broken down into trade accounts
receivables; the former refers to amounts owed by customers, and the latter refers to
amounts owed by employees and others".
Receivables are forms of investment in any enterprise manufacturing and selling goods
on credit basis, large sums of funds are tied up in trade debtors. When company sells its
products, services on credit, and it does not receive cash for it immediately, but would be
collected in near future, it is termed as receivables. However, no receivables are created
when a firm conducts cash sales as payments are received immediately. A firm conducts
credit sales to shield its sales from the rivals and to entice the potential clienteles to buy
its products at favourable terms. Generally, the credit sales are made on open account
which means that no formal reactions of debt obligations are received from the buyers.
This enables business transactions and reduces the paperwork essential in connection
with credit sales.
Accounts Receivables Management denotes to make decisions relating to the investment
in the current assets as vital part of operating process, the objective being maximization
of return on investment in receivables. It can be established that accounts receivables
management involves maintenance of receivables of optimal level, the degree of credit
sales to be made, and the debtors' collection.
Receivables are useful for clients as it increases their resources. It is preferred
particularly by those customers, who find it expensive and burdensome to borrow from
other resources. Thus, not only the present customers but also the Potential creditors are
attracted to buy the firm's product at terms and conditions favourable to them.
Receivables has vial function in quickening distributions. As a middleman would act fast
enough in mobilizing his quota of goods from the productions place for distribution
without any disturbance of immediate cash payment. As, he can pay the full amount after
affecting his sales. Likewise, the customers would panic for purchasing their needful
even if they are not in a position to pay cash immediately. It is for these receivables are
regarded as a connection for the movement of goods from production to distributions
among the ultimate consumer.

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Maintenance of receivable

Objectives of receivables management: The objective of Receivables Management is

to promote sales and profits until that point is reached where the return on investment in
further funding receivables is less than the cost of funds raised to finance that additional
credit i.e. cost of capita.
Management of Accounts Receivables is quite expensive. The following are the main
costs related with accounts receivables management: 
Cost of Management of Accounts Receivables

Advantages of accounts receivable management:

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Accounts Receivables Management has numerous benefits. These include:

1. Increased Sales: Offering goods or services on credit enhances sales, by holding

old customers and attraction potential customers.
2. Increased Market Share: When the firm is able to maintain old customers and
attract new customers automatically market share will be bigger to the extent new
sales.
3. Increase in profits: Increase sales, leads to increase in profits, because it need to
produce more products with a given fixed cost and sales of products with a given
sales network in both cost per unit comes down and the profit will be better.

Inventory Management

Inventory management is primarily about specifying the size and placement of

stocked goods. Inventory management is required at different locations within a facility
or within multiple locations of a supply network to protect the regular and planned
course of production against the random disturbance of running out of materials or
goods. The scope of inventory management also concerns the fine lines between
replenishment lead time, carrying costs of inventory, asset management, inventory
forecasting, inventory valuation, inventory visibility, future inventory price forecasting,
physical inventory, available physical space for inventory, quality management,
replenishment, returns and defective goods and demand forecasting. Balancing these
competing requirements leads to optimal inventory levels, which is an on-going process
as the business needs shift and react to the wider environment.

Other definitions of inventory management from across the web:

It involves a retailer seeking to acquire and maintain a proper merchandise
assortment while ordering, shipping, handling, and related costs are kept in check.

The Systems and processes that identify inventory requirements, set targets,
provide replenishment techniques and report actual and projected inventory status.

It handles all functions related to the tracking and management of material. This
would include the monitoring of material moved into and out of stockroom locations and
the reconciling of the inventory balances. Also may include ABC analysis, lot tracking,
cycle counting support etc.

It is the Management of the inventories, with the primary objective of

determining/controlling stock levels within the physical distribution function to balance

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the need for product availability against the need for minimizing stock holding and
handling costs. See inventory proportionality.

OBJECTIVES OF INVENTORY MANAGEMENT

The main objectives of inventory management are operational and financial. The
operational objectives mean that the materials and spares should be available in
sufficient quantity so that work is not disrupted for want of inventory. The financial
objective mean that investments in inventories should not remain idle and minimum
working capital should be locked in it. The followings are the objectives of inventory
management:

1. To ensure continuous supply of materials spares and finished goods so that production
should not suffer at any time and the customer’s demand should also be met.

2. To avoid both overstocking and under-stocking of inventory.

3. To maintain investment in inventories at the optimum level as required by the

operational and sales activities.

4. To keep materials cost under control so that they contribute in reducing cost of
production and overall cost.

5. To eliminate duplication in ordering or replenishing stocks. This is possible with the

help of centralising purchases.

6. To minimise losses through deterioration, pilferage, wastages and damages.

7. To design proper organisation for inventory management. Clear cut accountability

should be fixed at various levels of the organisation.

8. To ensure perpetual inventory control so that materials shown in stock ledgers should
be actually lying in the stores.

9. To ensure right quality goods at reasonable prices. Suitable quality standards will
ensure proper quality stocks. The price analysis, the cost analysis and value analysis will
ensure payment of proper prices.

10. To facilitate furnishing of data for short term and long term planning and control of
inventory.

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NEED FOR THE STUDY

At this competitive age, Materials Management can contribute in each of the
above field by getting right material at right time and at right price. For a typical
manufacturing organization, purchasing is responsible for spending over half of every
rupee the organization receives as income from sales. Every Rupee saved in purchasing
is equivalent to new Rupee of profit. Materials Managers need to minimize inventories to
improve the bottom line. At the same time, they need to maintain production levels. In
every stage of production inventories are stored to take care of any eventually in market
conditions. As inventory is idle resource for any organization and around 20% to 25%
money is spent towards Inventory carrying cost, hence it is required to do detailed
inventory management and control the inventory of major inputs to the process.

IMPORTANCE OF INVENTORY
 Classifications of stores and spares as per the guidelines to maintain optimum
inventory level.
 Common inventory with grinding units.
 Identification of obsolete and surplus spares from slow and non-moving category
for disposal.
 Fixation of ideal and min/max levels for general consumables.
 Proper preservation of insurance and essential items.
 Two bin system for fast moving consumables.

OBJECTIVES OF THE STUDY

 To study the minimum, maximum and average consumption level of each raw
material.
 To calculate the financial ratios related to inventory.
 To study how best the firm utilizing the availability of Inventory.
 To study the inventory techniques followed by the company.
 To analyze the inventory management efficiency of “ULTRATECH CEMENT
LTD”.
 To examine the profitability position of “ULTRATECH CEMENT LTD”.

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 To know the relationship between the inventory management and profitability
efficiency of “ULTRATECH CEMENT LTD”.
SCOPE OF THE STUDY

It discuss the process of managing inventory, as well as the financial ratios are
much helpful to calculate the inventory levels of the company, such as inventory ratios,
turnover ratios and holding period ratios are useful to know the effective inventory levels
maintained by the company.

The study is primarily combines the activities of all functional areas of

management like production, finance, costing, purchase, quality control , marketing and
human resource department

RESEARCH METHODOLOGY

SOURCE OF DATA:

Collection of facts and figures about a phenomenon is one of the most important
steps for any study whether it is related to business, management, economics, and natural
science. Collection of data refers to systematic recording of results either by counting or
by enumeration. Research methodology is a way to systematically solve the problem.
Therefore data in the study is collected in two ways namely primary data and secondary
data.

PRIMARY DATA:

Primary data is the data collected for the first time. The data that is collected from
primary sources of information is known as primary data. It is also known as first hand
information. In this the individual conducts his own research and collects data.

 Observation
 Interacting with finance executive and production executive
 Interacting with stores, manufacturing department managers
 Discussions with the Materials Manager, other Officers of Accounts and Finance
Department and Officers of Purchase Department.

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SECONDARY DATA:

Secondary data refers to the data, which is originally collected and published by
authorities other than who require it. Such data is already available in some government
publications, research study, journals, newspapers and magazines. It is observed that
presently in large number of investigation secondary data are generally used because of
the availability of large amount of reliable published data from the above said resources.

 Financial Statements of UTCL.

 Referring of financial books and sites.

 www.slideshare.com.

 www.ultratechcement.com.

LIMITATIONS OF THE STUDY

 The study of stores spares consists of only 8 major items details which are
provided by the company.
 The information used primarily for historical annual reports available to the
public and same does not indicate the current situation of the firm.
 Since financial matters are sensitive in nature the same could not be acquired
easily.
 The study is based on the limited no. of days only.
 However the company has maintained better limitations with regards to finance
and materials management and proved that it is maintaining international
Benchmarking in inventory index factor.
 The primary data was collected by the method of interviewing responsible
officers of different departments in the company. But due to heavy workload they
were unable to spend most of the time with us.
 The secondary data was collected from the previous reports which were not much
more effective.

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INDUSTRY PROFILE

CEMENT INDUSTRY IN INDIA:

The cement industry is very prominent in India. Basically, the industry comes under the
large scale industry segment. Globally, India is the second largest cement producing
country. Here in this article, we intend to craft a list of top 10 largest cement companies
in India.

The cement industry in our country has a pivotal role in the overall growth of the
economy. Apart from contributing GDP, the industry provides employment opportunity
for the millions of job seekers.

The real estate, construction, and infrastructure sectors are booming in India.
Additionally, the government initiatives of the development of 98 smart cities are
expected to provide a major boost to the sector.

Basically, the housing sector is the biggest demand driver of cement. The sector accounts
for about 67% of the total consumption in India. The other major consumers of cement
include infrastructure at 13%, commercial construction at 11% and industrial
construction at 9%.

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As far as the production is concerned, the industry is growing at 5 to 6 %. However, the
industry is highly dominated by few large companies. Basically, the top 10 cement
companies account for the more than 50% of the total production.

Ultratech cement limited

Introduction:

Ultra Tech Cement Limited is the largest cement company in India and among the
leading producers of cement globally. It s also the country’s largest manufacturer of
white cement and ready-mix concrete. The production of cement in India has increased
at a compound annual growth rate (CAGR) of 9.7% to reach 272 million tones (MT) in
the period 2006-2013. It is expected to touch 407 MT by 2020.

India’s potential in infrastructure is vast. It has the capacity to become the

world’s third largest construction market by 2025, adding 11.5 million homes a year to
become a US$ 1 trillion a year market, according to a study by Global Construction
perspectives and oxford Economics. This opens up a tremendous window of opportunity
for the country’s cement industry.

Notwithstanding its current position one of the leaders in cement production,

India’s riches in the sector remain somewhat untapped. “Lafarge’s India business has
been very successful and the country is among the top 10 markets globally for Lafarge.
But going forward, we should rank higher because of the potential of the Indian market,”
says Mr Martin Krieger, CEO of the Indian branch of the world’s largest cement
manufacturer, Lafarge.

MarketSize:

The Indian cement sector is expected witness positive growth in the coming years, with
the demand set to increase at a CAGR of more than 8 percent in the period FY 2013-14
to FY 2015-16,according to the latest report titled ‘Indian Cement Industry Outlook
2017’ by market research consulting firm RNCOS. The report further observed that
India’s southern reason is creating the maximum demand for cement, which is expected
to increase more in future.

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The cement and gypsum products sector has attracted foreign direct investment(FDI)
worth US$ 2,656.29 million in the period April 2000-August 2013, according to data
published by the Department of Industrial Policy and Promotion(DIPP).

Investments

 Prism Cement Ltd has become the first Indian company to get the quality council
of India’s (QCI) certification for its ready –mix concrete (RMC) plant in kochi,
Kerala. The company received the certification from institute for certification and
quality mark (ICQM), a leading Italian certification body authorized to oversee
QCI compliance.
 Ultra tech cement, an Aditya Birla Group Company, has acquired the 4.8 million
ton per annum (MTPA) Gujarat unit of Jaypee cement crop for RS 3,800 crore
(US$ 595.61 million).
 ACC Ltd plans to invest RS 3,000 crore (US$470.22 million) to expand its
capacity by nearly 4 MT a year in three eastern region states, over the next three
years.
 Reliance cement Co Pvt Ltd will set up a 3 MTPA grinding unit at an estimated
cost of RS 600 crore (US$ 94.04 million). The unit is likely to come up at
Raghunathpur in Purulia, West Bengal.
 Reliance cement Co, a special purpose vehicle (SPV) of Reliance infrastructure
Ltd, is commissioning its first 5 MTPA plant in Madhya Pradesh. The project has
been implemented at a cost of approximately RS 3,000 crore (US$ 470.22
million).
 Zurari Cement plans to set up a cement grinding unit at Auj (Aherwadi)
shingadgaon villages in Solapur, Maharashtra. The new unit will have a
production capacity of 1 MTPA and is expected to be operational by the second
quarter of 2015.

Government Initiatives:

Giving impetus to the market, the Indian government plans to roll out
public-private partnership(PPP) projects worth Rs 1 trillion (US$ 15.67 billion) over the
next six months.

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Also, the steering group appointed by Dr Manmohansingh, prime minister of India, to
accelerate infrastructure investments, has set deadlines for the awarding of projects such
as Mumbai rail corridor and Navi Mumbai Airport, among others.

Road Ahead:

The globally-competitive cement industry in India continues to witness positive trends

such as cost control, continuous technology upgradation and increased construction
activities.

Furthermore, major cement manufacturers in India are progressively using other

alternatives such as bio energy as fuel for their kilns. This is not only helping to bring
down production costs of cement companies, but is also proving effective in reducing
emission.

With the ever-increasing industrial activities, real estate, construction and

infrastructure, in addition to the various Special Economic Zones(SEZs) being developed
across the country, there is a demand for cement.

It is estimated that the country requires about US$ 1 trillion in the period FY 2012-2013
to FY 2016-17 to fund infrastructure such as ports, airports and highways to boost
growth, which promises a good scope for the cement industry.

Modern cement:
Modern hydraulic cements began to be developed from the start of the Industrial
Revolution (Modern around 1800), driven by three main needs:
Hydraulic renders for finishing brick buildings in wet climates
Hydraulic mortars for masonry construction of harbor works etc, in contact with sea
water.
Development of strong concretes.
In Britain particularly, good quality building stone became ever more expensive during a
period of rapid growth, and it became a common practice to construct prestige buildings
from the new industrial bricks, and to finish them with a stucco to imitate stone.
Hydraulic limes were favored for this, but the need for a fast set time encouraged the
development of new cements. Most famous was Parker's "Roman cement." This was
developed by James Parker in the 1780s, and finally in patented 1796. It was, in fact,
nothing like any material used by the Romans, but was “Natural cement" made by

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burning sept aria - nodules that are found in certain clay deposits, and that contain both
clay minerals and calcium carbonate. The burnt nodules were ground to a fine powder.
This product, made into a mortar with sand, set in 5–15 minutes. The success of "Roman
Cement" led other manufacturers to develop rival products by burning artificial mixtures
of clay and chalk.John Seaton made an important contribution to the development of
cements when he was planning the construction of the third Eddy stone Lighthouse
(1755-9) in the English Channel. He needed a hydraulic mortar that would set and
develop some strength in the twelve hour period between successive high tides. He
performed an exhaustive market research on the available hydraulic limes, visiting their
production sites, and noted that the "hydraulicity" of the lime was directly related to the
clay content of the limestone from which it was made. Seaton was a civil engineer by
profession, and took the idea no further. Apparently unaware of Seaton’s work, the same
principle was identified by Louis Vicat in the first decade of the nineteenth century.
Vicat went on to devise a method of combining chalk and clay into an intimate mixture,
and, burning this, produced an "artificial cement" in 1817. James Frost,orking in Britain,
produced what he called "British cement" in a similar manner around the same time, but
did not obtain a patent until 1822. In 1824, JosephAspin patented a similar material,
which he called Portland cement, because the render made from it was in color similar to
the prestigious Portland stone.
All the above products could not compete with lime/pozzolan concretes because of fast-
setting (giving insufficient time for placement) and low early strengths (requiring a delay
of many weeks before formwork could be removed). Hydraulic limes, "natural" cements
and "artificial" cements all rely upon their belite content for strength development. Belite
develops strength slowly. Because they were burned at temperatures below 1250 °C,
they contained no alite, which is responsible for early strength in modern cements. The
first cement to consistently contain alite was made by Joseph Aspdin's son William in the
early 1840s.
This was what we call today "modern" Portland cement. Because of the air of mystery
with which William Aspdin surrounded his product, others (e.g. Vicat and I C Johnson)
have claimed precedence in this invention, but recent analysis of both his concrete and
raw cement have shown that William Aspdin's product made at Northfleet, Kent was a
true alite-based cement. However, Aspdin's methods were "rule-of-thumb": Vicat is
responsible for establishing the chemical basis of these cements, and Johnson established
the importance of sintering the mix in the kiln.
William Aspdin's innovation was counter-intuitive for manufacturers of "artificial
cements", because they required more lime in the mix (a problem for his father), because
they required a much higher kiln temperature (and therefore more fuel) and because the
resulting clinker was very hard and rapidly wore down the millstones which were the
only available grinding technology of the time. Manufacturing costs were therefore
considerably.
Higher, but the product set reasonably slowly and developed strength quickly, thus
opening up a market for use in concrete. The use of concrete in construction grew rapidly

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from 1850 onwards, and was soon the dominant use for cements. Thus Portland cement
began its predominant role. it is made from water and sand

Types of modern cement

Portland cement
Cement is made by heating limestone (calcium carbonate), with small quantities of other
materials (such as clay) to 1450°C in a kiln, in a process known as calcination, whereby
a molecule of carbon dioxide is liberated from the calcium carbonate to form calcium
oxide, or lime, which is then blended with the other materials that have been included in
the mix . The resulting hard substance, called 'clinker', is then ground with a small
amount of gypsum into a powder to make 'Ordinary Portland Cement', the most
commonly used type of cement (often referred to as OPC).
Portland cement is a basic ingredient of concrete, mortar and most non-specialitygrout.
The most common use for Portland cement is in the production of concrete. Concrete is a
composite material consisting of aggregate (gravel and sand), cement, and water. As a
construction material, concrete can be cast in almost any shape desired, and once
hardened, can become a structural (load bearing) element. Portland cement may be gray
or white.

Portland cement blends

These are often available as inter-ground mixtures from cement manufacturers, but
similar formulations are often also mixed from the ground components at the concrete
mixing plant.

Portland blastfurnace cement

contains up to 70% ground granulated blast furnace slag, with the rest Portland
clinker and a little gypsum. All compositions produce high ultimate strength, but as slag
content is increased, early strength is reduced, while sulfate resistance increases and heat
evolution diminishes. Used as an economic alternative to Portland sulfate-resisting and
low-heat cements.

Portland flyash cement

Contains up to 30% fly ash. The fly ash is pozzolanic, so that ultimate strength is
maintained. Because fly ash addition allows a lower concrete water content, early
strength can also be maintained. Where good quality cheap fly ash is available, this can
be an economic alternative to ordinary Portland cement.

Portland pozzolan cement includes fly ash cement, since fly ash is a pozzolan, but
also includes cements made from other natural or artificial pozzolans. In countries where
volcanic ashes are available (e.g. Italy, Chile, Mexico, the Philippines) these cements are
often the most common form in use.

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Portland silica fume cement.

Addition of silica fume can yield exceptionally high strengths, and cements
containing 5-20% silica fume are occasionally produced. However, silica fume is more
usually added to Portland cement at the concrete mixer.

Masonry cements
Modern cement are used for preparing bricklaying mortars and stuccos, and must
not be used in concrete. They are usually complex proprietary formulations containing
Portland clinker and a number of other ingredients that may include limestone, hydrated
lime, air entertainers, retarders, water proofers and coloring agents. They are formulated
to yield workable mortars that allow rapid and consistent masonry work. Subtle
variations of Masonry cement in the US are Plastic Cements and Stucco Cements. These
are designed to produce controlled bond with masonry blocks.

Expansive cements contain, in addition to Portland clinker, expansive clinkers

(usually sulfoaluminate clinkers), and are designed to offset the effects of drying
shrinkage that is normally encountered with hydraulic cements. This allows large floor
slabs (up to 60 m square) to be prepared without contraction joints.

White blended cementsmay be made using white clinker and white supplementary
materials such as high-purity metakaolin.

Colored cements are used for decorative purposes. In some standards, the addition of
pigments to produce "colored Portland cement" is allowed. Inother standards (e.g.
ASTM), pigments are not allowed constituents of Portland cement, and colored cements
are sold as "blended hydraulic cements".

Very finely ground cementsare made from mixtures of cement with sand or with
slag or other pozzolan type minerals which are extremely finely ground together. Such
cements can have the same physical characteristics as normal cement but with 50% less
cement particularly due to their increased surface area for the chemical reaction. Even
with intensive grinding they can use up to 50% less energy to fabricate than ordinary
Portland cements.

Non-Portland hydraulic cements

Pozzolan-lime cementsMixtures of ground pozzolan and lime are the cements used
by the Romans, and are to be found in Roman structures still standing (e.g. the Pantheon
in Rome). They develop strength slowly, but their ultimate strength can be very high.
The hydration products that produce strength are essentially the same as those produced
by Portland cement.

Slag-lime cementsGround granulated blast furnace slag is not hydraulic on its own,
but is "activated" by addition of alkalis, most economically using lime. They are similar

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to pozzolan lime cements in their properties. Only granulated slag (i.e. water-quenched,
glassy slag) is effective as a cement component.

Super sulfated cementsThese contain about 80% ground granulated blast furnace
slag, 15% gypsum or anhydrite and a little Portland clinker or lime as an activator. They
produce strength by formation of ettringite, with strength growth similar to a slow
Portland cement. They exhibit good resistance to aggressive agents, including sulfate.

Calcium aluminate cements are hydraulic cements made primarily from limestone
and bauxite. The active ingredients are monocalcium aluminate CaAl 2O4 (CaO · Al2O3 or
CA in Cement chemist notation, CCN) and mayenite Ca12Al14O33 (12 CaO · 7 Al2O3 , or
C12A7 in CCN). Strength forms by hydration to calcium aluminate hydrates. They are
well-adapted use in refractory (high-temperature resistant) concretes, e.g. for furnace
linings.

Calcium sulfoaluminate cements

calciumsulfoaiuminate cements are made from clinkers that include ye'elimite
(Ca4(AlO2)6SO4 or C4A3 in Cement chemist's notation) as a primary phase. They are
used in expansive cements, in ultra-high early strength cements, and in "low-energy"
cements. Hydration produces ettringite, and specialized physical properties (such as
expansion or
rapid reaction) are obtained by adjustment of the availability of calcium and sulfate ions.
Their use as a low-energy alternative to Portland cement has been pioneered in China,
where several million tons per year are produced. Energy requirements are lower because
of the lower kiln temperatures required for reaction and the lower amount of limestone
(which must be endothermicallydecarbonated) in the mix. In addition, the lower
limestone content and lower fuel consumption leads to a CO 2 emission around half that
associated with Portland clinker. However, SO2 emissions are usually significantly
higher.

"Natural" Cements
correspond to certain cements of the pre-Portland era, produced by burning
argillaceous lime stones at moderate temperatures. The level of clay components in the
limestone (around 30-35%) is such that large amounts of belite (the low-early strength,
high-late strength mineral in Portland cement) are formed without the formation of
excessive amounts of free lime. As with any natural material, such cements have highly
variable properties.

Geopolymer cements
geopolymer cement are made from mixtures of water-soluble alkali metal silicates and
aluminosilicate mineral powders such as fly ash and metkaolin.

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List Of Top 10 Largest Cement Companies in India

1. Ultratech Cement – ‘The Engineer’s Choice’
Ultratech Cement is the India’s largest and amongst the World’s top cement
manufacturers. The company has the presence in five countries. The total operation
includes 11 integrated plants, one white cement plant, one clinkerisation plant, 15
grinding units, two rail and three coastal terminals, and 101 ready mix concrete (RMC)
plants. Additionally, the company is the largest clinker exporter in India.

Establishment: 1987l

Headquarter: Mumbai

Website: https://www.ultratechcement.com/

2. Shree Cements
Shree Cements is a trusted brand in India, mainly in the northern and eastern part of the
country. Currently, the company has the manufacturing operations over North and
Eastern India across six states. Additionally, the company is popular as one of the most
efficient and environment-friendly companies in the global cement industry.

Establishment: 1970

Headquarter: Bangur Nagar, Ajmer, Rajasthan

Website: http://shreecement.in/

3. Ambuja Cements
Ambuja Cements is one of the most popular brands in the western India. The company
was formerly known as Gujarat Ambuja Cement Limited. Basically, it is a major cement
producing company in India. Now, the company is a part of the global conglomerate
LafargeHolcim. Currently, Ambuja Cement has a cement capacity of 29.65 million tons
with five integrated cement manufacturing plants and eight cement grinding units across
the country.

Establishment: 1983

Headquarter: Mumbai

Website: http://www.ambujacement.com/

4. ACC
ACC Limited is India’s one of the largest manufacturers of cement and ready mixed
concrete. The company has 17 modern cement factories and more than 50 ready mixed

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concrete plants. ACC has a unique track record of innovative research, product
development, and specialized consultancy services. Basically, ACC is the first cement
company in the country to start Bulk Cement, especially for large consumers.

Establishment: 1936

Headquarter: Mumbai, Maharashtra

Website: http://www.acclimited.com/

5. Binani Cement
Binani Cement is the flagship company of the BrajBinani Group. Basically, the company
produces ‘Ordinary Portland Cement’ (OPC) and ‘Pozzolana Portland Cement’ (PPC)
under the Binani brand. Additionally, the company enjoys premium status amongst
major Indian cement brands with a significant market share in northern and western
India.

Establishment: 1996

Headquarter: Mumbai

Website: http://binaniindustries.com/

Related: Top 10 FMCG Companies in India

6. Ramco Cements – Supergrade
Ramco Cements was founded as Madras Cement. Companys’ flagship product Ramco
Grade is the most trusted cement brand in South India. The company has 5 cement
plants, 4 Grinding Plants, 1 Packing Plants, 1 Ready Mix Concrete Plant and 1Dry
Mortar Plant spread across the country.

In addition to that, the company is the fifth largest cement producer in the country.
Company’s product range includes Portland cement, Ready Mix Concrete, and Dry
Mortar products.

Establishment: 1957

Headquarters: Chennai

Website: http://www.ramcocements.in/

7. OCL India
Sjt. JaidayaljiDalmia, an industrialist of the farsighted vision set up a cement plant at the
request of the government of Odisha to manufacture super grade cement for use in the

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construction of Hirakud dam. The company is popular for producing one of the most
prestigious brands “Konark”.

Establishment: 1950

Headquarter: Rajgangpur (Odisha)

Website: http://www.ocl.in/

8. Birla Corp
Birla Corporation Limited is an Indian-based flagship company of the M P Birla group
of companies. The Cement Division of Birla Corporation Limited has seven plants. All
the cement plants are ISO 9001:2000 Certificate, covering the entire range of production
and marketing. Some of the most popular cement brands are Samrat, Khajuraho, Chetak,
and Birla Premium cement.

Establishment: 1919

Headquarter: Kolkata, West Bengal

Website: https://www.birlacorporation.com/

9. J. K. Cement
J. K. Cement company is extensively in the manufacturing and distribution of cement as
well as cement-based products. The company was founded by
LalaKamlapatSinghania. The Company is the second largest manufacturer of white
cement and wall putty in India. Actually, the company has the annual production
capacity of 600,000 tons and 700,000 tons respectively in India.

Establishment: 1975

Headquarter: Kanpur

Website: http://www.jkcement.com/

10. India Cement

India Cements Limited was founded by two men, Shri S N NSankaralingaIyer and Sri T
S Narayanaswami. This is one of the most popular cement companies in the southern
India. From a two-plant company having a capacity of just 1.3 million tons in 1989, the
company has robustly grown in the last two decades. Presently, the company has a total
capacity of 15.5 million tons per annum. It has 7 integrated cement plants in Tamil Nadu,
Telangana and Andhra Pradesh, one in Rajasthan and two grinding units, one each in
Tamil Nadu and Maharashtra.

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Establishment: 1946

Headquarters: Chennai, Tamilnadu

Website: http://www.indiacements.co.in/

COMPANY PROFILE

ULTRATECH CEMENT LTD:

Ultratech Cement Ltd. is the largest manufacturer of grey cement, Ready Mix Concrete (RMC)
and white cement in India. It is also one of the leading cement producers globally. Ultratech as
a brand embodies 'strength', 'reliability' and 'innovation'. Together, these attributes inspire
engineers to stretch the limits of their imagination to create homes, buildings and structures that
define the new India.
The company has an installed capacity of 93 Million Tonnes Per Annum (MTPA) of grey
cement. Ultratech Cement has 18 integrated plants, 1 Clinkerisation plant, 25 grinding units
and 7 bulk terminals. Its operations span across India, UAE, Bahrain, Bangladesh and Sri
Lanka. Ultratech Cement is also India's largest exporter of cement reaching out to meet the
demand in countries around the Indian Ocean and the Middle East.
In the white cement segment, Ultratech goes to market under the brand name of Birla White. It
has a white cement plant with a capacity of 0.56 MTPA and 2 Wall Care putty plants with a
combined capacity of 0.8 MTPA.
With 100+ Ready Mix Concrete (RMC) plants in 35 cities, UltraTech is the largest
manufacturer of concrete in India. It also has a slew of speciality concretes that meet specific
needs of discerning customers.
Our Building Products business is an innovation hub that offers an array of scientifically
engineered products to cater to new-age constructions. Aerated Autoclaved Concrete (AAC)
blocks are economical, light-weight blocks ideal for high-rise buildings, while Dry Mix
Products include waterproofing, grouting and plastering solutions designed for faster
completion of projects. The retail format of UltraTech Building Solutions offers a wide range
of construction products to the end customers under one roof.
With a significant presence in the grey and white cement, concrete and building products
segments as well as providing 360 degree building solutions, UltraTech is the one-stop shop for
every primary construction need. Its meteoric rise as India’s largest cement brand reflects on
the organisation's focus on cutting edge technology, research and technical services.

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UltraTech Cement provides a range of products that cater to the various aspects of construction,
from foundation to finish. These include:

 Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana
Cement under grey cement
 White cement, Wall Care putty and white cement based products under Birla
White
 Ready Mix Concrete and a range of specialty concretes with specific functional
properties under UltraTech Concrete
 AAC blocks, waterproofing solutions, grouting solutions and plastering solutions under
UltraTech Building Products.

UltraTech’s subsidiaries are Dakshin Cements Limited, Harish Cement Limited, Gotan
Limestone KhaujUdyog Private Limited, Bhagwati Limestone Company Private Limited,
UltraTech Cement Lanka (Pvt.) Ltd., UltraTech Cement Middle East Investments Limited, PT
UltraTech Mining Indonesia and PT UltraTech Investments Indonesia.
*UltraTech’ s parent company, the Aditya Birla Group, is in the league of Fortune 500
companies. It employs a diverse workforce comprising of 120,000 employees, belonging to 42
different nationalities across 36 countries. The Group has been ranked number 4 in the global
'Top Companies for Leaders' survey and ranked number 1 in Asia Pacific for 2011. 'Top
Companies for Leaders' is the most comprehensive study of organisational leadership in the
world conducted by Aon Hewitt, Fortune Magazine and RBL (a strategic HR and Leadership
Advisory firm). The Group has topped the Nielsen's Corporate Image Monitor three years in a
row -- 2012-13, 2013-14 and 2014-15 as the number 1 corporate, the 'Best in Class'.

The Aditya Birla Group

ABG VALUES
INTEGRITY
Honesty in Every Action
Acting and taking decisions in a manner that is fair, honest and following the highest standards
of professionalism.
COMMITMENT
Delivering on Promises
On the foundation of integrity, doing whatever it takes to deliver value to stakeholders.

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PASSION
Energised Action
A missionary zeal arising out of emotional engagement with the organisation that makes work
joyful and inspires each one to give his or her best.

SEAMLESSNESS
Boundary less in Letter and Spirit
Thinking and working together across functional silos, hierarchies, businesses and geographies.

SPEED
Always One Step Ahead
Continuously seeking to crash timelines and choosing the right rhythm to optimise
organisational efficiencies.
GROUP VISION & MISSION

VISION: To be a premium global conglomerate with a clear focus on each business.

MISSION: To deliver superior value to our customers, shareholders, employees and

society at large.

BUSINESSES
BUSINESS VISION & MISSION

VISION: To be a Leader in Building solutions.

MISSION: To deliver superior value to Stakeholders on the four pillars i.e.

Sustainability; Customer Centricity; Innovation and Team Empowerment.

UltraTech Cement Limited is the largest cement company in India and among the
leading producers of cement globally. It is also the country’s largest manufacturer of white
cement and Ready Mix Concrete.
UltraTech provides a range of products that cater to the various aspects of construction, from
foundation to finish. This includes Ordinary Portland Cement, Portland Blast Furnace Slag
Cement, Portland Pozzalana Cement, White Cement, Ready Mix Concrete, building products
and a host of other building solutions. Cement is sold under the brands ‘UltraTech, UltraTech
Premium and Birla Super.’ White cement is manufactured under the brand name of ‘Birla
White’, ready mix concretes under the name of ‘UltraTech Concrete’ and new age building
products under the names of ‘Xtralite, Fix block, Seal & Dry and Readiplast’. UltraTech
Building Solutions is a retail format that caters to the end consumer providing a variety of
primary construction materials under one roof.

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UltraTech Cement has 18 integrated plants, 1 Clinkerisation unit, 25 grinding units, 7 bulk
terminals, 1 white cement plant, 2 Wall Care putty plants and more than 100 RMC plants –
spanning India, UAE, Bahrain, Bangladesh and Sri Lanka. UltraTech Cement is also India's
largest exporter of cement and clinker reaching out to meet demand in countries around the
Indian Ocean, Africa, Europe and the Middle East.
The company's subsidiaries are Dakshin Cements Limited, Harish Cements Limited, UltraTech
Cement Lanka (Pvt.) Ltd and UltraTech Cement Middle East Investments Limited.

1) UltraTech cement
2) UltraTech concrete
3) UltraTech building products
4) UltraTech building solutions
5) Birla white.

BRAND ULTRATECH:

Ultratech’s modern-day journey began when the Aditya Birla group acquired a

sizeable Cement business from L&T, with a large pan-India presence, back in 2004.
Today, it is a clear industry leader in its segment, offering expert services and solutions for all
kinds of construction needs. The ubiquitous ‘Yellow Helmet’ has become synonymous with the
brand and its ‘expert’ status.
Durability has always been the brand’s core promise. Through its current communication,
UltraTech also exhorts the nation’s engineers and architects to ‘Build Beautiful’. Based on the
belief that every structure needs to be as aesthetic as it is long-lasting, the Build Beautiful
campaign urges its audience to create structures that go beyond being just strong and durable.

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AWARDS

YEAR Name of the award Unit

2010 IMC Ramakrishna Bajaj National Vikram Cement Works
Quality Award
2010 Subh Karan Sarawagi Vikram Cement Works
Environment award
2009 9th Greentech Vikram Cement Works
Safety Award
2009 Bhamashah Award from Vikram Cement Works
Commercial Tax Department, Ujjain
2011 ASSOCHAM CSR Excellence Award for Birla White
its "truly outstanding"    CSR activities
2010 Vikram Cement Works
OHSAS 18001:2007 re-certification,
DNV, The Netherlands
2004 Vikram Cement Works
OHSAS 18001:1999 re-certification,
DNV, The Netherlands
2001 Vikram Cement Works
OHSAS 18001:1999 certificate from
DNV, The Netherlands
2001
Appreciation award from NSC for achieving Andhra Pradesh
Cement works
OHSAS-18001

2009 Vikram Cement Works

ISO 9001:2000 re-certification, TUV,
Germany
2004 Gujarat Cement Works
BhartiyaUdyogRatan Award presented to
Sh. KYP Kulkarni By Indian Economic

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Development & Research Association

(IEDRA), New Delhi
2003
Overall Performance First Prize of Naokari
Limestones Mines Amongst Mechanised Awarpur Cement Works

Mines During MEMC Week

2016
National award for energy efficiency Kotpulti cement
2017
National energy conservation for bureau of energy
kkotpulti
efficiency

2015
Birla white yuvaratna awards biBirla white
2013
Unnathasurakshapuraskara Rajsree cement
2012
National safety council award Hotgi cement

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ANDHRA PRADESH CEMEMNT WORKS UNIT PROFILE

Andhra Pradesh Cement Works was a subsidiary of Grasim Industries Limited acquired by

Aditya Birla Group from L&T Group in 2004. It is located on the picturesque hilly area near
Tadipatri, on the border line between Anantapur and Kurnool Districts in Rayalaseema.  
The installed capacity of 2 MTPA commissioned in 1998, enhanced to 2.7 MTPA over a period
of six years through several improvements and modifications. The plant went through further
expansion in 2008 by putting up a second Line with another 3.4 MTPA. Currently, the total
cement production capacity of APCW, along with the associated Units, is 11 MTPA.
 
The integrated plant is associated with two grinding units and one bulk terminal - Arakkonam
Grinding Unit (ARCW) in Tamil Nadu, Ginigera Grinding Unit (GICW) in Karnataka and
Shankarapalli Bulk Terminal (SBT) in Hyderabad. The unit has also established a thermal
power plant of 2 X 25 MW capacity to cater the plant's power requirement.
The APCW Mine is located near Tummalapenta Village, KolimigundlaMandal, Kurnool
District at Andhra Pradesh. It has a production capacity of 9.20 MTPA.  The mine lease extents
up to 844.939 hector. It was opened in the year July 1997. The general geology falls in Narji
Limestone formation of Kurnool system, age of 800 Mio years old. As per UNFC
classification, mine has got the limestone reserves of 181.65 Mio MT as on 31 March 2012.
Winner of the prestigious National Environment FIMI Award for the year 2002-03, it is one of
the largest mines producing 9.20 Mio MTPA limestone at single location.

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Unit Vision & Mission

Vision: To be a Model Cement Plant by 2020 with a clear focus on Safety, Environment,
Quality, Cost, Productivity, Delivery, Employee & Societal Satisfaction.

Mission: To deliver superior value to our customers, shareholders, employees and society at
large with Systems & Team based, Safe & Environment friendly work culture through
Innovation, Skill up-gradation, Conservation and Technological up-gradation adhering to
Aditya Birla Group Values

Key Focus Areas

 Safety, Health & Environment

 Quality & Customer Orientation
 Operational Excellence
 Employee Engagement
 Societal Satisfaction

UltraTech Cement Limited is India's largest cement producer, with a manufacturing

capacity of over 16.5 million tonnes per year. It manufactures and markets
1. Ordinary Portland Cement
2. Portland Blast Furnace Slag Cement
3. Portland Pozzolana Cement
4. Rapid hardening Portland cement
5. Sulfate resistant cement
Ultratech Cement Limited plants are located at:
1 Awarpur cement works. Awarpur,
Maharashtra
2 Hirmi cement works. Hirmi, Madhya
Pradesh
3 Gujarat cement works. Kovya, Gujarat
4 Andhra Pradesh cement Tadipatri,
works. Andhra Pradesh

5 Narmada cements works. Gujarat

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Ultratech Cement Limited grinding units are located at:

1 Jharsuguda Orissa
2 Aakonam Tamilnadu
s3 Magdalla&Ratnagiri Maharashtra
4 Durgapur West Bengal

Organisation Chart:

Unit Head

FH-Mines FH-Tech FH-TPP FH- F&C FH- HR

HOD HOD HOD HOD

HOD-Mines (Mech-1) (Process) HOD
(TPP-Op) (HR)
(Maint.) (Accounts)
HOD HOD HOD (TPP)HOD
(Mech-2) (TS&WCM) HOD
Maint) (ER)
HOD-Mines (Materials)
Operations HOD
HOD HOD HOD
(TPP-E&I)
(Inst.) (Civil) (ADMN)
HOD HOD HOD
(Elect.) (Projects) (OHC)
HOD HOD
(QC) (Safety)

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ANDHRA PRADESH CEMENT WORKS (APCW)

APCW is located 360 kms. South of Hyderabad in the state of Andhra Pradesh in South
India. Along with the grinding unit at Arakonam it has a capacity of 3.6 million tones of
cement per annum. The plant is ideally suited to cater to markets in Andhra Pradesh,
Karnataka, Tamilnadu and Kerala.

Selected TADIPATRI for setting up its Andhra Pradesh Cement Works (APCW)
because there is a huge limestone deposit and the quality of limestone is considered to be
extremely good. Also, other corrective/additive materials such as iron ore, laetrile and
gypsum required in cement production are available nearby. In addition, Tadipatri is well
connected by railway line and roads. The Chennai-Mumbai railway lines runs close to
APCW's plant.

A peculiarity of APCW is that its mines fall in Kurnool district while the plant is in
Anantapur District.

The cement plant's installed capacity is 2 million tones per annum (Mt). APCW started
APCW project with a prospecting license in March 1992 followed by a mining lease in

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June 1993. When various formalities were completed, action shifted from the drawing
board to the project site with the first association commencing in November 1995. Due
to excellent co-operation from the Government of AP, APCW did not face many
problems while setting up APCW.Even the acute shortage of power in the state did not
hamper the construction activities. The construction was completed totally with the help
of diesel generating sets. In view of the expected power shortage, APCW is provided
with two diesel generator sets of 24.6 MW (i.e., 2x12.3 MW), which is around 60% of
total power requirement of the plant.
APCW caters to the cement users in the southern part of India. It is ideally located as far
as the market is concerned.

This Plant has been set up by APCW itself with the coordinated efforts of all its business
groups, which minimized the problems during the execution stage.

Land area of APCW is

Plant 549.86 acres

Mines

STP 9.00 Acres

Railway 169.00 acres

Township 140.00 acres

Capacity 8000 TPD

Total employees 368

Unique features of APCW:

Only cement plant in APCW with a split location of entire main plant on top of a hillock
and the packing plant down the hill.

1. One of the plants using minimum energy for cement manufacturing.

2. Only plant where the entire cement loading rake of 40 wagons can be placed on one
stretch constructed on engine on load concept.

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3. The RCC chimney at the plant is the tallest in the Indian cement Industry.
4. It has two raw mills having a roller diameter of 5m ATOX 50 mills; these are the two
biggest mills in the country.
5. First unit to implement computerized billing for cement loading.
Cement Machinery:
 Complete range – from crushing to packing plants are supplied by APCW
machinery division in Collaboration with F.L.Smitdth& co., Denmark,
extends over three decades Over 50 plants supplied – a major market share in
India
 Presently the largest capacity 7500 TPD in a single line cements production
in India.
 Vertical roller mills for raw materials and cement grinding
 Fuel-efficient pry-processing systems
 High-pressure roller presses for cement mill.
 Modern Deflect burner for efficient flame control.
 Hydraulic drive colas cooler with new generation CIS cooler inlet.
 Efficient Pollution control equipment like ESP, Reverse air Bag house
 CEM scanner for kiln refractory management
 QCX for meal blending and quality control
 Fuzzy logic system for plant optimization
 Cool scanner for monitoring colas cooler
DNV of Netherlands certifies the plant with following standards as:

 ISO 9002
 ISO 14001
 OHSAS 18001

APCW manufactures Ordinary Portland Cement, Portland pozzolana Cement and

Portland Blast Furnace Slag Cement, which are distributed through a wide network of
Authorized Stockiest through the brand named ‘L & T Cement’.

Man power
Based on requirement of each individual department hand of that department is asked to
give information to man power department regarding the number of persons required the

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departmental heads assess his requirements based on the available departmental job
description to ensure role clarity and to avoid role ambiguity.
The total employees in APCW are368 cover all departments. There are nearly 600
contract labors working every day.
Head Office

UltraTech Cement Limited

“A” Wing, AhuraCenter, 1st Floor

Mahakali Caves Rd. Andheri (E)

Mumbai 400 093, India

INVENTORY MANAGEMENET

What is inventory?

1. Inventory is the stock of goods held for doing business.

2. It is usually required to carry on the business and its allied activities.

Inventory management is primarily about specifying the size and placement of

stocked goods. Inventory management is required at different locations within a facility
or within multiple locations of a supply network to protect the regular and planned
course of production against the random disturbance of running out of materials or
goods. The scope of inventory management also concerns the fine lines between
replenishment lead time, carrying costs of inventory, asset management, inventory
forecasting, inventory valuation, inventory visibility, future inventory price forecasting,
physical inventory, available physical space for inventory, quality management,
replenishment, returns and defective goods and demand forecasting. Balancing these
competing requirements leads to optimal inventory levels, which is an on-going process
as the business needs shift and react to the wider environment.

Dictionary defines inventory as “Detailed list of goods or stock of goods”.

Importance of inventory:

 Classifications of stores and spares as per the guidelines to maintain optimum

inventory level.

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 Common inventory with grinding units.
 Identification of obsolete and surplus spares from slow and non moving category
for disposal.
 Fixation of ideal and min/max levels for general consumables.
 Proper preservation of insurance and essential items.
 Two bin system for fast moving consumables.

Classification of inventory:

 Insurance spares:
Insurance spare to be done, if an item of spare can use only in a particular plant
and machinery and the usability is to be tested cement business as a whole for
identical machinery of the company. As the insurance spares are critical for the
plant operation the availability of the same is to be monitored and reviewed on
monthly basis.
 Essential spares:
The spares which are critical in nature and having irregular uses in other words
the spares whose uses is certain unlike insurance spares, but time of uses is
uncertain, it means we need to keep the inventory of critical spares having higher
lead time and non- availability of which could result in stoppage of plant /reduce
level of production . As the essential spares are critical for the plant operations th
availability of the same is to be monitored and reviewed on monthly.
 Minimax stores and spares:
Under this category, mainly fast moving, consumables and common spares
having high and regular consumption by multiple department comes under this
category. Under this classification, the underline criteria is frequency of uses and
multi department use.
 Specified inventory:
These are the spares required for specified planned jobs/shutdowns in near future.
Their usage is not regular and indented by required departments/sections.
Specified category of inventory should be procured with defined consumption
time and respective department will be responsible for its consumptions. Usually

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these items are expected to consume within 1 year for shutdown/planned
replacement jobs.

Some of the decision in managing inventories without having shortages & impeding the
production activities.

What?

 What items to inventory.

Where?

 Where to keep items.

 Where to order or from which supplier to order.

When?

 When to place order.

 When to check the stock.

We need to check is there any cost associated by keeping the inventory like

 Placing the order

 Space
 Equipment’s
 Labor
 Interest from banks or institutions etc.

Looking to the above reasons we have opened VMI (Vendor Managed Inventory) for
some of the items like

 Bearings
 Lubes
 Adhesive etc.

Further to the above we have introduced min-max stores and spares concept in SAP by
which system itself will generate the auto PR when the stock reaches to reorder level. By
this procedure we can manage our inventory levels to the level of ideal without having
shortage management.

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Still if have any shortage even by above methods then we will approach to the cluster
units for having the item on loan basis/chargeable basis for having our work done
without hampering the production.

Meaning of inventory:

Activities employed in maintaining the optimum number of amount of each

inventory item. A complete list of items such as property, goods in stock or the content
of a building make a complete list of items.

A physical resource that a firm holds in stock with the intent of selling it or
transforming it into a more valuable asset.

The meaning of inventory mainly revolves around following four items:

1. Raw-materials required for production process.
2. Work in progress (WIP). For example, semi-finished goods.
3. Captive consumable goods are goods produced and used by producer.
4. Finished goods which are available for sale.

Inventory also includes investment made in raw-materials and their parts in accordance

with the inventory policy established by the management.

Definition of inventory management:

“Inventory management is a science primarily about specifying the shape and

percentage of stocked goods. It is required at different locations within a facility or with
in many locations of a supply network to precede the regular and planned course of
production and stock of materials”.

In general, the simple definition of inventory can be stated as follows.

“Inventory means the stock of goods available or held for sale in the ordinary course of
business.”
In a business sense, the inventory can be defined as under.
“Inventory includes raw-materials stored in a warehouse, work-in-progress in
production, and finished goods available for sale.”
From an academic or learning perspective,
“Inventory is that stock of goods, which have a demand and supply in the market and can
be easily realized in cash.”

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EXISTENCE OF INVENTORY:

The total balance of inventory is the sum of the value of each individual stock line. Stock
records are needed:

To provide an account of activity within each stock line;

 As evidence to support the balances used in financial reports.

Inventory typically exists at three levels:

operations
Operations

Raw Materials Work in progress finished

Consumable spares

Inventory involvements:
While accountants often discuss inventory in terms of goods for sale,
organizations - manufacturers, service-providers and not-for-profits - also have
inventories (fixtures, furniture, supplies ...) that they do not intend to sell.
Manufacturers', distributors', and wholesalers' inventory tends to cluster in warehouses.
Retailers' inventory may exist in a warehouse or in a shop or store accessible to
customers. Inventories not intended for sale to customers or to clients may be held in any
premises an organization uses. Stock ties up cash and if uncontrolled it will be
impossible to know the actual level of stocks and therefore impossible to control them.

While the reasons for holding stock are covered earlier, most manufacturing
organizations usually divide their "goods for sale" inventory into as below.

 Raw materials - materials and components scheduled for use in making a

product.
 Work in process, WIP - materials and components that have begun their
transformation to finished goods.

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 Finished goods - goods ready for sale to customers.

The reasons for keeping stock

There are three basic reasons for keeping an inventory:

• Time - The time lags present in the supply chain, from supplier to user at every
stage, requires that you maintain certain amount of inventory to use in this "lead
time".

• Uncertainty - Inventories are maintained as buffers to meet uncertainties in

demand, supply and movements of goods.

• Economies of scale - Ideal condition of "one unit at a time at a place where user
needs it, when he needs it" principle tends to incur lots of costs in terms of
logistics. So bulk buying, movement and storing brings in economies of scale,
thus inventory.

All these stock reasons can apply to any owner or product stage.

Buffer stock
This held in individual workstations against the possibility that the upstream
workstation may be a little delayed in long setup or change-over time.

These classifications apply along the whole Supply chain not just within a facility
or plant. Where these stocks contain the same or similar items it is often the work
practice to hold all these stocks mixed together before or after the sub-process to which
they relate. This 'reduces' costs. Because they are mixed-up together there is no visual
reminder to operators of the adjacent sub-processes or line management of the stock
which is due to a particular cause and should be a particular individual's responsibility
with inevitable consequences. Some plants have centralized stock holding across sub-
processes which makes the situation even more acute.

Special terms used in dealing with inventory

 Stock Keeping Unit (SKU) is a unique combination of all the components that are
assembled into the purchasable item. Therefore any change in the packaging or
product is a new SKU. This level of detailed specification assists in managing
inventory.

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 Stock out means running out of the inventory of an SKU.
 "New old stock" (sometimes abbreviated NOS) is a term used in business to
refer to merchandise being offered for sale which was manufactured long ago but
that has never been used. Such merchandise may not be produced any more, and
the new old stock may represent the only market source of a particular item at the
present time.

Typology
 Buffer/safety stock
 Cycle stock (Used in batch processes, it is the available inventory excluding
buffer stock)
 De-coupling (Buffer stock that is held by both the supplier and the user)
 Anticipation stock (building up extra stock for periods of increased demand - e.g.
ice cream for summer

Principle of inventory proportionality

Purpose

Inventory proportionality is the goal of demand driven inventory management.

The primary optimal outcome is to have the same number of days (or hours, etc.) worth
of inventory on hand across all products so that the time of run out of all products would
be simultaneous. In such a case, there is no "excess inventory", that is, inventory that
would be left over of another product when the first product runs out. Excess inventory is
sub-optimal because the money spent to obtain it could have been deployed better
elsewhere, i.e. to the product that just ran out.

The secondary goal of inventory proportionality is inventory minimization. By

integrating accurate demand forecasting with inventory management, replenishment
inventories can be scheduled to arrive just in time to replenish the product destined to run
out first, while at the same time balancing out the inventory supply of all products to
make their inventories more proportional, and thereby closer to achieving the primary
goal. Accurate demand forecasting also allows the desired inventory proportions to be
dynamic by determining expected sales out into the future; this allows for inventory to be

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in proportion to expected short term sales or consumption rather than to past averages, a
much more accurate and optimal outcome.

Integrating demand forecasting with inventory management in this way also

allows for the prediction of the "can fit" point when inventory storage is limited on a per
product basis.

Applications
The technique of inventory proportionality is most appropriate for inventories
that remain unseen by the consumer. As opposed to "keep full" systems where a retail
consumer would like to see full shelves of the product they are buying so as not to think
they are buying something old, unwanted, or stale; and differentiated from the "trigger
point" systems where product is reordered when it hits a certain level; inventory
proportionality is used effectively by just-in-time manufacturing processes and retail
applications where the product is hidden from view.

One early example of inventory proportionality used in a retail application in the

United States is for motor fuel. Motor fuel (e.g. gasoline) is generally stored in
underground storage tanks. The motorists do not know whether they are buying gasoline
off the top or bottom of the tank, nor need they care. Additionally, these storage tanks
have a maximum capacity and cannot be overfilled. Finally, the product is expensive.
Inventory proportionality is used to balance the inventories of the different grades of
motor fuel, each stored in dedicated tanks, in proportion to the sales of each grade.
Excess inventory is not seen or valued by the consumer, so it is simply cash sunk
(literally) into the ground. Inventory proportionality minimizes the amount of excess
inventory carried in underground storage tanks. This application for motor fuel was first
developed and implemented by Petrol Soft Corporation in 1990 for Chevron Products
Company. Most major oil companies use such systems today.

Roots
The use of Inventory Proportionality in the United States is thought to have been
inspired by Japanese just-in-time (business) parts inventory management made famous
by Toyota Motors in the 1980s.

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High level inventory Management

It seems that around about 1880 there was a change in manufacturing practice
from companies with relatively homogeneous lines of products to vertically integrated
companies with unprecedented diversity in processes and products. Those companies
(especially in metalworking) attempted to achieve success through economies of scope -
the gains of jointly producing two or more products in one facility. The managers now
needed information on the effect of product mix decisions on overall profits and
therefore needed accurate product cost information. A variety of attempts to achieve this
were unsuccessful due to the huge overhead of the information processing of the time.
However, the burgeoning need for financial reporting after 1900 created unavoidable
pressure for financial accounting of stock and the management need to cost manage
products became overshadowed. In particular it was the need for audited accounts that
sealed the fate of managerial cost accounting.

The dominance of financial reporting accounting over management accounting

remains to this day with few exceptions and the financial reporting definitions of 'cost'
have distorted effective management 'cost' accounting since that time. This is particularly
true of inventory.

Hence high level financial inventory has these two basic formulas which relate to the
accounting period:

 Cost of Beginning Inventory at the start of the period + inventory purchases

within the period + cost of production within the period = cost of goods
 Cost of goods − cost of ending inventory at the end of the period = cost of goods
sold

The benefit of these formulae is that the first absorbs all overheads of production
and raw material costs in to a value of inventory for reporting. The second formula then
creates the new start point for the next period and gives a figure to be subtracted from
sales price to determine some form of sales margin figure.

Manufacturing management is more interested in inventory turnover ratio or

average days to sell inventory since it tells them something about relative inventory
levels. Inventory turnover ratio (also known as inventory turns) = cost of goods sold /

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Average Inventory = Cost of Goods Sold / ((Beginning Inventory + Ending Inventory) /
2) and its inverse Average Days to Sell Inventory = Number of Days a Year / Inventory
Turnover Ratio = 365 days a year / Inventory Turn Over Ratio

This ratio estimates how many times the inventory turns over a year. This number
tells us how much cash/goods are tied up waiting for the process and is a critical measure
of process Reliability and effectiveness. So a factory with two inventory turns has six
months stock on hand which generally not a good figure (depending upon industry)
whereas a factory that moves from six turns to twelve turns has probably improved
effectiveness by 100%. This improvement will have some negative results in the
financial reporting since the 'value' now stored in the factory as inventory is reduced.

Whilst the simplicity of these accounting measures of inventory are very useful
they are in the end fraught with the danger of their own assumptions.

Inventory Turn is a financial accounting tool for evaluating inventory and it is not
necessarily a management tool. Inventory management should be forward looking. The
methodology applied is based on historical cost of goods sold. The ratio may not be able
to reflect the usability of future production demand as well as customer demand.

Business models including Just in Time (JIT) Inventory, Vendor Managed

Inventory (VMI) and Customer Managed Inventory (CMI) attempt to minimize on-hand
inventory and increase inventory turns. VMI and CMI have gained considerable attention
due to the success of third party vendors who offer added expertise and knowledge that
organizations may not possess.

Accounting for Inventory

Each country has its own rules about accounting for inventory that fit with their
financial reporting rules. So for example, organizations in the U.S. define inventory to
suit their needs within US Generally Accepted Accounting Practices (GAAP), the
rules defined by the Financial Accounting Standards Board (FASB) (and others) and
enforced by the U.S. Securities and Exchange Commission (SEC) and other federal
and state agencies. Other countries often have similar arrangements but with their own
GAAP and national agencies instead. It is intentional that financial accounting uses
standards that allow the public to compare firms' performance, cost accounting functions

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internally to an organization and potentially with much greater flexibility. A discussion
of inventory from standard and Theory of Constraints-based (throughput) cost
accounting perspective follows some examples and a discussion of inventory from a
financial accounting perspective. The internal costing/valuation of inventory can be
complex. Whereas in the past most enterprises ran simple one process factories, this is
quite probably in the minority in the 21st Century.

Where 'one process' factories exist then there is a market for the goods created
which establishes an independent market value for the good. Today with multi-stage
process companies there is much inventory that would once have been finished goods
which is now held as 'work-in-process' (WIP). This needs to be valued in the accounts
but the valuation is a management decision since there is no market for the partially
finished product. This somewhat arbitrary 'valuation' of WIP combined with the
allocation of overheads to it has led to some unintended and undesirable results.

Financial accounting
An organization's inventory can appear a mixed blessing, since it counts as an
asset on the balance sheet, but it also ties up money that could serve for other purposes
and requires additional expense for its protection. Inventory may also cause significant
tax expenses, depending on particular countries' laws regarding depreciation of
inventory, as in Thor Power Tool Company v. Commissioner.

Inventory appears as a current asset on an organization's balance sheet because

the organization can, in principle, turn it into cash by selling it. Some organizations hold
larger inventories than their operations require in order inflating their apparent asset
value and their perceived profitability. In addition to the money tied up by acquiring
inventory, inventory also brings associated costs for warehouse space, for utilities, and
for insurance to cover staff to handle and protect it, fire and other disasters,
obsolescence, shrinkage (theft and errors), and others. Such holding costs can mount up:
between a third and a half of its acquisition value per year.

Businesses that stock too little inventory cannot take advantage of large orders
from customers if they cannot deliver. The conflicting objectives of cost control and
customer service often pit an organization's financial and operating managers against its
sales and marketing departments. Sales people, in particular, often receive sales

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commission payments, so unavailable goods may reduce their potential personal income.
This conflict can be minimized by reducing production time to being near or less than
customer expected delivery time. This effort, known as "Lean production" will
significantly reduce working capital tied up in inventory and reduce manufacturing costs
(See the Toyota Production System).

Role of Inventory Accounting

By helping the organization to make better decisions, the accountants can help
the public sector to change in a very positive way that delivers increased value for the
taxpayer’s investment. It can also help to incentivize progress and to ensure that reforms
are sustainable and effective in the long term, by ensuring that success is appropriately
recognized in both the formal and informal reward systems of the organization.

To say that they have a key role to play is an understatement. Finance is

connected to most, if not all, of the key business processes within the organization. It
should be steering the stewardship and accountability systems that ensure that the
organization is conducting its business in an appropriate, ethical manner. It is critical that
these foundations are firmly laid. So often they are the litmus test by which public
confidence in the institution is either won or lost.

Finance should also be providing the information, analysis and advice to enable
the organizations’ service managers to operate effectively. This goes beyond the
traditional preoccupation with budgets – how much have we spent so far, how much
have we left to spend? It is about helping the organization to better understand its own
performance. That means making the connections and understanding the relationships
between given inputs – the resources brought to bear – and the outputs and outcomes that
they achieve. It is also about understanding and actively managing risks within the
organization and its activities.

INVENTORY CONTROL TECHNIQUES:

Inventory is being maintained as a cushion in supply of materials for continuous

production without causing stock out situation. This cushion should not be suicidal to
any organization. The following scientific techniques and methods are being used in
control of inventory.

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 Inventory Management Techniques
 Standardization
 Selective Inventory Control
 Just In Time
 Perpetual Inventory System
 Inventory turnover ratio

INVENTORY MANAGEMENT:

In ULTRATECH CEMENTS INDUSTRIES LTD. inventory is managed by both

physically and financially with the help of few tools. Few tools which are used in
ULTRATECH CEMENTS INDUSTRIES LTD. are explained below:

PHYSICAL CONTROLS

1. Minimum Level:

This represent the quality which must be maintained in hand at all times. If stocks
are less the minimum level then the work will stop due to shortage of material the nature
of materials also affects the minimum level. If a material is required only against special
order of the customers then minimum stock will not be required for such material. In
setting this level, the following factors must be considered.

 Rate of consumption of materials

 Time required obtaining delivery of new materials
 Reorder level

Minimum stock level can be calculated with the help of following formula:

Minimum stock level= Reordering level – (Normal consumption * Normal reorder

period)

2.Reorder Level:

It is the level of stock inventory at which it is decided to replenish the stock. It is

connected with the lead time, such that the item should be received just at the time when

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the stock level is at the minimum desired level. When safety of buffer stock is planned,
the ROL should cater for the level of consumption of inventory just sufficient to reach
safety stock level during the lead time.

Reorder Level= Normal consumption during lead time + Safety stock

SAFETY STOCK:

It is the level of inventory kept procured when either the lead time is uncertain or
the demand is critical and shortage cost may be high. This inventory is planned to meet
the demand during uncertain supply period or else to cater for sudden spurt in demand
for a short duration.

LEAD TIME:

It is the time between placing an order and delivery of items. It may vary from
one delivery to another.

Maximum Level:

It is the level beyond which materials should not fall in any case. If danger level arises
then immediate step should be taken to replenish the stock even if more cost is incurred
in arranging their materials. If materials are not arranged immediately there is a
possibility of stoppage of work.

The following factors are considered while fixing maximum level:

 Rate of consumption of material

 Storage space available
 Amount of capital needed and available
 Risk of obsolescence and deterioration
 Cost of storage
 Bulk purchase of seasonal materials

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FINANCIAL CONTROLS

 Inventory to working capital ratio

 Inventory turnover ratio
 Inventory holding period
 Raw material consumption period
 Work in process conversion period
 Finished goods conversion period

Working Capital and Inventory:

The organizational set up for materials in the industrial undertakings is worthy

of a study that enables to ascertain their financial strength. Profitability and liquidity are
the two dimensions which have to be considered while measuring the financial strength
of an undertaking.

It explains how inventory affects both profitability and liquidity considerations

in industrial undertakings.

The major constituents of currents in the industrial undertakings are:

 Raw materials, components, stores items and spares, work in progress and
finished goods
 Cash on hand or in bank deposits, short term investments, advances paid and
receivables

Financial ratios on inventory:

 Raw material turnover ratio = Raw material consumed / avg raw material.
 Holding period of raw material = 360/raw material turnover ratio.
 Work in process turnover ratio = Cost of production/avg. W.I.P.
 Holding period of W.I. P = 360/W.I.P turnover ratio
 Finished goods turnover ratio = Cost of goods sold /avg. finished goods.
 Inventory to capital employed = Inventory/total capital employed.
 Inventory to current assets = Inventory/current assets.

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 Inventory to total assets = Inventory/total assets.
 Inventory to working capital = Inventory / working capital.
 Inventory turnover ratio = Net sales/ avg. inventory cost.
 Inventory velocity = 360/inventory turnover ratio

INVENTORY MANAGEMENT TECHNIQUES:

Economic Order Quantity:

If the firm is buying raw materials, it has to decide lots in which it has to be
purchased on replenishment. If the firm is planning a production run, the issue is how
much production to schedule.

These problems are called order quantity problems, and the task of the firm is to
determine the optimum or economic order quantity.

Ordering Cost:

The term ordering cost is used in case of raw materials and includes the entire costs of
acquiring raw materials.

Carrying Cost:

Cost incurred for maintaining a given level of inventory is called carrying cost.

Economic Order Quantity is given by the formula:

EOQ=
√ 2 AO
C

Where,

A = quantity required

O = ordering cost and

C = carrying cost

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Reorder Points

The reorder point is that inventory level at which an order should be placed to
replenish the inventory. To determine reorder point:

 Lead time: It is the time normally taken in replenishing inventory after the order
has been placed
 Average usage
 Economic order quantity

Safety Stock

The demand for material may fluctuate from day to day. The actual delivery time may be
different from the normal lead time. If the actual usage increase or the delivery of
inventory is delayed the firm can face problem of stock out, which can be costly. So, in
order to guard against the stock out the firm may maintain a safety stock.

INVENTORY CONTROL SYSTEM

ABC ANALYSIS:

One of the widely used techniques for control of inventories is the ABC Analysis.
The objective of ABC control is to vary the expenses associated with maintaining
appropriate control according to the potential savings associated with a proper level of
such control.

Use of ABC Analysis is prioritizing or ranking a range of items, which have

different levels of significance. Its objective is to separate the ‘vital few’ from the ‘useful
many’.

ABC Analysis is a selective control technique which is required to be applied

when we want to control value of consumption of the item in rupees obviously when we
want to control value of the consumption of the material we must select those materials
where consumption is very high.

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FSN ANALYSIS:

This type of analysis is more concerned from the point of view of movement of the
item or issue of the item or issue of the item under this type of analysis.

‘F’ items are those items, which are fast moving i.e. in a given period of time, say a
month or a year they have been issued up till number of items. Although fast moving
does not necessarily mean that these items are consumed in large quantities.

‘S’ items are those items which are slow moving in the sense that in the given period
of time they have been issued in a very limited number of time.

‘N’ non moving items are those, which are not at all issues for a considerable period
of time.

Thus, stores department who is concerned with the moving of items would like to
know and classify that the items are storing in the categories FSN. So they can manage
operate and plan stores activity accordingly.

VED ANALYSIS:

VED analysis is carried out to control situation, which are critical. When applied to
material in VED analysis we try to identify material according to their critically to the
production, which means the material, without which the production will come to stop
and so on from this point of view material classified into three categories.

V- Vital,

E- Essential,

D- Desirable.

Vital categories of the items are those items for the want of which the production
will come to stop. For e.g. power in the factory.

Essential group of items are those items because of non-availability of which the
stock out cost is very high.

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Desirable group of items are those items because of non-availability of which
there is no immediate loss of production and stock cost is very less and it may cause
minor disruption in the production for a short time.

JUST IN TIME INVENTORY SYSTEM:

Keeping in view the enormous carrying cost of inventory in the stores and go
downs, manufactures and merchandisers are asking for more frequent deliveries with
shorter purchase order lead times from their suppliers. Now day organizations are
becoming more and more interested in getting potential gains from making smaller and
more frequent purchase orders. In other words, they are becoming interested in just in
time purchasing system. Just in time purchasing (JIT) purchasing is the purchase of
material or goods in such a way that delivery of purchased items is assured before their
use or demand.

Just in time purchasing recognizes too much carrying costs associated with
holding high inventory levels. Therefore, it advocates developing good relations with
suppliers and making timely purchases from proven suppliers who can make ready
delivery of goods available as and when need arises. EOQ model assumes a constants
order quantity whereas JIT purchasing policy advocates a different quantity for each
order if demand fluctuates.

EOQ lays emphasis on ordering and carrying costs but inventory management
extends beyond carrying and ordering costs to include purchase costs quality costs and
stock out. Just in time purchasing takes into consideration all these costs and move
outside the assumptions of the EOQ model.

Advantages of JIT purchasing

Investment in inventory is reduced because more frequent purchase orders of small

quantities are made.

 Carrying cost is reduced as a result of low investment in inventory.

 A reduction in the number of suppliers to be dealt with is possible. Only proven
suppliers who can give quick delivery of quality goods are given purchase orders.

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As a result of these reductions in negotiation time is possible. The use of long-
run contracts with some suppliers with minimal paper work involved is possible.

Quality costs such as inspection cost of incoming materials or goods, scraps and
rework costs are reduced because JIT purchasing assures quick and frequent delivers of
small size orders which results in low level of inventories causing minimum possible
wastage. Therefore, JIT purchasing is frequently applied by organizations dealing in
perishable goods.

BENEFITS OF HOLDING INVENTORIES:

Although holding inventories involves blocking of a firm’s and the costs of

storage and handling, every business enterprise has to be maintain certain level of
inventories of facilitate un-interrupted production and smooth running of business. In
the absence of inventories a firm will have to make purchases as soon as it receives
orders. It will mean loss of time and delays in execution of orders which sometimes may
cause loss of customers and business.

 A firm also needs to maintain inventories to reduce ordering cost and avail
quantity discounts etc.
 There are three main purpose of holding inventories.
 The transaction motive: this facilitates continuous production, and timely execution of
sales order.

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ABC CLASSIFICATION FOR THE YEAR 2012-2013

Raw materials Total value Class

(in crores)

Limestone 690.09 A

Fly ash 391.21 A

Sand 240.75 B

Gypsum 255.68 A

Aggregate 312.52 A

Others 901.87 A

CLASS VALUE % OF VALUE

(in crores)

A 2551.37 85.5

B 240.75 5.5

C - -

INFERENCE:

 “A” class items are of 85.5%

 “B” class items are of 5.5%

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ABC CLASSIFICATION FOR THE YEAR 2013-2014

Raw materials Total value Class

(in crores)

Limestone 684.62 A

Fly ash 290.92 B

Sand 227.72 C

Gypsum 270.20 B

Aggregate 408.24 A

Others 1029.25 A

CLASS VALUE % OF VALUE

(Rs.in CRORES)

A 2122.11 21.22

B 561.12 5.611

C 227.72 2.277

INFERENCE:

 “A” class items are of 21.22

 “B” class items are of 5.611
 “C” class items are of 2.277

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ABC CLASSIFICATION FOR THE YEAR 2014-2015

Raw materials Total value Class

(in crores)

Limestone 885.54 A

Fly ash 471.12 B

Sand 309.71 B

Gypsum 295.75 B

Aggregate 238.72 C

Others 1079.78 A

CLASS VALUE % OF VALUE

(Rs.in CRORES)

A 1965.32 19.65

B 1076.58 10.76

C 238.72 2.38

INFERENCE:

 “A” class items are of 19.65%

 “B” class items are of 10.76%
 “C” class items are of 2.38%

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ABC CLASSIFICATION FOR THE YEAR 2015-2016

Raw material Total value Class

(in crores)

Limestone 1020.83 A

Fly ash 527.87 B

Sand 321.39 B

Gypsum 305.04 C

Aggregate 257.75 C

Others 1120.83 A

CLASS VALUE (Rs. in CRORES) % OF VALUE

A 2141.66 21.41

B 849.26 8.49

C 562.79 5.62

INFERENCE:

 “A” class items are of 21.41

 “B” class items are of 8.49
 “C” class items are of 5.62

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ABC CLASSIFICATION FOR THE YEAR 2016-2017

Raw materials Total value Class

(in lakhs)

Limestone 1170.97 A

Fly ash 389.65 B

Sand 650.21 A

Gypsum 794.53 A

Aggregate 315.61 C

Others 146.81 C

CLASS VALUE % OF VALUE

(in lakhs)

A 2615.71 26.15

B 389.65 3.10

C 462.42 4.10

INFERENCE:

 “A” class items are of 26.15%

 “B” class items are of 3.10%
 “C” class items are of 4.10%

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ABC CLASSIFICATION FOR THE YEAR 2010-15

Raw 2012-2013 2013-2014 2014-2015 2015-16 2016-2017

materials
Value Value Value Value Value

(in lakhs) (in crores) (in crores) (in crores) (in crores)

Limestone 690.09 684.62 885.54 1020.83 1170.97

Fly ash 391.21 408.24 471.12 527.87 389.69

Gypsum 255.68 270.20 309.71 321.39 794.53

Aggregate 312.52 290.92 295.75 305.04 3015.61

Sand 240.75 227.72 238.72 257.75 650.21

Others 901.87 1029.25 1079.78 10120.83 146.81

INFERENCE:

The annual demand for all raw materials increasing year by year from 2012-13 to
2016-17.
FINANCIAL RATIOS RELATED TO INVENTORY

Raw material turnover ratio: Raw material turnover ratio is velocity at which raw
material converted into goods ready for sale. If raw material turnover ratio is high the
company is efficiency converting into finished goods.

Formula:

Raw material consumed/Average raw material cost

Raw material consumed = raw material cost for each fiscal year.

Avg. raw material cost = raw material cost all fiscal years / no. of years

Raw Material Turnover Ratio

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Year Raw material Average raw Ratio
consumed material cost
(%)
(in crores)
(in crores)

2012-2013 2792.12 697.34 4.00

2013-2014 2910.95 390.31 7.45

2014-2015 3742.30 745.27 4.40

2015-2016 3553.71 814.81 4.36

2016-2017 3467.82 788.68 4.39

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

RAW MATERIAL TURNOVER RATIO

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

From the above graph it is observed the raw material turnover ratio is increased rapidly
from 4.00% in 2012-13 to 7.45% in 2013-14. It indicates the company is converting raw
materials into finished or semi finished goods very quickly.

Holding period of raw material:

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It refers to the number of days taken for the production unit to convert raw
material to finished goods.

Formula: 360/ Raw material turnover ratio

Holding period of Raw material

Year Total No. of Days Ratio Days

2012-13 365 4.00 91.3

2013-14 365 7.45 48.99

2014-15 365 4.40 82.95

2015-16 365 4.36 83.71

2016-17 365 4.39 83.14

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

HOLDING PERIOD OF RAW MATERIAL RATIO

8

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

From the above graph it is observed the holding period turnover ratio is 83.14 days in
2016-17. It indicates the firm is taking less conversion period as compared to 2012-2013.

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In 2012-13 this period was 91.3 days .but it decreased to 83.14 days in 2016-17. This is
shown in the graph.

Work in process turnover ratio:

Work in process turnover ratio is velocity at which W.I.P converted into goods ready for
sale .if W.I.P turnover ratio is high then company is efficiency converting into finished
goods.

Formula:

Cost of production/average W.I.P

Work in process turnover ratio

Year Cost of Production Avg W.I.P Ratio

2012-13 15499.46 429.33 36.10

2013-14 17617.37 401.01 43.93

2014-15 19923.48 421.73 47.24

2015-16 20661.18 511.73 40.37

2016-17 25422.00 469.37 54.16

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

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W.I.P TURNOVER RATIO

60

50

40

30

20

10

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-207

INTERPRETATION:

From the above graph it is observed the work in process turnover ratio is increasing from
36.10% in 2012-13 to 54.16% in 2016-17. The ratio was high in 2016-17 when compare
with all years. It indicates that company is converting semi finished goods into finished
goods quickly.

Holding period of W.I.P:

It refers to the no. of days taken for the production unit to convert semi finished
goods into finished goods.

Formula:

365/W.I.P turnover ratio

Holding period of Work in process

Year Total No. of Days Ratio Days

2012-13 365 36.10 10.11

2013-14 365 43.93 8.30

2014-15 365 47.24 7.72

2015-16 365 40.37 9.04

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2016-17 365 54.16 6.73

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

HOLDING PERIOD OF W.I.P RATIO

60

50

40

30

20

10

0
2012-2013 2013-2014 2014-2015 20015-2016 2016-2007

INTERPRETATION:

As the holding period of W.I.P is decreased from 10.11 days in 2012-2013 to 6.73 days
in 2016-17. It indicates that the firm is taking less days for conversion. Which shown in
the graph.

Finished goods turnover Ratio:

Finished goods turnover Ratio is velocity at which finished goods converted into
for sale. If finished goods turnover ratio is high then company is efficient.

Formula:

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Cost of goods sold/Avg of finished goods

Finished goods turnover ratio

Year Cost of goods sold Average finished goods Ratio

cost
(in crores) (%)
(in crores)

2012-13 20017.94 536.02 37.34

2013-14 21443.72 318.89 67.24

2014-15 24064.75 319.38 75.34

2015-16 25280.66 328.30 77.00

2016-17 26886.73 343.67 78.23

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

FINISHED GOODS TURNOVER RATIO

80

70

60

50

40

30

20

10

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

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From the above graph it is identified the finished goods turnover ratio is increasing from
37.34% in 2012-13 to 78.23% in 2016-17. It indicates that company is selling goods very
quickly as compared to 2012-13 which shown in graph.

Inventory to total capital employed ratio:

This ratio indicates that the relationship between the total capitals employed and
inventories. It shows how much capital utilized to invest in the inventories other than the
other assets. The normal manufacturing firms have low ratio of inventory total capital
employed in the organization.

Formula:

Inventory/total capital employed

Inventory to capital employed

Year Inventory Total Capital employed Ratio

(in crores) (in crores) (%)

2012-13 2350.47 132.42 17.7

2013-14 2580.35 126.01 20.5

2014-15 2949.12 127.86 23.1

2015-16 2615.41 121.33 21.5

2016-17 2400.64 117.44 20.4

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

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INVENTORY

3000
2500
2000
1500
1000
500
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

By observing the above graph it is identified the firm investing huge amount in
inventories compared to other assets. It invested 17.7% in 2012-2013 where as it
increased to 20.4% in 2016-17.

Inventory to current assets:

This ratio indicates the relationship between the inventory and current assets. It
shows the percentage of inventory to current assets. This helps the organization in
deciding the current assets policy which also affects the liquidity position in the
organization.

Formula:

Inventory/current assets

Inventory to current assets

Year Inventory Current assets Ratio

(in crores) (in crores) (%)

2012-13 2350.47 7816.09 0.300

2013-14 2580.35 9502.16 0.2716

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2014-15 2949.12 8797.46 0.3352

2015-16 2615.41 9974.57 0.2622

2016-17 2400.64 13324.61 0.1802

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

RATIO (%)

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

The inventory to current assets ratio in the year 2012-13 was 0.300% and it decreased in
the year 2016-17 to 0.1802%, it shows that the firm investing 0.1802% of its investment
is for inventory only.

Inventory to total assets:

This ratio indicates the relationship between the inventory and total assets. The
significance of this ratio is reflects the portion the inventory as percentage of the total
assets .which helps the management deciding the utilization remaining resources
profitability ,since the inventory will lock up the huge funds and reduces the profitability
of the organization.

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Formula:

Inventory/ Total assets

Inventory to total assets

Year Inventory Total assets Ratio

(in crores) (in crores) (%)

2012-13 2350.47 27408.76 0.0857

2013-14 2580.35 32192.79 0.0802

2014-15 2949.12 38063.05 0.0775

2015-16 2615.41 40766.92 0.642

2016-17 2400.64 42218.65 0.0569

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

RATIO

0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

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During the year 2012-13 the ratio of inventory total assets was 0.0857%, it increased to
1.0569% in 2016-17. It indicates that firm investing only.

Inventory to working capital:

This ratio indicates the relationship between inventory to working capital and it
also indicates the amount to inventory tied up in the working capital and it also shows
the efficiency of inventory management.

Formula:

Inventory/working capital

Inventory to working capital

Year Inventory Working capital Ratio

(in crores) (in crores) (%)

2012-13 2350.47 1577.82 1.4896

2013-14 2580.35 2969.60 0.8689

2014-15 2949.12 -2222.82 -1.3267

2015-16 2615.41 -1552.97 -1.6841

2016-17 2400.64 4995.41 0.4806

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

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RATIO

1.5

0.5

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
-0.5

-1

-1.5

-2

INTERPRETATION:

In the year 2012-13 the ratio was 1.4896% . it increased to 1.6841% in 2015-16 and
again it decreased to 0.4806% in 2016-17, it indicates the firm investing huge amount in
inventory.

Inventory turnover ratio:

Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually
a high inventory turnover / stock velocity indicates efficient management of inventory
because more frequently the stocks are sold, the lesser amount of money is required to
finance the inventory. The inventory turnover ratio is also an index of profitability,
where a high ratio signifies more profit; a low ratio signifies low profit.

Formula:

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Cost of goods sold/average inventory

Inventory turnover ratio

Year Net sales Avginventory Ratio

cost
(in crores) (%)
(in crores)

2012-13 20071.94 2350.47 8.51

2013-14 21443.72 2580.35 8.31

2014-15 24064.75 2949.12 8.16

2015- 25280.66 2615.41 9.66

16

2016- 26886.73 2400.64 11.19

17

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

INVENTORY TURN OVER RATIO

12

10

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

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INTERPRETATION:

The company is making optimum utilization of its inventory in converting them in to

sales. The ratio decreases from 8.51% in 2012-13 to 11.19% in 2016-17. Which means
there is gradual increase in turnover.

Inventory velocity:

Inventory velocity is the time period beginning with the receipt of raw materials
and ending with the sale of the resulting finished goods. Thus, it is the period over which
a business has ownership of inventory. It is very much in the interest of a company to
keep inventory velocity as high as possible.

Formula:

365/inventory turnover ratio

Inventory velocity

Year No. Days Inventory turnover ratio Days

2012-13 365 8.51 42.85

2013-14 365 8.31 43.92

2014-15 365 8.16 44.73

2015-16 365 9.66 37.75

2016-17 365 11.19 32.58

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SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

DAYS

45
40
35
30
25
20
15
10
5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

The inventory velocity ratio gradually increased from 42.85 days in 2012-13 to 44.73
days in 2014-15. Which means it is very much in the interest of a company to keep
inventory velocity as high as possible.

Return on Investment:

Return on investment(ROI) measures the gain or loss generated on an investment

relative to the amount of money invested. ROI is usually expressed as a percentage and
is typically used for personal financial decisions, to compare the efficiency of different
investments.

Formula:

Net Profit/ Investment x 100

Return on Investment

Year Net profit Investment ROI (%)

(in Rs /Cr)

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2012-13 2655.43 3126.95 84.92

2013-14 2212.78 3729.34 59.33

2014-15 2102.11 2522.98 83.31

2015-16 2288.18 2027.61 112.85

2016-17 2713.51 5411.01 50.14

SOURCE: Data collected from annual reports of “ULTRATECH CEMENT LTD”.

ROI (%)

120

100

80

60

40

20

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

In the year 2012-13 the investment was 84.92% when compared to the 50.14% in 2016-
17. The company can decrease there investments in 2016-17. It indicates the company
the firm may less there investments.

Earnings per Share:

Earnings per share (EPS) is the portion of a company’s profit allocated to each outstanding
share of common stock. Earnings per share serves as an indicator of company’s profitability.

Formula:

EPS=Net profit/ No Of Equity shares*100

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Earnings per Share

Year No of equity shares Net profit EPS (%)

(in Rs /Cr) (in Rs /Cr)

2012-13 274.18 2655.43 968.49

2013-14 274.24 2212.78 806.87

2014-15 274.40 2102.11 766.07

2015-16 274.43 2288.18 833.79

2016-17 274.51 2713.51 988.49

SOURCE: Data collected from annssual reports of “ULTRATECH CEMENT LTD”.

EPS (%)

1000
900
800
700
600
500
400
300
200
100
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

INTERPRETATION:

The inventory in earning per share is 968.49% in the year 2012-13 when compared to
988.49% in 2016-17. The firm will earning more in every year.

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FINDINGS

 The “A” items carry high percentage than “B” & “C” items.
 The store department will maintaining some level of stock but not maintaining any
inventory techniques.
 In ABC classification for the 5 years may highly carry items in the year 2016-17.
 The holding period turnover ratio is 6.73 days in 2016-17. It indicates the firm is taking
less conversion period as compared to 2012-13.
 As the holding period of W.I.P is decreased from 8.30 days in 2013-14 to 6.73 days in
2016-17. It indicates that the firm is taking less days for conversion.
 The finished goods turnover ratio is increasing from 37.34% in 2012-13 to 78.23% in
2016-17. It indicates that company is selling goods very quickly as compared to 2012-
13.
 The firm investing huge amount in inventories compared to other assets. It invested
17.7% in 2012-13 where as it increased to 20.4% in 2016-17.
 The inventory to current assets ratio in the year 2012-13 was 0.300% and it decreased in
the year 2016-17 to 0.1802%, it shows that the firm investing 0.1802% of its investment
is for inventory only.
 During the year 2012-13 the ratio of inventory total assets was 0.0857%, it increased to
1.0569% in 2016-17. It indicates that firm investing only.
 In the year 2012-13 the ratio was 1.4896%. it increased to 1.6841% in 2015-16 and
again it decreased to 0.4806% in 2016-17, it indicates the firm investing huge amount in
inventory.
 The company is making optimum utilization of its inventory in converting them in to
sales. The ratio decreases from 8.51% in 2012-13 to 11.19% in 2016-17.
 The inventory velocity ratio gradually increased from 42.85 days in 2012-13 to 44.73
days in 2014-15.
 In the year 2012-13 the investment was 84.92% when compared to the 50.14% in 2016-
17. The company can decrease there investments in 2016-17. It indicates the company
the firm may less there investments.
 The inventory in earning per share is 968.49% in the year 2012-13 when compared to
988.49% in 2016-17. The firm will earning more in every year.

SUGGESTIONS

 The inventory turnover ratio is maintained in a proper way by implementing

proper inventory management techniques.
 It is suggested to maintain proper material receiving reports.
 Damage control measures have to be taken up for proper management of
inventory.
 Process like ABC analysis must be undertaken regularly from project to project
as the purchase requisition varies often.

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 Purchase Raw materials to the time when the stock reaches the minimum level.
 Quantity should be ordered as per the demand. We can assume the demand for
the goods from past experience.
 The company should maintain a safety level and also re-ordering point so that
they come to know at what time they should order for the supply of Raw material
and need not to suffer from short fall of required material.
 Route Selection – Selection of route is very important to reduce the transportation
lead-time and also for fixation of transportation rate.
 As I have seen that the major fluctuations in the materials are due to the climatic
condition the supplier must be capable enough to supply the goods irrespective of
the conditions prevailing this is possible extending SAP package to the suppliers
 Access to the supplier to the mines will reduce the fluctuations in the inventory
costs.
 Vendor management is applied for only few materials, by extending it to the
faster moving objects like bearings will definitely bring down the inventory costs.
 Introducing the new trends like JIT for some slow moving materials will
definitely show a positive impact on the costs and the variations in the average
costs.
 Following MUSIC 3D (Multi User Selective Inventory Control) technique will
reduce the lead times involved in recognizing and coding the materials especially
in the spare parts inventory.
 Implementation of MRP (Materials Requirement Planning) will also help to find
out what to order and how much to be maintained in the inventory, which enables
the plant, a precise and optimum quantity in the stock.
 As I have seen that the coal, which is the major fuel in the production process,
has undergone certain noticeable variations due to seasonal fluctuations has to be
control in order that the total cost involved in maintaining the inventory will
come down, which is possible if the supplier is capable of doing so.

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CONCLUSION
After the study, we can conclude that, the Ultratech Cements Industries Ltd.
company should maintain adequate stock of materials for a continues supply to the
factory for a untreated production. It is not possible for company to procure raw
materials whenever it is needed. If time lack exist uncertainty in procuring raw materials
in time in many occasion procurement of materials may delayed because of such factors
as strike, transport and disruption are short supply.

Therefore, the firm should maintain sufficient stock of raw materials at given
time to streamline the production. Other factors which may necessitate purchasing and
holding of raw materials, inventories or quantity discounts and anticipated price increase.

Broad conclusions:

 Implementation of inventory management and control in the cement

manufacturing industry has reduced the average costs of inventories, which has
lead to reduced carrying cost.
 Inventory has proved to be efficient and economic for certain raw materials.

 Although inventory is maintained efficiently there are certain other factors, which
are affecting the functioning of the plant like transportation, climatic conditions
and other critical problems.

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UltraTech Cement limited

BALANCE SHEET AS AT MARCH 31, 2013₹in Crores
Particulars Notes As at As at
March March
31,2013 I 31,2012
In In
Crores Crores
EQUITY AND LIABILITYS
Shareholders Fund
Share Capital 2 274.18 274.07
Reserves and Surplus 3 14,960.6 12,585.75
4
15,234.82 12,859.82
Non-Current Liabilities
Long-term Barrowings 4 3,893.92 3,648.19
Deferred Tax Liabilities (Net) 5 1,905.92 1,737.77
Other Long-term Liabilities 6 1.81 2.40
Long-term Provisions 7 134.02 120.57
5,935.67 5,508.93
Current Liabilities
Short-term Barrowings 8 568.76 161.92
Trade Payables 9 2,193.43 2,039.49
Other Current Liabilities 10 2,540.90 1,674.86
Short-term Provisions 7 935.18 700.17
6,238.27 4,576.44
Total 27,408.76 22,945.19
ASSETS
Non-Current Assets
Fixed Assets 11
Tangible Assets 13,074.00 11,597.24

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Intangible Assets 48.36 36.94
Capital Work-in-Progress 3,505.31 1,895.99
Intangible Assets under 0.06 0.64
Development
16,627.7 13,530.81
3
Non-Current Investments 12 1,981.77 1,147.83
Long-Term Loans and 13 983.17 1,462.32
Advances
19,592.67 16,140.96

Current Assets
Current Investments 14 3,126.95 2,640.94
Inventories 15 2,350.47 2,035.94
Trade Receivables 16 1,017.24 765.96
Cash and Bank Balances 17 142.66 189.58
Short-term Loans and 13 1,173.11 1,163.58
Advances
Other Current Assets 18 5.66 8.23
7,816.09 6,804.23
TOTAL 27,408.76 22,945.19

STATEMENT OF PROFIT AND LOSS FOR YEAR ENDED MARCH 31,2013₹in

Crores
Particulars Notes Year ended Year ended
March 31, March 31,
2013 2012
Revenue
Sale of Products and Services (Gross) 19 22,699.96 20,424.99
Less: Excise Duty 2,682.02 2,266.71
Sale of Products and Services (Net) 20,017.94 18,158.28

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Other Operating Revenues 157.00 151.57
20
Revenue from Operating (Net) 20,174.94 18,309.85
Other Income 21 305.00 371.87
Total (I) 20,479.94 18,681.72
Expenses
Cost of Raw Materials Consumed 2,792.12 2,377.70
22
Purchases of Stock-in-Trade 23 235.71 177.29
Changes in Inventories of Finished 24 (118.19) 21.26
Goods, Work-in-Progress and Stock-in-
Trade
Employee Benefits Expense 25 968.35 831.04
Power and Fuel 4,298.94 4,303.97
Freight and Forwarding Expense 26 4,223.99 3,739.81
Other Expenses 27 3,143.53 2,750.47
15,544.45 14,201.54
Less: Captive Consumption of Cement (44.99) (39.11)
{Net of Excise Duty ₹ 39.80 Crores,
(Previous Year 34.95 Crores)}
Total (II) 15,499.46 14,162.43
Profit before Interest, Depreciation and 4,980.48 4,519.29
Tax (PBIDT) (I)-(II)
Finance Costs 28 209.71 223.86
Depreciation and Amortisation Expense 29 945.37 902.56
Profit before Tax 3,825.40 3,392.87
Income Tax Expenses:
Current Tax 1,005.65 948.97
Excess tax provision reversal related to (3.83) (10.01)
prior years

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Deferred Tax Charge 168.15 7.72
Profit for the Year 2,655.43 2,446.19
Earnings Per Equity Share (Face value 39
₹ 10 each)
Basic (in ₹ ) 96.87 89.26
Diluted (in ₹ ) 96.85 89.22

BALANCE SHEET AS AT MARCH 31,2014

₹in Crores
Particulars Notes As at As at
March March
31, 2014 31, 2013
EQUITY AND LIABILITYS
Shareholders’ Funds
Share Capital 2 274.24 274.18
Reserves and Surplus 3 16,907.64 14,955.41
17,184.90 15,229.59
Minority Interest 16.64 78.12
Non-Current Liabilities
Long-term Barrowings 4 6,020.76 5,169.06
Deferred Tax Liabilities (Net) 5 2,299.65 1,909.55
Other Long-term Liabilities 6 2.30 1.81
Long-term Provisions 7 138.98 134.59
8,461.69 7,215.01
Current Liabilities
Short-term Barrowings 8 984.56 1,227.35
Trade Payables 9 2,587.01 2,311.79
Other Current Liabilities 10 2,105.73 2,578.71
Short-term Provisions 7 855.26 949.36

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6,532.56 7,067.21
TOTAL 32,192.79 29,589.93
ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 11 17,028.88 14,254.07
Intangible Assets 11 104.29 62.01
Capital Work-in-Progress 2,174.70 3,601.11
Intangible Assets under Development 3.19 0.06
19,311.06 17,917.25
Goodwill on Consolidation 966.53 733.66

Non-Current Investments 12 1,132.51 1,581.59

Deferred Tax Assets (Net) 13 9.29 8.38
Long-Term Loans and Advances 14 1,271.24 1,066.16
2,413.04 2,656.13
Current Assets
Current Investments 15 3,729.34 3,126.95
Inventories 16 2,580.35 2,540.67
Trade Receivables 17 1,632.06 1,376.29
Cash and Bank Balances 18 348.49 184.79
Short-term Loans and Advances 14 1,192.72 1,048.18
Other Current Assets 19 19.20 6.01
9,502.16 8,282.89
TOTAL 32,192.79 29,589.93

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STATEMENT OF PROFIT AND LOSS FOR YEAR ENDED MARCH

31,2014₹in Crores
Particulars Notes Year Year
ended ended
March March
31, 2013 31, 2013
Revenue
Sale of Products and Services (Gross) 20 24,168.97 23,84316
Less: Excise Duty (2,725.25) (2,682.02)
Sale of Products and Services (Net) 21,443.72 21,161.14
Other Operating Revenues 208.48 612.97
21
Revenue from Operating (Net) 21,652.20 21,324.11
Other Income 22 322.72 303.59
Total Revenue (I) 21,974.92 21,627.70
Expenses
Cost of Raw Materials Consumed 3,372.83 3,141.72
23
Purchases of Stock-in-Trade 24 309.37 241.86
Changes in Inventories of Finished Goods, 25 98.76 (115.20)
Work-in-Progress and Stock-in-Trade
Employee Benefits Expense 26 1,104.15 1,042.69
Power and Fuel 4,520.87 4,645.71
Freight and Forwarding Expense 27 4,596.66 4,243.27
Other Expenses 28 3,647.15 3,329.72
17,649.79 16,529.77
Less: Captive Consumption of Cement {Net (32.42) (44.99)
of Excise Duty ₹ 28.89 Crores, (Previous
Year 39.87 Crores)}
Total Expenses (II) 17,617.37 16,484.78
Profit before Interest, Depreciation and 4,357.55 5,142.92

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Tax (PBIDT) (I)-(II)
Finance Costs 29 360.95 252.34
Depreciation and Amortisation Expense 30 1,139.00 1,023.37
Profit before Tax 2,857.60 3,867.21
Income Tax Expenses:
Current Tax 572.65 1,014.76
MAT Credit (222.13) -
Excess tax provision reversal related to prior (95.56) (3.83)
years
Deferred Tax Charge 389.86 168.21
Total 644.82 1,179.14
Profit after Tax 2,212.78 2,688.07
Minority Interest 6.75 10.34
Profit for the Year 2,206.03 2,677.73
Earnings Per Equity Share (Face value ₹ 44
10 each)
Basic (in ₹ ) 80.45 97.69
Diluted (in ₹ ) 80.42 97.66

BALANCE SHEET AS AT MARCH 31, 2015

₹inCrores
Particulars Note As at As at
s March31, March31,
2015 2014
EQUITY AND LIABILITYS
Shareholders’ Funds
Share Capital 2 274.40 274.24
Reserves and Surplus 3 18,766.78 16,907.66
19,041.18 17,181.90
Minority Interest 18.19 16.64

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Non-Current Liabilities
Long-term Barrowings 4 4,992.66 6,020.76
Deferred Tax Liabilities (Net) 5 2,795.51 2,299.65
Other Long-term Liabilities 6 17.04 2.30
Long-term Provisions 7 178.19 147.89
7,983.40 8,470.60
Current Liabilities
Short-term Barrowings 8 2,563.93 984.56
Trade Payables 9 2,912.40 2,590.99
Other Current Liabilities 10 4,398.72 2,105.74
Short-term Provisions 7 1,145.23 843.54
11,020.28 6,524.83
TOTAL 1,053.11 32,193.97
ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 11 22,209.99 17,028.88
Intangible Assets 11 1,053.11 104.29
Capital Work-in-Progress 22,245.17 2,182.67
Intangible Assets under Development 4.84 3.19
24,539.75 19,319.03
Goodwill on Consolidation 1,053.11 966.53
Non-Current Investments 12 1,977.04 1,132.51
Deferred Tax Assets (Net) 13 9.64 9.29
Long-Term Loans and Advances 14 1,686.05 1,275.87
3,672.73 2,417.67
Current Assets
Current Investments 15 2,522.98 3,729.34

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Inventories 16 2,949.12 2,580.35
Trade Receivables 17 1,658.82 1,632.06
Cash and Bank Balances 18 392.58 348.49
Short-term Loans and Advances 14 1,256.03 1,180.88
Other Current Assets 19 17.93 19.62
8,797.46 9,490.74
Total 38,063.05 32,193.97

STATEMENT OF PROFIT AND LOSS FOR YEAR ENDED MARCH

31,2015
₹inCrores
Particulars Note Year ended Year ended
s March31,2015 March31,2014
Revenue
Sale of Products and Services 20 27,127.44 24,168.52
(Gross)
Less: Excise Duty (3,062.69) (2,725.25)
Sale of Products and Services 24,064.75 21,443.27
(Net)
Other Operating Revenues 284.21 208.23
21
Revenue from Operating (Net) 24,348.96 21,651.50
Other Income 22 350.08 322.38
Total Revenue (I) 24,699.04 21.973.88
Expenses
Cost of Raw Materials Consumed 3,742.30 3,347.66
23
Purchases of Stock-in-Trade 24 408.75 334.54
Changes in Inventories of 25 (100.88) 98.76
Finished Goods, Work-in-
Progress and Stock-in-Trade

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Employee Benefits Expense 26 1,308.29 1,102.78
Power and Fuel 5,115.68 4,523.12
Freight and Forwarding Expense 27 5,425.53 4,595.88
Other Expenses 28 4,065.57 3,646.01
19,965.24 17,648.75
Less: Captive Consumption of (41.76) (32.42)
Cement {Net of Excise Duty ₹
37.71 Crores, (Previous Year
₹28.89 Crores)}
Total Expenses (II) 19,923.48 17,616.33
Profit before Interest, 4,775.56 4,357.55
Depreciation and Tax (PBIDT)
(I)-(II)
Finance Costs 29 586.51 360.95
Depreciation and Amortisation 30 1,203.42 1,139.00
Expense
Profit before Tax 2,985.63 2,857.60
Income Tax Expenses:
Current Tax 510.78 572.65
MAT Credit (489.29) (222.13)
Excess tax provision reversal - (95.56)
related to prior years
Deferred Tax Charge 862.03 389.86
Total 883.52 644.82
Profit after Tax 2,102.11 2,212.78
Minority Interest 3.77 6.75
Profit for the Year 2,098.34 2,206.03
Earnings Per Equity Share 47
(Face value ₹ 10 each)
Basic (in ₹ ) 76.48 80.45
Diluted (in ₹ ) 76.44 80.42

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BALANCE SHEET AS AT MARCH 31, 2016

₹inCrores
Particulars Notes As at As at
March31, March31,
2016 2015
EQUITY AND LIABILITYS
Shareholders’ Funds
Share Capital 2 274.43 274.40
Reserves and Surplus 3 20,783.94 18,766.78
21,058.37 19,041.18
Minority Interest 15.45 18.19
Non-Current Liabilities
Long-term Barrowings 4 4,719.53 4,992.66
Deferred Tax Liabilities (Net) 5 3,231.74 2,735.51
Other Long-term Liabilities 6 16.29 17.04
Long-term Provisions 7 198.07 178.19
8,165.63 7,983.40
Current Liabilities
Short-term Barrowings 8 2,76.10 2,563.93
Trade Payables 9 1,749.23 1,711.15
Other Current Liabilities 10 6,346.54 5,595.46
Short-term Provisions 7 955.60 1,149.74
11,527.47 11,020.28
TOTAL 40,766.92 38,063.05
ASSETS
Non-Current Assets
Fixed Assets
Tangible Assets 11 23,934.00 22,209.99

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Intangible Assets 11 109.29 79.75
Capital Work-in-Progress 1,471.74 2,245.17
Intangible Assets under Development 1.08 4.84
25,516.11 24,539.75
Goodwill on Consolidation 1,106.24 1,053.11
Non-Current Investments 12 2,370.00 1,977.04
Deferred Tax Assets (Net) 13 10.20 9.64
Long-Term Loans and Advances 14 1,771.01 1,801.18
Other Non-Current Assets 15 18.79 21.98
4,170.00 3,809.84
Current Assets
Current Investments 16 2,027.61 2,522.98
Inventories 17 2,615.41 2,949.12
Trade Receivables 18 1,926.58 1,658.82
Cash and Bank Balances 19 2,272.06 370.60
Short-term Loans and Advances 14 1,102.93 1,140.90
Other Current Assets 20 29.98 17.93
9,974.57 8,660.35
Total 40,766.92 38,063.05

STATEMENT OF PROFIT AND LOSS FOR YEAR ENDED MARCH

31,2016
₹inCrores
Particulars Notes Year Ended Year
march31, 2016 Ended
march31,
2015
Revenue
Sale of Products and Services (Gross) 21 28,513.51 27,118.46
Less: Excise Duty (3,232.85) (3,062.69)

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Sale of Products and Services (Net) 25,280.66 24,055.77
Other Operating Revenues 271.15 284.21
22
Revenue from Operating (Net) 25,551.81 24,339.98
Other Income 23 218.31 350.08
Total Revenue (I) 25,770.12 24,690.06
Expenses
Cost of Raw Materials Consumed 3,985.74 3,742.30
24
Purchases of Stock-in-Trade 25 453.21 408.75
Changes in Inventories of Finished Goods, 26 (13.11) (100.88)
Work-in-Progress and Stock-in-Trade
Employee Benefits Expense 27 1,443.34 1,308.29
Power and Fuel 4,579.25 5,115.68
Freight and Forwarding Expense 28 5,973.92 5,418.44
Other Expenses 29 4,275.18 4,063.68
20,697.53 19,956.26
Less: Captive Consumption of Cement (36.35) (41.76)
{Net of Excise Duty ₹ 32.95 Crores,
(Previous Year 37.71 Crores)}
Total Expenses (II) 20,661.18 19,914.50
Profit before Interest, Depreciation and 5,108.94 4,775.56
Tax (PBIDT) (I)-(II)
Finance Costs 30 559.93 586.51
Depreciation and Amortisation Expense 31 1,368.35 1,203.42
Profit before Tax 3,180.66 2,985.63
Income Tax Expenses:
Current Tax 632.59 510.78
MAT Credit (176.86) (489.29)
Excess tax provision reversal related to 0.40

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Inventory management
prior years
Deferred Tax Charge 436.35 862.03
Total 892.48 883.52
Profit after Tax 2,288.18 2,102.11
Minority Interest 1.60 3.77
Profit for the Year 2,286.58 2,098.34
Earnings Per Equity Share (Face value 46
₹ 10 each)
Basic (in ₹ ) 83.33 76.48
Diluted (in ₹ ) 83.28 76.44

BALANCE SHEET AS AT MARCH 31, 2017

₹inCrores
Particulars Note As at As at As at
no march31, March31, April
2017 2016 1,2015
ASSETS
Non-Current
Assets
Property, plant and 2 24,476.32 23,881.82 22,220.88
Equipment
Capital Work-in- 2 920.85 1,468.01 2,240.72
Progress
Goodwill 2 1,085.11 1,106.24 1,053.11
Other Intangible 2 342.86 321.36 207.53
Assets
Intangible Assets 2 0.63 1.08 4.84
under development
26,825.7 26,778.51 25,727.08
7
Financial Assets

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Inventory management
Investment
(i) Investment 3 7.44 7.43 7.42
Accounted Using
Equity Method
(ii) Other 4 1,272.06 2,722.69 2,160.48
Investments
Loans 5 67.35 79.96 79.18
Other Financial 6 75.16 1,422.01 282.54 547.02
Assets
Income tax Assets 104.93 92.25 94.78
(Net)
Deferred Tax Assets 7 9.79 10.20 9.64
(Net)
Other Non-Current 8 531.54 695.87 909.50
Assets
Total Non-current 28,894.04 30,669.45 29,535.10
Assets
Current Assets
Inventories 9 2,400.64 2,454.58 2,828.93
Financial Assets
Investments 10 5,411.01 2,365.06 2,786.15
Trade receivables 11 1,757.09 1,928.21 1,660.76
Cash and Cash 12 58.81 90.18 82.04
Equivalents
Bank Balance other 13 2,189.98 2,176.78 281.26
than Cash and Cash
Equivalents
119.27Loans 5 122.77 117.81 119.27
Others Financial 6 355.99 9,895.65 574.88 195.94
Assets
Current tax Assets 29.25 25.56 21.05
(Net)
Other Current 14 992.37 786.35 853.06

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Inventory management
Assets
Assets held for 6.70 14.45 4.24
Disposal
Total Current 13,324.61 10,533.86 8,832.70
Assets
TOTAL ASSETS 42,218.65 41,203.31 38,367.80
EQUITY AND
LIABILITIES
EQUITY
Equity Share Capital 15 274.51 274.43 274.40
Other Equity 24,117.1 21,671.20 19,445.03
1
24,391.62 21,945.63 19,719.43
Non-Controlling 9.71 15.45 18.19
Interest
LIABILITIES
Non-Current
Liabilities
Financial Liabilities
Barrowings 16 6,370.84 4,896.59 5,379.83
Trade payables 22 8.13 8.31 15.70
Other Financial 17 31.16 6,410.13 6.94 77.87
Liabilities
Provisions 18 289.51 270.03 246.62
Deferred Tax 19 2,782.37 2,441.08 2,132.46
Liabilities (Net)
Other Non-Current 20 6.11 1.04 1.09
Liabilities
Total Non-Current 9,488.12 7,623.99 7,853.57
Liabilities
Financial Liabilities
Barrowings 21 1,079.18 2,475.79 2,563.93

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Inventory management
Trade Payables 22 1,857.27 1,717.25 1,700.91
Other Financial 17 1,314.64 4,251.09 3,598.16 2,722.07
Liabilities
Other Current 23 3,347.07 3,185.22 2,937.14
Liabilities
Provisions 18 168.35 168.72 162.71
Current Tax 562.69 473.10 689.85
Liabilities (Net)
Total Current 8,329.20 11,618.24 10,776.61
Liabilities
TOTAL EQUITY 42,218.65 41,203.31 38,367.80
AND
LIABILITIES

BIBLIOGRAPHY

REFERENCES

 I.M.PANDEY (10th edition) : FINANCIAL MANAGEMENT

 PRASANNA CHANDRA : FINANCIAL MANAGEMENT
 KS MENON : PURCHASING AND
INVENTORY
CONTROL
 PRODUCTION AND OPERATION MANAGEMENT - K.
ASWATHAPPA, SHRIDHARA BHAT

Websites
www.adityabirla.com

www.Ultratechcement.com

www.Google.com

www.Managementstudyguide.com

www.Slideshare.com

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