Preface

Objectives:
Main purpose of the Industrial Visit is to gain first hand information regarding functioning of the Industry which presents the students with opportunities to plan, organize and engage in active learning experiences both inside and outside the class room. As a part of B.B.A programmed there are specific objectives of industrial visit. Specific objectives for Industrial Visit are as follows: How management theories are applied practically by the company. To focus on specific aspects of our studies. Exposure to the process of manufacturing including packaging and distribution. Looking forward for the structure which companys follow. How actually production takes place and exposure to machineries. As it has been well quoted that Tell me and Ill forget, Show me and I may remember, Involve me and Ill Understand. This report presents the facts, findings and recommendations resulting from my understanding of the activities of Lao More Biscuits Private Limited. As per the project guidelines we are suppose to do specialization on one area of the given options that were marketing, operations and finance. So here in this report I will be doing specialization in Operations of the company and will focus on the operations carried out by the company as the company Lao More is indulged in job work so it carries out no marketing activities and as we were not provided the financial information of company so due to lack of data we cant even focus on financial as well as marketing area.

Scope:
(Scope of study is a general outline of what the study [report] will cover) Scope for the Industrial Visit was limited to:
1. 2.

Actual unit i.e. Lao More Biscuits Private Limited which we visited. And to the interaction with the executives of the industry.

Methodology:
(Methods use to obtain information)
1. 2. 3.

Visit to the unit. Interaction with members of the industry. Secondary source.

Internet Robbins and Stephen & Coulter Mary , Management 9th/10th Edition Prentice Hall of Indian Publication Production and Operations Management, 2/e by Kanishka Bedi

So here by I acknowledge that being a Second Year student my report may be rudimentary in nature and based on data collected during one visit only. In spite of my best efforts, there may be errors or omissions and commissions, which may please excused.

5) Introduction
(i) Industry Analysis

The parent industry category of Lao More Pvt. Ltd is Biscuit industry thus it functions in the biscuit products segment. So here is brief introduction of biscuit industry with global, national and regional overview along with relevant regulations related to biscuit industry. Biscuits are cheapest processed food ever made. But this industry size is about `12600Cr Biscuits were assumed as sick-mans diet in early days. But now, it has become the most loved fast food for every age group. The biscuit market has now moved from the core Glucose base to more value added categories. Per capita consumption of biscuits in one developing nation i.e. India is 2kg/person/yr and one developed nation i.e. USA is 15kg/person/yr, this helps us in estimating and imaging the biscuit consumption in developing and developed nation.

Global Overview of Biscuit Industry:

Largest Global Biscuit producers are as follows: 1. USA 2. China 3. India (htt1) Market Value The global biscuits market grew by 2.8% in 2007 to reach a value of $27.9 billion. The compound annual growth rate of the market in the period 2003-2007 was 2.8%. Market Volume The global biscuits market grew by 3.1% in 2007 to reach a volume of 6.6 billion kg. The compound annual growth rate of the market volume in the period 2003-2007 was 2.8%.

Product Market Segmentation Sales of chocolate cookies account for 21.2% of the global biscuit markets value. In comparison, sales of butter-based cookies generate 18.9% of the markets revenues. Geographical Market Segmentation Europe is the largest biscuits market, accounting for 43.2% of the global market's value. The US generates a further 22.9% of the global market's revenues. Biscuits Global Industry:

[Source: Biscuits Global Industry Guide] Analysis: This pie chart reflects major global market players of biscuit industry. The Altria Group is the leading company in the global biscuits market, holding a 36.7% market share by value. Kellogg holds a further 17.6% share of the markets value.

History of Biscuit Industry:

India Biscuits Industry came into major existence and started gaining a sound status in the bakery industry in the later part of 20th century when the urbanized society called for readymade food products at a tenable cost. Biscuits were assumed as sick-man's diet in earlier days. But today it has become one of the most loved fast food products for every age group. Biscuits are always easy to carry, tasty to eat, cholesterol free and reasonable at cost. States that have the larger intake of biscuits are Maharashtra, West Bengal, Andhra Pradesh, Karnataka, and Uttar Pradesh. Maharashtra and West Bengal are the most industrially developed states; hold the maximum amount of consumption of biscuits. Even, the rural sector consumes around 55 % of the biscuits in the bakery products. (htt2)

National Overview of Biscuit Industry:

Today the total production of biscuits in India is estimated to be around 30 lakh MT, the organized sector accounts for 65% and the unorganized sector accounts for 35% of the total industry volume and the organized sector is valued at above Rs 8000 crores. While the the biscuit industry is estimated to grow over 15-17% in the next few years. The biscuits per capita consumption in India is 2.0 kg. India is ranked 3rd after US and China amongst the global biscuits producers. The export of biscuits is approximately 17% of the annual production, the export of sweet biscuits for year 2007-08 was Rs 145.93 Cr and for year 2008-09(April-Dec) was Rs 280 Cr, the major exporting regions were Haiti, Angola, USA, Ghana, UAE. The imports are not significant amount as compared to the total consumption. The penetration of biscuits in India among the urban and rural market is 85% and 55% respectively. The annual turnover for the organized sector of the biscuit manufacturers at 200102 is Rs. 4,350 crores. The annual Growth showed a decline of 3.5% in 2000-01, mainly due to 100% hike in Central Excise Duty (from 9% to 16%) by the government. Production in the year 2001-02 increased very marginally by 2.75% where in 2002-03 the growth is around 3%. Government took initiatitive for the development as The Union Budget for 2003-04 granted 50% reduction in the rate of Excise Duty on Biscuit i.e. from 16% to 8%. The Federation's estimate indicates a growth of approximately 8% to 9% per year. Biscuit is always hygienically packaged nutritious snack food available at very competitive prices, volumes and different tastes. According to the NCAER analysis, biscuits are predominantly consumed by people from the lower strata of society, particularly children in both rural and urban areas with an average monthly income of Rs. 750and above.

The organized biscuit manufacturing industries annual production

Year

20030 4

20040 5

20050 6

20060 7

20070 8

20080 9

Annual Production( Lakh MT)

11.00

12.54

14.29

16.14

17.14

19.5

Market capitalization
India Biscuits Industry is the largest among all the food industries and has a turnover of around Rs.4350 crores.

Size of the industry

The production capacity of wafer biscuits is 60 MT and the cost is Rs.56, 78,400 with a motive power of 25 K.W. Indian biscuit industry has occupied around 55-60 % of the entire bakery production.The Indian Biscuit industry for the organized sector produces around 60% of the total production, the balance 40% being contributed by the unorganized bakeries. The industry consists of two large scale manufacturers, around 50 medium scale brands and small scale units ranging up to 2500 units in the country, as at 2000-01. The unorganized sector is estimated to approximately have 30,000 small & tiny bakeries across the country.

Total contribution to the economy/ sales

Biscuit industry contribute Rs 8,000 crore to the FMCG industry today, provides vast opportunity for growth, as the per capita consumption of biscuits is less than 2.1 kg in our country. India is classified under two sectors: organized and unorganized. Branded /Organized to Unbranded/Un organized market share of biscuit has been 70% for Organized sector and 30% for Unorganized sector. Apart from Big 3(Britannia, Parle, ITC) there are around 150 medium to small biscuit factory in India. (htt3)

Biscuit can he broadly categorized into the following segments: (Based on productions of 2000-01)

Sales

8% 12% 44% 13% Glucose Marie Cream Crackers Milk 10% 13% Others

The Biscuits market in India is estimated to be worth Rs. 100 billion. Glucose and milk biscuits account for 26-27% and 5-6% share respectively. Demand for biscuits is growing with the growing population. The market for cookies and cream biscuits growing at a very fast pace of over 25%.

The following figure represents the annual growth rate of the biscuit industry in India over the last few years:

Anuual Growth Rate of the Biscuit Industry in India

20% 15% 10% 5% 0% 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Annual Growth

Regional Overview of Biscuit Industry:

As regards the consumption pattern is concerned. surveys and estimates by industry from time to time indicate the average consumption scenario in the four Zones have been more or less close to each other, as below: Northern States: 28% Southern States: 24% Western States: 25% Eastern States: 23% (htt4)

Major Market Players

Major market players in India are as follows:
Britannia Parle Priyagold Anmol Sunfeast Biskfarm Dukes Cremica Priya Veeramani Bonn Bhagwati Raja Sobisco Madhabi (htt2)

FEDERATION OFBISCUIT MANUFACTIRE OFINDIA FBMI, Established in 1950, from gathering of CEOs of small, medium and largeBiscuit manufacturing organizations in the countrys capital city, the Federation of Biscuit Manufacturers of India, popularly known as FBMI has come to stay as the premier forum of the organized segment the biscuit industry in India, by virtue of itseffective servicing and result oriented activities, with the prime objective of protectingand promoting the interests and development of the Biscuit industry.The FBMI represents the organized biscuit industry consisting of small scale, mediumand large biscuit manufacturers located in all zones and all States of the country. As theapex body of the biscuit industry, the Federation strives to serve its members in particular and the biscuit industry in general. (htt5)

(ii) History of the Company

MohanLal Dayalji Chauhan in 1928 got an idea to go Germany and learn Confectionery making skills. Confectionaries are toffees, candies and sweets. Parle Pariwar serves more than 32biscuts candies and toffees. Shri Narottam Chauhan is the son of Mohanlal Dayalji who joined his fathers business and his efforts in making Parle more successful. There are more than ten thousand people working in Parle Pariwar. Parle-G is the number one biscuit in terms os selling in whole world. Parle Products company was founded in 1929 in British India. It was owned by the Chauhan family of Vile Parle, Mumbai. Parle began manufacturing biscuits in 1939. In 1947, when India became independent, the company launched an ad campaign, showcasing its Glucose biscuits as an Indian alternative to the British biscuits. The Parle brand became well known in India following the success of products such as the Parle-G biscuits and the Thums Up soft drink. The original Parle Company was split into three separate companies, owned by the different factions of the original Chauhan family: Parle Products, led by Vijay, Sharad and Anup Chauhan (owner of the brands Parle-G, Melody, Mango Bite, Poppins, Monaco and KrackJack) Parle Agro, led by Prakash Chauhan and his daughters Schauna, Alisha and Nadia (owner of the brands such as Frooti and Appy) Parle Bisleri, led by Ramesh Chauhan

All three companies continue to use the family trademark name "Parle". The original Parle group was amicably segregated into three non-competing businesses. But a dispute over the use of "Parle" brand arose, when Parle Agro diversified into the confectionary business, thus becoming a competitor to Parle Products. In February 2008, Parle Products sued Parle Agro for using the brand Parle for competing confectionary products. Later, Parle Agro launched its confectionery products under a new design which did not include the Parle brand name. In 2009, the Bombay High Court ruled that Parle Agro can sell its confectionery brands under the brand name "Parle" or "Parle Confi" on condition that it clearly specifies that its products belong to a separate company, which has no relationship with Parle Products.

The first plant of Parle was established in Mumbai i.e. Vile Parle, second at Bhadurgardh, third at Neemrana, fourth at Bangalore, fifth at Bhuj and sixth at Uttranchal. Small factories producing Parle products are also known as contract manufacturing units. These units are established at following places in India: Delhi, Rajasthan, Uttar Pradesh, Bihar Madhya Pradesh Gujarat, Maharashtra, Andhra Pradesh, Tamil Nadu and Karnataka. Thus, the plant we visited Lao More Biscuits Private Limited is one of the contract manufacturing units of Parle. Lao More Biscuits Private Limited was started in year 1991 Lao More Biscuits Private Limited is indulged in Job work for Parle-G as the name of the company is listed as LAO MORE BISCUITS PVT LTD / PARLE BISCUIT PVT LTD on many websites. It seems that the company follows B to B business model as they just manufacture the product there end target is not the consumer. They are the part of the Channel distribution of the Parle-G. Basically the firm is involved into the producing of the biscuits of Parle and the further distribution of these biscuits depends on the channel of distribution set by Parle. The firms major objective seems to be manufacturing and as it follows B to B model it does not require marketing of its product.
In 1991, Parle started his contract and manufacturing unit in Ahmedabad. This is known as Lao More biscuit Pvt Ltd. This factory is producing Parle G biscuits and Milk Shakti Biscuits.

The company is located at 1010-1011, Phase Iv, GIDC Industial Estate, Gayatri Mandir Lane, Naroda GIDC, Ahmedabad - 382330

6) Organizational Design

7) Operations
What are Operations? Jobs or tasks consisting of one or more elements or subtasks, performed typically in one location. Operations transform resource or data inputs into desired goods, services, or results, and create and deliver value to the customers. Two or more connected operations constitute a process, and are generally divided into four basic categories: (1) processing, (2) inspection, (3) transport, and (4) storage. What is Operations Management? Productions and operations management (POM) is defined as the design, operations and improvement of the transformation process, which converts the various inputs into the desired outputs of products and services. The term Production and operation management is being increasingly replaced simply by operations management, as the production function relating to the manufacturing organizations has become a part of operations. Operations management is a broad term which includes manufacturing as well as service organizations. Operations management also highlights the increasing importance of the service industry in the overall business environment. There is a growing need for the application of the principles of operations management in the service industry. (Bedi)

(i) Plant location

A factory or a plant is the manufacturing facility of a company. A warehouse is the storage facility of a manufacturing or a distribution company. The offices of a service sector company such as a courier company, bank or an insurance company are its facilities. The facility location decision is very important for big business houses as well as new entrepreneurs. Wrong location of the facility may lead to a failure of the complete project. (Bedi) Lao More Biscuits Private Limited is located at 1010-B/1011-A, GIDC Industrial Estate, Naroda, Ahmedabad

Proximity to Airport and Railway station: (Availability of Transportation facilities)

Ahmedabad Airport to GIDC Naroda:

Road Distance or driving distance from Ahmedabad Airport to Gidc Naroda is 7 kms(4.00 miles). Your total travel time is approximately 0 hour(s) 12 min(s); which may vary depending upon the road and traffic conditions. (htt6) Ahmedabad Railway Station and Highway to GIDC Naroda:

Road Distance or driving distance from Ahmedabad Railway Station to Gidc Naroda is12 kms (8.00 miles). Your total travel time is approximately 0 hour(s) 22 min(s); which may vary depending upon the road and traffic conditions.

Road Distance or driving distance from Ahmedabad to Gidc Naroda is 17 kms (10.00 miles). Your total travel time is approximately 0 hour(s) 26 min(s); which may vary depending upon the road and traffic conditions. (htt6) Before when Octroi use to be charged that time to transport goods from GIDC to inner Ahmedabad areas and outside Ahmedabad also company was suppose to pay Octroi and Excise duty charges but before two years these charges were removed by government so now they even enjoy benefit of no more Octroi and excise duty.

An ideal location is one where the cost of product is kept minimum, with a large market share, least risk and maximum social gain. The location of Lao More Biscuit Private Ltd. is suitable because every facility is available nearby. 1) Availability of Electricity Gujarat is one of the few states in India that do not have a power deficit. The government has ensured that basic utilities are easily available to industries. The electricity is procured via Gujarat electricity Board.

2) Availability of Gas The daily requirement of the production is not sufficient by Gujurat Gas Ltd.

3) Availability of water

Since April 2005, by signing an Agreement with the GIDC, NIA has started participating in the objective of the Water Supply Scheme in the Estate with a sole objective of regular Supply of water at most reasonable rates. The success of the involvement of NIA in the Scheme has prompted the GIDC authorities to offer to NIA to run the Water Supply Scheme by SPV Naroda Utilities Service - Water Supply Scheme. Hence from March, 2009, NUS has taken over Water Supply Scheme from GIDC and operating successfully.
(htt7)

4) Availability of Raw Material As the plant is only 17 kilometers far from Ahmedabad highways and to National Highway-8 joining Ahmadabad, Mumbai and Kandla Port, Mundra port. And is closer to S.P Ring road surrounding the Ahmedabad so its easy for company to reach outside Ahmedabad. As the company does job work for Parle and gets raw material from Parle Pariwaar and as the parent plant of Parle is located in Mumbai i.e. Vile Parle so by using National Highway-8 and S.P. Ring Road raw materials can be easily transported to this plant.

5) Transport Facilities Due to industrial development, logistics and transport facilities are well developed in Gujarat.

6) Availability of cheap, skillful and efficient labour As Gujarat is becoming an industrial hub, availability of manpower is hardly a concern around GIDC.

7) Other Benefits: Environmental and community considerations Easy avaibility of cheap land Less construction costs

(ii)Product Portfolio

A product portfolio is comprised of all the products which an organization has. A product portfolio may comprise of different categories of products, different product lines and finally the individual product itself. Management is needed on all the three levels of a product portfolio. You need managers for managing individual products, managing product lines and finally the top level management which manages the complete portfolio. Lets look at an organization from a macro angle. An organization is comprised of a number of different departments, all focused towards one goal the betterment of the organization. In the same manner, your product portfolio should be such that each and every product in the portfolio is focused towards one goal Bringing the organization on top by optimally using the resources available.As an organization is comprised of different products, it becomes difficult to manage all of them. Thus, there needs to be a hierarchy. This is where product portfolio management steps in. (Kotler) Before discussing the Product portfolio of Lao More Biscuits Private Limited I would like to highlight Product portfolio of Company Parle. As Lao More Biscuits Pvt. Ltd. does job work for Parle so first let us have a look on what all products are produced by Parle and then will look products outsourced by Parle to Lao More for producing, so the product portfolio of Parle is as follows:

Product portfolio of Parle Product line Product name

Parle G,Kreams, Monaco, Milano, Hide & Seek, Parle Actifit Digestive, Marie, Bourbon, Milk Shakti, 20-20 Cookies, Nimkin Festo, Golden Arcs, Happy Happy, Top, Coconut, Hide & Seek Fab,Other Biscuits KrackJack,Jam-In

Biscuits

Sweets Snacks

Londonderry,Mango Bite, Melody, Chox, Kaccha Mango Bite, Poppins Mazelo, Other Sweets
Parle's Wafers, Fulltoss, Namkeen, Other Snacks

Parle Pariwar produces more than 32 products and as it cannot produce all the products on its own it outsources work to various units in different regions so Lao More Biscuits Pvt. Ltd. is one of those various companies who do job work for parle. Thus, the product portfolio of Lao More Biscuits Private Limited is as follows: Product Portfolio of Lao More: Product line Biscuits Product name Parle-G and Parle 20-20

Products produced at Lao More Biscuits Pvt. Ltd. are Parle-G and Parle 20-20.

 Daily 60 lakhs of each are produced in total plant produces one crore twenty lakh biscuits daily. In one minute 120 packets are produced. Parle-G: Parle-G or Parle Glucose biscuits, manufactured by Parle Products Pvt. Ltd, are one of the most popular biscuits in India. Parle-G is one of the oldest brand names as well as the largest selling brand of biscuits in India. For decades, the product was instantly recognized by its iconic white and yellow wax paper wrapper with the depiction of a young girl on the front. Parle-G has been a strong household name across India. The great taste, high nutrition, and the international quality, makes Parle-G a winner. No wonder, it's the undisputed leader in the biscuit category for decades. Parle-G is consumed by people of all ages, from the rich to the poor, living in cities & in villages. While some have it for breakfast, for others it is a complete wholesome meal. For some it's the best accompaniment for chai, while for some it's a way of getting charged whenever they are low on energy. Because of this, Parle-G is the world's largest selling brand of biscuits. Launched in the year 1939, it was one of the first brands of Parle Products. It was called Parle Glucose Biscuits. Quality is the cornerstone of Parle-Gs success. The Parle-G initiated the process of getting ISO 9000 certification to get the larger share of the global market. At the same time, the company has tried adding value to its product in the form of experiences. The company publishes recipes of preparations that can be made with its products. This has resulted into Parle-G being the Worlds Largest Selling Biscuit.

Parle 20-20
20-20 cookies are baked to a golden brown crispiness to melt in the mouth and leave you with the taste of perfection. 20-20 cookies mainly focus tea times! It is available in different types they are: Butter Cashew

20-20 Butter is available at Rs. 5, Rs. 10 and Rs. 18 20-20 Cashew is available at : Rs. 5, Rs. 10, Rs. 20

(iii) Material & Inventory Management:

Materials and inventory management is the cornerstone of effective supply chain management. When the proper inventory management methods and material management system are in place, enterprises can enjoy the benefits of strategic cost management. People, process, and automation infrastructure all play key roles in proper materials and inventory management. Without all of the three legs, you have an unstable foundation for your business. (htt8) Raw Materials: A material or substance used in the primary production or manufacturing of a good. Raw materials are often natural resources such as oil, iron and wood. Before being used in the manufacturing process raw materials often are altered to be used in different processes. Raw materials are often referred to as commodities, which are bought and sold on commodities exchanges around the world. Raw materials are sold in what is called the factor market. This is because raw materials are factors of production along with labor and capital. Raw materials are so important to the production process that the success of a country's economy can be determined by the amount of natural resources the country has within its own borders. A country that has abundant natural resources does not need to import as many raw materials, and has an opportunity to export the materials to other countries. (htt10)

As Lao More Biscuits Private Limited does job work for Parle so the Raw Materials are decided, provided and sent by Parle Company itself. Here deciding of raw materials means that which raw materials will be put and in which quantity are decided by Parle, they even Provide and specify some particular places or outlets from where raw material is to be taken. For example, if Parle says that if you are suppose to purchase sugar from Xyz dealer then these CMUs are suppose to get sugar from that place only. Some raw materials are even sent by Parle directly to plants like Lao More. The reason why Parle decides everything related to

Raw Materials is to maintain standardization among the products all over the world wherever customer consumes Parle product he finds it same as he had it in his home town. Products Produced by Lao More Biscuit Private Limited are Parle-G and Parle 20-20 biscuits. So, ingredients i.e. raw materials which are prescribed and provided by Parle for the respective products are as follows: Parle-G: Wheat Sugar Vanaspati Milk Wheat flour Partially hydrogenated edible vegetable oils Invert syrup Leavening agents (503 Baking powder) Milk solids Salt Emulsifiers (E 322 or E 471 or E 481) Dough conditioners (E 223) and contains added flavors

Semi-Processed Materials: Semi-processed materialsstock-able items (meaning they have their own unique item number) that have gone through some processing, but will be later pulled from stock and undergo additional processing. (htt9) Products produced by Lao More Biscuits Pvt. Ltd. have no semi-processed products. Once raw materials are used then they directly come out as a final product.

Machinery: Follwing are the machinery used in manufacturing: STEPHEN MIXER The Stephan TK Mixer is an ideal component to fully automatically feed the down-stream makeup equipment for biscuits, bread, rolls, buns, cake, sweet goods, cookies and crackers. This machine was on the ground floor, it was a kind of well in which all raw materials are mixed and dough gets ready and then that ready dough comes up. All these functions are performed by machine. ROTARY MOULD structure in corrosion-proof; anodized aluminumand Aisi 304 stainless steel satin stainless steel paneling swivel wheels and support feet trays loader with automatic chain feed feeder roller anodizedaluminum kW speed validator

It moulds the biscuit and gives symbol to the biscuits. COOLING CONVEYOR The biscuit coming from stripping conveyor is directed on to the cooling conveyor to transfer the heat in the biscuit to atmospheric air as it is passing on it. The total travel of the cooling conveyor is 1.5 times the oven length. As per need specifications it need the travel of 150 ft.

LAMINATOR Laminators are generally used for production of all kinds of hard biscuits, crackers and cocktail snacks. With laminator it is possible to create a puffy pastry-like structure, which is of decisive importance for the quality level and consequently for the sales success. Laminating of Dough band improves the weight/volume ratio considerably. BISCUIT BAKING OVEN The oven body consists of steel steam tight tunnel with equally divided zones of the radiators. Stainless steel expansion joints are provided between these zones in order to eliminate the expansion of the oven section. The inspection doors are provided for inspection of the baking goods during the process.

Baking System: The baking in the heating chamber takes place by radiators located under and above the wire mesh band which distribute heat for uniform baking. The recirculation heating gases of these radiators can be controlled for each zone separately. The closed recirculation system is having slight vacuum so that combustion gases cannot enter into the baking chamber. The ventilating fan is for circulation of the heating gases through the recirculation system and thermostatically controlled burners provide the set temperature of the heating gases.

ROTARY CUTTER The single head rotary cutter prints fine design on a continuously fed dough sheet and also cuts out the individual dough piece. The unit powered by 1.5KW helical geared motor and speed controlled by AC frequency controller. Drive is given to cutting roller only to accommodate different sizes of dies in this machine. COUNTING UNIT The counting unit counts and see that the biscuit making process is going fine or not, i.e. as per the program set in the machine, program is set as per the grams required. Generally 16 biscuits are taken by the counting unit so that it leads to 100 grams. MULTIPACK WRAPPING MACHINE This machine helps in wrapping the biscuits on the particular wrapper fixed on the roller of the machine. The wrapper is feed into the machine and the sealing of the wrapper is done by four heater roller, which is fitted on the machine. This heater roller heat up the plastic and seals the packet. And at the same time the jaw cutter cut the packet on the cutting edge marked i.e. as per the grams of the packet which is feed in the automatic machine (100 120, 120 150, 150 -170, 170 - 190). The packets coming out from the wrapping machine in a minute is programmed in computer and can be changed as per the need. POLY BAGS Poly bags contain 24 packets of parle g biscuits in one poly bag. There are 4 workers employed on this section who take care of the work by putting 24 packets of biscuits in the bag and forwarding it to sealing machine section. SEALING MACHINE The sealing machine has heater rod for sealing the poly bag in which 24 packet of biscuit are placed, and it have a conveyer belt on other side so that when the poly bag passes through the heater and get sealed then it is passed to the tapping machine.

TAPPING MACHINE Six such poly bags are placed in one such corrugated box and the box is passed through the tapping machine where are tapped and then sent through a long diversion conveyer belt. This belt helps to transfer the box to the dispatch section directly. 36 boxes are arranged on pallet in the dispatch section, from where they are transferred to the various dealers all over the India and worldwide. Suppliers: Suppliers or providers are someone whose business is to supply a particular service or commodity. They are the one who provide Materials to the unit to manufacture the final product. There are no specific suppliers of Lao More Biscuits as the Raw materials are provided by Parle so in that sense Parle can be the supplier of Lao More. Logistics: Logistic means: The detailed coordination of a complex operation involving many people, facilities, or supplies. The organization of moving, housing, and supplying troops and equipment.

Thus Lao More has logistics like the facility (plant), workers and employees and machines which helps in production. The plant and machines are owned by Lao More Biscuits Private Limited and the workers and employees are also paid by Lao more Biscuits Private Limited thus, they are employees of Lao More.

(iv) Production Process

8) Marketing
What is marketing? Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of marketing is meeting needs profitably Marketing is the set of human activities directed at facilitating and consummating exchanges." - Philip Kotler ("Marketing Management") The application, tracking and review of a company's marketing resources and activities.The scope of a business' marketing management depends on the size of the business and the industry in which the business operates. Effective marketing management will use a company's resources to increase its customer base, improve customer opinions of the company's products and services, and increase the company's perceived value. (www)

(i)

4Ps of marketing

It is useful in manufacturing companies for marketing strategy.

1. Product
The product is defined as a "thing produced by labor or effort or result of an act or a process." Something produced by human or mechanical effort or by a natural process. The physical product itself is part of product as well as any packaging it arrives in. It involves Varity, quality, design, feature, brand name, packaging, sizes etc. It is a key and essential thing in the business without which business cannot run. Product involved its style, packing, quality, usage etc. Products produced at Lao More Biscuits Pvt. Ltd. are Parle-G and Parle 20-20. Daily 60 lakhs of each are produced in total plant produces one crore twenty lakh biscuits daily. In one minute 120 packets are produced. Parle-G: Parle-G or Parle Glucose biscuits, manufactured by Parle Products Pvt. Ltd, are one of the most popular biscuits in India. Parle-G is one of the oldest brand names as well as the largest selling brand of biscuits in India. For decades, the product was instantly recognized by its iconic white and yellow wax paper wrapper with the depiction of a young girl on the front. Parle-G has been a strong household name across India. The great taste, high nutrition, and the international quality, makes Parle-G a winner. No wonder, it's the undisputed leader in the biscuit category for decades. Parle-G is consumed by people of all ages, from the rich to the poor, living in cities & in villages. While some have it for breakfast, for others it is a complete wholesome meal. For some it's the best accompaniment for chai, while for some it's a way of getting charged whenever they are low on energy. Because of this, Parle-G is the world's largest selling brand of biscuits. Launched in the year 1939, it was one of the first brands of Parle Products. It was called Parle Glucose Biscuits. Quality is the cornerstone of Parle-Gs success. The Parle-G initiated the process of getting ISO 9000 certification to get the larger share of the global market. At the same time, the company has tried adding value to its product in the form of experiences. The company publishes recipes of preparations that can be made with its products. This has resulted into Parle-G being the Worlds Largest Selling Biscuit.

Parle 20-20
20-20 cookies are baked to a golden brown crispiness to melt in the mouth and leave you with the taste of perfection. 20-20 cookies mainly focus tea times! It is available in different types they are: Butter Cashew

2. Price :
Price is the quantity of payment or compensation given by one party to another in return for goods or services. In modern economies, prices are generally expressed in units of some form of currency.

Parle-G is available at Rs. 2, Rs. 3, Rs. 4, Rs. 5, Rs. 10, Rs. 20, Rs. 40 and Rs. 50 20-20 Butter is available at Rs. 5, Rs. 10 and Rs. 18 and 20-20 Cashew is available at : Rs. 5, Rs. 10, Rs. 20.

Parle-G and 20-20 available at different prices:

3.Physical Distribution:
In ordinary words, physical distribution of goods refers to accomplishment of those activities through which time and utility is created for goods and it is made available to consumers or users. In other words it includes production of goods, storing the goods actually before consumption and to deliver it from one place to another. In words of Mccarthy, Physical distribution is the actual handling and moving of goods within individual firms and along channel systems. According to Stanton, Physical Distribution involves the management of the physical flow of products and the establishment and operation of flow system.

As Lao More does job work for Parle and it plays a role of a channel member and has
business to business product so they dont need to send product to anyone as transportation of goods is done by Parle. All the transportation decisions and to whom to be transported at what time in how much quantity is decide by Parle and transportation cost is even incurred by Parle.

4. Promotion:
Promotions are categorized into push versus pull. Advertising pulls by making the consumer aware of and ask for your product or service. The specification of five elements creates a promotional mix or promotional plan. These elements are personal selling, advertising, sales promotion, direct marketing, and publicity. Lao More Biscuits Private Limited has Business to Business Product as they just manufacture the product there end target is not the consumer. And as they do job work for the Parle they dont promote the product they are the part of Channel of Parle their role is just to manufacture the product as guided by Parle. There tasks get over once product is ready and packed further distribution of the product its promotion and its transportation is headache of Parle.

(ii)

Segmentation/ Target customers/ Positioning

What is Segmentation? Segmentation refers to a process of bifurcating or dividing a large unit into various small units which have more or less similar or related characteristics. Market Segmentation Market segmentation is a marketing concept which divides the complete market set up into smaller subsets comprising of consumers with a similar taste, demand and preference. A market segment is a small unit within a large market comprising of like minded individuals. One market segment is totally distinct from the other segment. A market segment comprises of individuals who think on the same lines and have similar interests. The individuals from the same segment respond in a similar way to the fluctuations in the market.

Level of market segmentation Parle-G is consumed by people of all ages, from the rich to the poor, living in cities& in villages. While some have it for breakfast, for others it is a complete wholesome meal. For some it's the best accompaniment for tea, while for some it's a way of getting charged whenever they are low on energy. Parle company practices mass marketing for Parle- G which appeals to masses. It is a product liked by everyone and does not cater only to a specific group or part of the whole market. Thus it is mass production, mass distribution and mass promotion of Parle- G for all buyers. However, Parle follows Niche marketing for Hide & Seek. It is a premium product since it is priced at a high price and also with its chocolate flavor it is accepted by most chocolate lovers. When hide & seek was first launched, there were no other biscuits of its kind in the market. Parle products are segmented even through price and are available at

Rs. 1, Rs. 2, Rs. 3, Rs. 4, Rs. 5, Rs. 10, Rs. 20, Rs. 30, Rs. 40 and Rs. 50.

Market segmentation Geographic segmentation: Parle-G is consumed by people staying in urban, semi urban and rural areas.Hide & Seek however, being a premium product having a high price is consumed only in urban and semi urban areas Demographic segmentation: Age-Hide n Seek is mainly for youth and children. Parle-G is however consumed by everyone. Income-Hide n Seek being highly priced is consumed only by high income group. Whereas Parle-G is consumed by all income groups, but is mostly consumed by the lower and middle income groups. Social class-Hide & Seek is meant for middle class and rich class families. However one can also say that Parle-G is consumed only by lower n middle class consumers because rich class can afford more expensive biscuits. Behavioral segmentation: Benefit sought-The benefit sought in Parle-G is mainly replenishing energy and for Hide & Seek it is good taste. Pattern of market segmentation: (Preference: Clustered) If we divide the whole market on basis of their preferences foe sweetness and saltiness in the biscuits then the possible outcome would be that the preferences are clustered near some tastes i.e. the consumers would not like to have something really vague like 50%salty, 25%sweet and 25%creamy.That is why the preferences are clustered and not diffused wherein the preferences have to be very extreme and vague.Parle as a company makes use of this clustered preferences and manufactures biscuits for each and every cluster. For e.g. Monaco for entirely salty biscuits and its latest product Krackjack-cream is for sweet and salty taste.

Target customer Somebody expected to buy product: a customer of a type considered likely to buy a particular product. A 'target market or target Audience is the market segment which a particular product is marketed to. It is often defined by age, gender and/or socio-economic grouping. Market Targeting is the process in which intended actual markets are defined, analyzed and evaluated just before the final decision to enter is made. A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element to a marketing strategy. The target market and the marketing mix variables of product, place(distribution), promotion and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace. Organizations exist for one purpose to meet human needs. Thriving organizations do that exceedingly well. Venerated organizations have managed to meet evolving human needs over a long period of time. All of an organizations revenues and profits result from one thing customers who are willing to pay money for products and services that meet their needs. Any brand management initiative, any marketing initiative, and indeed any business or organizational initiative must start with a solid understanding of the customer. Following are the target customer attributes: Demographics Lifestyle Needs/desires Hopes/aspirations Fears/concerns Product purchase behavior Product usage behavior (htt11) PARLE Company as a whole inculcates SELECTIVE MARKET SPECIALIZATION strategy. It has one product i.e. Parle-G targeting all the three markets (classes) i.e. rich, middle class and

poor and it has Hide & Seek as a product where it targets only one market (rich) and it has Krackjack biscuits where the product is targeting two markets(rich and middle class).

Primary Target Customers: Kids as they are fond of fruit juice. Teens as they are more experimental in comparison to all consumers. Youth experimental and more purchasing power Working People Housewives Elderly people

Secondary Market: Travel industry- airlines, railways and local transport systems Recreational-Movies, theaters, malls, etc.

Positioning A marketing strategy that aims to make a brand occupy a distinct position, relative to competing brands, in the mind of the customer. Companies apply this strategy either by emphasizing the distinguishing features of their brand (what it is, what it does and how, etc.) or they may try to create a suitable image (inexpensive or premium, utilitarian or luxurious, entry-level or high-end, etc.) through advertising. Once a brand is positioned, it is very difficult to reposition it without destroying its credibility. Also called product positioning. (www1) Positioning strategy for Parle-G : Parle-G is positioned in the minds of people as a value for price product and also as a low-priced product. Whereas hide & seek has tapped a new market.

(iii)

Competion Ananlysis

Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. Competitor profiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and adjustment. As the Lao More Biscuits Private limited does the job work for Parle and has a business to business product it has no competitors.

9) Human Resource
HRM encompasses the management of people in organizations from a macro perspective i.e. managing people in the form of a collective relationship between management and employees. This approach focuses on the objectives and outcomes of the HRM function. What this means is that the HR function in contemporary organizations is concerned with the notions of people enabling, people development and a focus on making the employment relationship fulfilling for both the management and employees. (htt12)

(i)

Personnel Policies

A set of rules that define the manner in which an organization deals with human resources. A personnel policy should reflect good practice, be written down, be communicated across the organization, and should adapt to changing circumstances.

In Lao More Biscuits Private Limited, Number of employees: There are 200 to 215 workers out of which 35 to 40 are ladies. There are two types of worker contract based and company workers. Contract based workers are temporary workers while Company workers are permanent workers Employees hierarchy: Employees hierarchy at Lao More Biscuits Private Limited is as follows:
Director General Manager Manager

Shift Incharge

Supervisor

Workers

Work timings: The plant is on 24 hours. There are two shifts of working. Each shift is works from 8 to 8. Womens are left one hour prior i.e at 7 p.m. Working Conditions: They are given caps and mostly at all stages they are suppose to stand and observe there are no special facilities for workers they are given one hour break and there are sanitation facilities. The work place is airy not conjusted mostly work is mechanised at very few stages labor work is to be done. Safety Measures: There are no specific safety measures, but if any accident takes place in the premises of the plant then the company pays accident compensation to that worker. Leave: The plant is close on Tuesdays. At Tuesday evening 8 p.m plant again gets on. There are no holidays even on public holidays like Republic Day. During Diwali plant is close for 3 days so employees get three days paid leave. Promotion: As there are mainly workers in the unit who work at same level so, there are less promotion opportunities. Incentives: Incentives are given only to the Company workers (Permanent workers). They are given benefits of Vima (Insurance), Picnic. Rewards: Gifts are given if good work is done. Workers Salary: Rs.5000 to Rs. 5,500

(ii) Recruitment
Recruitment: The process of identifying the qualified and skilled people for a particular task or function within in the organization is known as recruitment. There are two way of recruitment: Internal recruitment - from the internal means the employee from the own organization, the x-employee, any relative of any employee.

External recruitment from external there should from online, recruitment offices, colleges, newspaper, etc. (Mary) In Lao More Biscuits Private Limited , Workers are recruited above 18 years of age. There are no specific qualification required for workers they are trained at plant only what and how to do. The workers are recruited through workers references,relatives from near by area. Till now they had no problem in avaiblity of workers

(iii) Training and Development

Conventional 'training' is required to cover essential work-related skills, techniques and knowledge, and much of this section deals with taking a positive progressive approach to this sort of traditional 'training'. Importantly however, the most effective way to develop people is quite different from conventional skills training, which let's face it many employees regard quite negatively. They'll do it of course, but they won't enjoy it much because it's about work, not about themselves as people. The most effective way to develop people is instead to enable learning and personal development, with all that this implies. So, as soon as you've covered the basic work-related skills training that is much described in this section - focus onenabling learning and development for people as individuals - which extends the range of development way outside traditional work skills and knowledge, and creates far more exciting, liberating, motivational opportunities - for people and for employers. Rightly organisations are facing great pressure to change these days - to facilitate and encourage whole-person development and fulfilment - beyond traditional training. It is a subsystem of an organization. It ensures that randomness is reduced and learning or behavioral change takes place in structured format. In Lao More Biscuits Private Limited, Workers after recruiting and selected are trained for 8 days. These 8 days they are just suppose to understand and observe how work is done so as to get clear understanding of the work carried out. These 8 days of training are paid days for workers. And for the existing workers there is training session every month so as to develop these workers and improve their efficiency in order to increase the efficiency of work of the plant.

10) Finance
(i)Capital Structure
In finance, capital structure refers to the way a corporation finances its assets through some combination of equity, debt, or hybrid securities. A firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells Rs. 20 billion in equity and Rs.80 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example is referred to as the firm's leverage. In reality, capital structure may be highly complex and include tens of sources. Capital Structure is a mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.

Debt comes in the form of bond issues or long-term notes payable, while equity is classified as common stock, preferred stock or retained earnings. Short-term debt such as working capital requirements is also considered to be part of the capital structure. The term capital structure refers to the percentage of capital (money) at work in a business by type. Broadly speaking, there are two forms of capital: equity capital and debt capital. Each has its own benefits and drawbacks and a substantial part of wise corporate stewardship and management is attempting to find the perfect capital structure in terms of risk / reward payoff for shareholders. Since capital is expensive for small businesses, it is particularly important for small business owners to determine a target capital structure for their firms. Capital structure decisions are complex ones that involve weighing a variety of factors. In general, companies that tend to have stable sales levels, assets that make good collateral for loans, and a high growth rate can use debt more heavily than other companies. On the other hand, companies that have conservative management, high profitability, or poor credit ratings may wish to rely on

equity capital instead. Thus, Capital Structure consists of total share capital, reserves, secured loans and unsecured loans.

(ii) Basic Ratios

Any successful business owner is constantly evaluating the performance of his or her company, comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of your company's effectiveness, however, you need to look at more than just easily attainable numbers like sales, profits, and total assets. You must be able to read between the lines of your financial statements and make the seemingly inconsequential numbers accessible and comprehensible. Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability, liquidity, financial structure, reordering, leverage, and interest coverage. Although ratios report mostly on past performances, they can be predictive too, and provide lead indications of potential problem areas. Ratio analysis is a widely used tool. It is defined as the systematic use of ratio interpret the financial statements so that the strength and weakness of a firm as well as its historical performance and current financial condition can be determined. Ratios can be classified into five types they are as follows:
Liquidity Ratios Leverage Ratios Profitability Ratios Turnover Ratios Valuation Ratios

Liquidity ratio
Liquidity ratio shows the company's ability to repay short-term creditors out of its total cash. Liquidity means ability to clear the current liabilities. The liquidity ratio is the result of dividing the total cash by short-term borrowings. It shows the number of times short-term liabilities are covered by cash. If the value is greater than 1.00, it means fully covered. Liquidity means ability of a firm to meet its current liabilities. The liquidity ratios, therefore, try to establish a relationship between current liabilities, which are the obligations soon becoming due and current assets, which presumably provide the source from which these obligations will be met. The failure of a company to meet its obligations due to lack of adequate liquidity will result in bad credit ratings, loss of creditors confidence or even in law suits against the company. The grater the coverage of liquid assets to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its ongoing operations. On the other hand, a company with a low coverage rate should raise a red flag for investors as it may be a sign that the company will have difficulty meeting running its operation, as well as meeting its obligation. Investor look at liquidity ratios to determine the ability of a business to pay off its short term obligations from cash or near cash assets to evaluate the risk associated if were to invest in this company. Failure to pay off short term obligation may result in financial difficulty or bankruptcy in near future.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern. Different analysts consider different assets to be relevant in calculating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most likely to be used to cover short-term debts in an emergency.

Generally, the higher the value of the ratio, the larger the margin of safety the company possesses to cover short-term debts. The greater the coverage of liquid assets to short-term liabilities the better as it is a clear signal that a company can pay its debts that are coming due in the near future and still fund its ongoing operations. On the other hand, a company with a low coverage rate should raise a red flag for investors as it may be a sign that the company will have difficulty meeting running its operations, as well as meeting its obligations.

The following rations are commonly used to indicate the liquidity of the company:

(1) Current Ratio This ratio is most commonly used to perform the short-term financial analysis. Also known as the working capital ratio, this ratio matches the current assets of the firm to its current liabilities. The ratio between the Current Assets and Current Liabilities of the firm. The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. Ideal value for this is 1; anything less indicates the inability of the firm to service its short term obligations. Current Assets: Current assets include: (a) Cash in hand and at bank, (b) Readily marketable securities, (c) Bills Receivable, (d) Debtors less provision for bad and doubtful debts, (e) Stock in trade, (f) Prepaid expense, (g) Any other asset, which, in the normal course of business, will be converted in cash in a years time Current liabilities: These include all obligations maturing within a year, such as : (a) Sundry Creditors (b) Bills Payable (c) Bank Overdraft (d) Income tax Payable (e) Dividends Payable (f) Outstanding expenses (g) Provision for taxation (h) Unclaimed dividends. Formula:

Significance and Objective of Current Ratio: Current ratio throws good light on the short-term financial position and policy. It is an indicator of a firms ability to promptly meet its short-term liabilities. A relatively high current ratio indicates that the firm is liquid and has the ability to meet its current liabilities. On the other hand, a relatively low current ratio indicates that the firm will find it difficult to pay its bills. Normally a current ratio of 2:1 is considered satisfactory. In other words, current assets should be twice the amount of current liabilities. If the current ratio is 1:1, it means that funds yielded by current assets are just sufficient to pay the amounts due to various creditors and there will be nothing left to meet the expenses which are being currently incurred. Thus the ratio should always be more than 1:1. A very high current ratio is also not desirable because it indicates idleness of funds which is not a sign of efficient financial management. (2) Quick Ratio This ratio is also known as acid test ratio or liquid ratio. It is a more severe test of liquidity of a company. It shows the ability of a business to meet its immediate financial commitments. It is used to supplement the information given by the current ratio.It is the ratio between the most liquid current assets and current liabilities. All current assets except inventory are considered liquid, so for this purpose inventory is subtracted from the current assets. It is a more conservative estimate of a firms short term paying capacity. A quick ratio of 2 is considered ideal.

Quick assets and quick liabilities: The quick assets include cash, debtors (excluding bad debts) and securities which can be realized without difficulty. Stock is not included in quick assets for the purpose of this ratio. Similarly, prepaid expenses are also excluded as they cannot be converted into cash. Liquid or quick liabilities refer to all current liabilities except bank overdraft. Formula:

Significance and Objective of Quick Ratio: Quick ratio is a more rigorous test of liquidity of a firm that the current ratio. When quick ratio is used along with current ratio, it gives a better picture of the firms ability to meet its short-term liabilities out of its short-term assets. This ratio is of great importance for banks and financial institutions. Generally a quick ratio of 1:1 is considered to represent a satisfactory current financial position. On account of such a low ratio, the business may find itself in serious financial difficulties.

LEVERAGE RATIO
What is leverage? Leverage allows a financial institution to increase the potential gains or losses on a position or investment beyond what would be possible through a direct investment of its own funds. There are three types of leveragebalance sheet, economic, and embeddedand no single measure can capture all three dimensions simultaneously. The first definition is based on balance sheet concepts, the second on market-dependent future cash flows, and the third on market risk. Leverage ratio: Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses. Leverage ratios are also known as gearing ratios or solvency ratios or capital structure ratios. These are used to analyze the long-term solvency of any particular business concern. There are two aspects of long-term solvency of a firm- (i) ability to repay the principal amount when due and (ii) regular payment of interest. In other words, long-term creditors like debenture holders, financial institutions, etc., are interested in the security of their loan amount as well as the ability of the company to meet interest costs. They, therefore, also consider the earning capacity of the company to know whether it will be able to pay off interest on loan amount. Liquidity ratios discussed earlier indicate short-term financial strength, whereas solvency ratios judge the ability of a firm to pay off its long-term liabilities. Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses.

A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income.

Companies with high fixed costs, after reaching the breakeven point, see a greater increase in operating revenue when output is increased compared to companies with high variable costs. The reason for this is that the costs have already been incurred, so every sale after the

breakeven transfers to the operating income. On the other hand, a high variable cost company sees little increase in operating income with additional output, because costs continue to be imputed into the outputs. The degree of operating leverage is the ratio used to calculate this mix and its effects on operating income. It is the degree to which an investor or business is utilizing borrowed money. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Leverage is not always bad, however; it can increase the shareholders' return on investment and often there is tax advantages associated with borrowing. These ratios deal with debt - that is, the funds borrowed by a business to finance the purchase of its assets. Important solvency ratios are discussed below: Leverage ratio consists of various ratios as follows: Debt Equity Ratio Capital Employed Ratio Fixed Interest Coverage Ratio

(1)Debt-Equity Ratio It is the ratio between the Total debt and Total shareholders funds (excluding preference capital) of the company. It throws some light on the extent to which the companys growth is leveraged or supported by debt. Aggressive companies tend to have a higher debt equity ratio. This ratio changes from industry to industry. Industries that are capital intensive in nature have debt equity ratios as high as 2. Formula:

(2)Capital Employed to Net Worth Ratio It is the ratio between the capital employed and net worth of the company. Here, capital employed = Shareholders funds + debt funds secured loans. This compares the shareholders funds to the total funds employed in the business without hypothecation. Formula:

(3) Fixed Interest Coverage Ratio It is the ratio between the EBIT (Earnings before Interest and Tax) & the annual interest payment of the company. It determines the number of times a company can clear its interest payment obligations at the current level of EBIT. An interest coverage ratio below 1 indicates the company is not generating sufficient revenues to satisfy interest expenses. It is a measure of long term solvency of the business. Interest costs which are a periodic expenditure for a long term borrowing are indicative of the financial health as any inability to make interest payments will result in default and lead to legal action. Formula: