INDEX

 Title Page
 Certificate
 Acknowledgement
 Declaration
 Introduction
 Industry profile
 Introduction to the Company
 Introduction to the Topic
 Research Methodology
 Analysis and Interpretation
 Conclusion
 Bibliography
 Annexure

1
 Introduction
Well, in simple terms, room inventory is basically a calculation: The number of rooms a hotel has
MINUS the amount of rooms sold. = the number of rooms available for a particular day

If development capital is what establishes a business Inventory Management is what keeps

it going. One of the most common downfalls of business is unexpectedly high running cost.
What is important is not just the size of operating costs, but the cash flows – that is when
money has to be paid out in relation to the stream of income arriving in. Thus Inventory
Management is of prime importance.
This project is a small attempt to study the Inventory management RADISSON HOTEL
VARANASI. The project can be divided into two sections. First is the analysis of inventory
management position of the company using ratio analysis and second is the study Inventory
management techniques.
Ratio analysis has been done on the basis of three years data. For calculating various ratios 300
days have been taken as number of working days after deducting Sundays and holidays except
for 2016-17, 2018-19 where 375 days have been taken. Reason being the company has changed
its financial year from 2016-18 therefore balance sheet figures for 2017-19 comprises of 15
months. Ratios have been discussed to compare inventory management performance over the
years and to comment and not the absolute values. Therefore figures have not been converted
into 12 months in this report. To analyze the performance, published balance sheets of
RADISSON HOTEL VARANASI have been used. This project report is based on financial data
up to 2017-18 only. Apart from liquidity and activity ratios cash and loans & advances has been
discussed separately as these two appears to be crucial in Liberty inventory management
analysis.

2
 INDUSTRY PROFILE

HOSPITALITY AND TOURISM INDUSTRY IN INDIA

The Hospitality and Tourism sector in the Indian subcontinent earns a huge amount
of importance in the service industry. The segment enjoys the benefit of its
attractiveness, given the unparalleled cultural, historical, ecological diversity and
depth of heritage of India. Icing on the cake, the growing disposable incomes in the
hands of the people has consistently given a new opportunity of expansion to the
industry.
The hospitality and tourism sector not only mobilizes higher level of employment,
but also attracts major contribution to foreign exchange inflow in the country. In
January 2018, the segment‘s forex increased by 17.6% in just one year.
The Hospitality industry happens to be one of the largest revenue generators in the
economy due to the variety of businesses. It is an umbrella industry which
includes:

 Air and land travel

 Hotel

 Food and beverage

 Entertainment such as movies/theatre/sports

 Tourist attractions

Market Size
With the growth in India’s disposable incomes, and digitally advanced tools for
experiencing journey, the country has witnessed major increase in the market share
in this segment.

 Domestic Tourist Visits (DTVs) to the States/Union Territories (UTs) rose

by 15.% y-o-y to 1.65 billion (provisional) during 2016 with the top 10
States/UTs contributing about 84.2 per cent to the total number of DTVs, as
per Ministry of Tourism.

3
  The number of Foreign Tourist Arrivals (FTAs) increased 10.8 per cent
year-on-year to 3.88 million

 The travel and tourism sector in India accounted for 8 per cent of the total
employment opportunities generated in the country in 2017, providing
employment to around 41.6 million people during the same year. The
number is expected to rise by 2 per cent annum to 52.3 million jobs by 2028.

 International hotel chains are increasing their presence in the country, as it

will account for around 47 per cent share in the Tourism & Hospitality
sector of India by 2020 & 50 per cent by 2022

The Structure of Hotel Industry

Initiatives by The Government

The growth driver of hospitality industry is Tourism sector. Thus, realizing

country’s burgeoning potential in the tourism industry, the Government has taken
several steps towards development of India as a global tourism hub.

4
Some of the major initiatives planned by the Government of India to give a boost
to the tourism and hospitality sector of India are as follows:

Set target for attainment of 1% share in world's international tourist arrivals by

2020 and 2% share by 2025.

Under Budget 2018-19, the government has allotted Rs. 1,250 crore (US$
183.89 million) for Integrated development of tourist circuits under Swadesh
Darshan and Pilgrimage Rejuvenation and Spiritual Augmentation Drive
(PRASAD).

Prospects of hotel industry

In the long run, budget and small hotels have a wide scope for capturing more
market, as the nation would see a huge gap in demand-supply.

As per ICRA, the revenue growth for the Financial Year 2018-19, is expected to
reach 6-7%.

Online portals like TripAdvisor and MakeMyTrip, and online accommodation

reservation services like Oyo Rooms have gained popularity thereby enhancing the
market reach of hotel industry.

The “Clean India” campaign and development of inland waterways for

transport and tourism projects have gained momentum over the previous year.
Additionally, programmes such as “Make in India” and the “Smart Cities”
initiative have highlighted the Government’s support to skill development and
investments in Hospitality and Tourism.

Apart from the above initiatives, the government has proactively sought foreign
investment from countries such as China, the United States and Japan, leading to
an increase of business related travel to the country.

Tourism And Hospitality – At a Glance

5
6
COMPANY PROFILE

7
RADISSON HOTEL VARANASI
The Mall Cantonment
Varanasi
U.P. 221002, IN
221 002
India

8
NAME OF THE RADISSON HOTEL
COMPANY
VARANASI
LOCATION
Hoteliering and Catering
SERVICE
Bhadohi Hotels Ltd.
OWNERSHIP
30th September ,2002
INCORPROTION
DATE

The Umbrella of Radisson Hotel Group

Carlson Rezidor- the hotel chain, which operates a highly dynamic set of hotel brands across the
globe – underwent rebranding at the start of this year to be known as Radisson Hotel Group. This
rebranding took place after the partnership between Radisson Hotel Group AB and Radisson
Hospitality. With more than 1400 hotels in operation, and under development, the RHG proudly
owns eight brands, namely:

a. Radisson Collection

b. Radisson Blu

c. Radisson

d. Radisson Red

e. Park Plaza

f. Park Inn by Radisson

g. Country Inn & Suits

h. Prizotel

Radisson Hotel, Varanasi, is the Radisson brand operating as a franchisee. Radisson is an upscale
hotel, which gathers inspiration from Scandinavian style of hospitality. The brand ensures satisfaction of
all its employees, following a “Yes, I Can!” attitude. Under this brand, the RHG owns 217 hotels, of
which 54 are in Asia Pacific region.
VISION
The company’s long-term vision is to be one of the top three hotel companies in the world, and the
company of choice for guests, owners and investors, and talent. Whenever a guest plans a trip or an
investor or owner is thinking of a partner, or whenever someone is looking for a job in the hospitality
industry, they will all think of Radisson Hotel Group first.

9
ABOUT RADISSON HOTEL VARANASI
Initiating its operations on September 30, 2002, the Radisson Hotel is the 5-star rated hotel brand
located at The Mall Road, Varanasi. The hotel offers 116 air conditioned rooms, equipped with a

minibar and seating area, among other amenities.

Apart from in-room dining services, the hotel operates The Great Kebab Factory, EastWest – the
coffee shop and R the Lounge which provides guests with multiple options, along with the luxurious
poolside barbeque and Oakwood Bar.

The three banquet halls - Jasmine, Rose Room I and Rose Room II – offer a meeting, and business
space within the property. The Radisson Rewards, Radisson Meetings, Health Club, Travel Desk,
free WiFi, laundry services, etc., add up to the value to the customers.

Organizational Structure at Radisson, Varanasi

Being a service oriented organization the company owns the human resources who work with full
dedication and commitment. It currently employs approximately 160 employees at different levels.
The company follows following hierarchical structure:

Director
↓
General Manger
↓
Assistant General Manager
↓
Head of the Departments
↓
Supervisors
↓
Employees
↓
Supervisors
↓
Staff

10
Further, the managers and supervisors and the remaining staff are classified on the basis of grade as:

Manager 3>Manager2>Manager1
Supervisor 2 > Supervisor 1

The staff is categorized as Staff 4 > Staff 3 > Staff 2 > Staff 1

At the peak,

CHAIRPERSON: DR. RAMESH KAPUR

MR. NITIN KAPUR
DIRECTOR
MR. AMIT KAPUR
MANAGING DIRECTOR:
MR. SAURABH
GENERAL MANAGER: MATHUR

The Departments at Radisson

The entire organization is divided into several departments in order to ensure smooth flow of
operations. These departments have been categorized on the functional basis. Each department is
headed by the controller - “head of the department” who reports directly to the General Manager of
the organization. Each department within itself acts as a small organizational unit, which constitutes
its dedicated team that works towards achievement of departmental and organizational goals.
The departments are as under:
SN DEPARTMENT HEAD OF THE
DEPARTMENT
ENGINEERING MR. RAKESH KUMAR
SRIVASTAVA
I.

FINANCE MR. SATISH PARIKH

II.

III. FRONT OFFICE MR. BRIJESH SINGH

11
 HOUSEKEEPING MR. ANJAN KUMAR
SAHU
IV.

HUMAN RESOURCE MR. RAVI SHANKAR

RAI
V.

IT MR. SANJAY
SRIVASTAVA
VI.

PRODCUTION MR. MAHESH

MAHETO
VII.

PURCHASE MR. AWDHESH

TIWARI
VIII.

SECURITY MR. SHIV SHANKAR

SINGH
IX.

SERVICE MR. FRANCIS

THOMAS
X.

12
 I. ENGINEERING DEPARTMENT
The engineering department at Radisson works to ensure efficient power supply to the entire property. It
handles the centralized air conditioning plant, water purifying plant, power-backup plant, steam boilers,
and fire-fighting mechanism for the entire premise. It caters to all the complaints related to these –coming
from the guests and other departments as well. The department prepares its detailed cost-sheet, budgets,
electricity consumption records etc. Additionally, the painting and decoration of the property is also
handled by this department only.

II. FINANCE DEPARTMENT

The finance department is the core of all departments. From budgeting & forecasting to cost controlling,
to inviting quotations, to entering into supply contracts with the vendors, to maintaining books of
accounts, to filing of returns, to managing working capital, to approving indirect expenses, to preparing
the revenue model - this department handles it all. The various other functional departments depend on
the Finance department to get approval and sanctions for their respective requirements.
The hierarchy of the positions in Finance department goes as under:
Finance Controller

Manager – Finance

Dy. Manager - Finance

Assistant Credit

Food& Beverage Controller

Assistant Accounts Manager

Cashier

Purchase Executive

Store Incharge

13
 SWOT Analysis of the Radisson Hotel, Varanasi
Every organization has its own way of dealing for achieving success in future. As I had gone
under training for six months in a hotel called Radisson rated as a 5 star hotel. During my
training phase, I was somehow familiar with the internal and external environment as an
important part of the strategic planning process of the hotel. Usually internal is classified as S =
Strength and W = Weakness, and External to the organization can be classified as O =
Opportunities and T = Threats. Due to SWOT analysis a organization is much capable in
functioning smoothly.
Somehow the SWOT analysis provides information that is helpful in matching the organizations
resources and capabilities to those competitive environment in which it operates, as it is
instrumental in strategy formulation and selection.
The SWOT analyses of the hotel Radisson are listed as follows:
Strength
 Brand name of Carlson
 24*7 hrs. service to the guest
 Location situated in the center heart of the city
 High standard and luxurious amenities and accessories
 Good reputation and meeting the expectation among the customer

Weakness
 Political Instability
 Lack of employee and the educational qualification
 Lack of equipment like trolley, chemicals, machines etc.
 Lack in refreshing environment

Opportunities
 New outlets such as Coffee Shop, terrace garden in the new wing
 Event organizing
 Appointing trainees from different institutes

14
  Adopting new and fast technologies
 Service rapidly increasing for the guest

Threads
 Political and Economic instability of the country
 Union interruption in different functions
 High competitive market

15
INTRODUCTION ABOUT INVENTORY

MANAGEMENT

16
 INTRODUCTION

Inventories constitute the most significant part of current assets of a company like in India. On
an average, Inventories are approximately 60% of current assets in public Ltd. companies in
India. A firm neglecting the management of Inventories will be jeopardizing its long run
profitability and may fail ultimately. It is possible for a company for a company to reduce its
level of Inventories to a considerable degree. The reduction in “excessive” inventories carries a
favorable impact on a company’s profitability. Inventory is composed of assets that will sell or
used in future in the normal course of business operations. The assets, which firms store as
inventory in anticipation of need, are

1. Raw material
2. Work in progress
3. Finished Goods
Inventory, is current assets, but differs from other current assets. Because only financial
managers are not involved rather, all the functional areas, i.e. finance, marketing, production &
purchasing are involved.

The job of the financial manager is to reconcile the conflicting view points of the various
functional areas regarding the appropriate inventory level in 0order to fulfil the overall objective
of maximizing the owner’s wealth.

Thus, Inventory management like the management of other current assets, should be related to
the over-all objective of the firm.

17
 INVENTORY AND FINANCE MANAGER

Although inventory management usually is not the direct operating responsibility of finance
manager, the investment of funds in inventory is an important aspect of financial management.
Consequently the finance manager must be familiar with ways to control inventory effectively,
so that capital may be allocated efficiently. The greater the opportunity cost of funds invested in
inventory, the lower is the optimal level of average inventory and also the lower the optimal
order quantity, all other things held constant. The EOQ model also can be useful to the finance
manager in planning for inventory financing.

When demand or usage of inventory is uncertain. The finance manager may try to effect policies
that will reduce the average lead time required to receive inventory, once an order is placed. The
lower the average lead time, lower is the safety stock needed and lower is the total investment in
inventory, all other things held constant. The greater the opportunity cost of funds invested in
inventory, the greater is the inventory to reduce this lead time. the purchasing department may
try to find new vendor that promise quick delivery ,or it may pressure existing vendor to deliver
faster. The production department may be able to deliver finish goods faster by producing a
smaller run. in either case, there is trade-off between the added cost involved in reducing the
;lead time and the opportunity cost of funds tied up in inventory.

The finance manager is also concerned with the risk involved in carrying inventory. The major
risks involved in carrying inventory. The major risk is that the market value of specific
inventories will be less than the value at which they were acquired. Certain types of inventory
are subject to obsolescence, whether it be in technology or in consumer tastes. A change in
technology may make an electronic component worthless. A change in style may cause a retailer
to sell goods at substantially reduced prices. The principle risk is that of fluctuations in market
price. The finance manager is perhaps the best person to make an objective analysis of

the risks associated with the Radisson Hotel investment in inventories. These risks must be
considered in determining the appropriate level of inventory the firm should carry.

18
NATURE OF INVENTORY

Inventory are stock of the company is manufacturing for sale and components that make up the
product. The various forms in which inventories exist in a manufacturing company are:

1. Raw Material: Raw Material is those basic inputs that are converts into finished
goods through manufacturing process. Raw Material inventories are those units,
which will purchase & stored for future production.
2. Work in progress: Work in progress inventories are semi-manufactured products.
They represent products that need more work before they become finished products
for sale.

3. Finished goods: These are completely manufactured products which are ready for
sale. Stock of raw materials and work in progress facilitates production while stock of
finished goods is required for smooth marketing operations.

19
 PURPOSE OF HOLDING INVENTORY

A firm also needs to maintain inventories to reduce costs and ordering costs and avail quantity
discounts. There are three main purposes or motive:

1. Transactions motive: It emphasizes the need to maintain inventories to facilitate

smooth production & sales operations.
2. Precautionary motive: It necessitates holding of inventories to guard against the
unpredictable changes in demand & supply force & other factors.
3. Speculative motive: It influences the decisions to increase or reduce inventory levels
to take advantage of price fluctuations

OBJECTIVES OF INVENTORY MANAGEMENT

Inventory Management consist various counter-balancing parts:

1. To meet the demand of the product by efficiently organizing the Radisson Hotel
operations.
2. To minimize the Radisson Hotel investment in inventory.
3. To avoid both over-stock and under-stock of inventory.
4. To eliminate duplications in ordering or replenishing stocks.
5. To minimize losses through deterioration, pilferage, wastages & damages.
6. To ensure right quality goods at reasonable prices.
7. To design proper organization for inventory management.
8. To facilitate furnishing of data for short –term & long-term planning & control of
inventory.

20
 VALUATION OF INVENTORY

The price of materials and income of a concern is directly proportional to each other. So it is
necessary that a method of pricing materials should be such that it gives a realistic value stocks.

To safe guard public interest, the Government of India has instituted statutory controls to prevent
frequent change of material valuation method for at least three years.

The following material pricing methods are generally used:

 First in First out (FIFO)

 Last in First out (LIFO)
 Average Price Method

Simple average method Weighted average method

 Base Stock Method

 Market Price Method
 Standard Price Method

21
 BENEFITS OF HOLDING INVENTORY

The major benefits of holding Inventory are the basic functions which are of crucial
important in Radisson Hotel production & marketing strategies.

The basic function of Inventory is to act as a buffer to decouple or uncouple the various
activities of a firm so that all do not have to be pursued at exactly the same rate

The key activities are:

1. Purchasing
2. Production
3. Selling

BENEFITS IN PURCHASING

If the purchasing of raw material and other goods is not tied to production/sales, i.e. a firm can
purchase, several advantages would become available. In the first place, a firm can purchase
larger quantities than is warranted by usage in production or the sales level.

In the second, firms can purchase goods before anticipated or announced price increase. This will
lead to a decline in the cost of production. Thus Inventory, serves as a hedge against price
increases as well as shortages of raw materials. This is highly desirable inventory strategy.

BENEFITS IN PRODUCTION

Finished goods inventor serves to uncouple production and sale. This enables production at a rate
different from that sale. That is production can be carried on at a higher or lower than the sales

22
rate. This would be of special advantage to firms with a seasonal sales pattern. In their case, the
sales rate will be higher than the production rate during the part of the year (peak season) and
lower during the off-season. The choice before the firm is either to produce at a level to meet the
actual demand. In brief, since inventory permits least cost production scheduling. Production can
be carried on more efficiently.

BENEFITS IN SALES

The maintenance of inventory also helps a firm to enhance its sales effort. For one thing, if there
are no inventories of finished goods, the level of sales will depend upon the level of current
production. A firm will not be able to meet demand instantaneously. There will be a lag
depending upon the production process. If the firm has inventory, actual sales will not have to
depend on lengthy manufacturing process.

23
 INVENTORY CONTROL

Effective inventory management requires an effective control system for the inventories. In
managing inventories, the Radisson Hotel objective should be in consonance with the
shareholders, wealth maximization principle. To achieve this, the firm should determine the
optimum level inventory. Efficiently controlled inventories make the firm flexible. Inefficient
control results in unbalanced inventory and inflexibility – the firm may sometimes run out of
the stock and sometimes may pile up unnecessary stocks. This increases the level of
investment and makes the firm unprofitable. To manage inventories efficiency, answers
should be sought to the following two questions:

1. How much should be ordered?

2. When it should be ordered?
The first questions, how much to order relates to the problem of determining economic
order quantity (EOQ), and is answered with an analysis of costs of maintaining certain
level of inventories.

The second question, when to order arises because of uncertainty and is problem of
determining the reorder point.

24
 ECONOMIC ORDER QUANTITY

One of the major inventory management problem is to be resolved is how much inventory
should be added when inventory is replenished. If the firm is buying raw materials, is has to
decide lots in which it has to be purchased on each replenish. If the firm is planning a
production run, the issue is how much production to schedule. These problem, are called
order quantity problems, and the task of the firm is to determine the optimum or economic
order quantity.

Determining an optimum level of inventory level involves two types of costs:

1. Ordering costs
2. Carrying costs

(1) ORDERING COST

This category of cost is associated with the acquisition or ordering of inventory. Firms have
to place orders with suppliers to replenish inventory of raw material. The expenses involved
are referred to as ordering costs. Included in the ordering costs are involved in

1.1 Preparing a purchase order or requisition form

1.2 Receiving, inspection and recording the goods received

25
Ordering costs increase with the number of orders; thus more frequently inventory is
acquired, the higher the Radisson Hotel ordering costs. On the other hand, if the firms
maintain large inventorylevels, there will be few orders placed and

Ordering costs will be relatively small. Thus, ordering costs decrease with increasing size of
inventory.

(2)CARRYING COST

Costs incurred for maintaining a given level of inventory are called Carrying costs. They
include: Storage. Insurance, taxes, Deterioration and Obsolescence. Carrying costs vary with
inventory size. This behavior is contrary to that of ordering costs which decline with increase
in size of inventory. The economic size of inventory would thus depend on trade-off between
carrying costs and ordering costs.

The optimum inventory size is commonly referred to as economic order quantity. It is that
order size at which annual total costs of ordering and holding are the, minimum. We can
follow three approaches – the trail and error approach, the formula approach and the graphic
approach – to determine the economic order quantity (EOQ).

Where, A is annual requirement.

O is Ordering cost.

And C is Carrying cost.

26
RE-ORDER POINT

The problem, how much to order is solved by determining the economic order quantity, yet the
answer should be sought to the second problem, when to order. This is a problem of determining
the re-order point. The re-order point is that inventory level at which an order should be placed to
replenish the inventory. To determine the re-order point under certainty, we should know: (a)
Lead time, (b) average usage, and (c) economic order quantity.

Lead time is the time normally taken in replenishing inventory after the order has been placed.
By certainty we mean that usage and lead time do not fluctuate. Under such a situation, re-order
point is simply that inventory level which will be maintain for consumption during the lead time.

That is:

Re-order point= Lead Time* Average usage.

SAFETY STOCK

It is difficult to predict usage and lead time accurately. The demand for material may fluctuate
from day to day or from week to week. Similarly, the actual delivery time may be different from
the normal lead time. If the actual usage increases or the delivery of inventory is delayed, the
firm can face a problem of stock-out which can prove to be costly for the firm. To guard this
problem, the firm may maintain a safety-stock – some minimum or buffer inventory as cushion
against expected increased usage and delay in delivery time.

27
 SELECTIVE INVENTORY CONTROL

ABC ANALYSIS

Usually a firm has to maintain several types of inventories. It is not desirable to keep the
same degree of control on all of the items. The firm should pay maximum attention to those
items whose value is the highest. The firm should, therefore, classify inventories to identify
which items should receive the most effort in controlling. The firm should be selective in its
approach to control investment in various types of inventories. This analytical approach is
called ABC analysis and tends to measure the significance of each item of inventories in
terms of its value. The high value items are classified as ‘An item’ and would be under the
tightest control. ‘C items’ represent relatively least value and would be under simple control.

‘B items’ fall in between these two categories and require reasonable attention of
management. The ABC analysis concentrates on important items is also known as control by
importance and exception (CIE). As the items are classified in the importance of their
relative, this approach is also known as proportional value analysis (PVA).

The following steps are involved in implementing the ABC analysis:

1. Classify the items of inventories, determining the expected use in units and the price
per unit for each item.
2. Determine the total value of each item by multiplying the expected units by its unit’s
price.
3. Rank the items in accordance with the total value, giving first rank to the item with
highest total value and so on.
4. Compute the ratios of number of units of each item to total units of all items and the
ration of total value of each item to total value of all items.
5. Combine items on the basis of their relative value to form three categories – A, B and
C

28
 6. The data in the following table illustrate the ABC analysis.

CLASS NO. OF VALUE OF

ITEMS% ITEMS%

A 15 70

B 30 20

C 55 10

The items with the highest values is given priority and soon and are more controlled then low
value item. The re - rational limits are as follows.

Category % of items % of total cost of materials

A 5 – 10 70-85
B 10-20 10-20
C 70-85 5-10

ABC analysis helps in allocating managerial efforts in proportion to importance of various items
of inventory.

29
 INVENTORY MANAGEMENT CONTROL TECHNIQUES

1. Minimum Order Quantity

Minimum order quantity (MOQ) is the lowest set amount of stock that a supplier is willing to
sell. If you can’t purchase the MOQ of a specific product, then the supplier won’t sell it to you.

The purpose of minimum order quantities is to allow suppliers to increase their profits while
getting rid of more inventory more quickly and weeding out the “bargain shoppers”
simultaneously.

A minimum order quantity is set based on your total cost of inventory and any other expenses
you have to pay before reaping any profit – which means MOQs help wholesalers stay profitable
and maintain a healthy cash flow.

2. JUST IN TIME (JIT)

The just in time (JIT) inventory system is a management strategy that aligns raw material orders
from suppliers directly with production schedules. Companies employ this inventory strategy to
increase efficiency and decrease waste by receiving goods only as they are needed in the
production process, thereby reducing inventory costs. This method requires that producers are
able to accurately forecast demand.

The just in time inventory supply system is a shift away from other "just-in-case (JIC)"
strategies, in which producers hold large inventories to have enough product to absorb maximum
market demand.
Minimize costs such as rent and insurance by reducing your inventory
Less obsolete, outdated, and spoiled inventory
Reduce waste and increase efficiency by minimizing or eliminating warehousing and stockpiling,
while maximizing inventory turnover
Maintain healthy cash flow by ordering stock only when necessary
Production errors can be identified and fixed faster since production happens on a smaller, more
focused level, allowing easier adjustments or maintenance on capital equipment

3. Reorder Point Formula

A reorder point formula tells you approximately when you should order more stock – that is, when you’ve
reached the lowest amount of inventory you can sustain before you need more.
Here’s the reorder point formula you can use today:

30
Reorder point = (Average Daily Unit Sales x Average Lead Time in Days) + Safety Stock
This equation can help you stop being a victim to market spikes and slumps and instead, consistently
order the right amount of stock each month.

4. Lean Manufacturing System

The Lean Manufacturing System, often referred to as lean manufacturing, lean production, or simply
“Lean” is a system for maximizing product value for the customer while minimizing waste without
sacrificing productivity.
This system originated in the Toyota Production System (TPS). There were 3 things TPS attempted to
prevent:

5. Perpetual Inventory Management

Perpetual inventory systems track sold and stocked inventory in real-time; they update your accounting
system whenever a sale is made, inventory is used, or new inventory has arrived.
 Proactive monitoring of inventory turnover
 multiple locations with ease
 More informed forecasting
6. Batch Tracking
Batch tracking is sometimes referred to as lot tracking, and it’s a process for efficiently tracing goods
along the distribution chain using batch numbers.
From raw materials to finished goods, batch tracking allows you to see where your goods came from,
where they went, how much was shipped, and when they expire if they have an expiration date.
 Easy and Fast Recall
 Streamlined Expiry Tracking
 Improved Relationships with Suppliers
 Fewer Accounting Errors from Manual Tracking

31
 VALUATION OF INVENTORY CONTROL

ACCOUNTING STANDARD (AS)-2

AS 2 requires that those assets that are considered inventory should be recorded at the lower of
cost or net realizable value. Cost not only includes the purchase cost but also the conversion
costs, which are the costs involved in bringing inventory to its present condition and location,
such as direct labour.
AS 2 also requires the use of the First-in, First-out (FIFO) principle whereby those items which
have been in stock the longest are considered to be the items that are being used first, ensuring
that those items which are held in inventory at the reporting date are valued at the most recent
price.

FIFO-:
"FIFO" stands for first-in, first-out, meaning that the oldest inventory items are recorded as sold first but
do not necessarily mean that the exact oldest physical object has been tracked and sold. In other words,
the cost associated with the inventory that was purchased first is the cost expensed first. With FIFO, the
cost of inventory reported on the balance sheet represents the cost of the inventory most recently
purchased.

32
FIFO in table form :

Date Recipt Issue Balance

Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount

LIFO-:
The LIFO method operates under the assumption that the last item of inventory purchased is the
first one sold. Picture a store shelf where a clerk adds items from the front, and customers also
take their selections from the front; the remaining items of inventory that are located further from
the front of the shelf are rarely picked, and so remain on the shelf – that is a LIFO scenario.

FIFO in table form :

Date Recipt Issue Balance

Quantity Rate Amount Quantity Rate Amount Quantity Rate Amount

33
HIFO-:
Highest in, first out (HIFO) is an inventory distribution method in which the inventory with the
highest cost of purchase is the first to be used or taken out of stock. This will impact the
company's books such that for any given period of time, the inventory expense will be the
highest possible for cost of goods sold (COGS) and ending inventory will be the lowest possible.

Average Cost Method-:

To put it real bluntly, the average cost method is rarely used. This method does not offer any real
convenience or added accuracy.
The average cost is computed by dividing the total cost of goods available for sale by the total
units available for sale. This gives a weighted-average unit cost that is applied to the units in the
ending inventory.
The equation for average cost method is as follows.
Average Cost = (Total Quantity of Inventory Units) / (Total Quantity of Units)

Where:-
Cost of Goods Sold = (Average Unit Cost) x (Number of Units Sold)
Unit Cost per batch = (Cost/Quantity)

Weighted Average Cost-:

When a company uses the weighted average method, inventory and the cost of goods sold are
based on the average cost of all units purchased during the period. This method is generally used
when inventory is substantially the same, such as grains and fuel.
The weighted average cost method is most commonly used in manufacturing businesses where
inventories are piled or mixed together and cannot be differentiated, such as chemicals, oils, etc.
Chemicals bought two months ago cannot be differentiated from those bought yesterday, as they
are all mixed together.

WAC = (Total Cost of Sitting Inventory) / (Number of Units)

Profit = Sales – Gross COGS

34
 Inventory Turnover Ratio
What it is
This ratio is often a firm’s inventory turns over during the course of the year. Because
inventories are the least liquid form of assets, a high inventory turnover ratio is generally
positive. On the other hand, and usually high ratio compared to the average for the industry could
mean a business is losing sales because of inadequate stock on hand.
When to use it
If a firm’s business has significant assets tied up in inventory, tracking its turnover is critical to
successful planning. If inventory is turning too slowly, it could indicate that is may be hampering
the firm’s cash flow.
Because this ratio judge’s annual inventory turns, it is usually conducted once a year.
The formula: cost of goods sold /Average value of inventory
YEAR COST OF GOODS SOLDAVG VALUE OF INVENTORY INVENTORY TURN OVER
RATIO
2013 70340.33 4076.86 17.25
2014 75687.45 4800.64 15.76
2015 184082.21 12583.99 14.63
2016 190053.62 16067.13 11.83
2017 419760.92 10185.20 41.21

RECEIPT AND ISSUE OF INVENTORIES:

(a) Receipt Inventories in to store:

After incoming materials have been examined and approved they are passed on to the
appropriate stores together with the goods received note. Articles are inspected and passed and
on the stores in the usual way. In order to keep the accounting procedure uniform, it is desirable
that a goods received note be prepared for these articles also, the store keeper than places the
inventory in appropriate bin or shelf and make necessary entries in the receipt column of the Bin
Card.

35
 A location code for materials helps in proper store - keeping with greater efficiency, because
stores can be easily identified. It is a part and parcel of stock control procedure. Location code
helps in mechanized accounting and safeguard against omission in counting as verification.

BIN CARD:-

DESCRIPTION: MAXIMUM LEVEL:

MATERIAL CODE: MINIMUM LEVEL:
LOCATION CODE: ORDERING LEVE: BIN NO:
ORDERING QUANTITY: STORES LEDGER NO: UNITS:

RECEIPTS ISSUES BALANC AUDIT

E

DAT GOOD QTY(UNI DAT REQUISITIO QTY(UNI QTY(UNI INITIA

E RECEIVE T) E N T) T) L&
D DATE

BIN CARD

For each kind of materials or article a Bin Card attached to the bin which each individual’s
materials is stored. A bin card provides a running record of receipts, issues and stock in the
simplest form. An entry will be made at the time of each receipt or issue and new balance will be
extended.
These cards should agree with the quantities entered in the relevant accounts in the stores ledge.
The main advantage is to enable the stores keeper to ascertain at a glance the quantity of
materials in stock and remind him to place purchase requisition for further suppliers the ordering
level has been reached more over they provide on independent check on stores ledger and
anciently a second perpetual inventory. If the bin card is from three years then the transactions
are made in same card. If Bin Card does not exist new Bin Card to be opened.

36
 STORES LEDGER ACCOUNT
FORM NO: FOLIO:

MATERIALS: MAXIMUM LEVEL:

GRADE: MINIMUM LEVEL:

UNITS: ORDERING LEVEL:

CODE NO: ORDERING LEVEL;

Location:

Date CSRV/STDNO. MIR NO. Production Order Receipts & issues

No./Section
Qty

in out balance

Materials returned to Stores

Where materials are issued in excess of requirement the excess quantity is return to the stories
together with materials return note.
Since the materials return to store form a works order is a reduction in the amount recorded as
issued, the preferable entry is to enter the number of units and the value of materials returned and
received in a different work in the issue column of the stores ledger account.
These values are deducted from total issues, and amount returned by each department as shown
by materials return note is deducted where return of materials to stores return of material to
stores is a major problem it is customary to use a materials and supplies journal for keeping
records of items.

37
 MATERIAL RETURN NOTE

FROM: NO:

DEPARTMENT: DATE:

JOB NO:

ORDER NO:

Qty. Description Code No. Office Use only Remarks

Rate
Amount

Approved by Returned by Returned by Bin NO. Cost Priced by

Stores officer
ledger Ref. No.
Follow No.

38
Being part of back end processes and hidden behind the glitz and
glamor of the hospitality industry is Inventory Management. A
rather important module, inventory management lets managers
automate the process of tracking rooms, and food and beverage
consumption in the hotel. I am sure many inventory managers will
agree that manually filing cash memos and getting clearance from
finance department to pay vendors was a nightmare and a huge
waste of effort. With the arrival of hospitality technology solutions,
automation of the inventory system means lesser work and greater
visibility into stock, automated reminders as stock levels diminish,
faster decision making on which vendor delivers what, at what
price point and thus greater efficiency on stock maintenance in the
hotel.
A hotel ERP or property management system (PMS) simplifies
inventory management to a large extent and makes tracking of
purchase and sales accurate. There are numerous operations in
inventory which happen simultaneously, these include sales
through point of sale terminals, room service, purchase of food,
beverages, other room related consumables and durables. Tracking
all these activities can be difficult and if not tracked adequately can
result in revenue leakage, wastage, and theft. A good inventory
39
management system helps a hotel predict demand and supply rate
with great accuracy and reduces the chance of error, it also helps a
hotel access business intelligence, plan expenditure and keep a
tighter control on profit. Besides all this, inventory management
also facilitates vendor management and provides information such
as:
 Vendor Performance – Allows hotel managers to choose better
performing vendors by tracking information such as time of
delivery time, accuracy of delivery, cost effectiveness etc.
 Vendor Accountability – Ensuring a vendor delivers the right
shipment and hotels. An integrated inventory management
system allows hotel managers to pinpoint errors in delivery with
great accuracy and make vendors accountable for their own
action.
 Order Management – to prevent both overstocking and stock
outing situations
Data obtained from inventory management system can be
advantageous to increase the efficiency of a hotel. To begin with
inventory management maintains a database of all buying, selling
and consumption trends and thus acts as an incredible source of

40
business information as it pinpoints areas of concern and helps
minimize fraud.
Functions of Inventory Management software
Here is a quick glance at some of the functions of a good inventory
management software.
 Stores creation – sub store and main stores can be created with
rate calculation like weighted average, last price and last in first
out (LIFO)
 FSN can be defined and analysis reports are available
 Quotation analysis can be done with vendor analysis, tender
forms, comparison sheets and auto generation of purchase order
is available
 Purchase requisition, purchase orders, indents can be mailed,
printed and two levels of authorizations are available. Also
available is a standing purchase order
 Service work order is available
 Item stock levels like minimum, maximum, and reorder level and
reorder quantity can be defined with recording of Batch#,
Consignment#, Capital goods etc
 Vendor master with vendor analysis, tax deduction at source
entry applicable
41
 Reports on stock levels, consumption summary by cost centers/
departments, spending pattern based on the last year average
consumption in comparison with current year
 Audit reports for transactions, PO, SPO, indents and purchase
requisition is available
 Value added tax (VAT) reports can be accessed
 Budgets can be defined and budgets vs. actualization is available
 Physical stock entries can be made for a month end process and
reports on physical stock, store balance, negative variance
reports are available
 Access to efficiency reports
 Reports on reorder levels and reorder quantities and option to
update reorder levels
 Lookups on stocks, consumptions and authorization status for
PO, SPO, indents and purchase requisitions, vendor selection
based on lat price and last received date
An inventory management system is a must for the smooth
functioning of any hospitality property but while choosing, a hotel
needs to review its size and requirements. Do ensure you have an
in-depth demo and check out all the features of the system before
you make an application.
42
INVENTORY MANAGEMENT

RADISSON VARANASI

43
 INVENTORY MANAGEMENT AT RADISSON

Being part of back end processes and hidden behind the glitz and glamor of the
hospitality industry is Inventory Management. A rather important module,
inventory management lets managers automate the process of tracking rooms, and
food and beverage consumption in the hotel. I am sure many inventory managers
will agree that manually filing cash memos and getting clearance from finance
department to pay vendors was a nightmare and a huge waste of effort. With the
arrival of hospitality technology solutions, automation of the inventory system
means lesser work and greater visibility into stock, automated reminders as stock
levels diminish, faster decision making on which vendor delivers what, at what
price point and thus greater efficiency on stock maintenance in the hotel.
A hotel ERP or property management system (PMS) simplifies inventory
management to a large extent and makes tracking of purchase and sales accurate.
There are numerous operations in inventory which happen simultaneously, these
include sales through point of sale terminals, room service, purchase of food,
beverages, other room related consumables and durables. Tracking all these
activities can be difficult and if not tracked adequately can result in revenue
leakage, wastage, and theft. A good inventory management system helps a hotel
predict demand and supply rate with great accuracy and reduces the chance of
error, it also helps a hotel access business intelligence, plan expenditure and keep a
tighter control on profit. Besides all this, inventory management also facilitates
vendor management and provides information such as:
 Vendor Performance – Allows hotel managers to choose better performing
vendors by tracking information such as time of delivery time, accuracy of
delivery, cost effectiveness etc.

44
 Vendor Accountability – Ensuring a vendor delivers the right shipment and
hotels. An integrated inventory management system allows hotel managers to
pinpoint errors in delivery with great accuracy and make vendors accountable
for their own action.
 Order Management – to prevent bothoverstocking and stock outing situations
Data obtained from inventory management system can be advantageous to increase
the efficiency of a hotel. To begin with inventory management maintains a
database of all buying, selling and consumption trends and thus acts as an
incredible source of business information as it pinpoints areas of concern and helps
minimize fraud.
Functions of Inventory Management software
Here is a quick glance at some of the functions of a good inventory management
software.
 Stores creation – sub store and main stores can be created with rate calculation
like weighted average, last price and last in first out (LIFO)
 FSN can be defined and analysis reports are available
 Quotation analysis can be done with vendor analysis, tender forms, comparison
sheets and auto generation of purchase order is available
 Purchase requisition, purchase orders, indents can be mailed, printed and two
levels of authorizations are available. Also available is a standing purchase
order
 Service work order is available
 Item stock levels like minimum, maximum, and reorder level and reorder
quantity can be defined with recording of Batch#, Consignment#, Capital goods
etc
 Vendor master with vendor analysis, tax deduction at source entry applicable

45
 Reports on stock levels, consumption summary by cost centers/ departments,
spending pattern based on the last year average consumption in comparison
with current year
 Audit reports for transactions, PO, SPO, indents and purchase requisition is
available
 Value added tax (VAT) reports can be accessed
 Budgets can be defined and budgets vs. actualization is available
 Physical stock entries can be made for a month end process and reports on
physical stock, store balance, negative variance reports are available
 Access to efficiency reports
 Reports on reorder levels and reorder quantities and option to update reorder
levels
 Lookups on stocks, consumptions and authorization status for PO, SPO, indents
and purchase requisitions, vendor selection based on lat price and last received
date
An inventory management system is a must for the smooth functioning of any
hospitality property but while choosing, a hotel needs to review its size and
requirements. Do ensure you have an in-depth demo and check out all the features
of the system before you make an application.

46
OBJECTIVE OF THE STUDY

Main Objective

The project is designed to give an overview of Inventory Management.

Sub Objective

The study on Inventory is very important for a hotel. The objectives of this study are as
follows:

 To determine the changes in the Inventory position of the hotel.

 To determine the increase or decrease in Inventory level.
 To determine the various ratios for analysing the Inventory level of the hotel.
 To determine the absolute figures for the last 3 years

47
 RESEARCH

METHADOLOGY

&

Data Survey

48
INTRODUCTION

This chapter deals with the methodology used to conduct research as a

specific investigation. It gives blueprintof the study and helps in
developing plan to proceed to conduct the research. This chapter gives a
detailed discussion on Research Question, Population and Sample to be
surveyed, method of data collection and analytical tools to be used for
the study.

RESEARCH QUESTION

The research question is to study the sources,uses,and components of

Inventory management, in order to assess the liquidity of the business.

NATURE OF THE STUDY

The nature of the study of this project report isanalyticalin nature.

SAMPLING TECHNIQUE

No statistical method of sampling was used. The method of collecting

data was secondary byway of financial statements of the company. The
primary data about the various departments, the operational process have
been gathered by way of discussions with concerned employees of the
organization.

SAMPLING SIZE

The study for this research was conducted on financial statements of 3

consecutive years.

49
SUMMARY OF ANALYTICAL TOOLS AND METHODS USED:-
For the purpose of the study, MS Excel has been used. The data has been
processed and presented in the form of Tables, Pie charts, Bar charts,
Line graphs, Area charts, to make interpretations of the financial
analysis tools used.

STEPS OF METHODOLOGY

COLLECTION OF DATA

ORGANIZATION OF DATA

PRESENTATION OF DATA

ANALYSIS OF DATA

INTERPRETATION OF DATA

50
COLLECTION OF DATA

There are two methods of collection of data which are as follows:-

1. Secondary Method
2. Primary Method

Secondary Method
The methodology followed in conducting the study is to collect data regarding financial
statement of company, working capital and its management, need of inventory management in
Radisson Hotel. .

The facts & data were taken from magazines and annual report of company.

Primary Method
The primary data were collected from asking many individuals, employee of the company. They
provide me relevant information for completing my study.

ORGANISING THE DATA

The information / data collected during data process are organizing and presented in a
comprehensible sequence to make the understandable. The data, thus obtained is then edited,
classified and put in a tabulated form to make it understandable.

51
PRESENTATION OF DATA

After organizing the data, it is ready for presentation. These are presented in different modes like
charts, tables, and diagrams etc. the main objective of presentation is to put collected data into a
easy reliable form.

ANALYSIS OF DATA
After organizing and presenting the data, the researchersthen has to proceed towards conclusions
by logical inferences.

The whole data is then analyzed:

1. By bringing raw data to measured data.

2. Summarizing the data
3. Applying analytical methods to manipulate the data so that their inter relationship and
quantitative meaning become evident.

INTERPRETATION

Interpretation is the last and main step of research methodology. Interpretation means to bring
out meaning of data & to convert mere data into information. After analysis the data, various
conclusion are found out on the basis of logical inferences. Without interpretation research study
can’t be completed.

52
 ANALYSIS AND INTERPRETATION

ABC Analysis
Raw material (at closing stock

Year AMOUNT OF RAW

MATERIALS
2013 274.94

2014 582.11

2015 1858.17

2016 2031.85

2017 1768.52

Series 1
3
Series 2
Series 3
2

0
Category 1 Category 2 Category 3 Category 4

53
 RATIO ANALYSIS
1.LIQUIDITY RATIOS FOR 3 YEAR

CURRENT RATIO AMOUNT RATIO

2017 2016 2015 2017 2016 2015

CURRENT ASSETS29.5422.7217.85 2.99 2.15 1.64

CURRENT LIABILITIES 9.88 10.58 10.86

2:Quick Ratio for 3 year

QUICK RATIO AMOUNT RATIO

2017 2016 2017 2016 2015
2015
CURRENT ASSETS 29.54 22.72 17.85

Less: Inventory (1.13) (1.15) (1.13)

2.67 1.97 1.50
Other Current
Assets (2.04) (0.74) (0.45)

Liquid Assets 26.37 20.83 16.27

CURRENT
LIABILITIES 9.88 10.58 10.86

54
 Liquidity Ratio

3.50 2.99

3.00 2.67

2.50 2.15

2.00 1.64 1.97

1.50 1.50 CURENT RATIO

1.00 QUICK RATIO

0.50

2015 2016 2017

YEARS

INTERPRETATION

The company shows a sound financial health as per the current ratios of the 3 years, all being
above 1. The business has enough funds to meet its short term obligations as they come by.
Also, the company’s liquid assets are sufficient to meet any sudden obligation that arises.

55
Activity Ratios

Total Assets Turnover Ratio

Total Assets Turnover Ratio

AMOUNT RATIO
201720162015 201720162015
Beginning Assets 73.59 63.27 53.98
Closing Assets78.52 73.59 63.27
Average Total
Assets 76.06 68.43 1.49 1.34 1.27
58.63
Revenue 50.99 51
46.29

56
 Fig 10: Total Assets Turnover Ratio

2017 1.49

2016 1.34 2015

2016

2015 1.27 2017

1.10 1.20 1.30 1.40 1.50 1.60

RATIO

INTERPRETATION

With total assets turnover ratio above 1 for each year, the company is able to manage its total assets well
enough to generate more than a rupee of revenue against each rupee invested in assets.

57
Table 6: Debtors Turnover Ratio

Debtors Turnover Ratio AMOUNT RATIOS

2017 2016 2015 2017 2016 2015
Net Credit sales 49.12 49.79 43.99
Opening Debtors 3.63 2.42 2.12
Closing Debtors 4.18 3.63 2.42 12.58 16.46 19.38
Average Debtors 3.91 3.03 2.27

Fig 11: Debtors Turnover Ratio

Debtors Turnover Ratio

2017 12.58

year 2015

2016 16.46 2016

2017

2015 19.38

0.00 5.00 10.00 15.00 20.00 25.00

RATIO

INTERPRETATION

Though the Debtors turnover ratio is high, it has been on a declining trend since 2015. The company is
facing issues in recovering its receivables within time, and has extended its credit period.

58
Table 7 : Creditors Turnover Ratio

Creditors Turnover Ratio

AMOUNT RATIO
2017 2016 2015 2017 2016 2015
Purchases 48.59 49.32 49.96
Opening Trade
Payables 3.88 4.02 4.16
Closing Trade
Payables 4.93 3.88 4.02 11.03 12.49 12.22
Average Trade
Payables 4.405 3.95 4.09

Fig 12: Creditors Turnover Ratio

Creditors Turnover Ratio

2017 11.03

2015
2016 12.49
2016

2017

2015 12.22

10.00 10.50 11.00 11.50 12.00 12.50 13.00

INTERPRETATION

The creditors’ turnover ratio shows that the business is able to pay its bills on time. The ratio
increased slightly from 2015 to 2016 but declined in 2017, stating that the firm is paying its
creditors more slowly.

59
 Fig 13: Average Collection and Payment Period

Collection Payment Period

35.0029.5829.22 33.09

30.00 29.01
25.00 22.17
20.00 18.83 Average payment
15.00 peroid
10.00 Average Collection
5.00 Period
0.00 2015 2016 2017
YEAR

INTERPRETATION

The business has been able to defer its payment for a period higher than the time it takes to recover its
receivables. Though the days taken to collect receivables have increased in 2017, it is still lower than the
payment deferral for the year.

Table 8: Inventory Turnover Ratio

Inventory Turnover
Ratio
AMOUN
T RATIOS
2017 2016 2015 2017 2016 2015
SALES 49.32 49.87 46.98
Opening
Inventory 1.15 1.13 1.17
Closing Inventory 1.13 1.15 1.13 43.26 43.75 40.85
Average
Inventory 1.14 1.14 1.15

60
 Fig 14: Inventory Turnover Ratio

Inventory Turnover Ratio

2017 43.26

43.75 2015

2016 2016

2015 40.85 2017

39.00 40.00 00 41. 42.00 43.00 44.00

Fig 15: Inventory Holding Period

Inventory Holding Period

44.00 43.75
43.50 43.26
43.00
42.50

42.00 Inventrory Holding Preiod

41.50
41.00 40.85
40.50
40.00
39.50
39.00
2015 2016 2017

YEARS

INTERPRETATION
The business is able to convert its inventory into cash in 43.26 days in 2017 which is clearly
higher than the holding period in 2015.

61
 Table 9: Fixed Assets Turnover Ratio

Fixed Assets Turnover

Ratio
AMOUNT RATIO
2017 2016 2015 2017 2016 2015
Sales 49.32 49.87 46.98
Fixed Assets 48.98 50.87 45.42 1.01 0.98 1.03

Fig 16: Fixed Assets Turnover Ratio

Fixed Assets Turnover Ratio

2017 1.01

year 20160.982015
YEA

2016
R

2 2017
0
1
5

INTERPRETATION
The firm’s efficiency to generate revenue with its fixed assets declined from year 2015 to
2016. It could generate only 0.98 rupee revenue against each rupee invested in fixed assets.
But, it gained back its earning capacity in 2017 as it managed to generate 1.01 rupee as
revenue against each rupee of fixed assets.

62
Statement of Working Capital Changes

Fig 1: Total Current Assets in 2015

Total Current Assets in 2015

2% 6%
Iventories

14%
Trade receivables

43% Cash & Cash

equivalents

Short term loans and

Advances
35%
Other Current Assets

INTERPRETATION
In the year 2015, the organisation’s current assets were dominantly short term loans and
advances (43%), while it maintained only 6% of inventory. The trade receivables were at
moderate level.

63
Fig 2: Total Current Liabilities in 2015

Total Current Liabilities in 2015

29% Trade Payables

37%

Other Current

Liabilities

Short term provisions

34%

INTERPRETATION
The organisation’s current liability mainly constituted trade payable which accounted for
37%, while its provisions for the short term requirements were for only 29%.

64
Fig 3: Total Current Assets in 2016

Total Current Assets in 2016

3% 5%

16%
26% Trade receivables

Cash & Cash

equivalents

Short term loans and

Advances

Other Current Assets

50%

INTERPRETATION
The company’s 50% of the current assets included cash and cash equivalents this year. While
other current assets constituted for only 3%.

65
: Total Current Liabilities in 2016

Total Current Liabilities in 2016

30% Trade Payables

37%

Other Current

Liabilities
Short
termprovisions

33%

INTERPRETATION
Similar to previous year, the company’s balance sheet showed high level of trade payables
(37%). The other current liabilities of the business were 33% of the current liabilities.

66
Table 1: Statement showing Working capital changes from Year 2015 to Year 2016

Statement of Working Capital Changes

(in crores)
PARTICULARS 31.3.16 31.3.15 INCREASE DECREASE
Inventories 1.15 1.13 0.02 -
Trade receivables 3.63 2.42 1.21 -
Cash & Cash equivalents 11.26 6.20 5.06 -
Short term loans and
Advances 5.94 7.65 - 1.71

Other Current Assets 0.74 0.45 0.29 -

Total Current Assets (A) 22.72 17.85

Trade Payables 3.88 4.02 0.14 -
Other Current Liabilities 3.53 3.68 0.15 -

Short term provisions 3.17 3.16 - 0.01

Total Current Liabilities (B) 10.58 10.86

Working Capital (A-B) 12.14 6.99

Increase in Working Capital - 5.15

TOTAL 6.87 6.87

67
CONCLUSION

&

LIMITATIONS

68
 CONCLUSION
SUMMARY OF THE KEY FINDINGS

i. .The company uses aggressive approach for inventory management.

ii. The company used to maintain a high level of cash and cashequivalents until 2016, but it
suddenly reduced the composition in 2017.

iii. The investment in inventory and other current assets is not high;hence maintenance of
high liquid assets is possible.

iv. Short term loans and advances form a major portion of current assets in all the years.

v. Companyowes a major portion of its current liabilities to its trade creditors.

vi. .Therehas been a positive change in the inventoryl of the business. Thefirm is able to
maintain ample fund for working capital needs over and above its current liabilities.

vii. Therehas been a major reduction in short term provisions, indicating a fall in short term
employee benefits in 2017.

viii. The firm holds a sound position in terms of short term finance with an average current
ratio of 2.26, i.e., it has more than twice funds to meet its current obligations.

ix. .Even its liquid ratio is strong;it maintains highly liquid assets to meet its any sudden cash
requirements, sufficiently.

x. Thetotal assets and fixed assets ratios suggest that the company has been using its
property efficiently enough to generate revenues.

xi. Aminor drop in fixed assets turnover ratio indicates investment in long term projects.

xii. The business does not maintain a very high level of inventory, yet its holding period has
been on an increasing trend, thus pushing up the inventory holding costs.

xiii. Although the business is able to shorten its operating cycle by collecting receivables
early and deferring its payments, past two years have shown a delay incollection period,
indicating mild difficulties in collection of receivables.

69
 LIMITATIONS

Although every effort have been made to collect the relevant information through the source
available, still some relevant information could not be gathered.

1. The time duration could not provide ample opportunity to study every detail of
management in the company.
2. There are restrictions not to visit some specific areas.
3. The concerned executives were having very busy schedule.
4. The company on account of confidential reports has not disclosed some figures
5. Estimates are based upon predictions.

70
BIBLIOGRAPHY

71
 BIBLIOGRAPHY

BOOKS

 Pandey, I.M., “Financial Management”, Ed. 2007, VIkas Publishing House

Private Ltd., New Delhi.
 Gupta, Shashi K., “Management Accounting”, Ed.2007, Kalyani Publishers,
New Delhi.
 KOthari, C.R., “Research Methodology”, Ed.2007, New Age International
(P) Limited, Publishers, New Delhi.

MANUAL

 Annual Reports

WEBSITES

 www.liberyshoes.com
 www.libertyfreedom.com

72
ANNEXURE

73
 Hotel Radisson
BALANCE SHEET AS AT 31st MARCH,2018

PARTICULARS

FUNDS EMPLOYED

Shareholder's Funds

Share Capital 17,04,00,000

Reserves and Surplus 64,63,40,225 81,67,40,225

Loan Funds

Secured Loans 48,81,18,223

Unsecured Loans 23,03,68,701 71,84,86,924

Deferred Tax

Deferred Tax Laibility 7,62,83,137

1,61,15,10,286

APPLICATIONS OF FUNDS

Fixed Assets

Gross Block 79,70,30,417

Less: Depreciation 31,21,63,209

Net Block 48,48,67,208

Add: Capital Work in Progress 91,82,688 49,40,49,896

Investments 6,42,62,581

CURRENT ASSETS,LOANS AND ADVANCES

Inventories 53,64,96,035

Sundry Debtors 48,33,85,817

Cash and Bank Balance 2,94,45,561

74
Loans and Advances 30,01,48,434

1,34,94,75,847

Less: Current Liabilities 22,26,20,721

Provisions 7,36,57,317

Net Current Assets 1,05,31,97,809

1,61,15,10,286

75
 PROFIT AND LOSS ACCOUNT

For the year ended 31st March, 2018

(Amount in Rs.)

PARTICULARS

INCOME

SALES 2,21,11,97,993

less: Excise Duty 16,23,68,219

2,04,88,29,774

Other Income 1,11,11,202

Increase/ (Decrease) in Stocks 6,49,73,637 2,12,49,14,613

EXPENDITURE

Raw Material Consumed and Finished Goods Purchased 96,67,26,712

Manufacturing Expenses 19,95,13,409

Payments and Benefits to Employees 19,91,55,747

Administration, Selling and Miscellaneous Expenses 43,20,32,918

Interest & Financial Charges 4,74,18,093

Excise Duty 15,12,462

Depreciation 3,99,98,538 1,88,63,57,879

Profit before tax 23,85,56,734

Provision for Taxation

Current Tax 4,88,26,320

Fringe Benefit Tax 35,05,000

Deferred Tax 12,96,900

Profit before tax 18,49,28,514

add/(less): Taxation adjustments of previous years(net) 42,01,294

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Earlier year adjustment 54,964

Net Profit for the year 18,91,84,772

Add: Opening balance 1,69,31,283

Net Profit available for appropriations 20,61,16,055

APPROPRIATIONS

Tranfer to General Reserve 6,00,00,000

Interim Dividend 2,53,50,000

Tax on Dividend 35,55,338

Balance carried over to Balance Sheet 11,72,10,717

Earning Per Share of Rs.10/- each 12.88

77
 BALANCE SHEET AS AT 31st MARCH,2018

PARTICULARS

FUNDS EMPLOYED

Shareholder's Funds

Share Capital 17,04,00,000

Reserves and Surplus 81,81,72,605 98,85,72,605

Loan Funds

Secured Loans 1,04,03,01,231

Unsecured Loans 23,92,47,480 1,27,95,48,711

Deferred Tax

Deferred Tax Laibility 7,30,34,307

2,34,11,55,623

APPLICATIONS OF FUNDS

Fixed Assets

Gross Block 1,10,55,30,324

Less: Depreciation 35,54,78,429

Net Block 75,00,51,895

Add: Capital Work in Progress 8,14,32,312 83,14,84,207

Investments 18,49,99,976

CURRENT ASSETS,LOANS AND ADVANCES

Inventories 76,17,38,315

Sundry Debtors 72,08,94,474

Cash and Bank Balance 4,62,40,483

Loans and Advances 28,31,64,880

1,81,20,38,152

78
Less: Current Liabilities 43,53,53,212

Provisions 5,20,13,500

Net Current Assets 1,32,46,71,440

2,34,11,55,623

***************S

79