Chapter 4
DATA ANALYSIS AND INTERPRETATION
The following are some of the performance indicators of inventory management
Overall inventory turnover ratio=(COGS/SALES)/(AVG.INVENTORY)
Average inventory period=(DAYS IN YEARS(365))/(INVENTORY TURNOVER RATIO)
Raw material turnover ratio=(ANNUAL CONSUPTION OF RAW MATIRERIAL)/(AVERAGE RAW MATIRIAL)
Work-in progress turnover ratio=(ANNUAL WORK IN PROGRESS INVENTORY)/(AVERAGE WORK IN PROGRESS INVENTORY)
Inventory to current assets ratio =INVENTORY/(CURRENT ASSETS)
Finished goods turnover ratio=(COST OF GOODS SOLD)/(AVERAGE FINISHED GOODS)
Components of inventory
All efforts of the management of control inventories should aim at maintaining various components of inventory at economic …show more content…
In the year 2009 it was 1.18%, and it is decreased to .91% in 2010. Again it is decreased in year 2011 i.e.-17.02%, it is increased in the 2012 and 2013 to -2.02% and -3.8% respectively.
10) FINISHED GOODS TURNOVER RATIO:
It indicates the number of times finished goods inventory replaced during the year it measure the relationship between the cost of goods and inventory of finished goods. It is calculated by using the following formula:
Formula: Finished goods turnover ratio=(COST OF GOODS SOLD)/(AVERAGE FINISHED GOODS)
Table: 4.10: table showing finished goods turnover
Year Cost of goods sold
(in lacs) Average finished goods (in lacs) Finished goods turnover ratio
2009 73374.82 3237.05 22.66
2010 90381.36 3151.03 28.68
2011 112232.4 3978.3 …show more content…
Inventory turnover ratio was 7.65 times in the year 2009 and it increased to 9.17in the year 2010, which show the efficient and optimum utilization of inventory and then there has been continuous declaim in subsequent years which represent the inefficiency in inventory management process. The fluctuation in inventory ratio indicates that there is no constant demand and sale of the products. Stock of raw-material have been fluctuating due to increase and decrease in demand and production targets. Work in progress turnover ratio 23.58% during the year 2009, and later there has been constant increase to 28.5., 28.58, and 28.21 in the year 2010, 2011 and 2012 respectively. Production cycle is lengthen which leads to accumulation ok work in progress, which in turn increase in maintenances. Working capital of the company is negative for the last three years because company current liability exceeds the current assets. Finished goods have been decreases constantly, which indicates that there is a decreases in
DATA ANALYSIS AND INTERPRETATION
The following are some of the performance indicators of inventory management
Overall inventory turnover ratio=(COGS/SALES)/(AVG.INVENTORY)
Average inventory period=(DAYS IN YEARS(365))/(INVENTORY TURNOVER RATIO)
Raw material turnover ratio=(ANNUAL CONSUPTION OF RAW MATIRERIAL)/(AVERAGE RAW MATIRIAL)
Work-in progress turnover ratio=(ANNUAL WORK IN PROGRESS INVENTORY)/(AVERAGE WORK IN PROGRESS INVENTORY)
Inventory to current assets ratio =INVENTORY/(CURRENT ASSETS)
Finished goods turnover ratio=(COST OF GOODS SOLD)/(AVERAGE FINISHED GOODS)
Components of inventory
All efforts of the management of control inventories should aim at maintaining various components of inventory at economic …show more content…
In the year 2009 it was 1.18%, and it is decreased to .91% in 2010. Again it is decreased in year 2011 i.e.-17.02%, it is increased in the 2012 and 2013 to -2.02% and -3.8% respectively.
10) FINISHED GOODS TURNOVER RATIO:
It indicates the number of times finished goods inventory replaced during the year it measure the relationship between the cost of goods and inventory of finished goods. It is calculated by using the following formula:
Formula: Finished goods turnover ratio=(COST OF GOODS SOLD)/(AVERAGE FINISHED GOODS)
Table: 4.10: table showing finished goods turnover
Year Cost of goods sold
(in lacs) Average finished goods (in lacs) Finished goods turnover ratio
2009 73374.82 3237.05 22.66
2010 90381.36 3151.03 28.68
2011 112232.4 3978.3 …show more content…
Inventory turnover ratio was 7.65 times in the year 2009 and it increased to 9.17in the year 2010, which show the efficient and optimum utilization of inventory and then there has been continuous declaim in subsequent years which represent the inefficiency in inventory management process. The fluctuation in inventory ratio indicates that there is no constant demand and sale of the products. Stock of raw-material have been fluctuating due to increase and decrease in demand and production targets. Work in progress turnover ratio 23.58% during the year 2009, and later there has been constant increase to 28.5., 28.58, and 28.21 in the year 2010, 2011 and 2012 respectively. Production cycle is lengthen which leads to accumulation ok work in progress, which in turn increase in maintenances. Working capital of the company is negative for the last three years because company current liability exceeds the current assets. Finished goods have been decreases constantly, which indicates that there is a decreases in