A STUDY ON THE INVENTORY MANAGEMENT ON TATA STEEL LIMITED

Submitted in partial fulfillment of the requirement for the reward of

BACHELOR OF COMMERCE
By SUNDAERSAN.R
Register No-39740233

BACHELOR OF COMMERCE
SCHOOL OF MANAGEMENT STUDIES

SATHYABAMA

INSTITUTE OF SCIENCE AND TECHNOLOGY

(DEEMED TO BE UNIVERSITY)

Accredited with Grade “A” by NAACI 12B Status by UGCI Approved by AICTE
Jeppiaar Nagar, RAJIV GANDHI SALAI, CHENNAI – 600119

MAY 2022

i
SCHOOL OF MANAGEMENT STUDIES

BONAFIDE CERTIFICATE
This is to certify that this Project Report is the bonafide work of SUNDARESAN.R
(39740233) who has done the Project work entitled A STUDY ON INVENTORY
MANAGEMENT OF TATA STEEL LIMITED under my supervision from December 2021
to February2022.

Dr. R. THAMILSELVAN

InternalGuide ExternalGuide

Dr. BHUVANESWARI G.

Dean, School of Management Studies

Submitted for Viva voice Examination held on

InternalExaminer External Examiner

ii
DECLARATION

I SUNDARESAN.R(39740230). Hereby declare that the Project Report entitled “entitled

A STUDY ON INVENTORY MANAGEMENT OF TATA STEEL LIMITED ” done by me
under the guidance of Dr. THAMILSELVAN .R, M.Com, M.B.A, M.Phil, B.Ed., Ph.D.,
Associate Professor, Department of Management Studies is submitted in partial
fulfillment of the requirements for the award of Bachelor of Commerce degree.

DATE:

PLACE: SUNDARESAN .R

iii
ACKNOWLEDGEMENT

I am pleased to acknowledge my sincere thanks to Board of Management of SATHYABAMA for

their kind encouragement in doing this project and for completing it successfully. I am grateful to
them.

I convey my thanks to Dr. G. BHUVANESWARI, MBA., Ph.D., Dean, School of Management

Studies and Dr. A. PALANI, M.Com., M.Phil., M.B.A., Ph.D., Head Dept. of Management
Studies for providing me necessary support and details at the right time during the progressive
reviews.

I would like to express my sincere and deep sense of gratitude to my Project Guide
Dr. THAMILSELVAN.R, M. Com, MBA., M.Phil. B.Ed., Ph.D. for his valuable guidance,
suggestions and constant encouragement paved way for the successful completion of my project
work.

I wish to express my thanks to all Teaching and Non-teaching staff members of the Department
of Business Administration who were helpful in many ways for the completion of the project.

SUNDARESAN.R

iv
Abstract

This research propose to get exposure in inventory and it is very important to the company. It is
to ensure quality in business that control the transaction between the consumer goods. It is
important to do proper inventory management and control in the production company. This
project is to analysis the inventory control in the leading STEEL manufacturing company (TATA
STEEL. In this project we will perform the inventory management of Tata steel Limited we will
go through the financial statements of the company diagnose inventory soundness.

v
TABLE OF CONTENTS
CHAPTER NO. TITLE PAGE NO.

V
Abstract

Vii
List of table

Vii
List of figure

INTRODUCTION

1.1Introduction of the study 1

1.2Industry profile 5

1.3Company profile 6

1.4Need of the study 7

1.5Objective of the study 8

1.6Scope of the study 8

1.7Limitations of the study 8

2 Review of literature 9

3 Research methodology

3.1 Research methodology 15

3.2 Data collection 15

Data analysis and interpretation

4
4. 1 Ratio analysis 16

vi
4.2 Comparitive balance sheet 34

5 Findings suggestions conclusion

5.1Findings 43

5.2Conclusion 44

Reference 45

Appendix 46

LIST OF TABLES:
CHAPTER TITLE PAGE NO
4.1 INVENTORY TURNOVER RATIO 16
4.2 INVENTORY HOLDING PERIOD 18
4.3 INVENTORY CONVERSION PERIOD 20
4.4 AVERAGE DAY TO SELL INVENTORY 22
RATIO
4.5 RAW MATERIALS CONVERSION 24
PERIOD
4.6 WORK IN PROGRESS CONVERSION 26
4.7 FINISHED GOODS CONVERSION 28
PERIOD
4.8 DAYS PAYABLE OUTSTANDING RATIO 30
4.9 CURRENT RATIO 32
4.10 COMPARATIVE BALANCE SHEET OF 34
THE YEAR 2020-2021
4.11 COMPARATIVE BALANCE SHEET OF 36
THE YEAR 2019-2020

vii
4.12 COMPARATIVE BALANCE SHEET OF 37
THE YEAR 2018-2019
4.13 COMPARATIVE BALANCE SHEET OF 40
THE YEAR 2017-2018
46
4.14 BALANCE SHEET

LIST OF FIGURES
CHAPTER TITLE PAGE NO

4.1 INVENTORY TURNOVER 17

RATIO
4.2 INVENTORY HOLDING 19
PERIOD
4.3 INVENTORY 21
CONVERSION PERIOD
4.4 AVERAGE DAY TO SELL 23
INVENTORY RATIO
4.5 RAW MATERIALS 25
CONVERSION PERIOD
4.6 WORK IN PROGRESS 27
CONVERSION
4.7 FINISHED GOODS 29
CONVERSION PERIOD
4.8 DAYS PAYABLE 31
OUTSTANDING RATIO
4.9 CURRENT RATIO 33

viii
ix
CHAPTER 1

1.1 INTRODUCTION OF THE STUDY

INVENTORY MANAGEMENT

Inventory or stock is the goods and materials that a business holds for the ultimate goal of
resale or repair. Inventory management is a discipline primarily about specifying the shape
and placement of stocked goods.

Inventory Management is a business process which is responsible for managing, storing,

moving, sorting, arranging, counting and maintaining the inventory i.e. goods, components,
parts etc. Inventory management ensures that the right inventory is available as per the
demand at low costs. Inventory Management makes sure that the core processes of a
business keep running efficiently by optimizing the availability of inventory.

IMPORTANCE OF INVENTORY MANAGEMENT

Inventory Management includes managing and controlling raw materials, stocks, finished
goods, warehousing, storage and other aspects which help reach the product from production
to distributor or retailer. Each organization regularly strives on efficient inventory
management to uphold optimum inventory to be able to meet its necessities and avoid over
or under inventory that can impact the monetary statistics of the firm.

Inventory is forever dynamic. A prerequisite of inventory management is steady and vigilant

assessment of exterior and interior factors and control via planning and evaluation. Most of
the businesses have an individual department of inventory planners who incessantly
observe, control and evaluate inventory and interface with manufacturing, procurement and
finance sections of the firm

Objectives of inventory management

The main objective of inventory management is to maintain inventory at appropriate level to

avoid excessive or shortage of inventory because both the cases are undesirable for
business. Thus, management is faced with the following conflicting objectives:

1
1. To keep inventory at sufficiently high level toper form production and sales activities
smoothly.
2. To minimize investment in inventory at minimum level to maximize
profitability.
3. To ensure that the supply of raw material & finished goods will remain continuous
so that production process is not halted and demands of customers are duly met.
4. To minimize carrying cost of inventory.
5. To keep investment in inventory at optimum level.
6. To reduce the losses of theft, obsolescence & wastage etc.
7. To make arrangement for sale of slow moving items.
8. To minimize inventory ordering costs

Types of Inventory

Inventory is generally categorized as raw materials, work-in-

progress, and finished goods.
RAW MATERIALS: Raw materials are inventory items that are used in the
manufacturer's conversion process to produce components or finished products.
These are unprocessed materials used to produce a good. Examples of raw materials
used in Tata Steel are coal, dolomite, High Volatile Coal, coke, lime stone etc.

WORK-IN-PROGESS: Work-in-progress inventory is the partially finished goods

waiting for completion and resale; work-in-progress inventory is
otherwise known as inventory on the production floor. For example, a half-assembled
airliner or a partially completed yacht would be work-in-process.

FINISHED & SEMI-FINISHED GOODS: Finished goods are products that have
completed production and are ready for sale. These goods have been inspected and

2
have passed final inspection requirements so that they can be transferred out of work-
in-process and into finished goods inventory. Example- export yard, wire & rod mill,
hot strip mill, steel, rings etc. are used in TataSteel.

Retailers typically refer to this inventory as "merchandise". Common examples of

merchandise include electronics, clothes, and cars held by retailers.

Inventory management at TATA STEEL

Inventory management is one of the most important managerial activities. TATA steel has
its own mines and quarries in India as well as in some other countries. The raw material
inventory includes materials from its own source as well as purchased from others. Raw
material inventory therefore lies both at works and its place of extraction. These are
transported to works both by road and rail.

Policies maintained by TATA STEEL for Inventories

• Finished and semi-finished products produced and purchased by the company are
carried at lower of cost and net realized value.
3
• Work in progress is carried at lower of cost and realized value.

• Coal, iron ore and other raw materials produced and purchased by the company are
carried at lower of cost and net realized value.

• Stores and spare parts are carried at cost. Necessary provision is made and
charges to revenue in case of identified obsolete and non-moving items.
• and semi-finished products are valued on full absorption cost basis.

• Costofinventoriesisgenerallyascertainedonthe“weightedaverage”basis. Work in
progress and finished

Following are the consequences of over investment:

- Unnecessary blockage of funds in inventory

- Excessive storage is required to store the inventory.
- Excessive insurance cost.
- Risk of liquidity: Value of the inventory reduces due to the long holding period as the inventories
once purchased are difficult to dispose of at the same value.

Following are the consequences of under investment:

- Under investment in the inventory may cause frequent interruptions in production

process.
- Insufficientstockoffinishedgoodsmaycreateproblemsinmeetingcustomers’ demands and they
may shift to the competitors.

4
1.2 INDUSTRY PROFILE

Establishedin1907,TataSteelis Asia’s first and India’s largest integrated private sector

steel company with its captive iron ore and coal mines and one of the world most modern
steel making facilities at Jamshedpur in eastern India which includes a state-of-art cold
rolling mill complex. Tata Steel is among the lowest cost producer of steel in the world.

The aim of the project is to understand what inventory management is and how it works
in Tata Steel and other steel companies. What is the various method of inventory
management and what method does Tata Steel follows for the same.
Inventory management is very crucial at TATA STEEL as it is a manufacturing firm and
a slight delay or other issues related to stock poses serious problems and huge losses.

The objectives of the project are:

➢ To understand the concept of inventory management in Tata Steel.

➢ To calculate the various inventory ratios and interpret the results thereon.
➢ To analyze the efficiency of purchase department, supply chain department
and finance and accounts department related to inventory management.
➢ To understand and analyze the deviation in the theoretical aspect and
practical implementation of an inventory system.

The aim of the project is to make use of the study of various inventory management
methods and utilizing them to find the best inventory management method, the steel
industry should try to minimize problem the plant faces.
The project concludes with major findings and recommendations

5
1.3 COMPANY PROFILE
Tata Steel, formerly known as Tata Iron and Steel Company Limited (TISCO), is an
Indian multinational steel-making company headquartered in Mumbai, Maharashtra.
Established in Jamshedpur, India in the year 1907, Tata Steel is part of the 150-year-
old Tata group. Bringing to reality the vision of its founder, J. N. Tata, who inspired the
steel and power industry in India, the Tata Steel Group is the 10th largest steel
manufacturer in the world and is known to be the hallmark of corporate citizenship and
business ethics.

With the operations in 26 countries and its commercial presence in 50 countries, the
Tata Steel Group has a steel production capacity of 27.5 Mn per annum (as on March
31, 2018). Tata Steel India also has its manufacturing units at Jamshedpur, Jharkhand,
with a production capacity of 10 Mn per annum and at Kalinganagar, Odisha, with a
production capacity of 3 Mn per annum. TISCO also exports ferromanganese, chrome
ore, steel tubes, strips, wires, rounds and agriculture implements to the United States,
China and the Middle East. The company together with its subsidiaries is engaged in
the manufacture and sale of steel products in India and internationally. They offer hot
and cold rolled coils and sheets, galvanized sheets, tubes, wire rods, construction
rebars and bearings. Tata Steel is one of the few companies that are fully integrated-
from mining to the manufacturing and marketing of finished products.

Tata Steel is by far the most important, multi-functional and most adaptable of
materials. The role of Iron and Steel industry in GDP is very important for the
development of the country.

Vision:

“We aspire to be the global steel industry benchmark for ‘value Creation’ and
‘Corporate Citizenship”.

6
Mission:

Consistent with the vision and values of the founder, Jamshedji Tata, Tata Steel
strives to strengthen India’s industrial base through the effective utilization of staff and
materials. The means envisaged to achieve this are high technology and productivity,
consistent with modern management practices. Tata Steel recognizes that while
honesty and integrity are the essential ingredients of a strong and stable enterprise,
profitability provides the main spark for economic activity. Overall, the company seeks
to scale the heights of excellence in all that it does in an atmosphere free from fear
and, thereby, its faith in democratic values.

Values:

Integrity| Unity | Pioneering | Excellence | Responsibility

1.4 NEED FOR THE STUDY

The following need has proposed me to choose the Study at Tata Steel limited on Inventory
management system.
• The need of inventory management system is essential at every stage of the business.
• The inventory is the back bone of the production company and how it works in the
development of other
• To know the industry’s progress through the inventory management system point of view
of companies

7
1.5 OBJECTIVES OF THE STUDY

Primary objective

• To examine the process of inventory management of tata steels.

Secondary objective
• To analyze the inventory position through various financial ratios .

• To understand the problems faced by company in handling inventory.

1.6 SCOPE OF THE STUDY

• The scope of an inventory system can cover many needs, including valuing the
inventory, measuring the change in inventory and planning for future inventory
levels.
• The value of the inventory at the end of each period provides a basis for
financial reporting on the balance sheet

1.7LIMITATIONS OF THE STUDY

• The inventory details of company are collected for 5 years only
• The information taken from the company was limited
• In this study only limited ratios are used

8
CHAPTER 2
2.1 REVIEW OF LITERATURE

1. Plinere, D. &Borisov, A. (2015). concluded that. inventory management is necessary to

every company, having inventories. Companies have stock, but so much as to keep away
from overstock and out-of-stock situations. Inventory management can better compan
inventory control existing condition and reduce costs of the company.

2. Jose, T.. Jayakumar. A., &Sijo. M. T. (2013) found the difference between EOQ &
number of pieces purchased. It is observed that the company is not using EOQ for buying
the materials. Therefore, inventory management is not reasonable. From estimate of
safety stock. company can decide how much inventory the company can keep in back
stock per annum.

3. Mohamad. S. J. A. N. bin S.. Suraidi. N. N.. Rahman. N. A. A.. &Suhaimi. R. D. S. R.

(2016) concluded that efficiency of inventory management is a major concern area of
business. Suggestions are given to improve the performance of inventory management.
demand forecasting, scattered inventory & cycle counting

4. Lwiki et al (2013) A survey conducted and established that there is generally positive
correlation between each of inventory management practices. Specific performance
indicators were proved to depend on the level of inventory management practices. They
established that Return on Equity had a strong correlation with lean inventory system and
strategic supplier partnerships. As such, they concluded that the performance of sugar
firms could therefore be stated as being a function of their inventory management
practices.

5. Panigrahi (2013) Undertook an in-depth study of inventory management practices. The

9
study also investigated the relationship between profitability and inventory conversion
days. The study, using a sample of the top five cement companies of India over a period
of 10 years from 2001 to 2010, concluded that a considerable inverse linear relationship
existed between inventory conversion period and profitability.

6. Madishetti and Kibona (2013) Found that a well designed and executed inventory
management contributes positively to a small or medium-sized enterprises (SMEs)
profitability.Regression analysis was adopted to determine the impact of inventory
conversion period over gross operating profit. The results cleared out that significant
negative linear relationship occurred between inventory conversion period and
profitability.

7. Srinivas Rao Kasisomayajula(2014) The study concluded that all the units in the
commercial vehicle industry have significant relationship between Inventory and Sales.
Proper management of inventory is important to maintain and improve the health of an
organization. Efficient management of inventories will improve the profitability of the
organization.

8. Sunitha, K. V. (2012) in her thesis. inventory management is vital for keeping costs down,
when meeting regulations. It is difficult to balance demand and supply and inventory
management to make sure that the balance is untouched. The trained inventory
management and good quality software will help make inventory management a victory.
The ROI of Inventory management has seen better revenue and profits, positive
employee ambiance and increase in customer satisfaction.

9. Atnafu. D. &Balda, A. (2018) focuses on inventory management & explains the

relationship between inventory management practices competitive advantage &
organizational performance. The finding of the study on basis of data analysis is that there
is a positive relationship between competitive advantages and inventory management
performance. And better organizational performance gives a firm bigger capital to apply

10
various inventory management techniques
10. HongShen. Qiang. Deng. Rebbaca Lao, Simon Wu (2016) focused on boosting the
inventory management to improve the supply chain of the company. Drop in inventory is
considered one of the most significant aspects of inventory management. In practice,
small Inventory level is not always a better solution, so manufacturers need to maintain
the correct amount of inventory at the correct level

11. Gaur and Bhattacharya (2011) Attempted to study the linkage between the performance
of the components of inventory such as raw material, work in progress and finished goods
and financial performance of Indian manufacturing firms. The study revealed that finished
goods inventory as inversely associated with business performance while raw material
inventory and work in progress did not have much effect on same. They emphasised that
instead of focusing on total inventory, an attempt should be made to concentrate on
individual components of inventory so as to adequately manage the same. They
concluded that managers not paying heed to inventory performance may become weak
in combating competitors.

12. Pradeep singh (2008) In his study made an attempt to examine the inventory and
working capital management of Indian Farmers Fertilizer Cooperative Limited (IFFCO)
and National Fertilizer Limited (NFL). He concluded that the overall position of the working
capital of IFFCO and NFL is satisfactory. But there is a need for improvement in inventory
in case of IFFCO. However inventory was not properly utilized and maintained bay IFFCO
during study period. The management of NFL must try to properly utilize the inventory
and try to maintain the inventory as per the requirements. So that liquidity will not interrupt

13. Lal (1981) his study focused on inventory management. He originated a model which
involve price variable in inventory management; earlier price variable in inventory was not
considered in that company. The analysis recommended solid policies, which would look
after internal and external factors, ultimately it would help in bringing in efficient working
capital management

11
14. Farzaneh (1997) Presented a mathematical model, to assist the companies in their
decision to switch from EOQ to JIT purchasing policy. He defines JIT as “to produce and
deliver finished goods just in time to be sold, sub-assemblies just in time to be assembled
in goods and purchased material just in time to be transformed into fabricated parts”. He
highlights that the EOQ model focuses on minimizing the inventory costs rather than
minimizing the inventory. Under the ideal condition where all the conditions meet, it is
economically better off to choose the JIT over the EOQ because it results in purchase
price, ordering cost

15. Rich Lavely (1998) Asserts that inventory means “Piles of Money” on the shelf and the
profit for the firm. However, he notices that 30% of the inventory of most retail shops is
dead. Therefore, he argues that the inventory control is facilitate the shop operations by
reducing rack time and thus increases profit. He also elaborates the two types of inventory
calculations that determine the inventory level required for profitability. The two
calculations are “cost to order” and “cost to keep”. Finally, he proposes seven steps to
inventory control.

16. Gaur, Fisher and Raman (2005) In their study examined firm-level inventory behaviour
among retailing companies. They took a sample of 311 public-listed retail firms for the
years 1987–2000 to examine the relationship of inventory turnover with gross margin,
capital intensity and sales surprise. They observed that inventory turnover for retailing
firms was positively related to capital intensity and sales surprise while inversely
associated with gross margins. They also suggested models that yield an alternative
metric of inventory productivity, adjusted inventory turnover that can be used in study of
performance analysis and managerial decision-making.

17. S. Singh (2006) Analysed the inventory control practices of single fertilizer company
named IFFCO. He statistically examined the inventory system with consumption, sales
and other variables along with growth of these variables and inventory patterns. He

12
concluded that an increase in components of inventory lead to an increase in the
proportion of inventory in current assets. A special focus was made on stores and spares
in order to calculate excess purchases resulting in loss of profit.

18. D.Hoopman2003 In this article he said that inventory optimization recognize that different
industry have different inventory profiles and requirements. Research has indicated that
solutions are priced in a large range from tens of thousands of dollars to millions of dollars.
In this niche market sector price is definitely not an indicator of the quality of solution, ROI
and usability are paramount.

19. Silver,EdwardA2002(Articlefromproductionandinventorymanagementjournal)This
article considers the context of a population of items for which the assumption underlying
the EOQ derivation holds reasonably well. However as is frequently the cash in practices
there is an aggregate constraint that applies to the population as a whole. Two common
forms of constraints are:

a. The existence of budget to be allocated among the stocks of the items and a
purchasing production facility having the capability to process atmost a certain
number of replenishment per year. Because of the constraint the individual
lreplenishment quantities cannot be selected independently.

20. DelaunayC,SahinE,2007 A lots of work has been done but now if we want to go ahead
we must have good visibility upon this field of research. That is why we are focused on
frame work for an exhaustive review on the
problemofsupplychainmanagementwithinventoryinaccuracies.Theauthorsaidthattheiraim
inthisworkisalsoto present the most important criterion that allow adistinction between
the different types of managing the inventory.

13
21. CharlesAtkinson,heexplainedtheinventorymanagementandassessmentofinventorylevel
s.Asper this study inventory management need to address two issue
a. Part I. How to optimize average
inventory levels.
b. Part II .How to
assess(evaluate)inventory levels.

c. This study tells about what the manager should do and not to do, and how much
amount should be order in one placed orders.

22. Bernatde William2008 This study tells that the main focus of inventory management is
on transportation and warehousing. The decision taken by management depends on the
traditional method of inventory control models. The traditional method of inventory
management is how much useful in these days the author tell about it. He is also saying
thatthe traditional method is not a cost reducing, it is so much expensive. But the
managing the inventory is most important work for any manufacturing unit.

14
CHAPTER 3

3.1RESEARCH METHODOLOGY

3.1TYPE OF RESEARCH
The proposed study is of ANALTICAL IN NATURE. Research design is needed because it
facilitates the smooth sailing of the various research operations, thereby making research as
efficient as possible. A research design for a particular problem usually involves the
consideration of the following factors.

3.2 DATA COLLECTION

SECONDARY DATA
Secondary Data has been collected from the company’s annual report, journal, magazine,
and website.

PERIOD OF THE STUDY

Period of study 5years from 2016-2017 to 2020-2021

TOOLS USED FOR THE STUDY

The following are major tools used in analysis and interpretation.
• Ratio analysis
• Comparative balance sheet statement.

15
CHAPTER 4
DATA ANALYSIS AND INTERPRETATION

4 1..1 Inventory turnover ratio

This ratio is an efficiency ratio which shows the efficiency of the firm in producing and selling its
products.

Table 4.1.1 Inventory turnover ratio Rs in Crores

Year Cost of goods sold Average inventories Ratio(Times)

2016-2017 2217.67 8687.115 3.91

2017-2018 139.35 10630.13 76

2018-2019 415.28 16651.08 40

2019-2020 2346.59 10985.97 5

2020-2021 3258.86 9660.195 3

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.1 shows that inventory turnover ratio of the company under study
is decreasing year by year from 2016-2017 to 2020-2021 except 2017-2018

16
80

70

60

50

40

30

20

10

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.1 Inventory Turnover Ratio

17
4.1.2 Inventory holding period
The holding period refers to the time between an asset purchased and its sale. A short term
holding period is defined as less than a year were as a long term holding period is more than
year.

Table 4.1.2 Inventory holding period Rs in Crores

Year No of days in a Inventory turnover ratio Ratio(Times )

Year

2016-2017 365 3.91 91.93

2017-2018 365 76 4.80

2018-2019 365 40 9.12

2019-2020 365 5 73

2020-2021 365 3 121.67

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.2 shows that inventory Holding period of the company under study
is increasing year by year from 2016-2017 to 2020-2021 except 2017-2018

18
140

120

100

80

60

40

20

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.2 Inventory holding period

19
4.1.3 Inventory conversion period
This ratio shows that in how many daysinventories are converted into net sales
and it generate revenue for thecompany.

Inventory conversion period = Inventory /Sales *365

Table 4.1.3 Inventory conversion period Rs in Crores

Year Inventories Sales Ratio(Days )

2016-2017 10236.85 53695.42 69.58

2017-2018 11023.41 61283.03 65.65

2018-2019 11255.34 73016 56.26

2019-2020 10716.60 60840.09 64.56

2020-2021 8603.79 65506.89 47.97

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.3 shows that inventory conversion period of the company under
study is decreasing year by year from 2016-2017 to 2020-2021 except 2019-2020 .

20
80

70

60

50

40

30

20

10

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.3 Inventory conversion period

21
4.1.4 Average day to sell inventory ratio
It is a financial ratio that indicates the average time in days that a company takes to turn its
inventory, including goods that are a work in progress, into sales.

Average Days to Sell Inventory Ratio= Average inventory / Cost of goods sold * 100

Table 4.1.4 Average day to sell inventory ratio Rs in Crores

Year Average inventories Cost of goods sold Ratio

2016-2017 8687.115 CC 391.72

2017-2018 10630.13 167 7628.37

2018-2019 16651.08 200 4009.60

2019-2020 10985.97 166 468.16

2020-2021 9660.195 179 296.42

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.4 shows that Average day to sell inventory ratio of the company
under study is decreasing year by year from 2016-2017 to 2020-2021 except 2019-2020

22
9000

8000

7000

6000

5000

4000

3000

2000

1000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.4 Average day to sell inventory ratio

23
4.1.5 Raw materials conversion period
This ratio states that for how much time (in terms of days) raw materials will be kept in
the warehouse before it is sent to the production department for work-in-progress. Low
raw material holding period indicates greater ability of a company to recover cost
incurred in production were as high raw material holding period means increasing
warehousing cost and thus less profit.

Table 4.1.5 Raw materials conversion period Rs in Crores

Year Raw material Raw materials Ratio(Days)
inventories consumption/365
(Raw materials
consumption in
Days)
2016-2017 3898.99 34 113.90

2017-2018 4953.2 46 148.73

2018-2019 4496.38 54 82.73

2019-2020 3586.21 47 75.22

2020-2021 2990.25 10 282.63

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.5 shows that Raw materials conversion period of the company under
study is increasing year by year from 2016-2017 to 2020-2021except 2018-2019 and 2019-
2020

24
300

250

200

150

100

50

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.5 Raw materials conversion period

25
4.1.6 Work in progress conversion period
This ratio indicates the time period whichthe company takes to convert its work in
progress into finished goods. Lesser the work in progress holding period, lesser will be
the blockage of company’s fund.

Table 4.1.6 Work in progress conversion period Rs in Crores

Year Work in progress Cost of production Ratio(Days)

2016-2017 5.88 131 0.4

2017-2018 6.77 140 0.4

2018-2019 14.54 157 0.9

2019-2020 6.9 143 0.4

2020-2021 0.01 155 0.01

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.6 shows that Work in progress of the company under study is
increasing year by year from 2016-2017 to 2020-2021 except 2018-2019 and 2020-2021.

26
1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.6 Work in progress conversion period

27
4.1.7 Finished goods conversion period
It refers to the time taken for the finished goods to be sold out or the time period between
production and sales when thefinished goods are kept in the warehouse before the actual sale is
made.
Finished goods conversion period = Finished goods inventory / (Cost of goods sold /365)

Table 4.1.7 Finished goods conversion period Rs in Crores

Year Finished good inventory Cost of sales Ratio(Days )

2016-2017
4096.56 147 674.88

2017-2018 3602.13 167 9479.28

2018-2019 4129.28 200 3710.04

2019-2020 4663.71 166 726.43

2020-2021 3293.71 179 369.25

Source of Data: Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.7 shows that Finished goods conversion period of the company under
study is decreasing year by year from 2016-2017 to 2020-2021 except 2017-2018

28
10000

9000

8000

7000

6000

5000

4000

3000

2000

1000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.7 Finished goods conversion period

29
4.1.8 Days payable outstanding ratio
It is an efficiency ratio which measures the average number of days a company takes to pay
its suppliers.

Table 4.1.8 Days payable outstanding ratio Rs in Crores

Year Trade payable Cost of sales Ratio(Days )

2016-2017 10717.44 147 1763.95

2017-2018 11217.27 167 29455.42

2018-2019 10820.07 200 9509.96

2019-2020 10482.34 166 1630.47

2020-2021 10479.93 179 1173.78

Source of Data : Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.8 shows that Days payable outstanding ratio of the company under
study is decreasing year by year from 2016-2017 to 2020-2021 except 2017-2018

30
35000

30000

25000

20000

15000

10000

5000

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.8 Days payable outstanding ratio

31
4.1.9 Current ratio
This ratio measures the company’s ability to pay short-termobligations or those due
within one year.

Table 4.1.9 Current ratio Rs in Crores

Year Current asset Current liabilities Ratio

2016-2017 1225.48 23056.80 0.053

2017-2018 34643.91 25607.34 0.7391

2018-2019 17035.58 25593.65 1.502

2019-2020 19959.03 30871.30 1.54

2020-2021 23372.68 29313.3 1.25

Source of Data: Company annual report from 2016-2017 to 2020-2021

Interpretation
From the above table 4.1.9 shows that current ratio of the company under study is increasing
year by year from 2016-2017 to 2020-2021 except 2020-202

32
1.8

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2016-2017 2017-2018 2018-2019 2019-2020 2020-2021

Fig 4.1.9 Current ratio

33
COMPARATIVE BALANCE SHEET OF THE YEAR MARCH 2020- 2021

Particulars March21 March20 Increase/ Percentage

Decrease Change
Assets
Non-current
assets
Property, plant 64032.32 66392.35 -2360.03 -1
and
equipment
Capital work in 10057.18 8070.41 1986.77 1
progress
Intangible assets 839.33 727.72 111.61 1
Intangible assets 408.79 176.64 232.15 1
underdevelopment
Investment in 28444.61 26578.41 1866.20 1
subsidiaries
associates and
joint
ventures
Financial assets
Investments 22621.66 20282.50 2339.16 1
Loans 7509.33 199.26 7310.07 37
Derivative assets 42.52 162.46 -119.94 1
Other financial 91.66 60.42 31.24 1
assets
Income tax assets 1645.10 1557.82 87.28 1
Other assets 1681.22 2062.07 -380.85 1
Total Non-current 141279.69 130383.37 10895.63 1
assets
Current assets
Inventories 8603.79 10716.66 -2112.87 -1
Financial assets
Investment 6404.46 3235.16 3169.30 1
Trades receivable 3863.31 1016.73 2846.58 3

34
Cash and cash 1501.71 993.64 508.07 1
equivalents
Other balance with 170.00 233.23 -63.23 -1
bank
Loans 1555.95 1607.32 -51.37 -1
Derivative assets 66.93 209.96 -143.03 -1
Other financial 351.54 230.41 121.13 1
assets
Other assets 854.99 1715.92 -860.93 -1
Total current 23372.68 19959.03 3413.65 1
assets
Total assets 165035.99 150392.56 14643.43 1
Equity and
liabilities
Equity
Equity share 1198.78 1146.13 52.65 1
capital
Hybrid perpetual 775.00 2275.00 -1500.00 -1
securities
Other equity 89293.33 73,416.99 15876.34 1
Total equity 91267.11 76838.14 14428.97 1
Non-current
liabilities
Financial liabilities
Borrowings 27313.80 31381.96 -4068.16 -1
Derivate liabilities 71.20 122.55 -51.35 -1
Other financial 413.66 293.59 120.7 1
liabilities
Provisions 2543.94 2113.56 430.38 1
Retirement benefit 2087.86 2224.44 -136.58 -1
obligations
Deferred income - - -
Deferred tax 6111.70 5862.28 249.42 1
liabilities(ne)
t)
Other liabilities 5913.40 684.75 5228.65 8
Total non-current 44455.56 42683.14 1772.42 1
liabilities
Current liabilities

35
Financial liabilities
Borrowings - 7857.27 -7857.27 1
Trade payable 10,638.59 10,600.96 37.63 1
Derivate liabilities 69.39 81.69 -12.3 -1
Other financial 5274.11 5401.55 -127.44 -1
liabilities
Provisions 1074.43 663.86 410.57 1
Retirement benefit 116.10 106.61 9.49 1
obligations
Income tax 4093.26 277.26 3816.00 14
liabilities(net)
Other liabilities 8013.00 5875.95 2137.05 31
Total current 29313.32 30871.30 -1557.68 -1
liabilities
Total equity and 165035.99 150392.56 14643.43 1
liabilities

COMPARATIVE BALANCE SHEET OF THE YEAR MARCH 2019-2020

Particulars March20 March19 Increase/ Percentage

Decrease Change
Assets
Non-current
assets
Property, plant 66392.35 70416.82 -4024.47 -1
and
Equipment
Capital working 8070.41 5686.02 2384.39 1
Progress
Intangible assets 727.72 805.20 -77.48 -1
Intangible assets 176.64 110.27 66.37 1
underdevelopment
Investment in 26578.41 4437.76 22140.65 5
subsidiaries
associates and
joint ventures
Financial assets
Investments 20282.50 34491.49 -14208.99 -1
Loans 199.26 231.16 -31.90 -1
Derivative assets 162.46 9.05 153.41 17
Other financial 60.42 310.65 -250.23 -1
Assets

36
Income tax assets 1557.82 1428.38 129.44 1
Other assets 2062.07 2535.98 -473.91 -1
Total Non-current 130383.37 120462.78 9920.59 1
Assets
Current assets
Inventories 10716.66 11255.35 -538.69 -1
Financial assets
Investment 3235.16 477.47 2757.69 6
Trades receivable 1016.73 1363.04 -346.31 -1
Cash and cash 993.64 544.85 448.79 1
Equivalents
Other balance 233.23 173.26 59.97 1
with
Bank
Loans 1607.32 55.92 1551.40 1
Derivative assets 209.96 14.96 195.00 13
Other financial 230.41 940.76 -710.35 -1
assets
Other assets 1715.92 2209.98 -494.06 -1
Total current 19959.03 17035.58 2923.45 1
assets
Total assets 150392.56 137498.36 12894.20 1
Equity and
liabilities
Equity
Equity share 1146.13 1146.12 0.01 1
capital
Hybrid perpetual 2275.00 2275.00 0 0
securities
Other equity 73.416.99 69308.59 10108.4 1
Total equity 76838.14 72729.71 -4108.43 -4

COMPARATIVE BALANCE SHEET OF THE YEAR 2019-2018

Particulars March19 March18 Increase Percentage

/decrease change
Assets
Non-current
assets
Property, plant 70416.82 70,942.90 -526.08 -1
and
equipment
Capital work in 5686.02 5,641.50 5303.52 1
progress
Intangible assets 805.20 786.18 19.02 1

37
Intangible assets 110.27 31.77 78.5 2
underdevelopment
Investment in 4437.76 3,666.24 771.52 1
subsidiaries as
sociates and joint
ventures
Financial assets

Investments 34491.49 5970.32 28521.17 5

Loans 231.16 213.50 17.66 1

Derivative assets 9.05 12.13 -3.08 -3

Other financial 310.65 21.21 289.44 14

assets
Income tax assets 1428.38 1043.84 384.54 1

Other assets 2535.98 2140.84 395.14 1

Total Non-current 120462.78 90470.43 29992.35 1

assets
Current assets

Inventories 11255.35 11023.41 231.94 1

Financial assets

Investment 477.47 14640.37 -14162.9 -1

Trades receivable 1363.04 1875.63 -512.59 -1

Cash and cash 544.85 4588.89 -4044.04 -1

equivalents
Other balance 173.26 107.85 65.41 1
with
bank
Loans 55.92 74.13 -18.21 -1

Derivative assets 14.96 30.07 -15.11 -1

Other financial 940.76 480.62 460.14 1

Assets
Other assets 2209.98 1822.94 387.04 1

Total current 17035.58 34643.91 -17608.33 -1

assets

38
Total assets 137498.36 125114.34 12384.02 1

Equity and
liabilities
Equity

Equity share 1146.12 1146.12 0 0

capital
Hybrid perpetual 2275.00 2275.00 0 0
securities
Other equity 69308.59 60368.72 8939.75 1

Total equity 72729.71 63789.84 8939.87 1

Non-current
liabilities
Financial liabilities

Borrowings 26651.19 24568.95 2082.24 1

Derivate liabilities 59.82 70.08 -10.26 -1

Other financial 125.07 19.78 105.29 5

liabilities
Provisions 1918.18 1961.21 -43.03 -1

Retirement benefit 1430.35 1247.73 182.62 1

obligations
Deferred income 747.23 1365.65 -618.42 -1

Deferred tax 7807.00 6259.09 1547.91 1

liabilities(ne)
t)
Other liabilities 436.16 224.71 211.45 1

Total non-current 39175.00 35717.16 3457.84 1

liabilities
Current liabilities

Financial liabilities

Borrowings 8.09 669.88 -661.79 -1

Trade payable 10,969.56 11242.75 -273.19 -1

Derivate liabilities 139.57 16.41 123.16 7

39
Other financial 6872.35 6541.40 330.95 1
liabilities
Provisions 778.23 735.28 687.62 1

Retirement benefit 102.12 90.50 11.62 1

obligations
Income tax 358.14 454.06 -95.92 -1
liabilities(net)
Other liabilities 6365.59 5857.06 508.53 1

Total current 25593.65 25607.34 -99520.69 4

Liabilities
Total equity and 137498.36 125114.34 12384.02 1
liabilities

COMPARATIVE BALANCE SHEET OF THE YEAR 2017-2018

Particulars March18 March17 Increase/decr Percentage

ease change
Assets
Non-current
assets
Property ,plant 70,942.90 71,778.97 -836.07 -1
and
equipment
Capital work in 5,641.50 6,125.35 -483.85 -1
progress
Intangible assets 786.18 788.18 -2 -1
Intangible 31.77 38.61 -6.84 -1
asset sunder
development
Investment in 3,666.24 3,397.57 268.67 1
subsidiaries
associates and
Joint ventures
Financial assets
Investments 5970.32 4958.33 1011.99 1
Loans 213.50 211.97 1.53 1
Derivative assets 12.13 0.12 12.01 100
Other financial 21.21 79.49 -58.28 -1
assets
Income tax assets 1043.84 867.75 176.09 1044
Other assets 2140.84 3121.64 -980.8 -1

40
Total Non-current 90470.43 91367.98 -897.55 -1
assets
Current assets
Inventories 11023.41 10236.85 786.56 1
Financial assets
Investment 14640.37 5309.81 9330.56 2
Trades receivable 1875.63 2006.52 -130.89 -1
Cash and cash 4588.89 905.21 36833.68 41
equivalents
Other balance 107.85 65.10 42.75 1
with
bank
Loans 74.13 27.14 46.99 2
Derivative assets 30.07 6.26 23.81 4
Other financial 480.62 315.06 165.56 1
assets
Other assets 1822.94 1225.48 597.46 1
Total current 34643.91 20097.43 14546.48 1
assets
Total assets 125114.34 1,11,465.41 13648.93 1
Equity and
liabilities
Equity
Equity share 1146.12 971.41 174.71 2
capital
Hybrid perpetual 2275.00 2,275.00 0 0
securities
Other equity 60368.72 48,687.60 11681.12 1
Total equity 63789.84 51,934.01 11855.83 1
Non-current
liabilities
Financial liabilities
Borrowings 24568.95 24,694.37 -125.42 -1
Derivate liabilities 70.08 179.33 -109.25 -1
Other financial 19.78 18.22 1.56 1
liabilities
Provisions 1961.21 2,024.74 -63.53 -1
Retirement 1247.73 1484.21 123288.79 83
benefit

41
obligations
Deferred income 1365.65 1,885.19 -4745.62 -3
Deferred tax 6259.09 6,111.27 147.82 1
liabilities (ne)t)
Other liabilities 224.71 77.74 -7549.29 -97
Total non-current 35717.16 36,475.07 -757.91 -1
liabilities
Current liabilities
Financial liabilities
Borrowings 669.88 3,239.67 -2569.79 -1
Trade payable 11242.75 10,717.44 525.31 1
Derivate liabilities 16.41 270.17 -253.76 -1
Other financial 6541.40 4,062.35 2479.05 1
liabilities
Provisions 735.28 700.60 34.68 1
Retirement 90.50 56.58 33.92 1
benefit
obligations
Income tax 454.06 465.72 -11.66 -1
liabilities(net)
Other liabilities 5857.06 3,543.80 2313.26 1
Total current 25607.34 23,056.33 2551.01 1
liabilities
Total equity and 125114.34 1,11,465.41 13648.93 1
liabilities

42
CHAPTER 5
FINDINGS, CONCLUSION
5.1FINDINGS

1. Inventory turnover ratio of the company under study is decreasing year by year from 2016-
2017 to 2020-2021 except 2017-2018
2. Inventory Holding period of the company under study is increasing year by year from
2016-2017 to 2020-2021 except 2017-2018
3. Inventory conversion period of the company under study is decreasing year by year from
2016-2017 to 2020-2021 except 2019-2020 .
4. Average day to sell inventory ratio of the company under study is decreasing year by year
from 2016-2017 to 2020-2021 except 2019-2020
5. Work in progress of the company under study is increasing year by year from 2016-2017
to 2020-2021 except 2018-2019 and 2020-2021.
6. Raw materials conversion period of the company under study is increasing year by year
from 2016-2017 to 2020-2021except 2018-2019 and 2019-2020
7. Current ratio of the company under study is increasing year by year from 2016-2017 to
2020-2021 except 2020-202

43
Conclusion

The overall performance of the company regarding inventory management is satisfactory in terms
of efficient utilization of the inventories during the period under the study..Inventory management
has to do with keeping accurate records of finished goods that are ready for shipment. This often
means positioning the production of newly completed goods to the inventory totals as well as
subtracting the most recent shipments of finished goods to buyers. When the company has a
return policy in place, there is usually a sub-category contained in the finished goods inventory to
account for any returned goods inventory makes it possible to quickly convey information to sales
personnel as to what is available and ready for shipment at any given time. Inventory
management is important for keeping costs down, while meeting regulation. Supply and demand
is delicate balance, and inventory management hopes to ensure that the balance is undisturbed.
Highly trained Inventory management and high quality software will help to make Inventory
management a success. The ROI of Inventory management will be seen in the form of increased
revenue and profits, positive employee atmosphere, and on overall increase of customer
satisfaction. In relation to main objective of the study , it can be concluded from the above results
that the company is efficient in management of inventory during the period of study and may
required to maintain this level of efficiency in coming years

44
REFERENCE

Gaur, V., Fisher, M. & Raman, A. (2005).” An econometric analysis of inventory turnover
performance in retail services”. Management Science, vol.5,iss.2, pp.181–194.

Lal, A.B (1981), “Inventory Models and Problems of Price Fluctuation”, Shree Publishing House,
New Delhi, 1981.

Pradeep Singh (2008),” Inventory and Working Capital Management- An Empirical Analysis”,
The ICFAI Journal of Accounting and Research, Vol.VII, NO.2, pp.53-73.

Singh, Sukhdev. (2006). Inventory control practices in IFFCO. The Management Accountant,
vol.41,iss.7, pp.577–582.

Srinivasa Rao Kasisomayajula (2014) “An Analytical Study on Inventory Management in

Commercial Vehicle Industry in India”, International Journal of Engineering Research, Vol.3, Iss.6,
pp.378-383.

Books

Maheshwari S.N Financial Management 9th Edition 2004.

Moorthy. A Financial Management 9th Edition 2018

Websites; www.tatasteel.com

45
APPENDIX

BALANCE SHEET OF TATA STEEL FROM 2016-2021

Particulars March21 March20 March19 March18 March17
Assets
Non-current assets
Property ,plant and 64032.32 66392.35 70416.82 70,942.90 71,778.97
equipment
Capital work in progress 10057.18 8070.41 5686.02 5,641.50 6,125.35
Intangible assets 839.33 727.72 805.20 786.18 788.18
Intangible assets under 408.79 176.64 110.27 31.77 38.61
development
Investment in 28444.61 26578.41 4437.76 3,666.24 3,397.57
subsidiaries
associates
And joint ventures
Financial assets
Investments 22621.66 20282.50 34491.49 5970.32 4958.33
Loans 7509.33 199.26 231.16 213.50 211.97
Derivative assets 42.52 162.46 9.05 12.13 0.12
Other financial assets 91.66 60.42 310.65 21.21 79.49
Income tax assets 1645.10 1557.82 1428.38 1043.84 867.75
Other assets 1681.22 2062.07 2535.98 2140.84 3121.64
Total Non-current assets 141279.69 130383.37 120462.78 90470.43 91367.98
Current assets
Inventories 8603.79 10716.66 11255.35 11023.41 10236.85
Financial assets
Investment 6404.46 3235.16 477.47 14640.37 5309.81
Trades receivable 3863.31 1016.73 1363.04 1875.63 2006.52
Cash and cash 1501.71 993.64 544.85 4588.89 905.21
equivalents
Other balance with bank 170.00 233.23 173.26 107.85 65.10
Loans 1555.95 1607.32 55.92 74.13 27.14
Derivative assets 66.93 209.96 14.96 30.07 6.26
Other financial assets 351.54 230.41 940.76 480.62 315.06
Other assets 854.99 1715.92 2209.98 1822.94 1225.48
Total current assets 23372.68 19959.03 17035.58 34643.91 20097.43
Total assets 165035.99 150392.56 137498.36 125114.34 1,11,465.41
Equity and liabilities
Equity
Equity share capital 1198.78 1146.13 1146.12 1146.12 971.41
Hybrid perpetual 775.00 2275.00 2275.00 2275.00 2,275.00
securities

46
Other equity 89293.33 73.416.99 69308.59 60368.72 48,687.60
Total equity 91267.11 76838.14 72729.71 63789.84 51,934.01
Non-current liabilities
Financial liabilities
Borrowings 27313.80 31381.96 26651.19 24568.95 24,694.37
Derivate liabilities 71.20 122.55 59.82 70.08 179.33
Other financial liabilities 413.66 293.59 125.07 19.78 18.22
Provisions 2543.94 2113.56 1918.18 1961.21 2,024.74

47