K.L.

E Society’s
College of Business Administrations-BBA
1st Floor, RLS College, Corporation circle, Dharwad -580008

A study on Inventory Management at

Elmeca works pvt. Ltd. , Dharwad

Adarsh Grampurohit
19N11201
Internal guide : Prof. Nandini Huddar
 EXECUTIVE SUMMARY
Inventory management is the process of overseeing and
controlling the flow of inventory units a business uses in the
production or manufacture of goods for sale or distribution.
Elmeca works is one of pioneer in manufacturing high
precision machine tool in Dharwad unit situated in Karnataka.
Its factory and office at Hattikolla in Dharwad and register
office in Mumbai
Mr.Appasaheb M. Jinagouder is director cum chairman of the
company.
Machinetool accessories ,Boring and face heads ,Power
operated Chuck's, CNC tooling system and Micro boring bars
and catridges are some of the products of Elmeca.
The company follows FIFO method of inventory management.
Investment in inventory management in many cases, one of the
largest asset items of business enterprise particularly those engaged
in manufacturing wholesale and retail trade.
Primary and secondary data has been collected from the company
for the completion of the project.
Data analysis has been done on the following topics Fixed asset
turnover ratio, days of inventory holding, inventory turnover ratio,
inventory to working capital ratio.
In the year 2018-2019 the inventory to working capital is negative
i.e. -0.73 and in the year 2019-2020 it has increased to 2 and in the
year 2020-2021 it has decreased to 1.19.
 The Days of inventory holding was 105.85 low in 2018- 2019 and
it was 255.5 in 2019-2020 and in the year 2020-2021 it has
increased to 423.4
The high inventory turnover ratio indicates that the products are
selling well
After the study, we can come to the conclusion that,
effectiveness of inventory management should be improved.
The finished goods have to be dispatched in feasible time as
soon as manufacturing is completed. The company should
increase the working capital as it is in negative and the fixed
asset turnover ratio is increase year by year it implies that
the company is more efficient at using its assets and the
company is generating revenue.
 Industry profile
The start of organized sector of the Indian machine tool industry took place in
early years of the Second World War.
Due to non-availability of imported machine tools, few British owned general
engineering firms took up their manufacturing in India.
The sixties marked the third phase of machine tool industry, typified by rapid
growth in production and horizontal expansion in types of machine tools
The fifth and current phase began in early nineties after the new policies of Open
Market Economy were introduced, which saw advent of Technocrats
the Indian machine tool industry has undertaken a long way in the last decade
since liberalization and economic reforms were ushered in.
The product range covers highly sophisticated engineering and Import substituting
products like Micro boring and facing heads, CNC Tooling’s, Pneumatic chucks
Jig grinder, Clare chucks and collets, milling accessories and collets.

The India machine tools market is expected to exhibit a CAGR of 11.45% during
2022-2027
 Company Profile
Year of establishment: 1971
Business Type: Manufacturing
Ownership pattern: Pvt. Ltd. company
Import and Export: Machine tool accessories, Boring and face
heads,Power operated Chuck's, CNC tooling system & Micro
boring bars and cartridges
No of staff:97
Organisation pattern: Functional organisation structure
Company Objectives :
To remain a leading producer of machinery products in India.
To continuously grow in our business and become a
significant player in the world market.
Products
Machine tool accessories
Boring and face heads
Power operated Chuck's
CNC tooling system
Micro boring bars and cartridges
 Conceptual Framework
Inventory has been defined by the Accounting Principles
Board as “the aggregate of those items of tangible personal
property which
Are held for sale in ordinary course of business,
Are in the process of production for sales, or
Are to be currently consumed in the production of goods
or services to be available for sale.”
Inventory Control; may be defined as “ systematic control
and regulation of purchase, storage and usage of materials in
such a way so as to maintain an even flow of production and
the time avoiding excessive investment in inventories.
Objectives of the study
To know about the techniques used by the company in
inventory management.
To examine the performance of the company in
relation to inventory management.
To examine the effectiveness of inventory
management system.
To draw the findings based on the results and to offer
suitable suggestions.
 
 Research methodology
Primary data
Personal interview: personal interaction with external guide,
within the company.
Questionnaire: list of questions asked about the project topic.
Secondary data
As the study is aimed at the inventory management of Elmeca
works the methodology adopted is analytical
Data has been calculated from secondary source like balance
sheet, profit and loss account.
Detailed study of last 4 years annual report is done and
required information is used for calculation.
 
 Data analysis and interpretation
Inventory turnover ratio:
Inventory turnover ratio = cost of goods sold
Average inventory
Year 2017-2018 2018-2019 2019-2020 2020-2021
 

cost of goods sold 1,38,05,980 2,87,95,158 1,50,33,300 4,60,53,600

 
average stock 5,75,24,918 9,72,23,975 2,13,43,509 3,95,75,875
 
Inventory 0.24 0.29 0.7
turnover ratio 1.16
Interpretation:
Chart (1) shows that the inventory turnover ratio has
increased from 0.24 to 0.7 during the year 2017 – 2020
which was a good sign and during the year 2020-2021
it has increased from 0.7 to 1.16 which is also a good
sign for the company.
Days of Inventory holding
Days of inventory holding= Inventory turnover
ratio*365
Particulars 2017-2018 2018-2019 2019-2020 2020-2021
 

Inventory 0.24 0.29 0.7 1.16

turnover ratio  
No of days in 365 365 365 365
year  
Days of 90.35 105.85 255.5 423.4
inventory  
holding  
Interpretation:
 The chart (2) shows the number of days of inventory holding. In
the year 2017-2018 the number of inventory holding was 90.35
days and In 2018-2019 it has increased to 105.85 days and in the
year 2020-2021 it has increased to 423.4 days the composition of
number of holding shows the inventory period of the firm.
 Fixed Asset Turnover Ratio:
Fixed asset turnover ratio = Net sales
Fixed asset
Particulars 2017-2018 2018-2019 2019-2020 2020-2021

Net sales 4,60,39,746 11,13,30,239 27,05,68,516 29,94,26,695

Fixed asset 16,11,32,920 21,64,28,777 25,24,31,220 26,86,17,585

fixed asset 0.28 0.51 1.07 1.11

turnover ratio
Interpretation
The chart shows the fixed asset turnover ratio. In the year 2017-2018
it was 0.28 and in the year 2018-2019 it was 0.51 and in the year
2019-2020 it was 1.07 . The fixed asset turnover ratio is increased
year by year. And it indicates that the company generate strong sales
for the level of fixed asset.
Inventory to current assets:
Inventory to current assets = Annual inventory
Total current assets
particulars 2017-2018 2018-2019 2019-2020 2020-2021

annual inventory 2,93,06,779 6,37,83,133 10,11,09,392 8,49,04,550

total current assets 3,66,33,474 8,33,05,843 17,20,24,333 17,25,46,995

inventory to current 0.80 0.76 0.58 0.49

asset ratio
Interpretation
Chart (5) indicates the inventory to current asset ratio. In the 2018-2019 it
was 0.76 times and in 2019-2020 it was 0.58 times and in 2020-2021 it
was 0.49 times. The inventory to total current asset ratio shows the store
of inventory in the total current asset requirement of the firm. Comparing
all the years the ratio of inventory to current asset is in decreasing trend.
Inventory to working capital:
 Inventory to working capital = Annual
inventory
Particulars 2017-2018 2018-2019 2019-2020 Working
2020-2021

capital
annual inventory 6,00,91,343 6,37,83,133 10,11,09,392 8,49,04,550

working capital -16,11,32,861 -8,69,25,908 5,05,30,758 7,09,22,895

inventory to working -0.37 -0.73 2 1.19

capital ratio
Interpretation:
Chart (6) shows the inventory to working capital ratio, in the year
2018-2019 the inventory to working capital ratio was negative i.e.,
-0.73 and in the year 2019-2020 it has increased to 2 and in the
year 2020-2021 it has decreased to 1.19 working capital ratio is
fluctuating year by year.
 Findings
Selective control techniques like ABC analysis, VED Analysis, FSN Analysis are not in
practice.
They are using only FIFO method. 
The high inventory turnover ratio indicates that the products are selling well. The
inventory turnover ratio was 0.29 low in 2018-2019. In 2019-2020 the ratio was 0.7 high
as it shows the increase in the performance of inventory ratio. But again in 2020-2021 it
has increased to 1.16 high as it shows optimum utilisation of inventory. 
The Days of inventory holding was 105.85 low in 2018- 2019 and it was 255.5 in 2019-
2020 and in the year 2020-2021 it has increased to 423.4 . This shows that the store of
inventory in the total current asset requirement of the firm has increased. the increase in
the inventory to current ratio can lead to put pressure on that current asset requirement of
the company. 
In the year 2018-2019 the inventory to working capital is negative i.e. -0.73 and in the
year 2019-2020 it has increased to 2 and in the year 2020-2021 it has decreased to 1.19. 
Operational efficiency of the company is increasing every year. 
From the physical observation of inventory management it was found that the company is
having only those materials for which they are having orders in hands.
Suggestions
All types of techniques and methods should be adopted.

Inventory turnover ratio has increased and optimum

utilisation of resources should be maintained.
Due to increase in the inventory to current ratio it has lead
to pressure and current asset certain actions should be
implemented.

The working capital should not be negative as the

operational efficiency company is increasing every year.
And finally still inventory have to be improved.
Conclusion
After the study, we can come to the conclusion that,
effectiveness of inventory management should be
improved. The finished goods have to be dispatched in
feasible time as soon as manufacturing is completed.
The company should increase the working capital as it
is in negative and the fixed asset turnover ratio is
increase year by year it implies that the company is
more efficient at using its assets and the company is
generating revenue.
Limitations
The data considered for study confined only for a
period of 4 years.

The study is based on primary data as well as

secondary data such as published annual accounts of
the company.

The reliability on accuracy calculation depended very

much on the information found in the balance sheet
First ­- In - First- Out method (FIFO):
Bibliography
Company manual
Company website – www.elmeca.netfirm.com
Company profile