A STUDY ON THE INVENTORY MANAGEMENT ON HERO MOTOR CORPORATION LIMITED

Submitted in partial fulfillment of the requirement for the reward of

BACHELOR OF COMMERCE
By SUBHA.D
Register No-39740230

BACHELOR OF COMMERCE

SCHOOL OF MANAGEMENT STUDIES

SATHYABAMA

INSTITUTE OF SCIENCE AND TECHNOLOGY

(DEEMED TO BE UNIVERSITY)

Accredited with Grade “A” by NAAC I 12B Status by UGC I 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 SUBHA . D
(39740230) who has done the Project work entitled ASTUDYONTHE
INVENTORY MANAGEMENT OF HERO MOTOR CORPORATION 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 ExternalExaminer

ii
 DECLARATION

I SUBHA .D (39740230). Hereby declare that the Project Report entitled “A STUDY
ON THE INVENTORY MANAGEMENT ON HERO MOTOR CORPORATION
LIMITED ” done by me under the guidance of Dr. THAMILSELVAN .R, M.Com,
M.B.A, MPhil, 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: CHENNAI SUBHA.D

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. Associate Professor, Dept. of
Management Studiesfor 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.

SUBHA . D

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 analyse the inventory control in the leading Two wheeler manufacturing
company (Hero motor corp ltd.). In this project we will perform the inventory management of
Tata steel Limited we will go through the financial statements of the company to diagnose
inventory soundness

v
TABLE OF CONTENTS

CHAPTER TITLE
ABSTRACT V
LIST OF TABLES Vi
INTRODUCTION
1.1 INTRODUCTION OF 1
THE STUDY
1.2 COMPANY PROFILE 4
1 1.3 NEED FOR THE STUDY 6
1.4 OBJETIVES OF THE 6
STUDY
1.5 SCOPE OF THE STUDY 6
1.6 LIMITATION OF THE 7
STUDY
1.7 CHAPTER 7
FRAMEWORK
REVIEW OF LITERATURE
2 2.1 REVIEW OF 8
LITERATURE
RESEARCH
METHODOLOGY
3 3.1 RESEARCH 15
METHODOLOGY
3.2 DATA COLLECTION 15
DATA ANALYSIS AND
INTERPRETATION
4 4.1 RATIO ANALYSIS 16
4.2 COMPARITIVE 34
BALANCE SHEET
Vi
 FINDING AND
SUGGESTIONS
5 5.1 FINDING 42
5.2 CONCLUSION 43
REFERENCE 44
APPENDIX 45

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
4.12 COMPARATIVE BALANCE SHEET OF 38
THE YEAR 2018-2019
4.13 COMPARATIVE BALANCE SHEET OF 40
THE YEAR 2017-2018
Vii
 45
4.14 BALANCE SHEET
4.15 PROFIT AND LOSS ACCOUNT OF THE 46
YEAR 2016-2021

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
 CHAPTER 1

1.1 INTRODUCTION OF STUDY

THEORETICAL FRAMEWORK OF INVENTORY MANAGEMENT

Every enterprise needs inventory for smooth running of activities. It serves, as a link between
production and distribution. For every process there is, generally, a time lag between the
recognition of a need and its fulfillment. The greater the time lag, the higher the requirement for
inventory. The unforeseen fluctuations in demand and supply of goods also necessitate the
need for inventory. It provides a cushion for future price fluctuations.

The investment in inventories constitutes the most significant part of current assets/working
capital in most of the undertakings. Thus, it is very essential to have proper control and
management of inventories. The purpose of inventory management is to ensure availability of
materials in sufficient quantity as and when required and also to minimize investment in
inventories.
The investment in inventory is very high in most of the undertakings engaged in manufacturing,
wholesale and retail trade. In India, a study of 29 major industries has revealed that the average
cost of materials is 65paise and the cost of labour is 10 paise and overheads is 15paise of a
rupee, 10%is profit. It is necessary for every management to give proper attention to inventory
management. A proper planning of purchasing, handling, storing and accounting should form a
part of inventory management.

An efficient system of inventory will determine,

• What to buy
• How to buy
• Where to buy
• Where to store

1
There are conflicting interests of different departmental heads over the issue of inventory. The
finance manager will try to invest less in inventory because to him it is an idle investment, where
as production manager will emphasis to acquire more inventory as he does not want any
interruption in production due to shortage of inventory. The purpose of inventory management is
to keep the stocks in such a neither way that there is over-stocking nor under-stocking. The
over-stocking will mean a reduction of liquidity and starving of other production processes
whereas under-stocking, on other hand, will result in stoppage of work. The investments in
inventory should be kept in reasonable limits.

MEANING AND NATURE OF INVENTORY

There are different meanings of inventory in different languages. In accounting language it may
mean stocks of finished goods only. In a manufacturing concern, it may include raw materials;
work in process and stores, etc., to understand the exact meaning of the work “inventory”
Inventory may include the following things:

1. RAW MATERIALS:

Raw materials form a major input into the organization. They are required to carry out
production activities uninterruptedly. The quantity of raw materials required will be determined
by the rate of consumption and the time required for replacing the supplies. The factors like the
availability of raw materials and government regulations, etc., too affect the stock of raw
materials.

2. WORK-IN-PROGRESS:

The work-in-progress is that stage of stocks, which are in between raw materials and finished
goods. The raw materials enter the process of manufacturing but they are yet to attain a final
shape of finished goods. The quantum of work-in-progress depends upon the time taken in the
manufacturing process. The greater the time taken in manufacturing, the more will be the
amount of work-in-progress.

2
3. CONSUMABLES:

These are the materials, which are needed to smoothen the process of production. These
materials do not enter directly into production but they act as catalysts. Consumables may be
classified according to their consumption and criticality. Generally, consumables stores do not
create any supply problem and form a small part of production cost. There can be instances
where these materials may account for much value than the raw materials. The fuel oil may
form a substantial part of the cost.

4. FINISHED GOODS:

These are goods, which are ready for the consumers. The stock of finished goods provides a
buffer between production and market. The purpose of maintaining inventory is to ensure proper
supply of goods to the customers. In some concerns the production is under taken on order
basis. In these concerns there will not be a need for finished goods inventory. The need for
finished goods inventory will be more when production is undertaken in general without waiting
for specific orders.

5. SPARES:

Spares also form a part of inventory. The consumption pattern of raw materials, consumables,
finished goods are different from that of spares. The stocking policies of spares are different
from industry to industry. Some industries like transport will require more spares than the other
concerns. The costly spare parts like engines, maintenance spares etc., are not discarded after
use. Rather they are kept in ready positions for further use. All decisions about spares are
based on the financial cost of inventory on such spares and the cost that may arise due to their
non-availabilityefficiency, aggressively expand its reach to customers, continue to invest in
brand building activities and ensure customer and shareholder delight.

3
1.2 COMPANY PROFILE

INTRODUCTION
Hero MotoCorp Ltd. (Formerly Hero Honda Motors Ltd.) is the world's largest manufacturer of
two - wheelers, based in India.

In 2001, the company achieved the coveted position of being the largest two-wheeler
manufacturing company in India and also, the 'World No.1' two-wheeler company in terms of
unit volume sales in a calendar year. Hero MotoCorp Ltd. continues to maintain this position till
date.

VISION

The story of Hero Honda began with a simple vision - the vision of a mobile and an empowered
India, powered by its two wheelers. Hero MotoCorp Ltd., company's new identity, reflects its
commitment towards providing world class mobility solutions with renewed focus on expanding
company's footprint in the global arena.

MISSION

Hero MotoCorp’s mission is to become a global enterprise fulfilling its customers' needs and
aspirations for mobility, setting benchmarks in technology, styling and quality so that it converts
its customers into its brand advocates. The company will provide an engaging environment for
its people to perform to their true potential. It will continue its focus on value creation and
enduring relationships with its partners.

4
STRATEGY

Hero MotoCorp’s key strategies are to build a robust product portfolio across categories,
explore growth opportunities globally, continuously improve its operational

Hero MotoCorp Limited was incorporated in the year 1984 with the name Hero Honda Motors
Ltd. Led by Dr. Pawan Munjal Chairman, Hero MotoCorp, it has taken rapid strides to expand its
presence to 40 countries across Asia, Africa, and South & Central America. Hero MotoCorp is a
truly global enterprise with a workforce that comprises of people from different nationalities
including India, Bangladesh, Colombia, Germany, Austria, Japan and France.

MANUFACTURING

Hero MotoCorp two wheelers are manufactured across 3 globally benchmarked manufacturing
facilities. Two of these are based at Gurgaon and Dharuhera which are located in the state of
Haryana in northern India. The third and the latest manufacturing plant is based at Haridwar, in
the hill state of Uttrakhand.

DISTRIBUTION

The Company's growth in the two wheeler market in India is the result of an intrinsic ability to
increase reach in new geographies and growth markets. Hero MotoCorp’s extensive sales and
service network now spans over to 6000 customer touch points. These comprise a mix of
authorized dealerships, service & spare parts outlets, and dealer-appointed outlets across the
country.

5
1.3 NEED FOR THE STUDY

• Inventory management helps companies identify which and how much stock to order at
what time.

• It tracks inventory from purchase to the sale of goods.

The practice identifies and responds to trends to ensure there's always enough stock to fulfill
customer orders and proper warning of a shortage

1.4 OBJECTIVES OF THE STUDY

PRIMARY OBJECTIVE

• To study inventory management system of Hero Motocorp Ltd..

SECONDARY OBJECTIVE

• To analyze the inventory position through various financial ratios .

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

1.5 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.

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1.6 LIMITATIONS 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

1.7 CHAPTER FRAMEWORK

CHAPTER-1 First Chapter discuss introduction of the study, Industry Profile, Company Profile,
Need for the study, Statement of the Problem, Objectives of the Study & Limitation of the study.

CHAPTER-2 Second Chapter Reviews previous studies.

CHAPTER-3 Third Chapter describes Research Methodology, Research Design, Data

Collection, Statistical Tools used for the Study.

CHAPTER-4 Forth Chapter deals with data analysis and Interpretation

CHAPTER-5 Fifth Chapter enlists findings and conclusions

7
 CHAPTER 2

2.1 REVIEW OF LITERATURE

1. Amrit Raj has reported that Hero Moto Corp Ltd is a focusing on technology revamp by
having tie ups with US based EBR racing and with Austria based engine maker AVL
these moves are with an ultimate aim to extend arm in R&D as the company has decided
not to run the existing brands on Honda engines.

2. Abhijeet Singh and Brijesh Kumar has mentioned that Hero Motors Ltd, is running a
program With an objective to create an innovative environment for interaction between
Hero Honda and its customers. Members of this program are given a magnetic card in
which all information is stored and this card is swiped when using any service at a
showroom or workshop and it works like a loyalty benefit card.

3. Joseph George is of the opinion about the hero tie up with Engines Engineering to
improve design that while hero needs good research and development support, it should
ensure it finds right partners, unlike Bajaj and TVS who pursued in house research and
development, hero seeking outside help is fraught with risks as it could be tough for hero
to synergize diverse inputs from variety of partners.

4. 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
company inventory control existing condition and reduce costs of the company.

8
5. 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.

6. 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

7. 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.

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

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.

9. 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

9
 conversion period over gross operating profit. The results cleared out that significant
negative linear relationship occurred between inventory conversion period and
profitability.

10. 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.

11. 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.

12. 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 various inventory management techniques

13. 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,

10
 small Inventory level is not always a better solution, so manufacturers need to maintain
the correct amount of inventory at the correct level

14. 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.

15. 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

16. 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
17. 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

18. 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.

19. 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.

20. S. Singh (2006) Analysed the inventory control practices of single fertilizer company
named IFFCO. He statistically examined the inventory system with consumption, sales

12
 and other variables along with growth of these variables and inventory patterns. He
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.

21. 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.

22. 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:

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.

23. 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.Theauthorsaidthattheiraimi
nthisworkisalsoto present the most important criterion that allow adistinction between the
different types of managing the inventory.

13
24. CharlesAtkinson,heexplainedtheinventorymanagementandassessmentofinventorylevels
.Asper this study inventory management need to address two issue
Part I. How to optimize average inventory
levels.
Part II .How to assess(evaluate)inventory
levels.

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

25. Bernatde William2008 This study tells that the main focus of inventory management is
on transportation and warehousing. The decision taken by management depend s 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 inventory Ratio (Times)

2016-2017 19095.33 819.58 23.29

2017-2018 22213.26 739.94 30.01

2018-2019 23355.90 864.34 25.86

2019-2020 11892.97 1081.68 10.99

2020-2021 21882.2 1280.76 17.08

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 increasing year by year from 2016-2017 to 2020-2021 except 2018-2019 and 2019-2020.

16
 35

30

25

20

15

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 a
year.

Table 4.1.2 Inventory holding period Rs in Crores

Year No of days in a Inventory turnover Ratio (Days)

Year ratio

2016-2017 365 23.29 15.67

2017-2018 365 30.01 12.16

2018-2019 365 25.86 14.11

2019-2020 365 10.99 33.21

2020-2021 365 17.08 21.37

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 and 2020-2021.

18
 35

30

25

20

15

10

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 days inventories are converted into net sales
and it generate revenue for the company.

Inventory conversion period = Inventory /Sales *365

Table 4.1.3 Inventory conversion period Rs in Crores

YEAR Inventories Sales Ratio (Days)

2016-2017 823.58 33397.64 9

2017-2018 656.31 31368.55 7.63

2018-2019 1072.37 34341.79 11.39

2019-2020 1091.97 29614.43 12.70

2020-2021 1469.55 31380 17.09

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 increasing year by year from 2016-2017 to 2020-2021 except 2017-2018 .

20
 18

16

14

12

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 area working 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 inventory Cost of goods sold Ratio

2016-2017 819.58 19095.33 4.29

2017-2018 739.94 22213.26 3.33

2018-2019 864.34 23355.90 3.70

2019-2020 1081.68 11892.97 9.09

2020-2021 1280.76 21882.2 5.85

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 ratioof the company
under study is decreasing year by year from 2016-2017 to 2020-2021 except 2018-2019 and
2019-2020.

22
 10

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

Raw materials
Raw materials consumption/365 (Raw Ratio
YEAR
inventory materials consumption in (Days)
Days)

2016-2017 395.02 86 4.59

2017-2018 442.21 60 7.38

2018-2019 615.99 64 9.63

2019-2020 567.65 54 10.42

2020-2021 740.2 60 12.35

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 2020-2021

24
 14

12

10

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 which the
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)

inventories 365 ( work in
progress conversion
period in days
2016-2017 31.89 52 0.61

2017-2018 37.14 60 0.62

2018-2019 31.37 64 0.48

2019-2020 50.13 55 0.91

2020-2021 46.9 60 0.77

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

Interpretation

From the above table 4.1.6 shows that inventory turnover ratio 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 the finished 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 goods Cost of sales/ No of Ratio(Days)

inventories days 365

2016-2017 98.76 53 1.88

2017-26018 106.66 60 17.54

2018-2019 150.81 63 2.36

2019-2020 301.83 32 9.26

2020-2021 448.53 60 7.48

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 periodof the company under
study is increasing year by year from 2016-2017 to 2020-2021 except 2018-2019 and 2020-
2021

28
 20

18

16

14

12

10

0
2016-2017 2017-26018 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 accompany 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 2650.56 19095.33 50.66

2017-2018 3247.27 22213.26 53.35

2018-2019 3355.28 23355.90 52.43

2019-2020 3022.18 11892.97 25.41

2020-2021 5188.90 21882.2 86.55

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 ratioof the company under
study is increasing year by year from 2016-2017 to 2020-2021 except 2018-2019 and 2020-
2021

30
 Ratio(Days)

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-term obligations or those due
within one year.

Table 4.1.9 Current ratio Rs in Crores

YEAR Current Asset Current Liabilities Current Ratio

2016-2017 6151.22 3488.32 1.78

2017-2018 7453.18 4093.33 1.82

2018-2019 8115.64 4130.36 1.96

2019-2020 8288.56 3976.06 2.08

2020-2021 10952.79 6110.22 1.79

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 2018-2019 and 2020-2021

32
 Current Ratio

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

Fig 4.1.9 Current ratio

33
Table 4.2.1 Comparative balance sheet of the year 2020-2021

Particulars Mar 21 Mar 20 INC/DEC Percentage

change
Assets
Non-current assets
Property, plant, 5293.40 5,562.42 -269.02 -5%
equipment
Capital work in progress 177.86 160.25 17.61 11%
Right of use of assets 404.75 414.57 -9.82 -2%
Other intangible assets 290.26 140.09 150.17 107%
Intangible assets under 258.73 181.02 77.71 42%
Development
Financial assets
Investments 4308.18 3,528.17 780.01 22%
Loans 52.23 67.27 -15.04 -22%
Income tax assets (net) 368.19 310.13 58.06 19%
Other non-current assets 34.66 96.85 -62.19 -64%
Current assets
Inventories 1450.55 1,091.97 358.58 33%
Financial assets
Investments 6191.49 4,694.48 1497.04 32%
Trade receivable 2426.76 1,603.14 823.62 51%
Cash and cash 169.22 147.91 21.31 14%
equivalents
Bank balances other than 87.93 93.95 -6.02 -6%
Loans 36.94 2236 -2199.06 -98%
Others 357.53 35461 35,103.47 99%
Others current assets 213.37 280.14 -66.77 -24%
Total current asset 10,992.79 8,288.56 2,704.23 33%
Total assets 22,161.05 18,749.33 3,411.72 18%
Equity and liabilities
equity

34
Equity share capital 39.96 39.95 0.01
Other equity 15,158.47 14,096.45 1062.02 8%
Total equity 15,198.43 14,136.40 1062.03 8%
Liabilities
Non-current liabilities
Financial liabilities
Lease liability 129.81 121.67 8.14 7%
Trade payables Nil Nil Nil Nil
Other financial liabilities 146.04 Nil
Provisions 172.46 122.37 50.09 41%
Preferred tax 404.09 392.83 11.26 3%
liabilities(net)
Total non-current 652.40 636.87 15.53 2%
liabilities
Financial liabilities
Lease liability 19.70 28.29 -8.59 -30%
Trade payable Nil Nil Nil Nil
Total outstanding dues of 15.71 8.33 7.38 89%
micro
and small enterprises
Total outstanding 5,188.90 3,022.18 2166.72 72%
dues of creditors other
than micro and
small enterprises
Other financial liabilities 159.53 252.44 -92.91 -37%
Other current liabilities 566.01 518.26 47.75 9%
Provisions 160.37 146.56 13.81 9%

35
Table 4.2.2 Comparative balance sheet of the year 2019-2020

Particulars Mar 20 Mar 19 INC/DEC Percentage

change
Assets
Non-current assets
Property, plant, equipment 5,562.42 4,477.53 1084.89 24%
Capital work in progress 160.25 360.67 -200.42 -56%
Right of use of assets 414.57 Nil
Other intangible assets 140.09 141.05 -0.96 -1%
Intangible assets under 181.02 181.19 -0.17 -1%
development
Financial assets
Investments 3,528.17 2,801.51 726.66 26%
Loans 67.27 59.96 7.31 12%
Income tax assets (net) 310.13 839.26 -529.13 -63%
Other non-current assets 96.85 664.38 -567.53 -85%
Current assets
Inventories 1,091.97 1,072.37 19.6 2%
Financial assets
Investments 4,694.48 3,167.10 1527.38 48%
Trade receivable 1,603.14 2,821.57 -1218.43 -43%
Cash and cash 147.91 40.68 107.23 263%
equivalents
Bank balances other than 93.95 95.78 -2 -2%
Loans 2236 25.03 2210.97 8833%
Others 35461 653.89 34807.11 5323%
24Others current assets 280.14 239.22 40.92 17%
Total current asset 8,288.56 8,115.64 172.92 2%
Total assets 18,749.33 17,641.19 1108.14 6%
Equity and liabilities equity
Equity share capital 39.95 39.95 0

36
Other equity 14,096.45 12,817.17 1279.28 10%
Total equity 14,136.40 12,857.12 1279.28 10%
Liabilities
Non-current liabilities
Financial liabilities
Lease liability 121.67 Nil
Trade payables Nil Nil Nil Nil
Other financial liabilities Nil Nil Nil Nil
Provisions 122.37 117.20 5.17 4%
Preferred tax 392.83 536.51 -143.68 -27%
liabilities(net)
Total non-current liabilities 636.87 653.71 -16.84 -3%
Financial liabilities
Lease liability 28.29 Nil
Trade payable Nil Nil Nil
Total outstanding dues of 8.33 Nil
micro
and small enterprises
Total outstanding 3,022.18 3,355.28 -333.62 -10%
dues of creditors other
than micro and
small enterprises
Other financial liabilities 252.44 220.87 31.57 14%
Other current liabilities 518.26 495.18 23.08 5%
Provisions 146.56 59.03 87.53 148%

37
Table 4.2.3 Comparative balance sheet of the year 2018-2019

Particulars Mar 19 Mar 18 INC/DEC Percentage

change
Assets
Non-current assets
Property, plant, equipment 4,477.53 4,485.89 -8.36 -1%
Capital work in progress 360.67 203.78 156.89 77%
Right of use of assets Nil Nil Nil Nil
Other intangible assets 141.05 168.65 -27.6 -16%
Intangible assets under 181.19 114.61 66.58 58%
development
Financial assets
Investments 2,801.51 1,934.08 867.43 45%
Loans 59.96 45.68 14.28 32%
Income tax assets (net) 839.26 379.26 460 121%
Other non-current assets 664.38 558.67 105.71 19%
Current assets
Inventories 1,072.37 823.38 248.99 30%
Financial assets
Investments 3,167.10 5,591.12 -2424.02 -43%
Trade receivable 2,821.57 1,520.18 1319.39 86%
Cash and cash equivalents 40.68 34.38 6.3 18%
Bank balances other than 95.78 106.96 -11.18 -10%
Loans 25.03 27.56 -2.53 -9%
Others 653.89 539.37 114.52 21%
Others current assets 239.22 205.03 33.97 17%
Total current asset 8,115.64 8,848.18 -732.54 -8%
Total assets 17,641.19 16,738.80 902.39 5%
Equity and liabilities equity
Equity share capital 39.95 39.94 0.01 -1%
Other equity 12,817.17 11,728.94 1088.23 9%
Total equity 12,857.12 11,768.88 1088.24 9%

38
Liabilities
Non-current liabilities
Financial liabilities
Lease liability Nil Nil Nil Nil
Trade payables Nil 3,318.81
Other financial liabilities Nil 202.14
Provisions 117.20 114.94 2.26 2%
Preferred tax liabilities(net) 536.51 511.66 24.85 5%
Total non-current liabilities 653.71 626.60 27.11 4%
Financial liabilities
Lease liability Nil Nil Nil Nil
Trade payable Nil 3,318.81
Total outstanding dues of Nil Nil Nil Nil
micro
and small enterprises
Total outstanding dues of 3,355.28 Nil
creditors other than micro
and
small enterprises
Other financial liabilities 220.87 202.14 18.73 9%
Other current liabilities 495.18 762.58 -267.4 -35%
Provisions 59.03 59.79 -0.76 -1%

39
Table 4.2.4 Comparative balance sheet of the year 2017-2018

Particulars Mar 18 Mar 17

Assets
Non-current assets
Property, plant, equipment 4,485.89 4,310.73 175.16 4%
Capital work in progress 203.78 270.72 -66.94 -25%
Right of use of assets Nil Nil Nil Nil
Other intangible assets 168.65 84.86 83.79 99%
Intangible assets under 114.61 194.33 -79.72 -41%
Development
Financial assets
Investments 1,934.08 1,349.00 585.08 43%
Loans 45.68 48.36 -2.68 -6%
Income tax assets (net) 379.26 331.94 47.32 14%
Other non-current assets 558.67 651.14 -92.47 -1%
Current assets
Inventories 823.38 656.31 167.07 25%
Financial assets
Investments 5,591.12 4,540.85 1050.27 23%
Trade receivable 1,520.18 1,561.87 -41.69 -3%
Cash and cash equivalents 34.38 15.40 18.98 123%
Bank balances other than 106.96 121.33 -14.37 -11%
Loans 27.56 24.18 2.38 10%
Others 539.37 144.95 394.42 272%
Others current assets 205.03 388.29 -183.26 -47%
Total current asset 8,848.18 7,453.18 8103 108%
Total assets 16,738.80 14,694.26 2044.54 14%
Equity and liabilities equity
Equity share capital 39.94 39.94 0 0%
Other equity 11,728.94 10,071.35 1657.59 16%
Total equity 11,768.88 10,111.29 1657.59 -1%
Liabilities

40
Non-current liabilities
Financial liabilities
Lease liability Nil Nil Nil Nil
Trade payables 3,318.81 3,247.27 71.54 2%
Other financial liabilities 202.14 352.77 -150.63 -43%
Provisions 114.94 75.30 39.64 53%
Preferred tax liabilities(net) 511.66 414.34 97.32 23%
Total non-current liabilities 626.60 489.64 136.96 28%
Financial liabilities
Lease liability Nil Nil Nil Nil
Trade payable 3,318.81 3,247.27 71.54 2%
Total outstanding dues of Nil Nil Nil Nil
micro
and small enterprises
Total outstanding dues Nil Nil Nil Nil
of creditors other than
micro and
small enterprises
Other financial liabilities 202.14 352.77 -150.63 -43%
Other current liabilities 762.58 454.28 308.3 68%
Provisions 59.79 39.01 20.78 53%

41
 CHAPTER 5

FINDINGS, CONCLUSION

5.1FINDINGS

1.Inventory turnover ratio of the company under study is increasing year by year
from 2016-2017 to 2020-2021 except 2018-2019 and 2019-2020.

2.Raw materials conversion period of the company under study is increasing year
by year from 2016-2017 to 2020-2021

3.Finished goods conversion periodof the company under study is increasing year
by year from 2016-2017 to 2020-2021 except 2018-2019 and 2020-2021

4.Current ratio of the company under study is increasing year by year from 2016-
2017 to 2020-2021 except 2018-2019 and 2020-2021

5. Days payable outstanding ratioof the company under study is increasing year by
year from 2016-2017 to 2020-2021 except 2018-2019 and 2020-2021

42
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

43
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

Reference

Maheshwari S.N Financial Management 9th Edition 2004.

Moorthy. A Financial Management 9th Edition 2018

Websites; www.heromotocorp.com

44
APPENDIX

Balance sheet of Hero motocorp limited from 2017-2021

Particulars Mar 2021 Mar 2020 Mar 2019 Mar 2018 Mar 2017
Assets
Non-current assets
Property, plant, equipment 5293.40 5,562.42 4,477.53 4,485.89 4,310.73
Capital work in progress 177.86 160.25 360.67 203.78 270.72
Right of use of assets 404.75 414.57 Nil Nil Nil
Other intangible assets 290.26 140.09 141.05 168.65 84.86
Intangible assets under 258.73 181.02 181.19 114.61 194.33
development
Financial assets
Investments 4308.18 3,528.17 2,801.51 1,934.08 1,349.00
Loans 52.23 67.27 59.96 45.68 48.36
Income tax assets (net) 368.19 310.13 839.26 379.26 331.94
Other non-current assets 34.66 96.85 664.38 558.67 651.14
Current assets
Inventories 1450.55 1,091.97 1,072.37 823.38 656.31
Financial assets
Investments 6191.49 4,694.48 3,167.10 5,591.12 4,540.85
Trade receivable 2426.76 1,603.14 2,821.57 1,520.18 1,561.87
Cash and cash equivalents 169.22 147.91 40.68 34.38 15.40
Bank balances other than 87.93 93.95 95.78 106.96 121.33
Loans 36.94 2236 25.03 27.56 24.18
Others 357.53 35461 653.89 539.37 144.95
Others current assets 213.37 280.14 239.22 205.03 388.29
Total current asset 10,992.79 8,288.56 8,115.64 8,848.18 7,453.18
Total assets 22,161.05 18,749.33 17,641.19 16,738.80 14,694.26
Equity and liabilities equity
Equity share capital 39.96 39.95 39.95 39.94 39.94
Other equity 15,158.47 14,096.45 12,817.17 11,728.94 10,071.35
Total equity 15,198.43 14,136.40 12,857.12 11,768.88 10,111.29
Liabilities
Non-current liabilities
Financial liabilities
Lease liability 129.81 121.67 Nil Nil Nil
Trade payables Nil Nil Nil 3,318.81 3,247.27
Other financial liabilities 146.04 Nil Nil 202.14 352.77
Provisions 172.46 122.37 117.20 114.94 75.30
Preferred tax liabilities(net) 404.09 392.83 536.51 511.66 414.34
Total non-current liabilities 652.40 636.87 653.71 626.60 489.64
Financial liabilities
Lease liability 19.70 28.29 Nil Nil Nil
Trade payable Nil Nil Nil 3,318.81 3,247.27
Total outstanding dues of micro 15.71 8.33 Nil Nil Nil
and small enterprises

45
 Total outstanding dues of 5,188.90 3,022.18 3,355.28 Nil Nil
creditors other than micro
and
small enterprises
Other financial liabilities 159.53 252.44 220.87 202.14 352.77
Other current liabilities 566.01 518.26 495.18 762.58 454.28
Provisions 160.37 146.56 59.03 59.79 39.01

Profit and loss account of Hero motocorp limited from 2017-2021

Particulars Mar2021 Mar2020 Mar2019 Mar2018 Mar2017

Revenue from operations 30,800.62 28,836.09 33,650.54 32,871.82 30,871.59
Other income 579.85 778.34 691.25 525.82 522.43
Total income 31,380.47 29,614.43 34,341.79 33,397.64 31,394.02
Expense
Cost of raw materials consumed 19,867.19 21,875.33 23,356.10 21,857.79 18,974.11
Purchase of stock in trade Nil 30.46 Nil Nil Nil
Change in inventories of (143.46) (169.78) (28.38) (23.15) 63.17
finished goods, stock-in-trade
and work in
progress
Employee benefit expenses 1,898.72 1,841.70 1,730.24 1,540.13 1,396.01
Finance costs 21.84 22.02 8.60 6.25 6.05
Depreciation and amortization 676.87 817.96 602.01 555.60 492.73
expense
Other expenses 3,120.33 3,339.02 3,672.49 3,575.53 3,432.36
Total expenses 27,480.09 25,718.11 29,331.06 28,153.48 26,735.56
Profit before exceptional item and 3,900.38 3,896.32 5,010.73 Nil Nil
tax
Expectation item-NCCD income Nil 737.48 Nil Nil Nil
Expectation item-VRS expenses Nil (60.11) Nil Nil Nil
Profit before tax 3,900.38 4,573.69 5,010.73 5,244.16 4,658.46
Tax expenses Nil Nil Nil Nil Nil
Current tax 924.92 1,084.11 1,601.02 1,446.95 1,082.08
Deferred tax charge/credit 11.26 (143.68) 24.84 99.85 199.26
Total tax expenses 936.18 940.43 1,625.86 1,546.80 1,281.34
Net profit after tax 2,964.20 3,633.26 3,384.87 3,697.36 3,377.12
Other comprehensive income Nil Nil Nil Nil Nil
Items that will not be reclassified Nil Nil Nil Nil Nil
subsequently to profit or loss
Re-measurement losses on (28.14) (42.47) (27.38) (7.24) (21.53)
defined
benefit plans
Income tax effect 7.08 10.69 9.57 2.53 7.45
Net other comprehensive (21.06) (31.78) (17.81) (4.71) (14.08)
income not to be reclassified to
profit or
loss

46
Total comprehensive income for 2,943.14 3,601.48 3,367.06 3,692.65 3,363.04
the year, net of income tax
Earnings per share (nominal Nil Nil Nil Nil Nil
value
of RS. 2 each) in RS
Basic 148.39 181.91 169.48 185.14 169.12
Diluted 148.37 18191 169.47 185.13 169.12

47