SUMMER TRAINING REPORT

On
“INVENTORY MANAGEMENT & ITS ANALYSIS”
AT
LIBERTY SHOES LIMITED, KUTAIL

Submitted in partial fulfillment of the award of degree

Of
MASTER’S OF BUSINESS ADMINISTRATION
Session (2008-2010)
SUBMITTED TO: - SUBMITTED BY: -
Kurukshetra University, Palvi Sharma
Kurukshetra M.B.A 3rd Semester
(Finance\ Marketing)
College Roll No. 8558
University Roll No.

DOON VALLEY INSTITUTE OF ENGINEERING AND

TECHNOLOGY KARNAL, HARYANA
(Approved By AICTE, Affiliated To Kurukshetra University,
Kurukshetra)

1
 Declaration

I, Palvi Sharma, student of MBA III Semester, studying at Doon Valley Institute of
Engineering and Technology, Karnal, hereby declare that the summer training report
on “Inventory Management And Its Analysis” submitted to Kurukshetra University,
Kurkshetra in partial fulfillment of Degree of Master’s of Business Administration is
the original work conducted by me.
The information and data given in the report is authentic to the best of
my knowledge. THIS SUMMER TRAINING REPORT IS NOT BEING
SUBMITTED TO ANY OTHER UNIVERSITY FOR AWARD OF ANY OTHER
DEGREE, DIPLOMA AND FELLOWSHIP.

(PALVI SHARMA)

2
 ACKNOWLEDGEMENT

“Gratitude is not a thing of expression; it is more a matter of feeling.”

It is my pleasure to be indebted to various people, who directly or indirectly

contributed in the development of this work and who influenced my thinking,
behavior, and acts during the course of study.
I express my sincere gratitude to Dr. Harish Abhichandani, worthy
Principal for providing me an opportunity to undergo summer training at Liberty
Shoes Ltd., Libertypuram, Kutail.
I am thankful to Mr. Rakesh Chauhan, HOD(Finance) working in
LIBERTY SHOES,KUTAIL who provided me his expert advice, inspiration & moral
support in spite of his busy schedule & assignments, and lastly Lecturers MBA who
has mainly provided me understanding of this project.
I also extend my sincere appreciation to Mrs. Manisha Singh, H.O.D
of M.B.A Department who provided her valuable suggestions and precious time in
accomplishing my project report.

Lastly, I would like to thank the almighty and my parents for their moral
support and my friends with whom I shared my day-to-day experience and received
lots of suggestions that improved my quality of work.

(Palvi Sharma)

3
 INDEX

 Title Page
 Acknowledgement
 Preface
 Executive Summary
 Introduction to the Company
 Introduction to the Topic
 Research Methodology
 Analysis and Interpretation
 Conclusion
 Bibliography
 Annexure

4
 PREFACE

LIBERTY shoes Ltd. Is the only Indian company that is among the top five
manufacturers of leather footwear in the world with a turnover exceeding US $100
million. This report is all about study of Inventory Management of Liberty shoes Ltd.
In this, I studied annual reports of different years of Liberty shoes Ltd.
My objective is to study Inventory Management of Liberty shoes Ltd. With
the help of Ratio Analysis. For this report, research design used is exploratory
research design. Exploratory research design main purpose is to formulate a problem
for more precise investigation.
In this, I define clearly what I want to measure and employ adequate method
for measuring it. Data is collected from annual reports of different years of Liberty
shoes Ltd., manual, websites and books.
The study contains certain limitations because enough data was not available
but all the efforts have been made to collect the relevant information through the
source available.
The Company is highly dependent on external debt, which bring in
inflexibility in company’s operation. But still the company is in stronger position
because the profits have increased with sales.

5
LIBERTY SYMBOL

6
 EXECUTIVE SUMMARY

If development capital is what establishes a business Inventory Management is

what keeps it going. One of the most common downfalls of business is
unexpectedly high running cost. What is important is not just the size of
operating costs, but the cash flows – that is when money has to be paid out in
relation to the stream of income arriving in. Thus Inventory Management is of
prime importance.
This project is a small attempt to study the Inventory management
LIBERTY SHOES LIMITED. The project can be divided into two sections. First is
the analysis of inventory management position of the company using ratio analysis
and second is the study Inventory management techniques.
Ratio analysis has been done on the basis of three years data. For
calculating various ratios 300 days have been taken as number of working days after
deducting Sundays and holidays except for 2006-07, 2007-08 where 375 days have
been taken. Reason being the company has changed its financial year from 2006-07,
therefore balance sheet figures for 2007-08 comprises of 15 months. Ratios have been
discussed to compare inventory management performance over the years and to
comment and not the absolute values. Therefore figures have not been converted into
12 months in this report. To analyze the performance, published balance sheets of
LIBERTY SHOES LIMITED have been used. This project report is based on
financial data up to 2007-08 only. Apart from liquidity and activity ratios cash and
loans & advances has been discussed separately as these two appears to be crucial in
Liberty inventory management analysis.

7
 INTRODUCTION TO FOOTWEAR INDUSTRY

Footwear is a man made outer covering of foot. It is genially made out of leather
but the same can be made with synthetic material. When the human being came
into existence, they were needed to protect themselves from heat, cold dampness,
dust and roughness of ground while walking, standing, or even running. So they
innovate shoes for the protection of their feet.

The importance of footwear is highly recognized in western and other advanced

countries, so the footwear industry grew in full swing that originated big companies
like Nike, Reebok, Gucci, and Addidas etc. But the scenario in India is somewhat
different and regretfully as the industry could not develop itself despite the fact that
India being second largest populated country in the world, surplus manpower and
resource of raw material, whatever the reason being.

Till the mid of 20th century, the bulk of shoe industry was in cottage sector.
Professional cobblers were responsible for production of every type of shoes. But in
the past one decade the situation has completely changed because new generation of
professionals did not adopt this line as shoemaker and preferred to join white-collar
jobs.

It resulted in the diversification from schedule caste to other class of people as

industrial workers. Up to eighties, Bata was the main source of supply of footwear to
the cites and towns with higher standard of living. But taking into consideration the
growing standard of living and demand, many new footwear companies came into
light like Liberty,Corona, Action, Lakhani etc. Production of footwear at this
movement is mainly at Agra, Karnal, Faridabad, Delhi, Kolkatta, Kanpur, Mumbai,
Madras, and Banglore etc.

8
9
Footwear industry in India can never be a heavy industry in general and small
entrepreneurs with small investments in machinery and capital could remain for all
purposes the backbone of industry. It is the ideal industry for entrepreneurs without
much of investment in the industry assuring growing demand and profits.
Availability of raw material and manpower is not a problem. So the small sector has
to play a vital role in industry development.

Depending upon the styles, type and purpose, the footwear can be broadly classified
into three groups:
 Chappal or open type footwear.
 Sandal or strap attached footwear.
 Boot & shoe or closed type footwear covering most part of the feet.

10
COMPANY PROFILE

11
 COMPANY INFORMATION

Board of Directors
 Adesh gupta CEO & Executive Director
 Shammi bansal Executive Director
 Adarsh Gupta Executive Director
 Harish Kumar goel Director(Law & Taxation)
 Sunil bansal Director
 Amitabh Taneja Independent Director
 Prem Chand Garg Independent Director
 Raghu Goel Independent Director
 Siddharth Sanghi Independent Director
 Surendra Kumar Arya Independent Director
 Vivek Bansal Independent Director

Audit committee
 Sunil Bansal
 Prem Chand Garg
 Raghu Dayal
 Vivek Bansal

Share transfer committee

 Adarsh Gupta
 Sunil Bansal
 Prem Chand Garg

Remuneration/Selection Committee
 Raghu Dayal

 Prem Chand Garg

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 Membership & certificate
 Confederation of India industry (CII)
 Federation of India chambers of commerce & industry (FICCI)
 PHD chamber of commerce and industry (PHDCCI)
 The associated chambers of commerce and industry of India
(ASSOCHAM)
 Federation of Indian export organization (FIEO)
 Council for leather export (CLE)
 ISO 9001

Company secretary & Vice President

 Munish kakra

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 LIBERTY OFFICES

 REGISTERED OFFICE

Liberty puram, 13th Mile Stone, G.T Karnal Road,

Kutail, P.O.BASTRA, Distt.Karnal-132001 (Haryana)
Tel. (91)-1748-251111-14
Fax. (91)-1748-251100
E-mail: lpm@libertyshoes.com

 CORPORATE OFFICE
2nd Floor, Tower-B, DLF Building No.8
DLF Cyber Citi, Phase II, GURGAON (Haryana)
Tel. (91)-124-4616200
Fax. (91)-124-4616222
E-Mail: mail@libertyshoes.com

 BRANCHES
Ahmedabad,Agra,Bangalore,Chennai,Delhi,Hyderabad,Jaipur,
Jammu,Kolkata,Mumbai,Rajpura and Saharanpur.

 BANKERS
ABN AMRO Bank N.V.
Central Bank of India
Corporation Bank
HDFC Bank
Hong Kong & Shanghai Banking Corporation Limited

14
GROUP DATA AT A GLANCE

Year of Establishment 1954

Employment More than 5000 employees
Business Investment US $ 100 Million
Status of Business Flagship company of the Group, Liberty Shoes Ltd., a public limited
company listed in all major stock exchanges of India.

Present Activities Second largest footwear manufacturer in the country having fully
integrated plants to manufacture various kind of footwear with Annual
Production of over 10 million pairs.

Annual Turnover Over US$ 125 Million

Brand Equity Mother Brand LIBERTY is ranked among Top 100 brands in the
country. Other 10 Successful National brands, known for its
respective segment of footwear

Infrastructure Various plants spread over 200 acres of land in and around Karnal,
Libertypuram, Gharaunda in Haryana, Dehradun & Roorkee in
Uttarakhand, Pounta Sahib in Himachal Pradesh supported by strong
Marketing Network having
 14 Branch offices
 02 Overseas offices
 300 Liberty Exclusive Distributors
 350 Liberty Exclusive Retail Stores
 20 Overseas showrooms

Export Markets All over the world, mainly with Europe in

 Germany
 United Kingdom
 France
 Spain
 Hungary

Technology Liberty’s patented technology “HUMANTECH” is a combination of

human craftsmanship and technological excellence with following
technologies available in the world for Footwear Industry.
 Cemented Construction
 Direct PVC Injection
 Direct PU Injection
 Direct EVA Injection
 Direct TPU Injection

15
INTRODUCTION

Liberty Group, come a long way since it began its operations a little over 50 years ago
in the cityof Karnal, Haryana. The emphasis since the very beginning has been to
offer “great products at value for money / affordable prices”. This led to the
development of Liberty Patented “HUMANTECH” approach which synergise
traditional workmanship with state of the art technology to provide the best quality at
the most competitive price.

Liberty group companies, set various benchmarks in Footwear Manufacturing within

the Group’s Production facilities and also to Industry.

HISTORY:

Liberty Group started operation in 1954 and today comprises of five firms, namely
Liberty Footwear Company, Liberty Enterprises, Liberty Leathers, Liberty Group
marketing Division and Liberty Shoes Limited. The group has an annual turnover of
Rs.500 Crores approximately. Liberty has its own studio for design and development
of footwear. It manufactures footwear both for export and domestic markets. The
company has carved a name for itself in the international market and is India’s largest
exporter of footwear to Germany.

Liberty Shoes Limited, the public company of the group started commercial
production in 1993 and is the country’s leading footwear manufactures today. The
company has state of the art production facilities at Libertypuram to manufacturer
high quality footwear and its contribution in Liberty Group’s total sale is over 30%
and it’s rising steadily.

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CORPORATE PHILOSPHY:

Steeped in a philosophy that has at its core innovation, technology and advancement,
we, at Liberty, pride ourselves over and above everything else on our healthy and
heart-felt respect for the human ethos. That which projects itself in the expectancy and
excitement with which one greets the arrival of the new combined with a sincere and
deep regard for the old. That which is appreciative of and adopts at every stage the
unique balance between modernization and tradition.”

Liberty as a brand is constantly evolving to keep pace with the changing trends,
styles, beliefs and aspirations of people while maintaining the sanctity of certain
traditions like workmanship and good value.

CORPORATE SAGA:

With people as its leitmotif, Liberty has for over 50 years always stayed in touch with
the aspirations of every successive generation even as it developed the largest range in
the industry catering to every income bracket and age segment. Using the patented
'Humantech' approach that combines the best of talent with the latest in technology.
From the price-conscious, value for money seeking buyer to the trendy, global, price-
indifferent customer, from the with it all attitude teenager to the conservative seen it
all adult just about everybody today finds a good reason for being in Liberty.

Liberty is today consolidating and expanding its following which extends from the
fashion alleys to the sidewalks with styles that compliment the newest most
happening trends and also by turning footwear selling into a byword for personalized
service in an ambience and shoe stations in India and abroad.

THE CREDO:

17
 To ensure that the method we use is the latest technology world-over.
 To follow the highest standard of honest workmanship in whatever we make.
 To walk that extra miles to ensure customer satisfaction worldwide.
 To remain a true cosmopolitan to the spirit.
 To remain a great corporation to associate with, to work for, to know that:
“We Are About People”.

LIBERTY RANGE:

The family brand style personified with something for every need. Be it formal or
casual, at office or at the beach, a conference or a soiree - Liberty fits in effortlessly.

MANUFACTURING:

What gives Liberty the edge is vertically integrated manufacturing infrastructure on

technology basis with completely in-house state of the art production facilities which
includes 8 DESMA machines for PU Direct Injection, 15 Machines for PVC Direct
Injection, 3 Machines for EVA Injection, 3 PU Injection units for unit sole, six lines
for cement lasted injection and one machine for the latest TPU Injection. Above
production facilities are maintained with focus on environment cleanliness ISES 2000
norms, provides a complete range of family footwear of all seasons and occasions,
covers the entire domain of industrial safety and health footwear requirements.

18
Liberty also has the ISO: 9001-2000 certification for its Quality, Management
System, a testimony to all the system and procedures in place.

Liberty is a technology driven company ‘HUMANTECH’ – Liberty’s patented

technology is combination of human craftsmanship and technological excellence.

Liberty has production facilities at the following locations:

 Gharaunda, Haryana, (Approx.95 K.M. from Delhi)
 Libertypuram, Haryana (Approx.102 K.M. from Delhi)
 Karnal, Haryana, (Approx.124 from Delhi)
 Satiwala, Pounta Sahib, Himachal Pradesh (Approx 225 K.M. from Delhi)
 Batamandi, Paunta Sahib, Himachal Pradesh (Approx 229 K.M. from Delhi)
 Dehradun, Uttranchal (Approx. 300 K.M. from Delhi)
 Roorkee, Uttranchal (Approx. 150 K.M. from Delhi)

GROUP COMPANIES:

Liberty Retail Revolutions Limited

Liberty Retail Revolutions Limited, the company behind the Revolutions store is a
100% subsidiary of Liberty Shoes Limited

The company is producing more than 50,000 pairs of footwear a day covering
virtually every age group and income category. Products are marketed across the
globe through 150 distributors, 350 exclusive showrooms and over 6000 multi-brand
outlets, and sold in thousands every day in more than 25 countries including fashion-
driven, quality-obsessed nations like France , Italy , and Germany.

Setting new benchmarks in the retail business in India Liberty Retail Revolutions
caters to the aspirations of the style-driven in India with an exclusive chain of
upmarket showrooms, Revolutions Concept Stores, at fashion centres across India.
It’s a concept that has opened new frontiers in retail selling - never seen before
fashion hubs, catering to individual styles and looks, in an ambience as magical and

19
exciting as the products lined up – a world class range in footwear fashion and
accessories.

Liberty Whiteware Limited

The newest member of the Liberty Group introduced a range of ceramic sanitary ware
and accessories of European design that’s inspired by a lifestyle of sheer elegance.
Where beauty and functionality achieve perfect harmony. Form compliments finesse.
And tradition blends seamlessly into innovation. Produced at a Rs.50 crore state-of-
the-art plant at Neemrana Industrial Area of Rajasthan the Beach range of fine
bathroom products and accessories including WCs, bidets, washbasins, and shower
trays, comprising five distinctive collections each with its own definitive character
and style.

BRANDS
This family brand is style personified with something for every need. Be it formal or
casual, at office or at the beach, a conference or a soiree Liberty fits in effortlessly.

COOLERS
They’re cool and they’re hot. They’re hap and
they’re happening. Perfect for those hot summer
days. When the sun blisters and the heat strokes,
they keep the feet cool and comfortable. But why
limit the pleasure to summers?! Here’s one brand of
sandals that stays cosy and comfy all year round.

FOOTFUN
Something for those little feet as they learn to walk.
Airy, light and comfortable with lycra uppers and no
laces. In fairy-tale colors and designs.

FORCE-10
The flair, the style and ease that forces the world to
take notice. A happening range of sports shoes in far
out colors that provides the perfect footnote to a
head-turning presence.

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FORTUNE
Genuine leather uppers and extra light poly soles
help complete the power dressing in men with élan
and panache.

GLIDERS
Cool and comfortable, trendy and with it. A range of
stunning brogues and smart lace ups that will be
noticed and talked about every step of the way.
Unmistakably a part of Generation You.

SENORITA
Walk tall, walk light and walk with amazing style.
Rediscover the little girl that lurks not far behind in
every woman, laughing and loving every moment of
life.

TIPTOPP
It’s what Mrs. Junejas of the world love to be seen
in. Strappy styles and comfortable heels. And colors
that become the envy of all and sundry. Perfect for
conquering the neighbourhood in designs that are
the latest rage the world over.

WARRIOR
Smart, stylish professional gear crafted from leather
uppers and direct injection P.U. soles with steel toe
caps and offering the widest range of styles in safety
shoes. To master the art of being confident and sure-
footed on slippery grounds and danger ones.

WINDSOR
The premium is on lightness, style and comfort
which makes it ideal for men who take every
challenge effortlessly in their stride.

FREEDOM
A new introduction in the safety footwear segment in Nitrile PVC
material, offering customers with waterproof, fire retardant and
shock free product in economic range. A safety footwear for
industrial use.

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RESEARCH & DEVELOPMENT:

Our 2-way channel partners dig their feed back deep and constantly. Hammering
String of creative workman at the manufacturing center to produce not just faceless
shows dancing down conveyor belts but shoes with character. So the centers have
poled 53 years of the research and continuous flow of emotions to redefine the R & D
center at Libertypuram. Fusing technology with the sweat of sagacity. Some call it
Research & Development Wing some put a price to investments in the “Emotional
Technology“ that it comes out as. We call the process HUMANTECH and it
priceless.

Liberty also very active in the area of Research & Development and has a number of
“firsts” to its credit like:

1. Liberty pioneered the PU (Polyurethane) technology in India in footwear industry

in 1982 and today is the largest producers of footwear with this technology in
Asia.

2. Liberty has developed new material TPE (Thermo-Plastic-Elastomer) for high

quality formal footwear.

3. Liberty has developed a high quality Eva Compound for beach footwear.

4. Liberty was the first company commissioning a latest CAD/ CAM System.

5. Die Less Leather cutting machine which is directly attached with its Design &
Development Section for speedy process of development of new models of
footwear.

6. Liberty is the only factory in India having water proofing technology approved by
SYMPATEX, a name known for water proofing technology worldwide.

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7. Liberty Management is very thin in size comparing with a huge work force in
front line operation.

DESIGN & DEVELOPMENT:

Liberty has well established state of the art design centers which are constantly
engaged in designing and developing latest trend setting footwear for the young
fashions conscious Indian consumers. On an average 4000 new styles are developed
every year out of which roughly 1200 styles are selected and introduced in the market
in two seasons i.e. spring / summer and fall, winter.

FINANCIAL

If you think a company that has helped 50 million people think on their feet in style is
big stuff, you have seen very little yet. For us the future plans are not something that
can be termed as crystal gazing but neatly enclosed ideas idea and deliverables in
continuum. We are fast building new brands and products, improving the all times
favorites and expending our marketing infrastructure and honing to our skills to
further the delight of the consumer. With an over all 25% boom planned each year for
the next 5 year you could says that India is only true blue footwear manufacturing
multinational is just peaking over the edge.

DISTRIBUTION NETWORK:

We have distribution network rivals the human arterial system. An reticulate network
of retailer showrooms, and exclusive outlets with a reach like blue – green marine
octopus a structured 2-way feeder-feed back system that both gives and receives an
organization of our size would have gone out-of-orbit without a firm support system.
Thanks to the vision and drive of our corporate think tank, we now have a sales
network that brings the breath-taking world of super footwear right at your feet within
seconds. A virtual room service at zero cost, if you will. A marketing system that we
have conceived and created, it is understandably, the envy of competition.

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MORE STORES FROM LIBERTY:

Liberty group is expecting to add Rs.70 crores from its footwear retail business. The
company will invest Rs.7 Crores towards expending “Revolution” - its exclusive
footwear showroom. This year company will add 10 more stores to take it to 25. The
company has also entered the manufacturing of white ware segment of sanitary and
bathroom products. Liberty is looking at introducing new design this season too. The
company has expended its retail presence in over 100 stores across small and big
cities.

LIBERTY PLANS TO EXPANDS GLOBAL PRESENCE

Liberty group has also establish manufacturing plant in Uttrakhand state and opening
25 exclusive outlets across the country as well as in 7 overseas centers. Each outlet is
estimated to see an investment of Rs.7.5 million.

With a turnover of Rs.500 crores the company is emerging as an multinational brands

with about 350 Exclusive distributors all over the world. “as opposed to the earlier
model of expending retail outlets we plan to bring down the number of retailer from
5000 to 4000. We do not want retail presence for name shake; the ideas to have real
brand presence”, Liberty plans to open super premium at Singapore, Kualampur,
Dhaka, Columbo and Dubai . The currently exports about 25% of footwear production
to Germany, Italy, France, United States and the Middle East.

STRENGTH:

At Liberty we upgrade and re-engineer our design every 6 months so that you have
something new, with it and futuristic every time you visit us. Our shoes are much
more than just B.E. Witching leather work. We understand that a shoe for you is an
extension of your personality. And for one who keeps moving onto to stables of desire
loaded with exciting world fashions trends we craft the dreams with the help of

24
Capital Fashion Technologists shut away not in dream bars but with their heart minds
on the pules of future fashion.

LIBERTY SHOES LIMITED

“AN INNER VIEW”
LOCATION:
The company has entered into a lease agreement for 410 cannals and 17 marlas
(248500sq. yards) of land on national highway no.1 main G.T. road in Libertypuram,
Kutail, district Karnal.
The site is around 115 KM from Delhi on national highway between Chandigarh and
Delhi. The site is 15KM from Karnal and is well connected with major cities and has
all basis infrastructure facilities.

BUILDING:
It mainly consists of eight huge halls meant for manufacturing operation facility, raw
material and finished goods storage, cutting sections, PVC Sole Section, PU Sole
Section, Administrative Block etc. the design and finishing of building is among the
best.
The total area of the building is 170 lacks sq.feet (approx) and total cost of building is
around 550 lacks. The building is of RC framed structure.

MACHINARY:
Five (new technology) injection-moulding machines are being used by the company
for production purpose. All the machines are imported from Italy and Germany.
Production of shoes as well as quality of shoes has been increased and problems of
pasting, sole cracking have been reduced substantially by this technology. Recently
one new computerized machine has been purchased for cutting leather. It has also
been imported from Italy

25
INNOVATIVE APPROACHES:
Entire production units of Liberty are interlinked by SAP, a unique ERP Solution
implemented for the first time in India in a Footwear Industry with all modules related
with Finance, Logistics & supply chain.
It is rare to see such clean, state of the art production facility in India with following
management systems and tools.
1. KAIZEN is implemented since 2000 and in practice throughout the
organization.

2. 5 S Concept is introduced and in practice since 2001 and presently in matured

stage. The impact of 5 S implementation is visible in all dept. and shop floors
of the organization. We may even consider these units are the model units for
any Footwear Industry

3. LEAN awareness is existing in all production floors of the organisation. Value

streams are standardized for most of the regularly produced articles. Now the
Group is in the process of integrating Lean Concept with PP Module of SAP
for controlling the flow.

4. ISO 9001:2000 CERTIFICATION is awarded to QMS of one of its units and

Group is in the process of getting for other units. Group is having an
appointed MR exclusively for monitoring the Quality System. DNV is the
Certifying agency and auditors of the QMS

5. WASTE MANAGEMENT SYSTEM is established in one of their unit and it

is a pilot project. Wastage Identification, handling and disposal are
documented and monitored by frequent internal audits.

26
 6. WATER MANAGEMENT SYSTEM is existing in the group. Water wastage
is almost –nil- and water is re-cycled in most of their operations.

8. ISES-2000 norms are followed to ensure the best Social, Health and
Environmental Standards. This standard is monitored by Indo German Export
Promotion Council of India.

9. Liberty is the Committee member for setting the standard for Safety Shoes.
The recently released IS: 15298:2000 for Safety shoes is followed by Liberty
and it is the first in Shoe Industry have applied for Certification to use ISI
Mark.

9. ENGERGY MANAGEMENT SYSTEM of Liberty is unique in Footwear

Industry. Liberty Units have got lot of incentives / discounts from Haryana
State Electricity Board for maintaining maximum Power Factor.

INTERNATIONAL EXPERIENCE:

1. Liberty has more than 25 years of experience in Export Business and enjoying
Status Holder status as “Recognized Export House” of India. In 80’s when Soviet
Market was invaded by Indian Exporters, Liberty was the Market Leader in
USSR.

2. Liberty is having its own office in Russia and Hungary for more than 2 decades.

3. Liberty’s major operations are mainly with Europe, Middle East, East African,
South African countries and USA.

4. Major brands of Europe, SALAMANDER, JELA, DEICHMANN, ROMIKA and

USA brands like TODDWELSH are selling only Liberty Shoes under their brand
umbrella.

27
CONTRIBUTION TO INDUSTRY:

1. Liberty has pioneered in bringing PU Technology to India. Liberty has given a

presentation on Footwear foot prints for the future in Asia Pacific Customer
Conference 2000 organized by Huntsman Polyurethane at Singapore on this
technology.

2. SYMPATEX is a patented technology on Water Proofing recognized world wide.

Liberty is the only company in India having recognition/approval of SYMPATEX
on Waterproofing.

3. Safety Shoes are brought to Indian Market for the first time and an exclusive
brand WARRIOR was launched by Liberty in Industrial Segment shoes. Our
safety shoes are meeting all DIN / EN standards in respective segments.

4. PU technology was introduced to Government Sector, Liberty has set the standard
as member of the BIS Committee. BIS Standard IS: 15298: 2000, applicable for
Safety shoes is the Standard on which Liberty is producing Safety shoes for more
than one decade.

5. Liberty Enterprises is the model unit for above Standard and complete testing
facility is available only with Liberty in India after FDDI.

6. Liberty is the First Footwear Manufacturing facility in India awarded with the
latest ISO 9001:2000 Certification.

7 The first and only footwear Industry in India, having SAP ERP with all modules
related to
Inward/Outward supply chain, Materials, Finance and Costing

28
8. Liberty has pioneered blend of NITRILE Rubber with PVC in 1996 to make it
more versatile for cold countries usage.

9. Liberty has developed new material TPE (Thermo Plastic Elastomer) for high
quality formal footwear. This material has better properties than PVC or TPR
conventionally
used for formal.

10. Liberty is expanding its operation by manufacturing non woven hags which are
environment clean.

29
SOCIAL CONTRIBUTION:

1. Liberty Footwear Training Institute formed by our Directors is developing the

local public as technicians of Footwear Industry.

2. Management of Liberty Sponsors the children of Liberty Employees for higher

studies, gives training and employment after graduation in FDDI.

3. Social and Environmental Standard ISES-2000 is in practice with Liberty.

This standard is being monitored by Indo German Export Promotion Project in
India.

4. The products being used by Liberty are Eco-friendly and providing latest
technology to Industry when Indian Markets related with Environment &
Safety are not even aware about the new standards and technology.

30
NATIONAL AND INTERNATIONAL AWARDS

 Leather Export Promotion Merit Award (1975), till 1982.

 Haryana Government Export Award (1978-79).
 International Asian Award, Jakarta (1982).
 European Awards, Paris (1987).
 National Award for best Export of Leather Garments (1987-88).
 International Award for Good Quality, Brussels, Belgium (1988).
 Leather Export Award for Government of India (1991-92).
 National Productivity Award from president (1997).
 Council of Leather Export (CLE), India’s apex body of leather products
exporters, during the international leather fair held at Chennai, conferred is
highest award the “DOYEN OF INDUSTRY” upon Mr.P.D.Gupta on 5th Feb.,
98.
 Worldwide Prestige Award (WPA)-2001.

CORPORATE GOALS

 Liberty wants to develop a spirit of cooperation between individuals & group

within the company.
 Liberty wants to attain & maintain good relations between its union &
management.
 Liberty will endeavor to keep highly qualified employees by appropriate
training and thus raise their morale & competence.
 Liberty will try to practice management of highest standard of competence &
professionalism.
 Liberty will strive to remain or become the technological as well as market
leaders in footwear industry and leather product industry.
 Liberty wants to be known for the quality for its products & services.

31
PROJECT REPORT

32
 OBJECTIVE OF THE STUDY

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

Sub Objective
The study on Inventory is very important for a firm. The objectives of this
study are as follows:
 To determine the changes in the Inventory position of the company.
 To determine the increase or decrease in Inventory level.
 To determine the various ratios for analyzing the Inventory level of the
company.
 To spot out strengths & weakness of business.
 To determine the absolute figures for the last two years

33
 INTRODUCTION ABOUT

INVENTORY MANAGEMENT

34
 INTRODUCTION

Inventories constitute the most significant part of current assets of a company like in
India. On an average, Inventories are approximately 60% of current assets in
public Ltd. companies in India. A firm neglecting the management of Inventories
will be jeopardizing its long run profitability and may fail ultimately. It is possible for
a company for a company to reduce its level of Inventories to a considerable degree.
The reduction in “excessive” inventories carries a favorable impact on a company’s
profitability. Inventory is composed of assets that will sell or used in future in the
normal course of business operations. The assets, which firms store as inventory in
anticipation of need, are
1. Raw material
2. Work in progress
3. Finished Goods
Inventory, is current assets, but differs from other current assets. Because only
financial managers are not involved rather, all the functional areas, i.e. finance,
marketing, production & purchasing are involved.
The job of the financial manager is to reconcile the conflicting view points of the
various functional areas regarding the appropriate inventory level in 0order to fulfill
the over all objective of maximizing the owner’s wealth.
Thus, Inventory management like the management of other current assets, should be
related to the over-all objective of the firm.

INVENTORY AND FINANCE MANAGER

35
Although inventory management usually is not the direct operating responsibility of
finance manager, the investment of funds in inventory is an important aspect of
financial management. consequently the finance manager must be familiar with ways
to control inventory effectively, so that capital may be allocated efficiently. the
greater the opportunity cost of funds invested in inventory, the lower is the optimal
level of average inventory and also the lower the optimal order quantity, all other
things held constant.The EOQ model also can be useful to the finance manager in
planning for inventory financing.
When demand or usage of inventory is uncertain. the finance manager may try to
effect policies that will reduce the average lead time required to receive inventory,
once an order is placed. the lower the average lead time ,lower is the safety stock
needed and lower is the total investment in inventory, all other things held constant.
The greater the opportunity cost of funds invested in inventory, the greater is the
inventory to reduce this lead time. the purchasing department may try to find new
vendor that promise quick delivery ,or it may pressure existing vendor to deliver
faster. the production department may be able to deliver finish goods faster by
producing a smaller run. in either case, there is trade off between the added cost
involved in reducing the ;lead time and the opportunity cost of funds tied up in
inventory.
The finance manager is also concerned with the risk involved in carrying inventory.
the major risks involved in carrying inventory. The major risk is that the market value
of specific inventories will be less than the value at which they were acquired. Certain
types of inventory are subject to obsolescence, whether it be in technology or in
consumer tastes. A change in technology may make an electronic component
worthless. A change in style may cause a retailer to sell goods at substantially reduced
prices. The principle risk is that of fluctuations in market price. The finance manager
is perhaps the best person to make an objective analysis of the risks associated with
the firms investment in inventories. These risks must be considered in determining the
appropriate level of inventory the firm should carry.

NATURE OF INVENTORY
36
Inventory are stock of the company is manufacturing for sale and components that
make up the product. The various forms in which inventories exist in a manufacturing
company are:
1. Raw Material: Raw Material is those basic inputs that are converts into
finished goods through manufacturing process. Raw Material inventories
are those units, which will purchase & stored for future production.
2. Work in progress: Work in progress inventories are semi-manufactured
products. They represent products that need more work before they
become finished products for sale.

3. Finished goods: These are completely manufactured products which are

ready for sale. Stock of raw materials and work in progress facilitates
production while stock of finished goods is required for smooth marketing
operations.

PURPOSE OF HOLDING INVENTORY

A firm also needs to maintain inventories to reduce costs and ordering costs and
avail quantity discounts. There are three main purposes or motive:
1. Transactions motive: It emphasizes the need to maintain inventories to
facilitate smooth production & sales operations.
2. Precautionary motive: It necessitates holding of inventories to guard
against the unpredictable changes in demand & supply force & other
factors.
3. Speculative motive: It influences the decisions to increase or reduce
inventory levels to take advantage of price fluctuations

37
 OBJECTIVES OF INVENTORY MANAGEMENT

Inventory Management consist various counter-balancing parts:

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

38
 VALUATION OF INVENTORY

The price of materials and income of a concern is directly proportional to each other.
So it is necessary that a method of pricing materials should be such that it gives a
realistic value stocks.
To safe guard public interest, the Government of India has instituted statutory controls
to prevent frequent change of material valuation method for at least three years.

The following material pricing methods are generally used:

 First in First out (FIFO)

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

Simple average method Weighted average method

 Base Stock Method

 Market Price Method
 Standard Price Method

BENEFITS OF HOLDING INVENTORY

39
 The major benefits of holding Inventory are the basic functions which are of
crucial important in firm’s production & marketing strategies.
The basic function of Inventory is to act as a buffer to decouple or uncouple the
various activities of a firm so that all do not have to be pursued at exactly the
same rate
The key activities are:
1. Purchasing
2. Production
3. Selling

BENEFITS IN PURCHASING
If the purchasing of raw material and other goods is not tied to production/sales, i.e. a
firm can purchase, several advantages would become available. In the first place, a
firm can purchase larger quantities than is warranted by usage in production or the
sales level.
In the second, firms can purchase goods before anticipated or announced price
increase. This will lead to a decline in the cost of production. Thus Inventory, serves
as a hedge against price increases as well as shortages of raw materials. This is highly
desirable inventory strategy.

BENEFITS IN PRODUCTION
Finished goods inventor serves to uncouple production and sale. This enables
production at a rate different from that sale. That is production can be carried on at a
higher or lower than the sales rate. This would be of special advantage to firms with a
seasonal sales pattern. In their case, the sales rate will be higher than the production
rate during the part of the year (peak season) and lower during the off-season. The
choice before the firm is either to produce at a level to meet the actual demand. In
brief, since inventory permits least cost production scheduling. Production can be
carried on more efficiently.

40
BENEFITS IN SALES
The maintenance of inventory also helps a firm to enhance its sales effort. For one
thing, if there are no inventories of finished goods, the level of sales will depend upon
the level of current production. A firm will not be able to meet demand
instantaneously. There will be a lag depending upon the production process. If the
firm has inventory, actual sales will not have to depend on lengthy manufacturing
process.

41
 INVENTORY CONTROL

Effective inventory management requires an effective control system for the

inventories. In managing inventories, the firm’s objective should be in consonance
with the shareholders, wealth maximization principle. To achieve this, the firm
should determine the optimum level inventory. Efficiently controlled inventories
make the firm flexible. Inefficient control results in unbalanced inventory and
inflexibility – the firm may sometimes run out of the stock and sometimes may
pile up unnecessary stocks. This increases the level of investment and makes the
firm unprofitable. To manage inventories efficiency, answers should be sought to
the following two questions:
1. How much should be ordered?
2. When it should be ordered?
The first questions, how much to order relates to the problem of determining
economic order quantity (EOQ), and is answered with an analysis of costs of
maintaining certain level of inventories.
The second question, when to order arises because of uncertainty and is problem
of determining the reorder point.

ECONOMIC ORDER QUANTITY

One of the major inventory management problem is to be resolved is how much

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

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

1. Ordering costs
2. Carrying costs

42
(1) ORDERING COST
This category of cost is associated with the acquisition or ordering of inventory.
Firms have to place orders with suppliers to replenish inventory of raw material.
The expenses involved are referred to as ordering costs. Included in the ordering
costs are involved in
1.1 Preparing a purchase order or requisition form
1.2 Receiving, inspection and recording the goods received
Ordering costs increase with the number of orders; thus more frequently inventory
is acquired, the higher the firm’s ordering costs. On the other hand, if the firms
maintain large inventory levels, there will be few orders placed and
Ordering costs will be relatively small. Thus, ordering costs decrease with
increasing size of inventory.

(2)CARRYING COST

Costs incurred for maintaining a given level of inventory are called Carrying
costs. They include: Storage. Insurance, taxes, Deterioration and Obsolescence.
Carrying costs vary with inventory size. This behavior is contrary to that of
ordering costs which decline with increase in size of inventory. The economic size
of inventory would thus depend on trade-off between carrying costs and ordering
costs.
The optimum inventory size is commonly referred to as economic order quantity.
It is that order size at which annual total costs of ordering and holding are the,
minimum. We can follow three approaches – the trail and error approach, the
formula approach and the graphic approach – to determine the economic order
quantity (EOQ).

2AO
EOQ = C

Where, A is annual requirement.

O is Ordering cost.
And C is Carrying cost.

43
RE-ORDER POINT

The problem, how much to order is solved by determining the economic order
quantity, yet the answer should be sought to the second problem, when to order. This
is a problem of determining the re-order point. The re-order point is that inventory
level at which an order should be placed to replenish the inventory. To determine the
re-order point under certainty, we should know: (a) Lead time, (b) average usage,
and (c) economic order quantity.
Lead time is the time normally taken in replenishing inventory after the order has
been placed. By certainty we mean that usage and lead time do not fluctuate. Under
such a situation, re-order point is simply that inventory level which will be maintain
for consumption during the lead time.
That is:
Re-order point= Lead Time* Average usage.

SAFETY STOCK

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

44
 SELECTIVE INVENTORY CONTROL
ABC ANALYSIS

Usually a firm has to maintain several types of inventories. It is not desirable to

keep the same degree of control on all of the items. The firm should pay
maximum attention to those items whose value is the highest. The firm should,
therefore, classify inventories to identify which items should receive the most
effort in controlling. The firm should be selective in its approach to control
investment in various types of inventories. This analytical approach is called ABC
analysis and tends to measure the significance of each item of inventories in terms
of its value. The high value items are classified as ‘An item’ and would be under
the tightest control. ‘C items’ represent relatively least value and would be under
simple control.
‘B items’ fall in between these two categories and require reasonable attention of
management. The ABC analysis concentrates on important items is also known as
control by importance and exception (CIE). As the items are classified in the
importance of their relative, this approach is also known as proportional value
analysis (PVA).
The following steps are involved in implementing the ABC analysis:
1. Classify the items of inventories, determining the expected use in units and
the price per unit for each item.
2. Determine the total value of each item by multiplying the expected units
by its unit’s price.
3. Rank the items in accordance with the total value, giving first rank to the
item with highest total value and so on.
4. Compute the ratios of number of units of each item to total units of all
items and the ration of total value of each item to total value of all items.
5. Combine items on the basis of their relative value to form three categories
– A, B and C
6. The data in the following table illustrate the ABC analysis.

CLASS NO. OF VALUE OF

45
 ITEMS% ITEMS%
A 15 70
B 30 20
C 55 10

46
INVENTORY MANAGEMENT AT

LIBERTY

47
 INVENTORY MANAGEMENT AT LIBERTY

Every industry needs raw material search,so as footwear industry. LIBERTY also
does this raw material search for finding cheaper source of raw material.
LIBERTY does this to find → the nearest supplier.
→ to reduce lead time.
LIBERTY works on ABC analysis for fund
management.There are three categories of such items in abc analysis
→ category A: items of higher value and importance.
→ category B: items of medium value and importance.
→ category C: items of lesser value and importance.
LIBERTY always monitor A category items, in the sense that these items should not
be kept idle because these items need lot of funds.So,they are very careful for A
category item.They keep only that much stock which is required immediately and
equal to that of lead time.

48
 MATERIAL MANAGEMENT DEPARTMENT AT LIBERTY;

1. Material management department at LIBERTY receives purchase requisition

Production Planning and Control Department. On the basis of that
requirement,they check their stock and adjust that in available stock and issue
the purchase order of the balance requirement to the predetermined and
predecided suppliers.
2. On receipt of material from the supplier,the invoices are entered in DMR
(daily material register)
→ From here, the material is sent to stores for Quality Control and the
invoices are send to computer section of material management department.
Now both the departments function primarily or side by side.
3. Then quality and quantity is being checked in the stores.
4. The invoices are being recived in SAP.
5. After quality control the material is given to the store keeper for proper
storage and if there is any deviation either in quality or quantity of material
than, the quality reports are send to account department by quality control
department for proper handling of bills.

ISSUE OF MATERIAL TO CONVEYER

On receipt of material required slip from production planning and control department
the stores issue and send the material to different conveyor as mention on the required
slip

49
PROCESS CYCLE

50
Manufacturing processs

The company has three kinds of production lines:-

1. PVC Injection Moulding Process.
2. Stuck on / Lasting Process.
3. EVA Injection Moulding Process.

The manufacturing process can be divided into the following:-

 Making of shoe.
 Soling (complete shoe).
 Finishing & packing.

NON LEATHER SHOES:-

Non-Leather Shoe Uppers:

In non leather upper making process, laminated cloth/synthetic material is cut on the
cutting machines according to required size of the uppers, then these cut compound of
the uppers undergo for stitching process where the required components are stitched
together to make the upper.

Non-Leather Shoe-Soling / Injection Moulding:-

The non-leather shoe upper undergo a process known as the “ PVC INJECTION
MOULDING PROCESS ” under which upper is tied upon the last which is mounted
on the machine according to the size roll. In the process PVC granules are used as raw
material for sole making which get stucked to the upper with the help of injecti

51
LEATHER SHOES:-

Leather Shoe Upper:-

In leather shoe upper making process leather is cut by hand or on the cutting machines
according to the required size of uppers. Machines cutting process is based on dyes
which are prepared separately for each model. Cutting by hand is on the basis of the
pattern to be specified for each model of the uppers.After skiving and folding these
components are assembled together with the help of stitching machines as per the type
of upper required.

Leather Shoe Soling / Stuck-On Process:-

In stuck on process , shoe is made by readymade sole which can be of PU , TPR ,
EVA , LEATHER etc. . Upper is lasted on the shoe last according to the size roll
with the help of machines. Thereafter sole according to the upper size is taken and
they get stucked together with the help of pasting process. After completing the sole
attachment , lasts are removed and then the shoe are finished with the help of
trimming machines and stamping machines.

FINISHING AND PACKING:-

Both Leather and Non-Leather shoe are given the required finished touches by putting
insole, padding, tissue paper etc… and after attaching tags, laces etc , are packed in
boxes dispatch

EVA INJECTION MOULDING PROCESS

The raw material used for the process is EVA( ethyl vinyl acetate ) granules which are
fed into the barrel with the help of hoppers ( suction device ). After entering into the
barrel , a paste of the granules is formed by heating and then this paste is injected into

52
the moulds as per shape and size of the required footwear . EVA Injected range of
slippers, sandals represent the most advanced step in the technology for a market .

RAW MATERIAL USED:

CUTTING MATERIAL
1. Cloth strobe
2. Padded foam
3. Goat skin
4. Softy (cow leather)
5. Cow Venus black
6. Toe puff sheet
7. Foam P.U
8. T.P counter sheet
9. Heavy nylex black
10. Silicon spray
11. Laminated cloth (rexine)
12. Laminated cloth (skin fit)
13. Laminated cloth (mesh)
14. Laminated cloth (RIB)
15. Laminated cloth (canvas)
16. Laminated cloth (EVA lycra)
17. Laminated cloth PVC lining)
18. Leather
19. Leather lining
20. Camarilla lining
21. Fleece lining
22. Rubber

53
Closing material:
1. Thread
2. Tongue
3. Tape intake (eyelet tape)
4. Eyelet brass
5. Adhesive neufix
6. Adhesive rubber solution
7. Binding nylon
8. Label
9. Adhesive rubber latex
10. Tape cotton
11. Piping polyester

PACKING MATERIAL:
1. Boxes
2. Shoe lift
3. Marketing bag corporate small/non woven
4. Adhesive sticker pictogram
5. Hologram liberty footwear
6. Silica gel blue
7. Tissue paper white/poster paper
8. Tag card
9. Tag pin
10. Carton
11. Carton label
12. Price stickers
13. Hologram genuine
14. Plastic heel
15. Label printed stock, glider black/red.

54
LASTING MATERIAL:
1. Adhesive P.U 107
2. Adhesive nefix
3. EVA Sole
4. EVA Sheet
5. Sole

INJECTION MATERIAL:
1. PVC Compound
2. EVA Compound
3. PVC Master batch
4. EVA Master batch

55
RAW MATERIAL AT LIBERTY

JAN FEB MARCH APRIL MAY JUNE

VALUATION CLASS (crores) (crores) (crores) (crores) (crores) (crores)
Raw material & comp-IMP 0.13 0.14 0.13 0.13 0.13 0.14
Raw material & comp-IND 2.59 3.19 2.99 2.47 2.58 2.36
Mfd EVA soles 0.11 0.1 0.11 0.11 0.11 0.11
Mfd PU soles 0.52 0.6 0.54 0.36 0.28 0.43
Mfd PVC soles 0 0.02 0 0 0 0.02
Trd PU soles-IND 0.28 0.3 0.35 0.34 0.29 0.39
Trd PVC soles-IND 0 0.05 0.06 0.01 0 0
Trd PU soles-IMP 0.05 0.05 0.04 0.04 0.04 0.04
Packing materials-IMP 0 0 0 0 0 0
Packing materials-IND 0.24 0.37 0.31 0.26 0.27 0.28
TOTAL (RAW MATERIAL) 3.91 4.82 4.54 3.72 3.7 3.76

WORK IN PROGRESS AT LIBERTY

56
 RESEARCH

METHADOLOGY

57
 RESEARCH METHODOLOGY

Research is an important pre-requisite for a dynamic organization to be précised.

Research is more systematic activity directed towards the discovery and development
of organized body of knowledge. Some of the characteristics of research methodology
are as follows:
1. Research is directed towards a solution of problem. It may attempt to answer a
question or determine the relation between two or more variables.
2. Research involves gathering new data for primary of first hand sources or
using existing data for new purposes.
3. Research is based on observable experience or empirical evidence.
4. Research strives to be objective and logical applying every possible test to
validate the proceed are employed the data collection and conclusion research.

58
STEPS OF METHODOLOGY

COLLECTION OF DATA

ORGANIZATION OF DATA
PRESENTATION OF DATA

ANALYSIS OF DATA

INTERPRETATION OF DATA

59
 COLLECTION OF DATA

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

1. Secondary Method
2. Primary Method

Secondary Method
The methodology followed in conducting the study is to collect data regarding
footwear production, working capital and its management, need of working capital in
Liberty Shoes Ltd. .
The facts & data were taken from magazines and annual report of company.

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

ORGANISING THE DATA

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

PRESENTATION OF DATA

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

60
ANALYSIS OF DATA
After organizing and presenting the data, the researches then has to proceed towards
conclusions by logical inferences.
The whole data is then analyzed:
1. By bringing raw data to measured data.
2. Summarizing the data
3. Applying analytical methods to manipulate the data so that their inter
relationship and quantitative meaning become evident.

INTERPRETATION

Interpretation is the last and main step of research methodology. Interpretation means
to bring out meaning of data & to convert mere data into information. After analysis
the data, various conclusion are found out on the basis of logical inferences. Without
interpretation research study cant be completed.

61
 ANALYSIS AND INTERPRETATION

1.LIQUIDITY RATIOS

1.1 CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILTIES

YEAR 2005-2006 2006-2007 2007-2008

Current Assets 1,34,94,75,847 1,81,20,38,152 1,80,59,34,193
Current 75,67,58,438 1,37,98,19,154 1,32,78,92,788
Liabilities
Current Ratio 1.78 1.31 1.36

2
1.8
1.6
1.4
1.2 Current Assets
1 Current Liabilities
0.8 Current Ratio
0.6
0.4
0.2
0
2005-2006 2006-2007 2007-2008

INTERPRETATION
1. IDEAL CURRENT RATIO IS 2:1.
2. The current ratio has increased from 1.47 to 1.78 between the year 2004-2005
and 2005-2006. Then it decreased to 1.31 in the year 2006-2007 and then
increased 1.36 in the year 2007-2008.
3. This shows that the short term liquidity of the company is not good.

62
 1.2 QUICK RATIO = QUICK ASSETS/CURRENT LIABILITIES

YEAR 2005-2006 2006-2007 2007-2008

Quick Assets 81,29,79,812 1,05,02,99,837 1,04,40,61,085
Current 75,67,58,438 1,37,98,19,154 1,32,78,92,788
Liabilities
Quick Ratio 1.07 0.76 0.79

1.2

0.8
Quick Assets
0.6 Current Liabilities
0.4 Quick Ratio

0.2

0
2005-2006 2006-2007 2007-2008

INTERPRETATION
1. THE IDEAL QUICK RATIO IS 1:1
2. The quick ratio of the company has increased from 0.94 to1.07 between the
year 2004-2005 and 2005-2006. Then decreased to 0.76 and0.79 in the year
2006-2007 and 2007-2008.
3. This means that the company cannot meet its short term obligations.

63
 1.3 CASH RATIO = CASH AND BANK/CURRENT LIABILITIES

YEAR 2005-2006 2006-2007 2007-2008

Cash 2,94,45,561 4,62,40,483 4,49,26,777
Current 75,67,58,438 1,37,98,19,154 1,32,78,92,788
Liabilities
Cash Ratio 0.039 0.033 0.034

0.04
0.035
0.03
0.025 Cash
0.02 Current Liabilities
0.015 Cash Ratio
0.01
0.005
0
2005-2006 2006-2007 2007-2008

INTERPRETATION
1. The cash ratio has first increased from 0.032 to 0.039 between the year 2004-
2005 and 2005-2006 and then decreased in the year 2006-2007 and then
increased by 0.001 in 2007-2008.
2. This reveals that the cash position of the company is not sound.

64
2. ACTIVITY RATIOS
2.1 INVENTORY TURNOVER RATIO = NET SALES / INVENTORY

YEAR 2005-2006 2006-2007 2007-2008

Net Sales 2,21,11,97,993 2,37,54,48,269 2,57,89,34,907
Inventory 53,64,96,035 76,17,38,315 76,18,73,108
Inventory 4.12 3.12 3.38

Turnover Ratio

4.5
4
3.5
Net Sales
3
2.5
Inventory
2
1.5
Inventory Turnover
1 Ratio
0.5
0
2005-2006 2006-2007 2007-2008

INTERPRETATION
1. This shows that the company is somehow efficient in generating the inventory
into sales.
2. The inventory turnover ratio has decreased from 4.75 to 3.12 between the
years 2004-2005 and 2006-2007and increased to 3.38 in 2007-2008.

65
2.1 DEBTORS TURNOVER RATIO = SALES/DEBTORS

YEAR 2005-2006 2006-2007 2007-2008

Sales 2,21,11,97,993 2,37,54,48,269 2,57,89,34,907
Debtors 48,33,85,817 72,08,94,474 72,41,47,983
Debtors 4.57 3.29 3.56

Turnover Ratio

4
Sales
3

2 Debtors

1 Debtors Turnover
Ratio
0
2005- 2006- 2007-2008
2006 2007

INTERPRETATION
1. The debtor turnover ratio has first increased from 4.12 to 4.57 between the
year 2004-2005 and 2005-2006 and then decreased in the year 2006-2007 and
then increased in 2007-2008.
2. This shows that the debtor management system is try to maintain their
position.

66
AVERAGE COLLECTION PERIOD = NUMBER OF WORKING DAYS /
DEBTORS TURNOVER RATIO

YEAR 2005-2006 2006-2007 2007-2008

Number of Working 365 365 365
Days
Debtors Turnover 4.57 3.29 3.56
Ratio
Average 80 days 110 days 102 days

Collection Period

INTERPRETATION
1. The average collection period has decreased from 89 days to 80 days between
the year 2004-2005 and 2005-2006 and then increased in the year 2006-2007
and again decreased in 2007-2008.
2. More the average collection period less efficient is the debtor management
system.

67
 2.2 WORKING CAPITAL TURNOVER RATIO = SALES /
NET WORKING CAPITAL
YEAR 2005-2006 2006-2007 2007-2008
Sales 2,21,11,97,993 2,37,54,48,269 2,57,89,34,907
Net Working 59,27,17,409 43,22,18,998 47,66,97,765
Capital
Working Capital 3.73 5.50 5.41

Turnover Ratio

5
Sales
4

3 Net Working Capital

2
Working Capital
1 Turnover Ratio
0
2005-2006 2006-2007 2007-2008

INTERPRETATION
1. The working capital turnover ratio has first decreased from 5.32 to 3.73
between the year 2004-2005 and 2005-2006 and then increased to 5.50 in the
year 2006-2007 and then decreased by 0.09 in the year 2007-2008.

68
 3. PROFITABILITY RATIOS
3.1 OPERATING PROFIT RATIO = OPERATING PROFIT X 100
SALES
YEAR 2005-2006 2006-2007 2007-2008
Operating Profit 31,48,62,163 31,28,91,662 32,99,64,549
Sales 2,21,11,97,993 2,37,54,48,269 2,57,89,34,907
Operating Profit 14.24 13.17 12.79

Ratio

16
14
12
10
8
6
4
2
0
2005-2006 2006-2007 2007-2008

INTERPRETATION

69
 1. The operating profit first increases to 14.24% in the year 2005-2006 and then
decreases to 13.17% and 12.79% in the year 2006-2007 and 2007-2008.
2. This shows that the operating cost of the company has increased from 2004-
2005 to 2007-2008.

3.2 NET PROFIT RATIO = NET PROFIT AFTER TAX X 100

NET SALES

YEAR 2005-2006 2006-2007 2007-2008

Net Profit After 18,49,28,514 17,01,94,555 16,05,13,611
Tax
Net Sales 2,21,11,97,993 2,37,54,48,269 2,57,89,34,907
Net Profit Ratio 8.36 7.16 6.22

10

6 Net Profit After Tax

Net Sales
4
Net Profit Ratio
2

0
2005-2006 2006-2007 2007-2008

INTERPRETATION

70
 1. The net profit ratio first increases from 5.03 to 8.36 in the year 2004-2005 and
2005-2006 and then decreases to 7.16 in the year 2006-2007 and too
decreasing in 2007-2008.
2. This reveals that the efficiency in manufacturing, administering and selling the
products is decreasing.

4. LONG TERM SOLVENCY RATIOS

4.1 DEBT EQUITY RATIO = OUTSIDER’S FUNDS/SHAREHOLDER’S
FUNDS

YEAR 2005-2006 2006-2007 2007-2008

Outsider’s funds 38,70,96,269 1,14,81,89,285
25,80,06,524
Shareholder’s funds 81,67,40,225 98,85,72,605 3,95,92,73,396
Debt Equity 0.32 0.39 0.29

Ratio

71
 0.4
0.35
0.3
0.25 Outsider’s funds
0.2
Shareholder’s funds
0.15
Debt Equity Ratio
0.1
0.05
0
2005-2006 2006-2007 2007-2008

INTERPRETATION

1. The debt equity ratio is decreasing which means that the company’s
dependence on the external debt is decreasing.
2. This shows greater flexibility in the company’s operation.

4.2 INTEREST NET PROFIT BEFORE INTEREST AND TAXES

COVERAGE = FIXED INTEREST CHARGES
RATIO
YEAR 2005-2006 2006-2007 2007-2008
Net profit before 27,48,63,625 26,65,57,054 24,44,21,752
interest and
taxes
Interest 4,74,18,093 8,81,68,867 13,34,56,945
Interest 5.8 3.02 1.83

Coverage
Ratio

72
 6

0
2005-2006 2006-2007 2007-2008

INTERPRETATION

1. The interest coverage ratio first increases between the year 2004-2005 and
2005-2006 and then decreases in the year 2006-2007 and in 2007-2008.
2. A low ratio indicates excessive use of debt.

73
SUGGESTION

74
SUGGESTIONS AND RECOMMENDATIONS
FOR INDIAN FOOTWEAR INDUSTERY

1. In India as most of the population is under low-income group, they wear

unbranded or local brand shoes. So the company which can capture this
income group especially living in villages and small towns will be the winner.
2. As the exclusive showroom play an important role in making and marking the
image of company. So there should be policy for exclusive showroom.
3. Quality control operations should be modernized effectively as people are
more educated and give more preference to quality.
4. Television has become the most effective mode of advertising. New trend of
naming programs before the actual name of programs give more insertion in
the minds of people as there was performance on Zee T.V called LIBERTY
PUBLIC DEMAND.
5. There should be some special brands, which should be available only in
exclusive showrooms to attract the crowd there.
6. There should be no bargain with the quality of the product.
7. Showroom owners tend to heavily tend to heavily depend on the brand image
rather than they’re own skills and knowledge regarding product. So the big
companies should try to internationalize their products and image and should
give a psychological feeling of being a universal brand.
8. Regular meeting should be organized by the companies to educate the
showroom owners regarding new innovation, their features as well as new
policies.

9. Claim policy regarding replacement etc. should be clearly made by the

company and followed in spirit of the world.

75
STEPS TAKEN BY
LIBERTY

STEPS TO BE TAKEN BY LIBERTY

76
1. Most of customers felt Liberty as a premium product company (which is true
to much extent), which is out of reach of common man. It is suggested that an
economical range of footwear should also be introduced to capture the low-
income group people who account for most of the population in villages &
small towns.
2. Companies should control, review and improve their discount policy so as to
improve company’s image.
3. New designs and colours should be introduced in Ladies section, as ladies
every time demand something new.
4. More attention should be paid to customer’s complaints and efforts should be
made to remove them.
5. The placement of defected pairs should be paid more attention so as to remove
dissatisfaction among the exclusive showroom owners.
6. A Company persons should regularly visit exclusive showrooms and listen to
the problems and find solution to them as is done by Bata Company.
7. Some special planning on appointment of dealers should be there to avoid the
complications.
8. Trough inspection of stock should be done to avoid mixing of inferior quality
stock with fresh stock, which is send to dealers.
9. The company should allow at the most two exclusive showrooms in one city.
That too should be atleast 2—3 K.M apart to attract customers from all the
localities.

77
LIMITATIONS

78
 LIMITATIONS

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

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

79
BIBLIOGRAPHY

80
 BIBLIOGRAPHY

BOOKS
 Pandey, I.M., “Financial Management”, Ed. 2007, VIkas
Publishing House Private Ltd., New Delhi.
 Gupta, Shashi K., “Management Accounting”, Ed.2007, Kalyani
Publishers, New Delhi.
 KOthari, C.R., “Research Methodology”, Ed.2007, New Age
International (P) Limited, Publishers, New Delhi.

MANUAL
 Annual Reports

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

81
ANNEXURE

82
 LIBERTY

BALANCE SHEET AS AT 31st MARCH,2006

PARTICULARS
FUNDS EMPLOYED
Shareholder's Funds
Share Capital 17,04,00,000
Reserves and Surplus 64,63,40,225 81,67,40,225
Loan Funds
Secured Loans 48,81,18,223
Unsecured Loans 23,03,68,701 71,84,86,924
Deferred Tax
Deferred Tax Laibility 7,62,83,137
1,61,15,10,286
APPLICATIONS OF FUNDS
Fixed Assets
Gross Block 79,70,30,417
Less: Depreciation 31,21,63,209
Net Block 48,48,67,208
Add: Capital Work in Progress 91,82,688 49,40,49,896
Investments 6,42,62,581
CURRENT ASSETS,LOANS AND ADVANCES
Inventories 53,64,96,035
Sundry Debtors 48,33,85,817
Cash and Bank Balance 2,94,45,561

83
Loans and Advances 30,01,48,434
1,34,94,75,847
Less: Current Liabilities 22,26,20,721
Provisions 7,36,57,317
Net Current Assets 1,05,31,97,809
1,61,15,10,286

PROFIT AND LOSS ACCOUNT

For the year ended 31st March, 2006
(Amount in Rs.)
PARTICULARS

INCOME
SALES 2,21,11,97,993
less: Excise Duty 16,23,68,219
2,04,88,29,774
Other Income 1,11,11,202
Increase/ (Decrease) in Stocks 6,49,73,637 2,12,49,14,613
EXPENDITURE
Raw Material Consumed and Finished Goods Purchased 96,67,26,712
Manufacturing Expenses 19,95,13,409
Payments and Benefits to Employees 19,91,55,747
Administration, Selling and Miscellaneous Expenses 43,20,32,918
Interest & Financial Charges 4,74,18,093
Excise Duty 15,12,462
Depreciation 3,99,98,538 1,88,63,57,879
Profit before tax 23,85,56,734
Provision for Taxation
Current Tax 4,88,26,320
Fringe Benefit Tax 35,05,000
Deferred Tax 12,96,900

84
Profit before tax 18,49,28,514
add/(less): Taxation adjustments of previous years(net) 42,01,294
Earlier year adjustment 54,964
Net Profit for the year 18,91,84,772
Add: Opening balance 1,69,31,283
Net Profit available for appropriations 20,61,16,055
APPROPRIATIONS
Tranfer to General Reserve 6,00,00,000
Interim Dividend 2,53,50,000
Tax on Dividend 35,55,338
Balance carried over to Balance Sheet 11,72,10,717
Earning Per Share of Rs.10/- each 12.88

BALANCE SHEET AS AT 31st MARCH,2007

PARTICULARS
FUNDS EMPLOYED
Shareholder's Funds
Share Capital 17,04,00,000
Reserves and Surplus 81,81,72,605 98,85,72,605
Loan Funds
Secured Loans 1,04,03,01,231
Unsecured Loans 23,92,47,480 1,27,95,48,711
Deferred Tax
Deferred Tax Laibility 7,30,34,307
2,34,11,55,623
APPLICATIONS OF FUNDS
Fixed Assets
Gross Block 1,10,55,30,324
Less: Depreciation 35,54,78,429
Net Block 75,00,51,895
Add: Capital Work in Progress 8,14,32,312 83,14,84,207
Investments 18,49,99,976
CURRENT ASSETS,LOANS AND ADVANCES
Inventories 76,17,38,315
Sundry Debtors 72,08,94,474
Cash and Bank Balance 4,62,40,483
Loans and Advances 28,31,64,880
1,81,20,38,152

85
Less: Current Liabilities 43,53,53,212
Provisions 5,20,13,500
Net Current Assets 1,32,46,71,440
2,34,11,55,623

PROFIT AND LOSS ACCOUNT

For the year ended 31st March, 2007
(Amount in Rs.)
PARTICULARS

INCOME
SALES 2,37,54,48,269
less: Excise Duty 15,39,92,692
2,22,14,55,577
Other Income 1,67,28,098
Increase/ (Decrease) in Stocks 20,12,80,051 2,43,94,63,726
EXPENDITURE
Raw Material Consumed and Finished Goods Purchased 1,21,22,49,787
Manufacturing Expenses 20,19,18,212
Payments and Benefits to Employees 21,23,26,510
Administration, Selling and Miscellaneous Expenses 47,36,32,514
Interest & Financial Charges 8,81,68,867
Excise Duty 25,16,943
Depreciation 4,63,34,609 2,24,43,47,442
Profit before tax 19,51,16,284
Provision for Taxation
Current Tax 2,46,36,260
Fringe Benefit Tax 35,34,300
Deferred Tax 32,48,830
Profit after tax 17,01,94,554
add/(less): Taxation adjustments of previous years(net) 8,97,143

86
Earlier year adjustment 7,40,683
Net Profit for the year 17,18,32,380
Add: Opening balance 11,72,10,717
Net Profit available for appropriations 28,90,43,097
APPROPRIATIONS
Tranfer to General Reserve 6,00,00,000
Balance carried over to Balance Sheet 22,90,43,097
Earning Per Share of Rs.10/- each 9.99

BALANCE SHEET AS AT 31st MARCH,2008

PARTICULARS
FUNDS EMPLOYED
Shareholder's Funds
Share Capital 17,04,00,000
Reserves and Surplus 97,77,89,285 1,14,81,89,285
Loan Funds
Secured Loans 1,03,31,65,873
Unsecured Loans 17,49,91,716 1,20,81,57,589
Deferred Tax
Deferred Tax Laibility 7,08,75,737
2,42,72,22,611
APPLICATIONS OF FUNDS
Fixed Assets
Gross Block 1,26,06,40,151
Less: Depreciation 40,60,66,799
Net Block 85,45,73,352
Add: Capital Work in Progress 1,54,92,360 87,00,65,712
Investments 20,33,98,812
CURRENT ASSETS,LOANS AND ADVANCES
Inventories 76,18,73,108
Sundry Debtors 72,41,47,983
Cash and Bank Balance 4,49,26,777
Loans and Advances 27,49,86,325
1,80,59,34,193

87
 Less: Current Liabilities 42,93,74,450
Provisions 2,28,01,656
Net Current Assets 1,35,37,58,087
2,42,72,22,611

PROFIT AND LOSS ACCOUNT

For the year ended 31st March, 2008
(Amount in Rs.)
PARTICULARS

INCOME
SALES 2578934907
less: Excise Duty 100427026
2478507881
Other Income 50711294
Increase/ (Decrease) in Stocks 69857067 2599076242
EXPENDITURE
Raw Material Consumed and Finished Goods Purchased 1319594764
Manufacturing Expenses 189559879
Payments and Benefits to Employees 226092498
Administration, Selling and Miscellaneous Expenses 509261505
Interest & Financial Charges 133456945
Excise Duty -4362344
Depreciation 63796894 2437400141
Profit before tax 161676101
Provision for Taxation
Current Tax 18589712
MAT Credit Entitlement -18317902
Fringe Benefit Tax 3049250
Deferred Tax -2158570

88
Profit after tax 160513611
add/(less): Taxation adjustments of previous years(net) -5284920
Earlier year adjustment 4,387,989
Net Profit for the year 159616680
Add: Opening balance 229043097
Net Profit available for appropriations 388659777
APPROPRIATIONS
Tranfer to General Reserve 6,00,00,000
Balance carried over to Balance Sheet 328659777
Earning Per Share of Rs.10/- each 9.42

89