Question

Calculate Inventory Turnover Ratio from the following:

STATEMENT OF PROFIT AND LOSS for the year ended 31st March, 2023
Particulars	Note No.	₹
I. Revenue from Operations (Sales)		12,00,000
II. Expenses:
Purchase of Stock in Trade		6,50,000
Change in Inventories of Stock in Trade	1	(30,000)
Employee Benefit Expenses	2	2,40,000
Other Expenses	3	90,000
Total Expenses		9,50,000
III. Profit before Tax (I − II)		2,50,000

Notes to Accounts:

Particulars	₹
1. Change in Inventories of Stock in Trade:
Opening Inventory	1,25,000
Less: Closing Inventory	1,55,000
	(30,000)
2. Employee Benefit Expenses:
Wages	1,48,000
Salaries	92,000
	2,40,000
3. Other Expenses:
Manufacturing Expenses	72,000
Administration Expenses	10,000
Selling Expenses	8,000
	90,000

Answer 1

Cost of Revenue from Operations = Purchase of Stock in Trade + Change in Inventory of Stock in Trade + Employee Benefit Exp. (Wages) + Manufacturing Expenses

= 6,50,000 − 30,000 + 1,48,000 + 72,000

= ₹ 8,40,000

Average Inventory = `("Opening Inventory + Closing Inventory")/2`

= `(1,25,000 + 1,55,000)/2`

= `(2,80,000)/2`

= ₹ 1,40,000

Inventory Turnover Ratio = `"Cost of Revenue from Operations"/"Average Inventory"`

= `(8,40,000)/(1,40,000)`

= 6 times