Question

In the year 2021-22, Kartik Ltd.:

• Carried an average stock of ₹ 40,000
• Its Inventory Turnover Ratio was 8 times.
• It sold goods at a profit of 25% on the cost of revenue from operations.

Calculate the profit made by Kartik Ltd. in the year 2021-22.

Answer 1

Average stock = ₹ 40,000

Inventory Turnover Ratio = 8 times

Let cost of revenue from operations be x

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

`8 = x/(40,000)`

x = 40,000 × 8

x = ₹ 3,20,000

Profit = 25% on cost of revenue from operations

= 25% of 3,20,000

= `25/100 xx 3,20,000`

= ₹ 80,000