Question

Calculate Inventory Turnover Ratio from the data given below:

 

	Rs
Inventory in the beginning of the year	10,000
Inventory at the end of the year	5,000
Carriage	2,500
Revenue from Operations	50,000
Purchases	25,000

Answer 1

`"Inventory turnover ratio" = "Cost of Revenue from operations"/"Average Inventor"`

`"Cost of revenue from operations" = "Inventory in the begining + Purchases + Carriage - Inventory at the end"`

                    =`10,000 + 25,000 + 2,500 - 5,000`

                    =`32,500`

`"Average Inventory" = "Inventory in the begining + Inventory at the end"/2`

                                 = `(10,000 + 5,000)/2`

                                  = `7,500`

`"Inventory Turnover Ratio" = "32,500"/"7,500" = 4.33 "times"`