Question

From the following Information, calculate Inventory Turnover Ratio:
Credit Revenue from Operations ₹ 3,00,000; Cash Revenue from Operations ₹ 1,00,000, Gross Profit 25% of Cost, Closing Inventory was 3 times the Opening Inventory. Opening Inventory was 10% of Cost of Revenue from Operations.

Answer 1

Average Inventory = `(30000 + 90000)/2 = 60000`'

Opening Inventory = 300000 × 10% = Rs 30000

Closing Inventory=30,000 × 3= Rs 90,000 

Cost of Revenue from Operations=Revenue from Operations−Gross Profit 

=4,00,000-1,00,000=Rs 3,00,000 

Inventory Turnover Ratio

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

`= 300000/60000` = 5 times