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Ledger
Inventory in the beginning | ₹ 30,000 |
Inventory at the end | ₹ 50,000 |
Net Purchases | ₹ 5,00,000 |
Wages | ₹ 25,000 |
Salaries | ₹ 40,000 |
Revenue from operations | ₹ 8,00,000 |
Carriage Inwards | ₹ 5,000 |
Returns Outwards | ₹ 30,000 |
Calculate Inventory Turnover Ratio
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Solution
Inventory Turnover Ratio | = Cost of Goods Sold/Average Stock |
Opening Inventory | = ₹ 30,000 |
Closing Inventory |
= ₹ 50,000 |
Average Inventory | = (Opening Inventory + Closing Inventory) / 2 |
= `(30,000 + 50,000) / 2` = ₹ 40,000 | |
Cost of Goods Sold | = Opening Stock + Net Purchase + Direct Expenses – Closing Stock |
= ₹ (30,000 + 5,00,000 + 25,000 + 5,000 – 50,000) | |
= ₹ 5,10,000 | |
Inventory Turnover Ratio |
= Cost of Goods Sold/Average Stock |
|
= `(5,10,000)/(40,000)` = 12.75 times |
Concept: Activity Ratios - Inventory Turnover Ratio
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