Question

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

Answer 1

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