Question

Compute Stock Turnover Ratio from the following information:

 

	Rs
Net Revenue from Operations	2,00,000
Gross Profit	50,000
Inventory at the end	60,000
Excess of inventory at the end over inventory in the beginning	20,000

Answer 1

`"Inventory Turnover Ratio" = "Cost of goods sold"/"Average Inventory"`

`"Cost of goods sold" = "Net Sales" - "Gross Profit"`

                                  = `2,00,000 - 50,000`

                                 = `1,50,000`

`"Inventory in the begining" = "Inventory at the end" - "20,000"`

                                             = `60,000 - 20,000`

                                             = `40,000`

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

                                  = `(40,000 + 60,000)/2`

                                  = `50,000`

`"Inventory turnover ratio" = "1,50,000"/"50,000" = 3 "times"`