Question

Cost of Revenue from Operations ₹ 5,00,000; Purchases ₹ 5,50,000; Opening Inventory ₹ 1,00,000.

Calculate Inventory Turnover Ratio.

Hint: Closing Inventory = Opening Inventory + Purchases − Cost of Revenue from Operations.

Answer 1

Cost of Revenue from Operations = Opening Inventory + Purchases − Closing Inventory

5,00,000 = 1,00,000 + 5,50,000 − Closing Inventory

Closing Inventory = 1,50,000

Average Stock = `("Opening Stock + Closing Stock")/2`

`=(100000 + 150000)/2 = 125000`

Inventory Turnover Ratio=`"Cost of Revenue from Operations"/"Average Stock"`

`= 500000/125000` = 4 times