Question

Cost of Revenue from Operations (Cost of Goods Sold) ₹5,00,000; Purchases ₹5,50,000; Opening Inventory ₹1,00,000.
Calculate Inventory Turnover Ratio.

Answer 1

Cost of Goods Sold = 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 goods Sold"/"Average Stock"`

`= 500000/125000` = 4 times