Question

Mercury Ltd. wanted to analyse their profitability position along with a check on their inventory level of past two years. The following data is available for your reference for the year ended:

	31st March, 2025 (₹)	31st March, 2026 (₹)
Revenue from Operations	21,00,000	30,00,000
Inventory	3,60,000	7,50,000

During the year 2024–25, Inventory increased by 20%, Gross Profit is 25% on Cost of Revenue of Operations.

You are required to answer the following questions on the basis of the above information:

1. State the amount of Inventory increased during the year 2024–25.
   1. ₹ 72,000
   2. ₹ 40,000
   3. ₹ 60,000
   4. ₹ 36,000
2. Average Inventory of the year 2024–25 is ______.
   1. ₹ 3,30,000.
   2. ₹ 4,68,000.
   3. ₹ 4,56,000.
   4. ₹ 3,40,000.
3. Inventory Turnover Ratio of year 2024–25 is ______.
   1. 4.05 Times.
   2. 5.7 Times.
   3. 5.09 Times.
   4. 4.87 Times.
4. Inventory Turnover Ratio of 2025-26 is ______.
   1. 4.87 Times.
   2. 5.7 Times.
   3. 4.05 Times.
   4. 4.32 Times.

Answer 1

1. ₹ 60,000
2. Average Inventory of the year 2024–25 is ₹ 3,30,000.
3. Inventory Turnover Ratio of year 2024–25 is 5.09 times.
4. Closing Trade Receivables is 4.32 Times.

Explanation:

A. `₹ 3,60,000 xx 20/120 = ₹ 60,000`

B. `(₹ 3,00,000 + ₹ 3,60,000)/2 = ₹ 3,30,000`

C. Cost of Goods Sold or Cost of Revenue from Operations = `₹ 21,00,000 xx 100/125`

 = ₹ 16,80,000

Inventory Turnover Ratio for 2024-25 = `(₹ 16,80,000)/(₹ 3,30,000)`

= 5.09 times

D. Cost of Goods Sold = `₹ 30,00,000 xx 100/125`

= ₹ 24,00,000

Inventory Turnover Ratio for 2025 – 26 = `(₹ 24,00,000)/((₹ 3,60,000 + ₹ 7,50,000)/2)`

= 4.32 times