Question

Revenue from Operations (Sales) ₹ 8,00,000, Average Inventory ₹ 1,00,000; Closing Inventory ₹ 1,20,000. The rate of Gross Loss on Revenue from Operations was 10%.

Inventory Turnover Ratio will be:

Options

• 7.2 Times

• 8 Times

• 8.8 Times

• 6 Times

Answer 1

8.8 Times

Explanation:

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

Gross Loss = 10% of ₹ 8,00,000

= ₹ 80,000

Cost of Revenue from Operations = Revenue from Operations + Gross Loss

= 8,00,000 + 80,000

= ₹ 8,80,000

Inventory Turnover Ratio = `(8,80,000)/(1,00,000)`

= 8.8 Times