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Revenue from Operations ₹4,00,000; Gross Profit ₹1,00,000; Closing Inventory ₹1,20,000; Excess of Closing Inventory Over Opening Inventory ₹40,000. Calculate Inventory Turnover Ratio. - Accountancy

Sum

Revenue from Operations ₹4,00,000; Gross Profit ₹1,00,000; Closing Inventory ₹1,20,000; Excess of Closing Inventory over Opening Inventory ₹40,000. Calculate Inventory Turnover Ratio.

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Solution

Sales = 4,00,000

Gross Profit = 1,00,000

Cost of Goods Sold = Sales − Gross Profit

= 4,00,000 − 1,00,000 = 3,00,000

Let Opening Inventory = x

Closing Inventory = x + 40,000

1,20,000 = x + 40,000

x= 80,000

Opening Inventory = 80,000 

Average Inventory

= `("Opening Inventory + Closing Inventory")/2`

`= (80000 + 120000)/2 = 100000`

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

`= 300000/100000` = 3 times

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APPEARS IN

TS Grewal Class 12 Accountancy - Analysis of Financial Statements
Chapter 3 Accounting Ratios
Exercise | Q 66 | Page 99
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