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Calculate Inventory Turnover Ratio from the Data Given Below: - Accountancy

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ConceptTypes of Ratios

Question

Calculate Inventory Turnover Ratio from the data given below:

 

 

Rs

Inventory in the beginning of the year

10,000

Inventory at the end of the year

5,000

Carriage

2,500

Revenue from Operations

50,000

Purchases

25,000

Solution

`"Inventory turnover ratio" = "Cost of Revenue from operations"/"Average Inventor"`

`"Cost of revenue from operations" = "Inventory in the begining + Purchases + Carriage - Inventory at the end"`

                    =`10,000 + 25,000 + 2,500 - 5,000`

                    =`32,500`

`"Average Inventory" = "Inventory in the begining + Inventory at the end"/2`

                                 = `(10,000 + 5,000)/2`

                                  = `7,500`

`"Inventory Turnover Ratio" = "32,500"/"7,500" = 4.33 "times"`

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Solution Calculate Inventory Turnover Ratio from the Data Given Below: Concept: Types of Ratios.
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