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Compute Stock Turnover Ratio from the Following Information: - Accountancy

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ConceptTypes of Ratios

Question

Compute Stock Turnover Ratio from the following information:

 

 

Rs

Net Revenue from Operations

2,00,000

Gross Profit

50,000

Inventory at the end

60,000

Excess of inventory at the end over inventory in the beginning

20,000

Solution

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

`"Cost of goods sold" = "Net Sales" - "Gross Profit"`

                                  = `2,00,000 - 50,000`

                                 = `1,50,000`

`"Inventory in the begining" = "Inventory at the end" - "20,000"`

                                             = `60,000 - 20,000`

                                             = `40,000`

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

                                  = `(40,000 + 60,000)/2`

                                  = `50,000`

`"Inventory turnover ratio" = "1,50,000"/"50,000" = 3 "times"`

  Is there an error in this question or solution?
Solution Compute Stock Turnover Ratio from the Following Information: Concept: Types of Ratios.
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