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Question
Calculate Inventory Turnover Ratio from the following:
| ₹ | |
| Opening Inventory | 29,000 |
| Closing Inventory | 31,000 |
| Revenue from Operations, i.e., Sales | 3,20,000 |
| Gross Profit Ratio 25% | |
Solution
Sales = 3,20,000
Gross Profit = 25% on Sales
∴ Gross Profit = `320000 xx 25/100 = 80000`
Cost of Goods Sold = Total Sales − Gross Profit
= 3,20,000 − 80,000 = 2,40,000
Average Inventory
= `("Opening Inventory + Closing Inventory")/2`
`=(29000 + 31000)/2 = 30000`
Inventory Turnover Ratio=`"Cost of goods Sold"/"Average Inventory"`
`= 240000/30000` = 8 times
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