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Question
Calculate Inventory Turnover Ratio if:
Inventory in the beginning is Rs. 76,250, Inventory at the end is 98,500, Gross Revenue from Operations is Rs. 5,20,000, Sales Return is Rs. 20,000, Purchases is Rs. 3,22,250.
Solution
`"Inventory Turnover ratio" = "Cost of revenue from operations"/"Average Inventory"`
`"Cost of revenue from Operations" = "Inventory in the begining + Purchases - Inventory at the end"`
= `76,250 + 3,22,250 - 98,500`
= `3,00,000`
`"Average Inventory" = ("Inventory in the begining" + "Inventory at the end")/2`
= `(76,250 + 98,000)/2`
= `87,375`
`"Inventory turnover Ratio" = "3,00,000"/"87,375" = 3.43 "times"`
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