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Question
From the given information calculate the Stock turnover ratio. Sales Rs 2,00,000; G.P: 25% on cost; Stock at the beginning is 1/3 of the stock at the end which was 30% of sales.
Solution
`"Stock Turnover Ratio"="Cost of Goods Sold (COGS)"/"Average Stock"`
Sales = Rs 2,00,000
Gross Profit = 25% on cost
Let the cost = Rs 100
Gross Profit = 25% of Rs 100 = Rs 25
Sales = 100 + 25 = Rs 125
`"Cost Of Goods Sold"=2,00,000xx100/125="Rs"1,60,000`
Closing Stock = 30% of sales
=`2,00,000xx30/100="Rs" 60,000`
Opening Stock = 1/3 of the Closing Stock
=`60,000xx1/3= "Rs" 20,000`
`"Average Stock" = ("Opening Stock" +"Closing stock")/2=(20,000+60,000)/2=Rs 4 "times"`
∴` "Stock Turnover Ratio"=(1,60,000)/(40,000)=4 "times"`
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