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Question
From the following information of Ajanta Ltd., calculate 'Inventory Turnover Ratio':
| Particulars | ₹ |
| Opening inventory | 19,000 |
| Closing inventory | 21,000 |
| Purchases | 80,000 |
| Wages | 9,000 |
| Carriage Outwards | 2,000 |
| Return Outwards | 1,000 |
| Revenue from operations | 80,000 |
| Carriage inwards | 4,000 |
| Rent paid | 5,000 |
Numerical
Solution
Inventory Turnover Ratio = `"Cost of Revenue from Operations"/"Average Inventory"`
= `(90,000)/(20,000)`
= 4.5 times
Average Inventory = `("Opening Inventory" + "Closing Inventory")/2`
= `(19,000 + 21,000)/2`
= 20,000
Cost of RFO = Opening Inventory + Net Purchases + Direct Expenses − Closing Inventory
= 19,000 + (80,000 − 1,000) + 9,000 (Wages) + 4000 (Carriage Inward) − 21,000
= ₹ 90,000
shaalaa.com
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