Question

Compute Inventory Turn over Ratio from the following information: 

Net Revenue from Operations Rs. 2,00,000 

Gross Profit Rs. 50,000 . 

Inventory at the end Rs. 60,000 

Excess of inventory at the end over inventory in the beginning Rs. 20000

Answer 1

Stock Turn over Ratio = \(\frac {\textit{Cost of goods sold}}{\textit{Average Stock}} \)

Cost of Goods sold = Net Sales – Gross Profit

= 2,00,000 – 50,000= 1,50,000 Opening Stock 

= Closing Stock – 20,000 = 60,000 – 20,000 

= 40,000

Average Stock = Opening Inventory + Closing inventory/2

Average Inventory 

=  = 50,000
Stock turnover ratio 

=  

= 3 times