LIVE Course for free

Rated by 1 million+ students
Get app now
0 votes
1.2k views
in Accounts by (64.6k points)

You are able to collect the following information about a company for two years:

Calculate Inventory Turnover Ratio and Trade Receivables Turnover Ratio

1 Answer

0 votes
by (59.7k points)
selected by
 
Best answer

Stock turnover Ratio = \(\frac {\textit{Cost of goods sold}}{\textit{Average stock}} \)

or, Cost of Revenue from Operations = Revenue from operations – Gross Profit 

or, Gross Profit = 25% of Sales 

= 25% of 24,00,000 = 6,00,000 or, Cost of Goods sold 

= 24,00,000 – 6,00,000 = 18,00,000

Average Stock = (Opening debtors + Closing debtors/2)

Average Debtors

= (Opening Trade receviables + closing receivables/2)

Debtors Turnover Ratio 

\frac { 24,00,000 }{ 5,30,000 } = 4,53 times
Note: It has been assumed that all Revenue from operations are credit Revenue from operations

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

Categories

...