Question

Calculate inventory turnover ratio: 

Opening stock = Rs. 30,000; Closing stock = Rs. 50,000; Purchases = Rs. 1,20,000

Answer 1

Inventory turn over ratio = (Cost of revenue form operations)/(Average inventory)

Cost of revenue form operations = Opening stock + purchase - closing inventory

= 30,000 + 1,20,000 - 50,000

= Rs. 1,00,000

Average inventory = (Opening inventory + Closing inventory)/2

= (30,000 + 50,000)/2

= 80,000/2

Rs. = 40,000

Inventory turn over ratio = 1,00,000/40,000

= 2.5 times