Question

A Trader carries an Average Inventory of 1,00,000. His Inventory Turnover Ratio is 8 Times. He sells
goods at a profit of 25% of cost. Calculate Gross Profit Ratio.

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Answer 1

Answer:

Gross Profit Ratio will be 20%

Explanation:

Solution :

Inventory Turnover Ratio = 8 times

Inventory Turnover Ratio :

$\sf{\longrightarrow{\dfrac{CostOf \: Goods \: Sold}{Average \: Inventory}}}$

$\sf{\longrightarrow{\dfrac{CostOf \: Goods \: Sold}{1,00,000}}} \: = \: 8$

Cost Of Goods Sold = 1,00,000 × 8

Cost Of Goods Sold = 8,00,000

Gross profit = 8,00,000 × 25/100

Gross profit = 2,00,000

★ Gross Profit Ratio =

$\sf{\longrightarrow{\dfrac{Gross \: Profit}{Net \: Sales}}} \times 100$

Net Sales = 8,00,000 + 2,00,000

Net Sales = 10,00,000

Gross Profit Ratio =

$\sf{\longrightarrow{\dfrac{Gross \: Profit}{Net \: Sales}}} \times 100$

Gross Profit Ratio =

$\sf{\longrightarrow{\dfrac{200000}{1000000}}} \times 100$

$\longrightarrow20\%$

Gross Profit Ratio = 20%

∴ Gross Profit Ratio will be 20%