Question

calculate inventory turnover ratio from the following information:
revenue from operation 1000000
gross profit 200000
purchases 840000
closing inventory 180000​

Answer 1

Answer:

A) Inventory ratio = Cost of goods sold / Average inventory

cost of goods sold = Net sales - Gross profit

= 400000 - 100000 = 300000

Average inventory = op. inventory + cl. inventory / 2

= 60000 + 90000 = 15000

so, Inventory ratio = 300000/ 15000 = 20 %

B) Gross profit ratio = Gross profit / Net sales x 100

= 100000/400000 x 100 =25%