Question

Calculate Inventory Turnover Ratio from the following information Opening Inventory is 50,000: Purchases 3,90,000 Revenue from Operations, ie. Net Sale 6,00,000, Gross Profit Ratio 30%.

Answer 1

Given
Opening inventory=50000

purchases=390000

Revenue from operations=600000

Gross profit ratio = 30℅
then gross profit = sales×30℅
=600000×30℅=180000

Then closing stock = purchases+ opening stock+ gross profit-revenue from operations

closing stock=390000+50000+180000-600000
closing stock=620000-60000=20000

average stock = opening stock+ closing stock/2
average stock = 50000+20000/2=35000

Inventory Turnover Ratio = Average stock/sales
Inventory Turnover Ratio=20000/600000=1:30

So.. inventory Turnover Ratio=1:30

Answer 2

gross profit = sales *  Gross Profit Ratio
                     =600000*.30
                      = 180000
cost of goods sold = sales - gross profit 
                               =600000-180000
                               =420000

cost of goods sold = opening stock +purchases - closing stock 
     420000               = 50000+390000-closing stock
      420000= 440000- clsoing stock 

closing stock = 440000-420000
                       = 20000
                 

averahe inventory = (opening stock + closing stock ) \ 2
                              =(50000+20000)\2
                               =70000/2
                                =35000
                             
inventory turnover ratio = (cost of goods sold \ average inventory )
                                      (420000/35000)
                                      = 12  times 

Hope its useful ..!!