Question

calculate inventory turnover ratio if opening inventory is 42500 closing inventory is 37500 and revenue from operation is 300000 and gross profit 20% on cost​

Answer 1

Explanation:

Let the cost of Revenue from operations be x.

Cost of Revenue from operations = Revenue from operations-Gross Profit

x= 300000- 20x/100

6x/5=300000

6x=1500000

x=250000.

Cost of Revenue from operations =250000.

Inventory Turnover Ratio =Cost of Revenue from operations/Average Inventory

Average Inventory =Opening Inventory +Closing Inventory/2

Average Inventory = 42500+37500/2=40000.

Inventory Turnover Ratio =250000/40000 =6.25 times.