Question

calculate inventory turnover ratio:
sales 400000
average stock 55000
gross loss ratio 10%
​

Answer 1

Inventory Turnover Ratio = 8 times.

Explanation:

Solution :

• Net Sales = 4,00,000
• Average Stock = 55,000
• Gross Loss Ratio 10 %
• Inventory Turnover Ratio: = ??

★ Inventory Turnover Ratio :

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

★ Cost of Goods Sold = Net Sales + Gross loss

• Net Sales = 4,00,000

• Gross Loss Ratio 10 %

Gross Loss Ratio = $\sf{\dfrac{Gross \: Loss}{Net \: Sales}}$

$\sf{\longrightarrow{10\% \: = \: \dfrac{Gross \: Loss}{4,00,000}}}$

$\sf{\longrightarrow{4,000\times 10\:= \:Gross\:Loss}}$

$\longrightarrow$ 40,000 = Gross Loss

Gross Loss = 40,000

★ Cost of Goods Sold = Net Sales + Gross loss

$\longrightarrow$ 4,00,000 + 40,000

Cost of Goods Sold = 4,40,000

★ Inventory Turnover Ratio :

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

$\sf{\longrightarrow{\dfrac{4,40,000}{55,000}}}$

$\longrightarrow$ 8

Inventory Turnover Ratio = 8 times

∴ Inventory Turnover Ratio = 8 times.

Answer 2

Explanation:

Gross Loss = 10%

Gross loss ratio 10%

Gross loss ratio = gross loss/sales

Gross loss/4,00,000 = 10%

Gross loss/400000 = 10/100

Gross loss = 40,00000 / 100

Gross loss = 40,000

Cost of goods sold = sales + loss

Cost of goods sold = 4,00,000 +40,000

Cost of goods sold = 4,40,000

Inventory turnover ratio = Cost of goods sold/average stock

= 4,40,000/55000

= 8

Inventory turnover ratio = 8 times

Hence, Inventory turnover ratio = 8 times