Question

From the following calculate inventory turnover ratio revenue from operation rupees 200000 gross profit 25% on cost of inventory as a beginning is one third of the inventory and end with what 30% of revenue from operation

Answer 1

Answer: 5 times

Explanation:

Let CORFO = x

GP is 25 % x

GP is 25 / 100 *x = x / 4

Using CORFO =RFO -GP

x = 200000 - x / 4

Thus x = 160000 = CoRFO

Also closing inventory is 30% of CORFO

Closing inventory = 30/100 *160000

= 48000

And opening inventory is 1/3 closing inventory

i.e. opening inventory = 16000

Average inventory = 16000+48000/2 = 32000

ITR CORFO /average inventory =160000/32000 =5 times