Question

From the following information calculate gross profit ratio... stock turnover ratio : 8 times, average stock - 40000 , gross profit - 25% on cost of goods sold

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

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