Question

From the following information, calculate Inventory Turnover Ratio; Operating Ratio and Working Capital Turnover Ratio: Opening Inventory `28,000; Closing Inventory `22,000; Purchases `46,000; Revenue from Operations, i.e., Net Sales `80,000; Return `10,000; Carriage Inwards `4,000; Office Expenses `4,000; Selling and Distribution Expenses `2,000; Working Capital `40,000.

Answer 1

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 ..!!