Question

from the given information calculate the inventory turnover ratio revenue from operations rupees 200000 GP 25% on Cost opening inventory one third on the value of closing inventory closing inventory 30% of revenue from operation ​

Answer 1

Stock Turnover Ratio=cost of Goods Sold (COGS) /Average stock

Sales = Rs 2,00,000

Gross Profit = 25% on cost

Let the cost Rs 100

Gross Profit 25% of Rs 100/25 = Rs 25

Sales = 100 + 25 = Rs 125

cost Of Goods Sold = 2,00, 000 x 100/ 125

Closing Stock = 30% of sales

=2, 00, 000 x 30 /100 = Rs 60, 000 %D

Opening Stock = 1/3 of the Closing Stock

=60, 000 x 1/3= Rs20, 000

Average Stock = Opening Stock+Closing stock/2

=1,60,000

40,000

Stock Turnover Ratio =160000/40000

= 4times

Answer 2

GIVEN :  Sales = 2,00,000 ;  Gross Profit = 20% on sales

TO FIND: Inventory Turnover Ratio

SOLUTION:

Inventory Turnover Ratio = $\frac{Cost of goods sold }{Average Inventory}$

Sales = 2,00,000

Gross Profit = 25% on cost

Let the cost be 100

Gross Profit 25% of $\frac{100}{25}$

            = 25

Cost of goods sold = 2,00,000 × $\frac{100}{25}$

                              =  8,00,000

Closing Stock = 30% of sales

                        = 30% of 20,00,000

                        = 60,000

Opening Stock = $\frac{1}{3}$ of closing stock

                          = 20,000

Average Inventory = $\frac{60,000 + 20,000}{2}$

                                = 40,000

For calculating average inventory, we add opening and closing stock and then divide it by 2.

Stock Turnover Ratio = $\frac{1,60,000}{40,000}$

                                   = 4 times

Stock turnover ratio is 4 times.