Question

From the given information, Calculate the Inventory Turnover Ratio :
Revenue from Operations ₹2,00,000; Opening Inventory ₹20,000; Closing Inventory ₹60,000.
Gross Profit is 25% on Cost of Revenue from Operations.
[Ans. Stock Turnover Ratio 4 times)



Please solve it Quickly!!!!

Answer 1

Answer:

The Stock Turnover Ratio = 4 times

Explanation:

Solution :

★ The Stock Turnover Ratio :

$\sf{\longrightarrow{\dfrac{Cost \: of \: Revenue \: from \: Operation}{Average \: Inventory}}}$

★ Average Inventory =

$\sf{\longrightarrow{\dfrac{Ope.ning \: Inventory \: + \: Closing \: Inventory}{2}}}$

$\sf{\longrightarrow{\dfrac{20,000 \: + \: 60,000}{2}}}$

$\sf{\longrightarrow{\dfrac{80,000}{2}}}$

$\longrightarrow \: 40,000$

Average Inventory = 40,000

Net Sales = Cost of Revenue from Opreation + Gross Profit

Let,

Cost of Revenue from Opreation = x

Net Sales = x + 25% of x

$\longrightarrow$ 2,00,000 = x + 25x/100

$\longrightarrow$ 2,00,000 = x + 0.25x

$\longrightarrow$ 2,00,000 = 1.25x

$\longrightarrow$ x = 2,00,000/1.25

$\longrightarrow$ x = 1,60,000

Cost of Revenue from Opreation = 1,60,000

The Stock Turnover Ratio :

$\sf{\longrightarrow{\dfrac{Cost \: of \: Revenue \: from \: Operation}{Average \: Inventory}}}$

$\longrightarrow{\sf{\dfrac{1,60,000 }{40,000} \: = \: 4}}$

The Stock Turnover Ratio = 4 times

Therefore, the Inventory Turnover Ratio = 4 times.

Answer 2

Explanation:

Solution :

Revenue from Operations ₹2,00,000

Inventory Turnover Ratio = COGS/ Average Inventory

Suppose,

cost = 100

G.p. = 25% on cost

G.p. = 25/100 × 100

G.p. = 25

Sales = 125

G.p. on sales = 25/125× 100

G.p. on sales = 20%

G.p. = 2,00,000 × 20/100

=> 40,000

G.p. = 40,000

COGS = 2,00,000 - 40,000

COGS = 1,60,000

Average Inventory = Opening Inventory + Closing Inventory /2

=> 20,000 + 60,000/2

=> 80,000/2

=> 40,000

Average Inventory = 40,000

Inventory Turnover Ratio = COGS/ Average

=> 1,60,000/40,000

=> 4

Inventory Turnover Ratio = 4 times

Hence, Inventory Turnover Ratio = 4 times.