Question

inventory tirnover ratio 8 times revenue grom operation 5000000gross profit ratio 40% closing inventory os twice the oening inventory determine operating nd closing inventory

Answer 1

SALES = 50L GP Ratio = 40% which implies,

COGS = 30L

inventory turnover ratio is = COGS/ avg inventory

8 = 30L/avg inventory

avg inventory = 3,75,000

opening inventory = x

closing inventory = 2x

x+2x / 2 = 375000

on solving

x = 250000

opening inventory = 250000

closing inventory = 500000