Question

inventory turnover ratio
opening stock 31000
closing stock 39000
credit sales 100000
cash sales 20000
returns inward 10000
gross profit 20 percentage
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Answer 1

Answer:

Before reply is give, one should know what is the Inventory turnover ratio

Explanation:

Inventory turnover ratio is cost of goods sold divided by average inventory for the period. It is the rate at which a company sells and replaces its stock of goods during a particular period.

What is average inventory   = Opening stock + closing stock

                                                                      2

                                             = 31000+39000=70000/2=35000.00

Inventory Turnover ratio     = Cost of goods sold / average inventory

Cost of goods sold            = Stock consumed

                                           = Opening stock+Purchases+Direct expenses-      closing stock + profit

From the given question, the cost of goods sold will be ascertained as under:-

Cost of goods sold            = Total sales - gross Profit

                                              =100000+20000-10000=110000.00- GP

                                              =110000*20/100=22000.00 *

                                                   =110000-22000=88000.00

*Treating 20 % on list price

Inventory turnover ratio  will be= 88000/35000=2.51 times