Inventory Turnover Ratio

Q.

What Is Deferred Revenue Expenditure?

Q.

From the following information obtained from the books of Kundan Ltd.,
Calculate the inventory turnover ratio for the years 2015-16 and 2016-17:

$\begin{array}{ccc}\text{Particulars}& 2015-16& 2016-17\\ & \left(Rs\right)& \left(Rs\right)\\ \text{Inventory on 31st March}& 7,00,000& 17,00,000\\ \text{Revenue from operations}& 50,00,000& 75,00,000\end{array}$

(Gross profit is 25% on cost of revenue from operations)

In the year 2015-16, inventory increased by Rs 2, 00, 000.

Q.

Carriage on purchases is carriage inward?​ The given statement is true or false.

1. True
2. False

Q. From the following information calculate
(i) Gross Profit Ratio
(ii) Inventory Turnover Ratio
(iii) Current Ratio
(iv) Liquid Ratio
(v) Net Profit Ratio
(vi) Working Capital Ratio

$$\begin{array}{cc}\text{Items}& \text{Rs.}\\ \text{Sales}& 25,20,000\\ \text{Net Profit}& 3,60,000\\ \text{Cost of Sales}& 19,20,000\\ \text{Long term Debts}& 9,00,000\\ \text{Creditors}& 2,00,000\\ \text{Average Inventory}& 8,00,000\\ \text{Current Assets}& 7,60,000\\ \text{Fixed Assets}& 14,40,000\\ \text{Current Liabillities}& 6,00,000\\ \text{Net Profit Before Interest and Tax}& 8,00,000\end{array}$$

Q.

Calculate the amount of Opening Trade Receivables and Closing Trade Receivables from the following figures :

Trade Receivables Turnover Ratio 4 times

Cost of Revenue from Operations (Cost of Goods Sold) Rs. 6, 40, 000

Gross Profit Ratio 20%

Closing Trade Receivables were Rs. 20, 000 more than at the beginning.

Cash Revenue from Operations being 33 $\frac{1}{3}$% of Credit Revenue from Operations.

Q.

Compute the value of goodwill on the basis of four year's purchase of the average profits based on the last five years. The profits for the last five years were as follows.
$\begin{array}{cc}\text{Year}& \text{Amt. (Rs.)}\\ 2002& 40,000\\ 2003& 50,000\\ 2004& 60,000\\ 2005& 50,000\\ 2006& 60,000\end{array}$

Q.

Opening Inventory Rs. 29, 000; Closing Inventory Rs. 31, 000; Revenue from Operations (Sales) Rs. 3, 20, 000; Gross Profit Ratio 25% on Revenue from Operations.
Calculate:
(i) Inventory Turnover Ratio and
(ii) Average Age of Inventory.

Q.

From the following information, calculate the following ratios:

i) Quick Ratio

ii) Inventory Turnover Ratio

iii) Return on Investment

	Rs.
Inventory in the beginning	50, 000
Inventory at the end	60, 000
Revenue from operations	4, 00, 000
Gross Profit	1, 94, 000
Cash and Cash Equivalents	40, 000
Trade Receivables	1, 00, 000
Trade Payables	1, 90, 000
Other Current Liabilities	70, 000
Share Capital	2, 00, 000
Reserves and Surplus	1, 40, 000

(Balance in the Statement of Profit & Loss A/c)

Q.

Determine stock turnover ratio if, Opening stock is Rs 31, 000, Closing stock is Rs 29, 000, Sales is Rs 3, 20, 000 and Gross profit ratio is 25% on sales.

1. 11 times

2. 8 times

3. 31 times

4. 32 times

Q. Direct Expesnses are in case of calculation of cost of revenue from operations.

1. added
2. reduced
3. multiplied
4. divided

Q. Calculate the following ratio on the basis of following information:
(i) Gross Profit Ratio (ii) Current Ratio (iii) Acid Test Ratio (iv) Inventory Turnover Ratio (v) Fixed Assets Turnover Ratio

	Rs.
Gross Profit	50, 000
Revenue from Operations	1, 00, 000
Inventory	15, 000
Trade Receivables	27, 500
Cash and Cash Equivalents	17, 500
Current Liabilities	40, 000
Land & Building	50, 000
Plant & Machinery	30, 000
Furniture	20, 000

Q.

Following information is given to you :
(I) Inventory Turmover Ratio 5 Times

(II) Inventory at the end is Rs. 5, 000 more than the inventory in the beginning.

(III) Revenue from Operations (all credit) Rs. 2, 00, 000

(IV) Gross Profit Ratio $\frac{1}{4}$ on cost.

(V) Current Liabilities Rs. 60, 000.

(VI) Quick Ratio 0.75.

Calculate (i) Cost of Revenue from Operations, (ii) Opening Inventory Closing inventory, and (iii) Quick Assets and Current Assets.

Q. Cost of Goods Sold is Rs. 1, 50, 000, Operating expenses are Rs. 60, 000. Sales is Rs. 2, 60, 000 and Sales Return is 10, 000. Calculate Operating Ratio.

Q. Cost of Revenue from Operations = Opening Inventory + _____________ + Direct expenses - _____________

1. Work-in-progress, Closing inventory
2. Closing inventory, Gross profit
3. Net sales, Gross profit
4. Net purchases, Closing inventory

Q.

Turnover ratios are also known as___

1. Both Activity ratios & Performance ratios

2. All of these

3. Activity ratios

4. Performance ratios

Q. Calculate Stock Turnover Ratio if Opening Stock is Rs. 76, 250, Closing Stock is Rs. 98, 500, Sales is Rs. 5, 20, 000, Sales Return is Rs. 20, 000, Purchase is Rs. 3, 22, 250.

Q.

Calculate Inventory Turnover Ratio from the following particulars :

Cost of Revenue from Operations (Cost of Goods Sold) Rs. 6, 40, 000

Gross Profit 20% on Sales

Closing Inventory : 4 times of Opening Inventory

Opening Inventory : 10% of Cost of Revenue from Operations.

Q.

Q. Why would the inventory turnover ratio be more important when analysing a grocery store than an insurance company?

Q. The average age of inventory is viewed as the average length of time inventory is held by the firm for which explain with reasons.

Q. Inventory Turnover Ratio is expressed in .

1. pure ratio
2. times
3. percentage
4. days

Q. Calculate Stock turnover Ratio From the data given below

$$\begin{array}{cc}\text{Items}& \text{Rs.}\\ \text{Stock at the beginning of the year}& 10,000\\ \text{Stock at the end of the year}& 5,000\\ \text{Carriage}& 2,500\\ \text{Sales}& 50,000\\ \text{Purchase}& 25,000\end{array}$$

Q.

Calculate the Gross Profit Ratio from the following information : -

$\begin{array}{ccc}& \text{2016}& \text{2017}\\ & \text{Rs.}& \text{Rs.}\\ \text{Sales (Revenue from Operations)}& 1,20,000& 1,80,000\\ \text{Gross Profit}& 30,000& 36,000\end{array}$

Q. The average age of inventory is viewed as the average length of time inventory is held by the firm or as the average number of day’s sales in inventory. Explain.

Q.

Compute Stock Turnover Ratio from the following information:

$\begin{array}{cc}\text{Items}& \text{Rs.}\\ \text{Net Sales}& \text{2, 00, 000}\\ \text{Gross Profit}& \text{50, 000}\\ \text{Closing Stock}& \text{60, 000}\\ \text{Excess of Closing Stock over Opening Stock}& \text{20, 000}\end{array}$

Q.

The ___________ measures the activity of a firm’s inventory.

1. liquid ratio

2. average collection period

3. current ratio

4. inventory turnover ratio

Q. Inventory turnover ratio
= Cost of Revenue from Operations / Inventory.

1. Opening Inventory
2. Closing Inventory
3. Average Inventory
4. Total Inventory

Q. You are able to collect the following information about company for two years:

$$\begin{array}{ccc}\text{Items}& 2004& 2005\\ \text{Books Debts on April 1}& 4,00,000& 5,00,000\\ \text{Books Debts on March 30}& & 5,60,000\\ \text{Stock in trade on March 31}& 6,00,000& 9,00,000\\ \text{Sale}\left(\text{at gross profit of}25\%\right)& 3,00,000& 24,00,000\end{array}$$

Calculate stock turnover Rratio and debtor turnover ratio if in the year 2004 stock in trade increased by Rs. 2, 00, 000.

Q.

From the following information of Astha Ltd. for the year ended 31st March 2015, prepare Notes to Accounts on Employee Benefit Expenses:

(i) Wages Rs. 5, 20, 000

(ii) Medical Expenses Rs. 30, 000

(iii) Salaries Rs. 7, 40, 000

(iv) Printing and Stationery Rs. 15, 000

(v) Business Promotion Expenses Rs. 50, 000

(vi) Gratuity Paid Rs. 1, 50, 000

(vii) Contribution to Provident Fund Rs. 1, 10, 000

Q.

A high inventory turnover may indicate ___

1. company is selling its products fast and that there’s demand for their product

2. a high risk of stock-outs

3. a low profit margin

4. Both :

   company is selling its products fast and that there’s demand for their product

   a high risk of stock-outs