Question

A trading firm’s average inventory is Rs 20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a profit of 20% on sale, ascertain the profit of the firm.

Answer 1

Let Sale Price be Rs 100

Then Profit is Rs 20

Hence, the Cost of Revenue from Operations = Rs 100 − Rs 20 = Rs 80

If the Cost of Revenue from Operations is Rs 80, then Revenue from Operations = 100

If the Cost of Revenue from Operations is Rs 1, then Revenue from Operations =