Question

'Agrawal Brothers' provide following data:

	Rs
Total Sales	$2,20,000$
S/R	$20,000$
Gross Profit	$50,000$
Closing Stock	$60,000$

Excess of closing stock over opening stock = Rs.$20,000$. What is the 'Stock Turnover ratio'?

• A. $5$ times
• B. $4$ times
• C. $3$ times
• D. $2$ times

Answer 1

Answer: (C)

$3$ times

Stock Turnover Ratio
Cost of Goods Sold = Net Sales - Gross Profit
= Rs.2,00,000 - Rs.50,000
= Rs. 1,50,000
Average Stock
= \frac{Opening Stock + Closing Stock}{2}
= Rs. \frac{40,000+60,000}{2}
= Rs. 50,000
Stock Turnover ratio = \frac{Cost of Goods Sold}{Average Stock}
= Rs. 1,50,000

Rs. 50,000
= 3 times.