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Question

'Agrawal Brothers' provide following data:


Rs
Total Sales2,20,000
S/R20,000
Gross Profit50,000
Closing Stock60,000
Excess of closing stock over opening stock = Rs.20,000. What is the 'Stock Turnover ratio'?

A
5 times
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B
4 times
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C
3 times
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D
2 times
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Solution

The correct option is D 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.

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