Question

Compute Stock Turnover Ratio from the following information:

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

Answer 1

(i) Stock Turnover Ratio
= $\frac{CostofGoodsSold}{AverageStock}$

Cost of Goods Sold
= Net sales – Gross Profit
= Rs. 2,00,000 – Rs. 50,000
= Rs. 1,50,000

Average Stock = $\frac{OpeningStock+ClosingStock}{2}$

Opening Stock = Closing Stock - 20,000

= Rs. 60,000 – Rs. 20,000

= Rs. 40,000

Average Stock
= $\frac{40,000+60,000}{2}$
= $\frac{1,00,000}{2}$
= Rs. 50,000

Stock Turnover Ratio
= $\frac{Rs.1,50,000}{Rs.50,000}$
= 3 times