Question

From the following data, calculate Inventory Turnover Ratio:
Total Sales ₹5,00,000; Sales Return ₹50,000; Gross Profit ₹90,000; Closing Inventory ₹1,00,000; Excess of Closing Inventory over Opening Inventory ₹20,000.

Answer 1

Cost of Goods Sold = Net Sales (Sales – Sales Return) – Gross Profit
= Rs 5,00,000 – Rs 50,000 – Rs 90,000 = Rs 3,60,000
Closing Inventory = Rs 1,00,000
Closing Inventory is Rs 20,000 more than the Opening Inventory
Therefore, Opening Inventory = Rs 80,000 (Rs 1,00,000 – Rs 20,000)