Question

From the following Information, calculate Inventory Turnover Ratio:
Credit Revenue from Operations ₹ 3,00,000; Cash Revenue from Operations ₹ 1,00,000, Gross Profit 25% of Cost, Closing Inventory was 3 times the Opening Inventory. Opening Inventory was 10% of Cost of Revenue from Operations.

Answer 1

$\begin{array}{l}\text{Average Inventory}=\frac{30,000+90,000}{2}=\text{Rs 60,000}\\ \text{Opening Inventory}=\text{3,00,000}\times \text{10\%}=\text{Rs 30,000}\\ \text{Closing Inventory}=\text{30,000}\times \text{3}=\text{Rs 90,000}\\ \text{Cost of Revenue from Operations}=\text{Revenue from Operations}-\text{Gross Profit}\\ =\text{4,00,000-1,00,000}=\text{Rs 3,00,000}\\ \mathrm{Inventory}\mathrm{}\mathrm{Turnover}\mathrm{}\mathrm{Ratio}=\frac{\mathrm{Cost}\mathrm{}\mathrm{of}\mathrm{}\mathrm{Revenue}\mathrm{}\mathrm{from}\mathrm{}\mathrm{Operations}}{\mathrm{Average}\mathrm{}\mathrm{Inventory}}\\ \text{=}\frac{3,00,000}{60,000}=5\text{Times}\end{array}$