From the following information obtained from the books of Kundan Ltd., calculate the inventory turnover ratio for the years 2015-16 and 2016-17:
2015-16
Rs. 2016-17
Rs.
Inventory on 31st March $7, 00, 000$ $17, 00, 000$
Revenue from operations $50, 00, 000$ $75, 00, 000$
(Gross profit is $25$ % on cost of revenue from operations)
In the year 2015-16, inventory increased by Rs. $2, 00, 000$

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Solution

Inventory Turnover Ratio = Cost of goods sold (COGS)
Average Inventory

2015-16
Gross Profit = 25% of cost = 20% of sales = 20/100 X 75,00,000 = Rs. 15,00,000

Cost of goods sold = Revenue from operations - Gross profit
= 50,00,000 - 10,00,000
= Rs. 40,00,000

Average Inventory = 5,00,000 + 7,00,000 = 12,00,000 = Rs. 6,00,000
2 2

Inventory turnover ratio = 40,00,000 = 6.7 times
6,00,000

2016-17
Gross profit = 20% of sale = 20 X 50,00,000 = Rs. 10,00,000
100
Cost of goods sold = Revenue from operations - Gross profit
= 75,00,000 - 15,00,000
= Rs. 60,00,000

Average inventory = 7,00,000 + 17,00,000 = 24,00,000 = Rs. 12,00,000
2 2

Inventory turnover ratio = 60,00,000 = 5 times
12,00,000

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Similar questions

From the following information obtained from the books of Kundan Ltd.,
Calculate the inventory turnover ratio for the years 2015-16 and 2016-17:

$\begin{matrix} Particulars & 2015 - 16 & 2016 - 17 (R s) & (R s) Inventory on 31st March & 7, 00, 000 & 17, 00, 000 Revenue from operations & 50, 00, 000 & 75, 00, 000 \end{matrix}$

(Gross profit is 25% on cost of revenue from operations)

In the year 2015-16, inventory increased by Rs 2,00,000.

You are able to collect the following information about a company for two years:

		2015-16		2016-17
Book Debts on Apr. 01	Rs	4,00,000	Rs	5,00,000
Book Debts on Mar. 31			Rs	5,60,000
Stock in trade on Mar. 31	Rs	6,00,000	Rs	9,00,000
Revenue from Operations (at gross profit of 25%)	Rs	3,00,000	Rs	24,00,000

Calculate Inventory Turnover Ratio and Trade Receivables Turnover Ratio if in the year 2015-16 stock in trade increased by Rs 2,00,000.

You are able to collect the following information about a company for two years:

		2015-16		2016-17
Trade receivables on Apr. 01	Rs.	4,00,000	Rs	5,00,000
Trade receivables on Mar. 31			Rs	5,60,000
Stock in trade on Mar. 31	Rs.	6,00,000	Rs	9,00,000
Revenue from operations (at gross profit of 25%)	Rs.	3,00,000	Rs	24,00,000

Calculate Inventory Turnover Ratio and Trade Receivables Turnover Ratio.

Opening Inventory Rs. 29,000; Closing Inventory Rs. 31,000; Revenue from Operations (Sales) Rs. 3,20,000; Gross Profit Ratio 25% on Revenue from Operations.
Calculate:
(i) Inventory Turnover Ratio and
(ii) Average Age of Inventory.

Calculate Inventory Turnover Ratio from the following particulars :

Cost of Revenue from Operations (Cost of Goods Sold) Rs. 6,40,000

Gross Profit 20% on Sales

Closing Inventory : 4 times of Opening Inventory

Opening Inventory : 10% of Cost of Revenue from Operations.

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	2015-16 Rs.	2016-17 Rs.
Inventory on 31st March	$7, 00, 000$	$17, 00, 000$
Revenue from operations	$50, 00, 000$	$75, 00, 000$