Question

Stock Turnover ratio is a .

• A. Liquidity ratio
• B. Profitability ratio
• C. Solvency ratio
• D. Activity ratio

Answer 1

The correct option is D Activity ratio

Stock (Inventory) Turnover ratio is a activity ratio as it shows how much times the stock is being used or sold with respect to the turnover or cost of goods sold.

Let Cost of goods sold = $Rs.100000$ , Opening inventory = $Rs.55000$ and Closing Inventory = $Rs.45000$

Stock turnover ratio = Cost of goods sold/ Average Inventory

Average Inventory = [Opening Inventory + Closing Inventory] /$2$

=[ $55000+45000$]/$2$

=$Rs.50000$

Stock turnover ratio = $100000/50000$

= $2$ times