Query Detail : RBI Grade B Phase II
In F&M,Basics of Finance section ,while going through the Activity Ratios example video , i came across a question. It is about Calculate Inventory Turnover Ratio. Revenue from Operation = 10,00,000
Avg Inventory = 2,00,0000,Profit % = 20%. While calculating the COGS, in the video it has been shown that COGS will be 0.8*Revenue from operation.
If, Revenue from operation= Total Sales Credit = COGS+PROFIT
Then in this case,COGS = Revenue from operation - profit or Revenue from operation /1.2 (as profit is 20%). Kindly clarify, if I have mistaken.
JYOTIPRAKASH, August 23rd 2020,
RBI Grade B Phase II
No. i am unable to understand how you got COGS = revenue/1.2?
First please note that this is gross profit.
going ahead, yes COGS = 0.8*Revenue
Later when you say COGS = Revenue - gross profit which means 0.8*Revenue = Revenue - gross profit which means gross profit = revenue - 0.8*revenue and we come back to the same thing.