Question
From the following information, calculate the Inventory
Turnover Ratio: Net Sales: ₹4,00,000 Average Inventory: ₹55,000 Gross Loss on Sales: 10%Solution
The Inventory Turnover Ratio is calculated using the formula: Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory Calculation of Gross Loss: Gross Loss = 10% of Net Sales = 10% of ₹4,00,000 = ₹40,000 Calculation of Cost of Revenue from Operations: Cost of Revenue from Operations = Net Sales + Gross Loss Cost of Revenue from Operations = ₹4,00,000 + ₹40,000 = ₹4,40,000 Inventory Turnover Ratio = ₹4,40,000 / ₹55,000 = 8 times
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