Question
Calculate the Inventory Turnover Ratio given: ยทย ย ย ย ย ย ย Opening Stock: โน40,000; ยทย ย ย ย ย ย ย Closing Stock: โน20,000; ยทย ย ย ย ย ย ย Sales: โน4,00,000; ยทย ย ย ย ย ย ย Gross Profit Margin: 25% on Sales.
Solution
Inventory Turnover = ๐ถ๐๐บ๐ / ๐ด๐ฃ๐๐๐๐๐ ๐ผ๐๐ฃ๐๐๐ก๐๐๐ฆ ย COGS = ๐๐๐๐๐ โ ๐บ๐ = 4,00,000 โ (25% of 4,00,000) = 4,00,000 - 1,00,000 = 3,00,000 ย Average Inventory = ย ( ๐๐๐๐๐๐๐ ย + ๐ถ๐๐๐ ๐๐๐ )/2 = (40,000+20,000) / 2 = 30,000 ย Thus, Inventory Turnover = ๐ถ๐๐บ๐ / ๐ด๐ฃ๐๐๐๐๐ ๐ผ๐๐ฃ๐๐๐ก๐๐๐ฆ = 3,00,000/30,000 = ๐๐ ๐ญ๐ข๐ฆ๐๐ฌ
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