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      Question

      A company's financials show: • Net Sales:

      ₹1,000 lakh • Cost of Goods Sold (COGS): ₹700 lakh • Opening Inventory: ₹100 lakh • Closing Inventory: ₹150 lakh What is the Inventory Turnover Ratio, and what does it indicate?
      A 4.2 times – indicating efficient stock usage Correct Answer Incorrect Answer
      B 5.1 times – suggesting high liquidity Correct Answer Incorrect Answer
      C 3.3 times – indicating slow inventory movement Correct Answer Incorrect Answer
      D 7.5 times – excellent sales conversion Correct Answer Incorrect Answer
      E 5.6 times- showing stock is selling efficiently Correct Answer Incorrect Answer

      Solution

      • Average Inventory = (100 + 150) / 2 = ₹125 lakh • Inventory Turnover = COGS / Avg. Inventory = 700 / 125 = 5.6 times • A turnover of 4–6 times is considered good in many industries and shows stock is selling efficiently.

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