Question
From the following given information, calculate
inventory turnover ratio: Revenue from operations = Rs.200,000 Average Inventory = Rs.20,000 Gross Profit Ratio = 20%Solution
Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period of time. Inventory Turnover equals to Cot of Goods Sold (COGS)/Average Inventory In the example COGS = 200,000 * (1-0.2) = 160,000 Inventory turnover is a ratio = 160,000/20,000= 8
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