90 :– From the following information, calculate Inventory Turnover Ratio:
Credit Revenue from Operations Rs 6,00,000; Cash Revenue from Operations Rs 2,00,000, Gross Profit 25% of cost, Closing Inventory was 3 times the Opening Inventory. Opening Inventory was 10% of cost of Revenue from Operations.
Solution :-
Net Revenue from Operation = Credit Revenue from Operations + Cash Revenue from Operation
= 6,00,000 + 2,00,000
= Rs 8,00,000
Let the Cost of Goods Sold be x.
Gross Profit = Net Revenue from Operation – Cost of Goods Sold
25x/100 = Net Revenue from Operation – x
(1 + 25/100)x = 8,00,000
x = 8,00,000 x 100/125
Cost of Revenue from Operation = Rs 6,40,000
Opening Inventory = 10% of Cost of Revenue from Operations
= 10/100 x 6,40,000
= Rs 64,000
Closing Inventory = 3 x 64,000 = Rs 1,92,000
Average Inventory = Opening Inventory + Closing Inventory/2
= 64,000 + 1,92,000/2
= Rs 1,28,000
Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
= 6,40,000/1,28,000
= 5 Times