86 :- From the following information, calculate Inventory Turnover Ratio:
Total Sales Rs 10,00,000; Sales Return Rs 1,00,000; Gross Profit Rs 1,80,000; Closing Inventory Rs 2,00,000; Excess of Closing Inventory over opening Inventory Rs 40,000.
Solution :-
Net Sales = Gross Sales – Sales Return
= 10,00,000 – 1,00,000
= Rs 9,00,000
Revenue from Operations = Rs 9,00,000
Opening Inventory = 2,00,000 – 40,000
= Rs 1,60,000
Gross Profit = Revenue from Operations – Cost of Goods Sold
1,80,000 = 9,00,000 – Cost of Goods Sold
Cost of Goods Sold = 9,00,000 – 1,80,000
= Rs 7,20,000
Average Inventory = Opening Inventory + Closing Inventory/2
= 1,60,000 + 2,00,000/2
= 3,60,000/2
= Rs 1,80,000
Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
= 7,20,000/1,80,000
= 4 Times