From the following Information, calculate Inventory Turnover Ratio: Credit Revenue from Operations Rs. 3,00,000; Cash Revenue from Operations Rs. 1,00,000, Gross Profit 25% of Cost, Closing Inventory was 3 times the Opening Inventory. Opening Inventory was 10% of Cost of Revenue from Operations.

SOLUTION

Average Inventory = 30,000 + 90,0002
= Rs. 60,000

Opening Inventory = 3,00,000 × 10%
= Rs. 30,000

Closing Inventory = 30,000 × 3
= Rs. 90,000

Cost of Revenue from Operations = Revenue from Operations – Gross Profit
= 4,00,000 – 1,00,000
= Rs. 3,00,000

Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory
= 3,00,000 / 60,000
= 5 Times