From the following Statement of Profit and Loss for the year ended 31st March, 2019 of Rex Ltd., calculate Inventory Turnover Ratio:

STATEMENT OF PROFIT AND LOSS for the year ended 31st March, 2019

ParticularsNote No.Amount
(Rs.)
I. Revenue from Operations (Net Sales)6,00,000
II. Expenses:
(a) Purchases of Stock-in-Trade3,00,000
(b) Change in Inventory of Stock-in-Trade150,000
(c) Employees Benefit Expenses60,000
(d) Other Expenses245,000
Total Expenses4,55,000
III. Profit before Tax (I-II)1,45,000
IV. Less: Tax 45,000
V. Profit after Tax (III-IV) 1,00,000

Notes to Accounts

ParticularsAmount
(Rs.)
I. Change in Inventory of stock-in-Trade
Opening Inventory1,25,000
Less: Closing Inventory75,000
 50,000
2. Other Expenses
Carriage Inwards15,000
Miscellaneous Expenses30,000
 45,000

SOLUTION

Cost of Goods Sold = Opening Inventory + Purchases + Direct Expenses – Closing Inventory
= 1,25,000 + 3,00,000 + 15,000 – 75,000
= Rs. 3,65,000

Average Stock = Opening Stock + Closing Stock / 2
= 1,25,000 + 75,000 / 2
= 2,00,000 / 2
= 1,00,000

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
= 3,65,000 / 1,00,000
= 3.65 times


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