Calculate Inventory Turnover Ratio from the data given below: ₹ ₹ Inventory in the beginning of the year. 20,000 Carriage Inwards. 5,000 Inventory at the end of the year. 10,000 Revenue from Operations, i.e., Sales. 1,00,000 Purchases. 50,000 State the significance of this ratio.

Cost of Goods Sold = Opening Stock + Purchases + Carriage Inwards - Closing Stock = 20,000 + 50,000 + 5,000 - 10,000 = 65,000 Average Inventory = Opening Stock+Closing Stock 2 =20,000+10,000 2 =15,000 Inventory Turnover Ratio = Cost of Good Sold Avarage Stock =65,000 15,000 =4.33 time

Calculate Inventory Turnover Ratio from the data given below: ₹ ₹…

Download App

Question

Calculate Inventory Turnover Ratio from the data given below:

	₹		₹
Inventory in the beginning of the year.	20,000	Carriage Inwards.	5,000
Inventory at the end of the year.	10,000	Revenue from Operations, i.e., Sales.	1,00,000
Purchases.	50,000

State the significance of this ratio.

✓

Answer

Cost of Goods Sold = Opening Stock + Purchases + Carriage Inwards - Closing Stock
= 20,000 + 50,000 + 5,000 - 10,000 = 65,000
Average Inventory $=\frac{\text{Opening Stock+Closing Stock}}{2}$
$=\frac{20,000+10,000}{2}=15,000$
Inventory Turnover Ratio $=\frac{\text{Cost of Good Sold}}{\text{Avarage Stock}}$
$=\frac{65,000}{15,000}=4.33\text{ time}$

Need a full question paper?

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Start Generating Free

Explore more

More "3 Marks Question" from Accounting Ratios→Accounting Ratios — all question types→Accountancy STD 12 Commerce question papers→CBSE Board STD 12 Commerce question papers→CBSE Board question paper generator→

Similar questions

The current ratio of Y Ltd is 2 : 1. State with reason, which of the following transactions would (a) increase, (b) decrease (c) not change the ratio.
i. Trade receivables included debtors of ₹ 40,000 which were received earlier.
ii. Company purchased furniture of ₹ 45,000. The vendor was paid by the issue of equity shares of ₹ 10 each at par.

→

From the following information for the year ended 31st March 2018 prepare Notes to Accounts on Finance Costs:

	₹
Interest paid on Cash Credit	2,20,000
Interest paid on Debentures	3,50,000
Commitment Charges	20,000
Bank Charges	4,500
Interest paid on Public Deposits	80,000
Commission paid for Deposit mobilisation	16,000

→

Vishesh Ltd. forfeited 1,000 Equity Shares of ₹ 10 each issued at a primium of ₹ 2 per share for non-payment of allotment money of ₹ 5 per share including primium The final call of ₹ 2 per share was not yet called on these shares Of the forfeited shares 800 shares were reissued at ₹ 12 per share fully paid-up. The remaining shares were reissued at ₹ 11 per share fully paid up.

→

Pass necessary journal entries relating to the issue of Debentures for the following:
Issued ₹ 10,00,000; 9% Debentures of ₹ 100 each at a premium of 5%,redeemable at par.

→

Calculate Operating Profit Ratio from the following:

	₹
Revenue from Operations (Net Sales).	5,00,000
Cost of Revenue from Operations (Cost of Goods Sold).	2,00,000
Wages.	1,00,000
Office and Administrative Expenses.	50,000
Interest on Borrowings.	5,000