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From the following information, calculat...

From the following information, calculate inventory turnover ratio:
`{:(,,,Rs.),("Revenue from operations",,=,4_(,)00_(,)000),("Average Inventory",,=,55_(,)000),("Gross Profit Ratio",,=,10%):}`

Text Solution

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Revenue from operations = Rs. 4,00,000
Gross Profit = `10% ` of Rs. 4,00,000 = Rs. 40,000
Cost of Revenue from operations = Revenue from operations – Gross Profit
= Rs. 4,00,000 – Rs. 40,000 = Rs. 3,60,000
`"Inventory Turnover Ratio" = ("Cost of Revenue from Operations")/("Average Inventory")`
`=(Rs. 3,60,000)/(Rs. 55,000)` = 6.55 times
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