Openiong Inventory is Rs 29000, purchases Rs 242000, revenue from operationsi.e net sales Rs 320000,m gross profit 25% on sales. Calculate inventory Turnover Ratio.

Explanation

Inventory Turnover Ratio =`("Cost of Revenue from Operation")/("Average Inventory")=(Rs 240000)/(Rs 30000)= 8 Times`
Cost of Revenue form operations (cost of goods sold)
=Revenue from operation-Gross profit
=Rs 320000-Rs 80000(i.e, 25% of Rs 320000)=Rs 240000
Closing Inventory =Opening Inventory+Purchases -cost of Revenue from opertion
=Rs 29000+Rs 242000-Rs 240000=Rs 31000
Average Inventory=`("opening Inventory+closing Inventory")/(2)`
`=(Rs 29000+Rs 31000)/(2)=Rs 30000`