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✦ FREE LEARNING — CLASS 11 & 12 — CBSE · PSEB — ACCOUNTS · ECONOMICS · BST ✦
From the following information, calculate the Inventory Turnover Ratio: Credit Revenue from Operations ₹6,00,000; Cash Revenue from Operations ₹2,00,000; Gross Profit 25% of Cost; Closing Inventory was 3 times the Opening Inventory; Opening Inventory was 10% of Cost of Revenue from Operations.
Total Revenue = Credit Revenue + Cash Revenue = 6,00,000 + 2,00,000 = ₹8,00,000
Since Gross Profit is 25% of Cost (i.e., Cost = 100, Profit = 25, Revenue = 125):
Gross Profit = 8,00,000 × 25 ÷ 125 = ₹1,60,000
Cost of Revenue from Operations = Revenue from Operations − Gross Profit = 8,00,000 − 1,60,000 = ₹6,40,000
Opening Inventory = 10% of 6,40,000 = ₹64,000
Closing Inventory = 3 × 64,000 = ₹1,92,000
Average Inventory = (64,000 + 1,92,000) ÷ 2 = ₹1,28,000
Inventory Turnover Ratio = Cost of Revenue from Operations ÷ Average Inventory = 6,40,000 ÷ 1,28,000 = 5 times
Accounting & Commerce Educator
Sarbjit Singh holds a B.Com and M.Com degree and has over 12 years of teaching experience in double entry bookkeeping, financial accounting, and business studies.
This guide covers "T.S. Grewal Class 12 Vol 3 Chapter 4 Q.90 - Accounting Ratios", focusing on key definitions, step-by-step concepts, applications, and revision guidelines relevant to Chapter 4 - Accounting Ratios.
It is primarily curated for Class 11 and Class 12 high school commerce, accounting, and economics students, as well as aspirants preparing for board exams or CA Foundation.
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