Question : From the following information related to a company Opening inventory of Rs.20,000; Closing inventory of Rs.22,000; Purchases of Rs.80,000;
Wages Rs.9,000; Carriage outwards Rs.2,000; Returns outwards Rs. 1,000; Revenue from
operations Rs.80,000; Carriage inwards Rs.4,000; Rent Rs.5,000.
The inventory turnover ratio will be ------------
Option 1: 4 times
Option 2: 4.28 times
Option 3: 3 times
Option 4: None of the above
Correct Answer: 4.28 times
Solution : Answer = 4.28 times
$\mathrm{Inventory Turnover Ratio}=\mathrm{\frac{Cost of goods sold}{Average Inventory}}$
Cost of Goods
Sold = 20,000+(80,000-1000)+9000+4000-22000
= 20,000+79000+13000-22000
= 90,000
$\begin{aligned}
\text { A. Inventory } & =\frac{20,000+22000}{2} \\
\\& =\frac{42000}{2}=21000
\end{aligned}$
Inventory Turnover
Ratio = 90,000/21000
=
4.28 times.
Hence, the correct option is 2.
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