ABC Ltd., a telecom company was passing through a bad phase of business cycle and banks were unwilling to lend further amount. It decided to do introspection and compiled following information for the purposes of analysis:

Calculate the inventory turnover ratio of the company.

4 times

Inventory Turnover Ratio = Cost of Revenue from Operations /Average Inventory
                                           = 100000 / {(20000+30000)/2}
                                           = 100000 /25000
                                           = 4 times

Cost of Revenue from Operations = Inventory in the beginning + Net Purchases – Inventory at the end
                                                =30000 + 90000 - 20000
                                                = ₹100000

Aggregate of opening and closing inventory ₹50000
Excess of opening inventory over closing inventory ₹10000
Let us assume opening inventory is x
So, closing inventory will 50000 - x
x- (50000-x) = 10000
x-50000 + x = 10000
2x= 60000
x= 30000
Closing inventory= 50000- 30000 = ₹20000
Opening inventory = 50000 - 20000 = ₹30000