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Home Questions G7738QXCH9
Target Exam

CUET

Subject

-- Accountancy Part B

Chapter

Accounting Ratios

Question:

Study the information given below carefully and answer the following question.

Particulars 2020
(Amount in ₹)		 2019
(Amount in ₹)		 2018
(Amount in ₹)
Outstanding Expenses 50,000 40,000 25,000
Prepaid Expenses 3,00,000 2,50,000 3,50,000
Trade Payables 18,00,000 16,00,000 14,00,000
Inventory 12,00,000 10,00,000 11,00,000
Trade Receivables 11,00,000 8,00,000 10,00,000
Cash In hand 17,00,000 12,00,000 15,00,000
Revenue from Operations 24,00,000 18,00,000 20,00,000
Gross Profit Ratio 12% 15% 18%

Inventory turnover ratio for the year 2020 will be:

Options:

1.62 times

1.82 times

1.55 times

1.92 times

Correct Answer:

1.92 times

Explanation:

The correct answer is option 4- 1.92 times.

Gross profit ratio = Gross profit/ Revenue from operations x 100
                       12 =  Gross profit/24,00,000 x 100
Gross profit = 12 x 24,00,000/100
                   = 2,88,000

Cost of Revenue = Revenue from operations - Gross profit
                           = 24,00,000 - 2,88,000
                           = 21,12,000

Closing inventory of 2019  becomes the opening inventory of 2020.
Average Inventory = (Opening inventory + closing inventory)/2
                              = (12,00,000 + 10,00,000)/2
                              = 11,00,000

Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory
                                        = 21,12,000/11,00,000
                                        = 1.92 times

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