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Home Questions G7738QXCH9
Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

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

Particulars 2020 (Amount in Rs) 2019 (Amount in Rs) 2018 (Amount in Rs)
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 Operation 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:

Inventory Turnover Ratio = Cost of Revenue from Operations / Average Inventory
Where average Inventory refers to arithmetic average of opening and closing inventory, and the cost of revenue from operations means revenue from operations less gross profit.
Gross profit for 2020= 12% of 24,00,000= 2,88,000
Cost of Revenue= 24,00,000-2,88,000= 21,12,000
Average Inventory= (12,00,000+10,00,000)/2=11,00,000
ITR= 21,12,000/11,00,000=1.92

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