A company maintains average inventory of ₹1,20,000. Its inventory turnover ratio is 6 times. If the company sells goods at a gross profit of 25% on revenue from operations, find out the revenue from operations.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → ₹9,60,000
Inventory turnover ratio = cost of revenue from operations ÷ average inventory. Cost of revenue from operations is revenue from operations less gross profit, so with a gross profit of 25% on revenue, the cost is 75% of revenue.
Cost of revenue from operations = ₹1,20,000 × 6 = ₹7,20,000
Cost = 75% of revenue from operations
Revenue from operations = ₹7,20,000 × 100/75 = ₹9,60,000
Note: ₹7,20,000 is the cost of revenue from operations, not the revenue itself.
NCERT (2026-27 edition): NCERT (2026-27 edition):
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