A company maintains average inventory of ₹1,20,000. Its inventory turnover ratio is 6 times. If company sells goods at a gross profit of 25% on revenue from operations. Find out revenue from operations.

₹9,60,000

The correct answer is Option (2) - ₹9,60,000.

Inventory turnover ratio = Cost of revenue from operations / Average inventory
                                 6 = Cost of revenue from operations / 1,20,000
Cost of revenue from operations = 6 x 1,20,000
                                                = 7,20,000

Let revenue from operations = a
Gross profit = 25/100 x a
                  = a/4

Revenue from operations = Cost of revenue from operations + Gross profit
                                  a = 7,20,000 + a/4
a - a/4 = 7,20,000
3a/4 = 7,20,000
a = 7,20,000 x 4/3
   = 9,60,000

So, revenue from operations is ₹9,60,000.