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If the cost of goods sold is Rs. 1 Lakh and the opening and closing stocks are Rs. 20,000 and Rs. 30,000 respectively, what will be the stock turnover ratio ?

If the cost of goods sold is Rs. 1 Lakh and the opening and closing stocks are Rs. 20,000 and Rs. 30,000 respectively, what will be the stock turnover ratio ? Correct Answer 4 times

Given Information:

  1. Cost of Goods Sold = Rs. 100000
  2. Opening Stock = Rs. 20000
  3. Closing Stock = Rs. 30000

To Find:

  1. Stock Turnover Ratio

Formula:

  1. Stock Turnover Ratio = Cost of Goods Sold ÷ Average Inventory
  2. Average Inventory = (Opening Stock + Closing Stock) ÷ 2

Solution:

Average Inventory = (Opening Stock + Closing Stock) ÷ 2

                                = (20000 + 30000) ÷ 2

                                = 50000÷ 2

                                = Rs. 25000

Stock Turnover Ratio = Cost of Goods Sold ÷ Average Inventory

                                     = 100000 ÷ 25000

                                     = 4 times

Therefore, if the cost of goods sold is Rs. 1 Lakh and the opening and closing stocks are Rs. 20,000 and Rs. 30,000 respectively,  the stock turnover ratio will be 4 times.

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