From the given information calculate the inventory turnover ratio and

1.	From the given information calculate the inventory turnover ratio and inventory conversion period (in months) of Sania Ltd.
Answer» Inventory turnover ratio = (Cost of revenue from operations)/(Average inventory) Cost of revenue from operations = Opening inventory + Net Purchases + Direct expenses (carriage inwards) – Closing inventory = 1,70,000 + 6,90,000 + 20,000 – 1,30,000 = 7,50,000 Average inventory = (Opening inventory + Closing inventory)/2 = (1,70,000 + 1,30,000)/2 = 1,50,000 Inventory Turnover ratio = 7,50,000/1,50,000 = 5 times Inventory conversion period = (Number of months in a year)/(inventory turnover period) = 12/5 = 2.4 months

From the given information calculate the inventory turnover ratio and inventory conversion period (in months) of Sania Ltd.

Answer»

Inventory turnover ratio = (Cost of revenue from operations)/(Average inventory)

Cost of revenue from operations = Opening inventory + Net Purchases + Direct expenses (carriage inwards) – Closing inventory

= 1,70,000 + 6,90,000 + 20,000 – 1,30,000

= 7,50,000

Average inventory = (Opening inventory + Closing inventory)/2

= (1,70,000 + 1,30,000)/2

= 1,50,000

Inventory Turnover ratio = 7,50,000/1,50,000

= 5 times

Inventory conversion period = (Number of months in a year)/(inventory turnover period)

= 12/5 = 2.4 months