(a) Inventory Turnover Ratio: This ratio is cc puted to determine the efficiency with which the stock is used. This ratio is b; scd on the relationship between cost of goods sold and average stock kept during the year

Inventory/Stock Turnover Ratio = \(\frac {\textit{Cost of good sold}}{\textit{Average stock}}\)

Cost of goods sold = Opening Stock + Purchases + Direct expenses – Closing Stock 

Or cos to goods sold = Net sales – Gross Profit

Average Stock = \(\frac {\textit{opeing stock+Closing stock}}{\textit{2}}\)

(b) Debtors Turnover Ratio: This ratio is computed to determine the rate at which the amount is collected from the debtors. It establishes the relationship between net credit sales and average accounts receivables,

Debtors Turnover Ratio = \(\frac {\textit{Net Credit sales}}{\textit{Average Acounts Receivables}}\)

Net Credit Sales = Total Sales – Cash Sales 

Average Account Receivables 

=\(\frac {\textit{(Opening Debtors+Opening B/R)+(Closing Debtors +Closing B/R)}}{\textit{2}}\)

(c) Payable Turnover Ratio: This ratio is known as Creditors Turnover Ratio.’ It is computed to determine the rate at which the amount is paid to the creditors. It establishes the relationship between net credit purchases and average accounts payables.

Payable Turnover Ratio = \(\frac {\textit{Net Credit sales}}{\textit{Average Account Paybles}}\)

Net Credit purchases = Total Purchases – Cash Purchases Average Account Payable

\(\frac {\textit{(Opening Creditors+Opening B/R)+(Closing Creditors +Closing B/R)}}{\textit{2}}\)

(d) Working Capital Turnover Ratio: This ratio is computed to determine how efficiently the working capital is utilised in making sales. It establishes the relationship between net sales and working capital.

Working Capital Turnover Ratio =\(\frac {\textit{Net sales}}{\textit{Working Captal}}\)

Net Sales = total Sales – Sales Return Working Capital 

= Current Assets – Current Liabilities.