Calculate the Inventory Turnover Ratio of the company.
Calculate the Inventory Turnover Ratio of the company.
Show Hint
- 4.5 times
- 7 times
- 6 times
- 5 times
The Correct Option is D
Solution and Explanation
Step 1: Understand Inventory Turnover Ratio
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
Average inventory is assumed to be the closing inventory of ₹1,00,000, as no other data is available.
Step 2: Calculate the ratio
= ₹5,00,000 / ₹1,00,000 = 5 times.
Step 3: Interpretation
This indicates the company sells and replenishes its inventory 5 times annually, signifying efficient inventory management.
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