Calculation of rate of stock turnover
Q: The value of opening stock is Rs.2 lakhs, purchases during the year Rs. 8
lakhs and value of closing stock Rs. 2 lakhs, the rate of stock turnover can be
calculated as follows:
COST OF GOODS SOLD
Rs. In Lakhs
Opening stock 2
Purchases during the year 8
Total goods on hand during the year 10
Less: closing stock 2
Cost of goods sold 8
AVERAGE INVENTORY
Rs. In Lakhs
Opening stock 2
Closing stock 2
Average inventory = 2 +2 =2 2
2
Rate of stock turnover = cost of goods sold
Average inventory
=8
2
= 4 times.
The stock turnover ratio in the above case is 4 times. It means that inventory
is replaced 4 times a year.
Q: The value of opening stock is Rs.2 lakhs, purchases during the year Rs. 8
lakhs and value of closing stock Rs. 2 lakhs, the rate of stock turnover can be
calculated as follows:
COST OF GOODS SOLD
Rs. In Lakhs
Opening stock 2
Purchases during the year 8
Total goods on hand during the year 10
Less: closing stock 2
Cost of goods sold 8
AVERAGE INVENTORY
Rs. In Lakhs
Opening stock 2
Closing stock 2
Average inventory = 2 +2 =2 2
2
Rate of stock turnover = cost of goods sold
Average inventory
=8
2
= 4 times.
The stock turnover ratio in the above case is 4 times. It means that inventory
is replaced 4 times a year.
