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Ratio Analysis 4.13

Notes to Accounts
1. Revenue from Operations `
Sales 2,10,000
Less: Return 10,000
2,00,000
2. Change in Inventories of Stock-in-Trade
Opening Stock (Inventory) 40,000
Less: Closing Stock (Inventory) 20,000
20,000
Solution:

Cost of Revenue from Operations ` 1,50,000
Inventory Turnover Ratio = = = 5 Times.
Average Inventory ` 30,000
Cost of Revenue from Operations
= Purchases of Stock-in-Trade + Change in Inventories of
Stock-in-Trade
= ` 1,30,000 + ` 20,000 = ` 1,50,000

1
Average Inventory = × (Opening Inventory + Closing Inventory)
2
1
= × (` 40,000 + ` 20,000) = ` 30,000.
2
Illustration 10.
Following is the Statement of Profit and Loss of New Delhi Sales Ltd. for the year ended
31st March, 2019:

STATEMENT OF PROFIT AND LOSS for the year ended 31st March, 2019
Particulars Note No. `
I. Income
Revenue from Operations (Net Sales) 12,50,000
II. Expenses
Purchases of Stock-in-Trade 8,75,000
Change in Inventories of Stock-in-Trade (27,000)
Employees Benefit Expenses 1,20,000
Finance Costs 5,000
Depreciation and Amortisation Expense 8,000
Other Expenses 1 39,000
Total 10,20,000
III. Net Profit (I – II) 2,30,000
Note to Accounts
1. Other Expenses `
Administrative and General Expenses 10,000
Provision for Tax 29,000
39,000
Calculate Net Profit Ratio.