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3.12 Analysis of Financial Statements—CBSE XII
(ii) Inventory Turnover Ratio
Cost of Revenue from Operations, . ., Cost of Goods Sold
ie
=
Average Inventory
` 4,60,000
=  3.09 Times .
Working Notes: ` 1,49,000
1. Cost of Revenue from Operations, i.e., Cost of Goods Sold
= Purchases of Stock-in-Trade + Change in Inventories of
Stock-in-Trade + Direct Expenses
= ` 5,45,000 – ` 1,00,000 + ` 15,000 = ` 4,60,000.
2. Average Inventory = (Opening Inventory + Closing Inventory)/2
= (` 99,000 + ` 1,99,000)/2 = ` 1,49,000.
Illustration 7.
From the following Statement of Profit & Loss, calculate Inventory Turnover Ratio:

STATEMENT OF PROFIT & LOSS for the year ended 31st March, 2024
Particulars Note No. `
I. Revenue from Operations (Sale) 5,00,000
II. Expenses:
Purchases of Stock-in-Trade 3,00,000
Change in Inventories of Stock-in-Trade 1 60,000
Employee Benefit Expenses 2 40,000
Finance Costs 10,000
Depreciation and Amortisation 20,000
Other Expenses 3 20,000
Total 4,50,000
III. Profit before Tax (I – II) 50,000
IV. Tax Expenses: Current Tax 17,500
V. Profit after Tax (III – IV) 32,500

Notes to Accounts
Particulars `

1. Change in Inventories of Stock-in-Trade
Opening Inventory 1,00,000
Less: Closing Inventory 40,000
60,000
2. Employee Benefit Expenses
Wages 10,000
Salaries 30,000
40,000
3. Other Expenses
Carriage Inwards 5,000
Carriage Outwards 5,000
Miscellaneous Expenses 10,000
20,000