Question

Calculate the Inventory Turnover Ratio of the company.

• A. 4.5 times
• B. 7 times
• C. 6 times
• D. 5 times

Hint:

Higher inventory turnover ratio reflects faster movement of inventory.

Answer 1

The Correct Option is D

Step 1: Understand Inventory Turnover Ratio

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory.
Here, average inventory is assumed equal to closing inventory ₹1,00,000 (as no other data provided).

Step 2: Calculate the ratio

= ₹5,00,000 / ₹1,00,000 = 5 times.

Step 3: Interpretation

This means the company’s inventory is sold and replenished 5 times a year, indicating inventory management efficiency.