MPR Sanjay Kumar (3118 Points)
21 December 2021
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 21 December 2021
(a) Inventory turnover ratio: It helps management to avoid capital being locked up unnecessarily.
This ratio
reveals the efficiency of stock-keeping.
Inventory turnover ratio is given by the formula:
Cost of average stock held during the period
Cost of material consumed/Cost of average stock held during the period
Cost of average stock =
Cost of opening stock + Cost of closing stock/2
The inventory turnover ratio can be calculated (in days) as follows:
Inventory turnover ratio/
Days during the period
This will reveal the number of days for which the stocks are held.
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