Adama’s opening stock is D5,000. He purchased goods worth D30,000. His closing stock was D7,000 and sales D55,000
What is the rate of stock turnover.
- 11 times
- 6 times
-
4.7 times
- 4 times
The correct answer is: C
Explanation
How to calculate inventory turnover ?
- Determine the Cost of Goods from your annual income statement.
- Add your Beginning Inventory to your Ending Inventory.
- Divide the sum of the Beginning and Ending inventory in half to calculate the Average Inventory.
- Calculate the Inventory Turnover by dividing the Cost of Goods Sold by the Average Inventory.
rate of turnover= cost of goods sold / average stock.
cost of goods sold= opening stock + purchases - closing stock
5,000 + 30,000= 35,000 - 7,000 = 28,000
Average stock is gotten as; 5000 + 7000 = 12,000 / 2 = 6,000
therefore rate of turnover= 28,000 / 6,000= 4.7 times