How to calculate inventory turnover ratio

How to calculate inventory turnover ratio class 12

The inventory turnover ratio is a measure of how quickly a company is able to sell its inventory. It indicates how efficiently a company is using its inventory to generate sales. To calculate the inventory turnover ratio, you will need the following information:

The cost of goods sold (COGS) for a given period of time (such as a year). This can be found on the income statement.

The average inventory for the same period of time. To calculate the average inventory, you will need the beginning inventory and the ending inventory for the period. Add these two amounts together and divide by 2 to get the average inventory.

Once you have these two numbers, you can calculate the inventory turnover ratio by dividing the COGS by the average inventory. For example, if the COGS is $500,000 and the average inventory is $100,000, the inventory turnover ratio is 5 (500,000 / 100,000).

The higher the inventory turnover ratio, the more efficiently a company is using its inventory to generate sales. A lower ratio may indicate that the company is holding onto inventory for longer periods of time, which can tie up cash and lead to higher carrying costs.

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[DHungama]

what is the point of revenue from operations = 80000?