| Particulars | Amount (Rs.) | Particulars | Amount (Rs.) |
| Inventory in the beginning of the year | 20,000 | Carriage Inwards | 5,000 |
| Inventory at the end of the year | 10,000 | Revenue from Operations, i.e., Sales | 1,00,000 |
| Purchases | 50,000 |
State the significance of this ratio.
SOLUTION
Cost of Goods Sold = Opening Stock + Purchases + Carriage Inwards − Closing Stock
= 20,000 + 50,000 + 5,000 − 10,000
= 65,000
| Average Stock | Opening Stock + Closing Stock / 2 |
| = 20,000 + 10,000 / 2 = 15,000 |
| Stock turnover ratio | Cost of Goods sold / Average Stock |
| = 65,000 / 15,000 = 4.33 Times |