Stock turnover ratio
This query is : Resolved
01 March 2012
Sir,
Please tell me to which formula preference should be given for computing stock turnover ratio
1 COGS/ AVG. Stock
2 Sales/ AVG. Stock
Please tell me to which formula preference should be given for computing stock turnover ratio
1 COGS/ AVG. Stock
2 Sales/ AVG. Stock
CA. RAVIKUMAR
(Expert)
02 March 2012
Cost of goods sold/Average Stock is the correct formula of calculating Stock turnover ratio
02 March 2012
But for tax audit purpose (44AB of the Income tax Act,1961) ICAI suggests to consider 'closing stock' only as denominator.
CA. RAVIKUMAR
(Expert)
03 March 2012
Yes agree with B. Chackrapani Sir,
This Ration indicates The the ratio of stock to turnover which is mainly essential for calculating and estimating the working capital requirement for the company
This Ration indicates The the ratio of stock to turnover which is mainly essential for calculating and estimating the working capital requirement for the company
08 April 2012
Stock TO is stock divided by your sales it indicates that for how many days you are keeping the stock in your godown and it also indicated the time period for movement of the goods purchased by you.
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