Stock turnover ratio

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pulkit (Querist)
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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

CA. RAVIKUMAR

CA. RAVIKUMAR (Expert)
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02 March 2012 Cost of goods sold/Average Stock is the correct formula of calculating Stock turnover ratio

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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02 March 2012 But for tax audit purpose (44AB of the Income tax Act,1961) ICAI suggests to consider 'closing stock' only as denominator.

pulkit

pulkit (Querist)
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02 March 2012 Sir,
What stock turnover ratio represents?

anurag

anurag (Expert)
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02 March 2012 Calculation depends upon, for what purpose u need the ratio.

CA. RAVIKUMAR

CA. RAVIKUMAR (Expert)
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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

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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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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