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CMA doubts

21 December 2021

🌟 as per ICAI module of intermediate, in cost accounting what is mean by inventory turnover ratio could you please explain me very detail and with formula

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 21 December 2021

(a) Inventory turnover ratio: It helps management to avoid capital being locked up unnecessarily.

This ratio
reveals the efficiency of stock-keeping.
Inventory turnover ratio is given by the formula:

Cost of average stock held during the period
Cost of material consumed/Cost of average stock held during the period
Cost of average stock =

Cost of opening stock + Cost of closing stock/2
The inventory turnover ratio can be calculated (in days) as follows:
Inventory turnover ratio/
Days during the period
This will reveal the number of days for which the stocks are held.