Question : A Trader carries an average inventory of Rs. 2,00,000. His Inventory Turnover Ratio is 8 Times. He sells goods at a profit of 25% on cost. The Gross Profit Ratio will be
Option 1: 25%
Option 2: 50%
Option 3: 20%
Option 4: 15%
Answer (1)
24th Jan, 2024
Correct Answer: 20%
Solution :
Answer =
20%
Gross profit ratio=$\frac{\text {Gross Profit × 100}}{\text {Net Sales}}$=$\frac{4,00,000}{20,00,000}$×100= 20%.
Inventory turnover ratio= $\frac{\text {Cost of Goods Sold}}{\text {Average Inventory}}$
⇒8 times = $\frac{\text {Cost of Goods Sold}}{\text {2,00,000}}$
⇒COGS= 16,00,000
G.P= 16,00,000×25%= 4,00,000.
Net sales= 20,00,000.
Hence, the correct option is 3.
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