Q.From the illustrative data in Section 1 (Cost of Revenue from Operations ₹14,00,000; Opening Inventory ₹1,50,000; Closing Inventory ₹2,00,000), calculate the Stock (Inventory) Turnover Ratio.

This ratio divides the year's cost of goods sold by the average stock held, showing how many times that stock was sold and refilled.

Step 1 - Average Inventory.

Average Inventory = (Opening Stock + Closing Stock) / 2 = (1,50,000 + 2,00,000) / 2 = ₹1,75,000.

Step 2 - Stock Turnover Ratio.

Stock Turnover Ratio = Cost of Revenue from Operations / Average Inventory = 14,00,000 / 1,75,000 = 8 times. …

A common mistake is using Revenue from Operations (sales) in the numerator instead of Cost of Revenue from Operations (cost of goods sold) - the Stock Turnover Ratio uses COST, so that both numerator and …