A firm’s Inventory Turnover (IT) is 5 times on a cost of goods sold of Rs. 8,00,000. If the IT is…
Rs. 60,000 is released. Average inventory falls from Rs. 8,00,000 / 5 = Rs. 1,60,000 to Rs. 8,00,000 / 8 = Rs. 1,00,000. The reduction of Rs. 60,000 releases funds…
Choose your answer
A firm’s Inventory Turnover (IT) is 5 times on a cost of goods sold of Rs. 8,00,000. If the IT is improved to 8 times while the cost of goods sold remains the same, a substantial amount of funds is released from or additionally invested in inventory. In fact
Answer and explanation
Correct answer C
Rs. 60,000 is released. Average inventory falls from Rs. 8,00,000 / 5 = Rs. 1,60,000 to Rs. 8,00,000 / 8 = Rs. 1,00,000. The reduction of Rs. 60,000 releases funds previously tied up in inventory.
Practice for these exams
-
Telangana SET (TG SET)