Question

During the year ended 30th June 2012 a company's sales were £498,400. As at 30th June 2011 the cost of its inventory was £98,200 and its trade payables £124,600. As at 30th June 2012 its cost of inventory was £74,200 and trade payables £114,800; while it paid £294,800 to its suppliers during the year ended 30th June 2012.. Calculate the company's inventory turnover.

Answer 1

Inventory turnover = Cost of goods sold/Average inventories = (Beginning inventory plus trade payables + Cost paid to suppliers - Ending inventory plus trade payables) / Average inventories = $\frac{(98,200 + 294,800 - 74,200) + (124,600 - 114,800)}{(98,200 + 74,200)/2} = 3.81.$