The stock turnover ratio is a financial ratio that measures the number of times a company's stock or inventory is sold and replaced within a specific period. It indicates how efficiently a company manages its inventory.
To calculate the stock turnover ratio, we divide the cost of goods sold by the average stock.
Given the information provided:
Sales: GH⊄ 200,000
Purchase: GH⊄ 170,000
Opening stock: GH⊄ 40,000
Closing stock: GH⊄ 50,000
First, we need to calculate the cost of goods sold (COGS):
COGS = Opening stock + Purchase - Closing stock
= GH⊄ 40,000 + GH⊄ 170,000 - GH⊄ 50,000
= GH⊄ 160,000
Next, we calculate the average stock:
Average stock = (Opening stock + Closing stock) / 2
= (GH⊄ 40,000 + GH⊄ 50,000) / 2
= GH⊄ 45,000
Finally, we can calculate the stock turnover ratio:
Stock turnover ratio = COGS / Average stock
= GH⊄ 160,000 / GH⊄ 45,000
≈ 3.56 times (rounded to two decimal places)
Therefore, the stock turnover ratio is approximately 3.56 times.