If the opening stock of Ali ltd is N40,000, the cost of goods sold is N48,000 and the closing stock is N24,000, its rate of turnover will be?
Answer Details
The rate of turnover indicates how many times a company sells and replaces its inventory over a given period. To calculate the rate of turnover, we need to divide the cost of goods sold by the average inventory.
The average inventory can be calculated by adding the opening and closing inventories and dividing by two.
Average inventory = (Opening inventory + Closing inventory) / 2
Average inventory = (N40,000 + N24,000) / 2
Average inventory = N32,000
Now we can calculate the rate of turnover:
Rate of turnover = Cost of goods sold / Average inventory
Rate of turnover = N48,000 / N32,000
Rate of turnover = 1.5 times
Therefore, the answer is 1.5 times. This means that Ali Ltd sold and replaced its inventory 1.5 times during the given period.