Inventory turnover ratio: Class 12 practice
Inventory turnover = cost of revenue from operations ÷ average inventory, where average inventory = (opening + closing) ÷ 2 and cost of revenue = sales − gross profit.. Read the method, follow the three worked examples, then try the six questions.
What you should know first
- Trading account
The idea behind inventory turnover ratio
Inventory turnover = cost of revenue from operations ÷ average inventory, where average inventory = (opening + closing) ÷ 2 and cost of revenue = sales − gross profit.
Step-by-step method
- Average inventory = (opening + closing)/2.
- Cost of revenue = sales − gross profit (or opening + purchases − closing).
- Divide.
Worked example 1 (Basic)
Cost of revenue ₹1,60,000, opening inventory ₹60,000, closing inventory ₹90,000. Find the inventory turnover ratio.
- Average inventory = ₹75,000
- ₹1,60,000 ÷ ₹75,000 = 2.13 times
- Answer: 2.13 times
Worked example 2 (Standard)
Cost of revenue ₹3,50,000, opening inventory ₹50,000, closing inventory ₹80,000. Find the inventory turnover ratio.
- Average inventory = ₹65,000
- ₹3,50,000 ÷ ₹65,000 = 5.38 times
- Answer: 5.38 times
Worked example 3 (Challenge)
Sales ₹7,20,000, gross profit 25% on sales, opening inventory ₹50,000, closing ₹80,000. Find inventory turnover.
- Cost of revenue = ₹7,20,000 − 25% = ₹5,40,000
- Average inventory = ₹65,000
- Turnover = 8.31 times
- Answer: 8.31 times
Common mistakes and misconceptions
- Using sales instead of cost of revenue
- Using closing inventory only
Practice questions
- (Basic) Cost of revenue ₹3,00,000, opening inventory ₹1,00,000, closing inventory ₹1,00,000. Find the inventory turnover ratio.
- (Basic) Cost of revenue ₹5,20,000, opening inventory ₹80,000, closing inventory ₹1,00,000. Find the inventory turnover ratio.
- (Standard) Cost of revenue ₹2,10,000, opening inventory ₹40,000, closing inventory ₹50,000. Find the inventory turnover ratio.
- (Standard) Cost of revenue ₹4,10,000, opening inventory ₹80,000, closing inventory ₹90,000. Find the inventory turnover ratio.
- (Challenge) Sales ₹3,86,667, gross profit 25% on sales, opening inventory ₹1,00,000, closing ₹20,000. Find inventory turnover.
- (Challenge) Sales ₹7,86,667, gross profit 25% on sales, opening inventory ₹20,000, closing ₹70,000. Find inventory turnover.
Answer key with full working
- Q1: Average inventory = ₹1,00,000 → ₹3,00,000 ÷ ₹1,00,000 = 3 times → Answer: 3 times
- Q2: Average inventory = ₹90,000 → ₹5,20,000 ÷ ₹90,000 = 5.78 times → Answer: 5.78 times
- Q3: Average inventory = ₹45,000 → ₹2,10,000 ÷ ₹45,000 = 4.67 times → Answer: 4.67 times
- Q4: Average inventory = ₹85,000 → ₹4,10,000 ÷ ₹85,000 = 4.82 times → Answer: 4.82 times
- Q5: Cost of revenue = ₹3,86,667 − 25% = ₹2,90,000 → Average inventory = ₹60,000 → Turnover = 4.83 times → Answer: 4.83 times
- Q6: Cost of revenue = ₹7,86,667 − 25% = ₹5,90,000 → Average inventory = ₹45,000 → Turnover = 13.11 times → Answer: 13.11 times
Syllabus note
This skill is listed under "Accounting Ratios" for Class 12 in the NCERT/CBSE books. ICSE, IGCSE, IB and state boards may teach it in a different chapter or year.
Answers on this page are generated and automatically re-checked by a second, independent calculation. They have not been reviewed by a teacher — if you spot a problem, tell us on WhatsApp.
Related practice and notes
- Current ratio and quick ratio
- Debt–equity ratio
- Gross profit and net profit ratios
- Trade receivables turnover
- Working capital and its turnover
- Return on investment (capital employed)
- Interest on capital and drawings
- New and sacrificing ratio on admission
- Gaining ratio on retirement
- Valuation of goodwill
- All Class 12 practice
Frequently asked questions
Which chapter is inventory turnover ratio in?
"Accounting Ratios", Class 12 Accountancy (NCERT/CBSE). Other boards may place it differently.
How were the answers checked?
Answers on this page are generated and automatically re-checked by a second, independent calculation. They have not been reviewed by a teacher — if you spot a problem, tell us on WhatsApp.