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Question -

A trading firm’s average inventory is ₹ 20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a profit of 20% on sale, ascertain the profit of the firm.



Answer -



Let Sale Price be ₹ 100
Then Profit is ₹ 20
Hence, the Cost of Revenue from Operations = ₹ 100 − ₹ 20 = ₹ 80
If the Cost of Revenue from Operations is ₹ 80, then Revenue from Operations = 100

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