To calculate the stock turnover ratio, the following information is needed:

- Cash sales = 20% of Total sales
- Credit sales = Rs. 900,000
- Gross profit = 25% on Cost
- Closing stock = Rs. 225,000
- Opening stock = Rs. 75,000

Step 1: Calculate the total sales

Total sales = Credit sales / (100% - Cash sales %)
Total sales = Rs. 900,000 / (100% - 20%)
Total sales = Rs. 1,125,000

Step 2: Calculate the cost of goods sold (COGS)

COGS = Total sales - Gross profit
COGS = Rs. 1,125,000 - (25% of COGS)
COGS = Rs. 843,750

Step 3: Calculate the average stock

Average stock = (Opening stock + Closing stock) / 2
Average stock = (Rs. 75,000 + Rs. 225,000) / 2
Average stock = Rs. 150,000

Step 4: Calculate the stock turnover ratio

Stock turnover ratio = COGS / Average stock
Stock turnover ratio = Rs. 843,750 / Rs. 150,000
Stock turnover ratio = 5.625



The stock turnover ratio is a measure of how quickly a company is selling its inventory and replacing it with new stock. The ratio is calculated by dividing the cost of goods sold by the average stock over a period of time.

In this case, the stock turnover ratio is 5.625, which means that the company is selling its entire stock 5.625 times during the year. This indicates that the company is effectively managing its inventory and is able to sell its products quickly.

A high stock turnover ratio is generally considered a positive sign for a company, as it suggests that the company is efficient in managing its inventory and is able to generate revenue quickly. However, a very high ratio may also indicate that the company is not holding enough stock to meet demand, which could result in lost sales. On the other hand, a low stock turnover ratio may indicate that the company is holding too much stock and may have cash flow issues.

Overall, the stock turnover ratio is an important metric for businesses to track, as it can provide insights into their inventory management and financial health.