Page 25 - A Level Business Studies - Financial Analysis Tasks

Efficiency Ratios

Average Inventory

Liquidity Ratios;

Working out Average Inventory
Opening Inventory + Closing Inventory / [divided by] 2

Task 1.a
Look at the trading section of the Income Statement and calculate the Average Inventory.

Income Statement - Trading Account Average
£ £ Inventory £

Sales Revenue 150,000

Less Cost of Sales
Opening Inventory (Stock) 10,000

Add Purchases 50,000

60,000

Less Closing Inventory (Stock) 4,000 56,000

Gross Profit 94,000

Task 1.b

Look at the trading section of the Income Statement and calculate the Average Inventory.

Income Statement - Trading Account Average
£ £ Inventory £
Sales Revenue 500,000

Less Cost of Sales

Opening Inventory (Stock) 65,000
Add Purchases 200,000

265,000
Less Closing Inventory (Stock) 35,000 230,000
Gross Profit 270,000

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