[Peachey]

Hi I am in a little trouble, I need to calaculate the gross profit ratio, net Income and the inventory turnover ratio.

Company 1... Company 2
500,000... 800,000--------Sales
350,000... 500,000--------Cost of Goods Sold
75,000... 60,000... Inventory, Beginning of year
25,000... 40,000... Inventory, End of year
25,000... 10,000... Office Rent Expense

My working Gross Profit Ratio
150,000/500,000 = 0.3 x 100% = 30%
300,000/800,000 = 0.375 x 100% = 37.5%

Net Income
Revenue:
Sales... 500,000----------800,000
Expense:
Office Rent Expense... 25,000... 10,000
Net Income---------------.=475,000... 790,000

Inventory Turnover Ratio = This is my problem

[ArcSine]

Whoops, watch that Net Income calc. You've forgotten to deduct COGS.

The Inventory TO ratio is



Figure your Average Inventory from the given beginning-of-year and end-of-year amounts.

Make that computation, and it'll be just.. um... peachey keen.;)

[Peachey]

Thank you, yes I forgot the COGS in net income and in Inventory Turnover Ratio:
Is this it or what am I doing incorrect.

350,000 = 2.6
75,000 + 60,000

[rehmanvohra]

Average inventory: Opening + Closing/2
Company 1:
Cogs 350,000
Avg Inventory 50,000 (75,000+25,000)/2
Turnover 7

Company 2:
500,000/50,000 = 10

[Peachey]

Thank you again.