The correct answer is: C. 9 times
Stock turnover ratio is a measure of how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold by the average inventory.
In this case, the cost of goods sold is Rs. 2,42,000 and the average inventory is Rs. 29,000. Therefore, the stock turnover ratio is 2,42,000 / 29,000 = 8.3 times.
However, the gross profit margin is 25% of sales, which means that the cost of goods sold is only 75% of sales. Therefore, the adjusted stock turnover ratio is 3,20,000 x 0.75 / 29,000 = 9 times.
The higher the stock turnover ratio, the more efficiently a company is managing its inventory. A high stock turnover ratio indicates that a company is selling its inventory quickly and not holding onto it for too long. This can be a good thing, as it means that the company is not tying up its cash in inventory. However, a high stock turnover ratio can also indicate that a company is not ordering enough inventory to meet customer demand. This can lead to stockouts and lost sales.
The ideal stock turnover ratio will vary from industry to industry. For example, companies in the retail industry typically have a higher stock turnover ratio than companies in the manufacturing industry. This is because retail companies need to keep their shelves stocked with fresh products, while manufacturing companies can often produce products in advance of demand.
It is important to track the stock turnover ratio over time to see if it is improving or declining. A declining stock turnover ratio may indicate that a company is not managing its inventory efficiently. This could be due to a number of factors, such as poor forecasting, inaccurate inventory records, or inefficient ordering procedures. If a company’s stock turnover ratio is declining, it should take steps to improve its inventory management practices.