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ABC (Ltd) has asked for you assistance, and their accountant has given you the information below: Cash sales R90,000 Credit sales R300,000 Returns inwards R40,000

ABC (Ltd) has asked for you assistance, and their accountant has given you the information below:

  • Cash sales R90,000
  • Credit sales R300,000
  • Returns inwards R40,000
  • Opening stock R20,000
  • Closing stock R40,000
  • Gross profit ratio 30%

Task:

Assist ABC to calculate its inventory turnover ratio, and then explain to them the implications of having either a very high or a very low inventory turnover ratio.

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