Skip to content

CS Executive · Corporate Accounting and Financial Management · Forecasting Financial Statements

Sunrise Textiles Ltd had sales of Rs 50,00,000 in the current year with inventory of Rs 6,00,000. Sales are forecast to rise to Rs 60,00,000 and inventory varies in proportion to sales. What is the forecast inventory?

Forecast inventory is Rs 7,20,000. Inventory is 12% of sales (6,00,000 divided by 50,00,000), so at forecast sales of Rs 60,00,000 inventory is 12% of that, which equals Rs 7,20,000, a 20% increase matching sales growth.

  1. ARs 6,60,000
  2. BRs 7,20,000Correct
  3. CRs 7,00,000
  4. DRs 8,00,000

Explanation

Inventory is 6,00,000/50,00,000 = 12% of sales. Forecast inventory = 12% x 60,00,000 = Rs 7,20,000. Rs 6,60,000 wrongly adds only 10% growth instead of the 20% sales growth.

Did you get it right without looking?

One question tells you little. A timed set on Forecasting Financial Statements shows your real accuracy, how long you take and where you lose marks.

Practise Forecasting Financial StatementsFree diagnostic mock

More Forecasting Financial Statements questions