The inventory turnover is computed by dividing cost of goods sold by
A) beginning inventory.
B) ending inventory.
C) average inventory.
D) 365 days.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. This formula helps to assess a company's efficiency in managing its inventory by measuring the frequency at which the inventory is sold and replaced. Using beginning or ending inventory alone may not provide an accurate assessment of inventory management as it does not account for fluctuations in inventory levels throughout the year. Dividing by 365 days is also incorrect as it does not provide a ratio of inventory turnover.

The Inventory Turnover Is Computed by Dividing Cost of Goods