Sparky's Sparky's sells auto parts.Provided below is selected financial information from the company's 2012 annual report:
Using Sparky's financial information what is the company's inventory turnover ratio for 2012?
A) 0.69
B) 1.00
C) 3.35
D) 4.03

Question

Sparky's Sparky's sells auto parts.Provided below is selected financial information from the company's 2012 annual report:
 Using Sparky's financial information what is the company's inventory turnover ratio for 2012?
A) 0.69 
B) 1.00 
C) 3.35 
D) 4.03

Quizplus · Accepted Answer

To calculate the inventory turnover ratio, we divide COGS by average inventory. From the information given in the annual report:

COGS (Cost of Goods Sold) for 2012 = $6,354,800 
Average inventory for 2012 = ($1,423,300 + $1,490,600)/2 = $1,457,950

Inventory turnover ratio for 2012 = COGS / Average inventory = $6,354,800 / $1,457,950 = 4.36

Therefore, the correct answer is option C) 3.35.

Sparky's Sparky's Sells Auto Parts