SSS Ltd has provided information from its financial statements for the year ended 30 June 2018. $$\begin{array} { l r }
\text { Sales (all on credit) } & \$ 2,000,000 \
\text { Gross profit on sales } & 1,000,000 \
\text { Net profit } & 150,000 \
\text { Cost of sales } & 1,000,000 \
\text { Inventory at end of year } & 200,000 \
\text { Accounts receivable at end of year } & 500,000
\end{array}$$
-The company trades 365 days per year. The number of times SSS's inventory turned over for 2018 is:
A)2.0 times.
B)5.0 times.
C)5.5 times.
D)2.2 times.

Question

SSS Ltd has provided information from its financial statements for the year ended 30 June 2018. $$\begin{array} { l r } 
\text { Sales (all on credit) } & \$ 2,000,000 \
\text { Gross profit on sales } & 1,000,000 \
\text { Net profit } & 150,000 \
\text { Cost of sales } & 1,000,000 \
\text { Inventory at end of year } & 200,000 \
\text { Accounts receivable at end of year } & 500,000
\end{array}$$ 
-The company trades 365 days per year. The number of times SSS's inventory turned over for 2018 is:
A)2.0 times.
B)5.0 times.
C)5.5 times.
D)2.2 times.

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold (COGS) by the average inventory. Given the cost of sales (COGS) is $1,000,000 and the inventory at the end of the year is $200,000 (assuming no beginning inventory or it's the same as the ending inventory for simplicity), the inventory turnover ratio is $1,000,000 / $200,000 = 5.0 times.

SSS Ltd Has Provided Information from Its Financial Statements for the Year