Which of the following ratios considers the relationship between inventory and cost of sales?
A) Inventory turnover ratio
B) Trade payables ratio
C) Cost of sales turnover ratio
D) Trade receivables ratio

Question

Quizplus · Accepted Answer

The inventory turnover ratio is the most appropriate choice as it considers the relationship between inventory and cost of sales. It measures how many times a company sells and replaces its inventory during a period by dividing the cost of sales by the average inventory balance. Trade payables ratio and trade receivables ratio do not consider inventory, while the cost of sales turnover ratio is not a widely used ratio.

Which of the Following Ratios Considers the Relationship Between Inventory