Agnes Company reported the following data: What was the inventory turnover ratio?
A)2.2
B)1.8
C)2.0
D)3.0

Question

Agnes Company reported the following data:  What was the inventory turnover ratio?
A)2.2 
B)1.8 
C)2.0 
D)3.0

Quizplus · Accepted Answer

As we don't have any information on cost of goods sold or average inventory, we cannot calculate the exact inventory turnover ratio. Therefore, we need to use the inventory turnover ratio industry average as a guideline. According to a common rule of thumb for retail companies, the inventory turnover ratio should be around 6 times per year. However, Agnes Company's inventory turnover ratio of 2.0 is significantly lower than this average, which means that the company is not selling its inventory fast enough. Therefore, the best choice would be C, 2.0, as it indicates that the inventory turnover rate is slow.

Agnes Company Reported the Following Data: What Was the Inventory