The inventory turnover
A)reflects how many times,on average,that the inventory balance was sold during the year.
B)is increased when accounts receivable increases.
C)is decreased if inventory balances decrease from the beginning of the year to the end of the year.
D)is improved if cost of goods sold decreases and inventory balances increase from one year to the next.

Question

Quizplus · Accepted Answer

The inventory turnover reflects how many times, on average, that the inventory balance was sold during the year. It is calculated by dividing the cost of goods sold by the average inventory balance. The higher the inventory turnover, the more efficient a company is at managing its inventory. Therefore, option A is the correct choice. Option B is incorrect because there is no relationship between inventory turnover and accounts receivable. Option C is incorrect because a decrease in inventory balances will increase the inventory turnover, not decrease it. Option D is incorrect because an increase in inventory balances will decrease the inventory turnover, not improve it.

The Inventory Turnover