Inventory Turnover can be calculated by:
A) Ratio of cost of goods sold over average inventory cost
B) Ratio of average inventory cost over cost of goods sold
C) Ratio of inventory days in stock over average inventory cost
D) Ratio of average inventory cost over inventory days in stock

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory cost. This provides a measure of how efficiently a company is using its inventory to generate sales. A higher ratio indicates that the company is selling inventory quickly and efficiently, while a lower ratio suggests that the company may be holding onto inventory for too long or experiencing sales problems. Choice A is the correct calculation for inventory turnover.

Inventory Turnover Can Be Calculated By