At January 1, 2014, Britannica Inc. reported inventory of £425,000. At December 31, 2014, the inventory on hand was £501,000. If cost of goods sold for 2014 was £4,996,875, What is the inventory turnover ratio for the year?

Question

Quizplus · Accepted Answer

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
To find the average inventory, we need to add the beginning inventory and ending inventory and divide it by 2:
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = (£425,000 + £501,000) / 2 = £463,000

Now we can calculate the inventory turnover ratio:
Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Inventory Turnover Ratio = £4,996,875 / £463,000
Inventory Turnover Ratio = 10.8 times

Therefore, the answer is C) 10.8 times.