Inventory turnover is calculated by dividing
A) cost of goods sold by the ending inventory.
B) cost of goods sold by the beginning inventory.
C) cost of goods sold by the average inventory.
D) average inventory by cost of goods sold.

Question

Quizplus · Accepted Answer

Inventory turnover is calculated by dividing cost of goods sold by the average inventory. This gives us the number of times the average inventory was sold during the year. A higher inventory turnover ratio indicates that the company is selling its inventory faster and more frequently, which means it is generating more revenue. Therefore, the best option is C.

Inventory Turnover Is Calculated by Dividing