A company that specializes in planning parties for children had $7,000 worth of inventory on January 1, 2018, and it had $5,000 worth of inventory on December 31, 2018.If its cost of goods sold for that period was $3,000, and its net profit was $9,000, what was its inventory to turnover ratio?

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as the cost of goods sold divided by the average inventory. The average inventory is ($7,000 + $5,000) / 2 = $6,000. The cost of goods sold is $3,000. Therefore, the inventory turnover ratio is $3,000 / $6,000 = 0.5, which means the inventory turned over 2 times during the year.

A Company That Specializes in Planning Parties for Children Had