What is the inventory turnover?

Question

Quizplus · Accepted Answer

Inventory turnover is calculated as cost of goods sold divided by average inventory balance. From the given information, we can calculate the inventory turnover as:

Inventory turnover = Cost of goods sold / Average inventory balance
= 322,500 / [(100,000 + 120,000) / 2]
= 322,500 / 110,000
= 2.932

To convert the turnover into times, we take the reciprocal of the turnover, which gives:

Inventory turnover times = 1 / 2.932
= 0.341 times

Therefore, the inventory turnover is approximately 7.1 times (i.e., 1 / 0.341 = 7.1). The best choice is option B.

What Is the Inventory Turnover