Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: The company's inventory turnover for Year 2 is closest to:
A) 3.89
B) 1.04
C) 3.97
D) 4.05

Question

Ribaudo Corporation has provided the following financial data from its balance sheet and income statement:  The company's inventory turnover for Year 2 is closest to:
A) 3.89 
B) 1.04 
C) 3.97 
D) 4.05

Quizplus · Accepted Answer

Inventory turnover = Cost of Goods Sold / Average Inventory

Average inventory = (Beginning Inventory + Ending Inventory) / 2

In Year 2,

Cost of Goods Sold = $4,500,000

Beginning Inventory = $700,000

Ending Inventory = $800,000

Average Inventory = ($700,000 + $800,000) / 2 = $750,000

Inventory turnover = $4,500,000 / $750,000 = 6

Therefore, the closest value to the inventory turnover is answer choice C, 3.97.

Ribaudo Corporation Has Provided the Following Financial Data from Its