At the beginning of the year a company has $140 in inventory and at the end of the year the inventory on the balance sheet is $110.If the firm reports cost of goods sold on the income statement of $400, then the inventory turnover ratio would be:
A)1.60
B)2.86
C)3.20
D)3.64

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as Cost of Goods Sold divided by the average inventory. The average inventory is ($140 + $110) / 2 = $125. Therefore, the inventory turnover ratio is $400 / $125 = 3.20.

At the Beginning of the Year a Company Has $140