At January 1, 2011, Britannica Inc.reported inventory of £425,000.At December 31, 2011, the inventory on hand was £501,000.If cost of goods sold for 2011 was £3,331,250, What is the inventory turnover ratio for the year?

Question

Quizplus · Accepted Answer

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
Average Inventory = (£425,000 + £501,000) / 2 = £463,000
Inventory Turnover Ratio = £3,331,250 / £463,000 = 7.2 times. Therefore, the answer is choice C.