Pretzels & Pilates is trying a new retail model that combines selling salted pretzels before a rigorous Pilates workout in order to "carbo load." At the end of the first six months, how could P&P determine its pretzel inventory turnover ratio?
A) current assets divided by current liabilities
B) cash + receivables divided by current inventory
C) total liabilities divided by owners' equity
D) total inventory divided by average inventory
E) cost of goods sold divided by average inventory

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold (COGS) by the average inventory. This measures how many times a company's inventory is sold and replaced over a period.

Pretzels & Pilates Is Trying a New Retail Model That