To measure how effectively a client employs its assets,an auditor calculates inventory turnover by dividing the average inventory into:
A)Net sales.
B)Cost of goods sold.
C)Operating income.
D)Gross sales.

Question

Quizplus · Accepted Answer

Inventory turnover measures how effectively a company is selling its inventory. The formula for inventory turnover is cost of goods sold divided by the average inventory. Therefore, the answer is B) Cost of goods sold.

To Measure How Effectively a Client Employs Its Assets,an Auditor