A company that specializes in planning parties for children had $7,000 of inventory on January 1, 2007, and it had $5,000 of inventory on December 31, 2007. If its cost of goods sold for that period was $10,000, and its net profit was $9,000, which of the following represents its inventory turnover ratio?

Question

Quizplus · Accepted Answer

Inventory turnover ratio = Cost of goods sold / average inventory

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

Average inventory = ($7,000 + $5,000) / 2 = $6,000

Inventory turnover ratio = $10,000 / $6,000 = 1.67 times

A Company That Specializes in Planning Parties for Children Had