Sarah's Smart Shop has an inventory turnover ratio of 3 times per year and an average inventory of $156,000. If Sarah could manage her inventory better and increase the number of turnovers to the industry average of 6 times per year, what average inventory would she need to generate the same level of sales?
A)$78,000
B)$52,000
C)$468,000
D)$312,000

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as Sales / Average Inventory. If the turnover increases to 6 times with the same sales, the average inventory would be $156,000 / 2 = $78,000.

Sarah's Smart Shop Has an Inventory Turnover Ratio of 3