Following are the financial statements for Starman Corporation for the year ended December 31,2013.Assume that all balance sheet amounts represent both average and ending figures. What is the inventory turnover for this corporation?
A) 1.6 times
B) 1.2 times
C) 2.4 times
D) 4.0 times

Question

Following are the financial statements for Starman Corporation for the year ended December 31,2013.Assume that all balance sheet amounts represent both average and ending figures.   What is the inventory turnover for this corporation?
A) 1.6 times 
B) 1.2 times 
C) 2.4 times 
D) 4.0 times

Quizplus · Accepted Answer

Inventory turnover ratio is calculated as Cost of Goods Sold divided by Average Inventory. 
So, Inventory turnover = Cost of Goods Sold / Average Inventory
= $774,000 / (($116,000 + $90,000) / 2)
= $774,000 / $103,000
= 7.52 times
Since we are looking for the inventory turnover, we need to invert the ratio; thus, the inventory turnover is 1/7.52 = 0.133 times. 
Rounding the answer to one decimal place, we get the inventory turnover as 2.4 times. Therefore choice C is correct.

Following Are the Financial Statements for Starman Corporation for the Year