Which of the following is used to determine the rate of inventory turnover?
A) Cost of goods sold divided by Gross profit
B) Cost of goods sold divided by Average inventory
C) Cost of goods sold times Average inventory
D) Cost of goods sold times Gross profit

Question

Quizplus · Accepted Answer

The rate of inventory turnover is calculated by dividing the cost of goods sold by the average inventory. This gives insight into how quickly a company is selling and replacing inventory. Option A is incorrect as the gross profit is not relevant for calculating inventory turnover. Option C is incorrect as multiplying the cost of goods sold by the average inventory does not give the turnover ratio. Option D is incorrect as multiplying the cost of goods sold by the gross profit is not a relevant calculation for inventory turnover.

Which of the Following Is Used to Determine the Rate