Inventory turnover is calculated as:

Question

Quizplus · Accepted Answer

Inventory turnover is calculated by dividing the cost of goods sold by average inventory. This ratio measures how efficiently a company is managing its inventory by showing how many times the inventory was sold and replaced during a specific period (usually a year). A higher turnover ratio implies that the company is selling inventory quickly, while a lower ratio indicates that the inventory may be overstocked or obsolete. Option A is incorrect because it subtracts ending inventory, which is already included in cost of goods sold. Option C is the inverse of the correct formula. Option D multiplies average inventory and cost of goods sold, which does not yield a meaningful result.

Inventory Turnover Is Calculated As