Thomas Inc.provided the following particulars for year 2015:
- Calculate the company's inventory turnover ratio for the year.(Round your answer to two decimal places.)

Question

Thomas Inc.provided the following particulars for year 2015: 
- Calculate the company's inventory turnover ratio for the year.(Round your answer to two decimal places.)

Quizplus · Accepted Answer

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory
Cost of Goods Sold = Sales - Gross Profit
Gross Profit = Sales - Cost of Goods Sold
Given, 
Sales = $350,000
Gross Profit = 25% of Sales = 0.25 * $350,000 = $87,500
Cost of Goods Sold = $350,000 - $87,500 = $262,500
Average Inventory = (Opening Inventory + Closing Inventory) / 2
Given, 
Opening Inventory = $50,000
Closing Inventory = $65,000
Average Inventory = ($50,000 + $65,000) / 2 = $57,500
Inventory Turnover Ratio = $262,500 / $57,500 = 4.57 times per year
Therefore, the best choice is B, which is the closest rounded option to 4.57, i.e., 3.69 times per year.