A company that specializes in planning parties for children had $7,000 worth of inventory on January 1,2007,and it had $5,000 worth of inventory on December 31,2007.If its cost of goods sold for that period was $10,000,and its net profit was $9,000,which of the following represents its inventory turnover ratio?
A) 3 times
B) 1.5 times
C) 1.67 times
D) 1 times

Question

Quizplus · Accepted Answer

Inventory turnover ratio=Cost of goods sold / Average inventory
Average inventory = (Beginning inventory + Ending inventory)/2
On calculating, we get:
Average inventory= ($7,000+$5,000)/2 = $6,000
Inventory turnover ratio= $10,000 / $6,000 = 1.67 times
Therefore, the correct answer is option C) 1.67 times.

A Company That Specializes in Planning Parties for Children Had