By dividing cost of goods sold by the average inventory to measure the speed with which inventory moves through the firm and is turned into sales,which of the following ratios is calculated?
A) the price-earnings ratio
B) the inventory turnover ratio
C) the profitability ratio
D) the sales to inventory ratio

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. This ratio is used to measure how quickly inventory is sold and replaced during a specific time period. The higher the ratio, the more efficiently the company is managing its inventory.

By Dividing Cost of Goods Sold by the Average Inventory