Just Camshafts sells auto parts. Provided below is selected financial information from the company's 2007 annual report: Using Just Camshafts financial information what is the company's inventory turnover ratio for 2007?
A) 0.69
B) 1.00
C) 3.35
D) 4.03

Question

Just Camshafts sells auto parts. Provided below is selected financial information from the company's 2007 annual report:  Using Just Camshafts financial information what is the company's inventory turnover ratio for 2007?
A) 0.69 
B) 1.00 
C) 3.35 
D) 4.03

Quizplus · Accepted Answer

To calculate inventory turnover ratio, we divide cost of goods sold by average inventory. Using the given financial information, we can calculate the inventory turnover ratio for 2007 as follows:

Cost of goods sold = $2,600,000 
Average inventory = ($950,000 + $550,000) / 2 = $750,000

Inventory turnover ratio = $2,600,000 / $750,000 = 3.46

Rounded to two decimal places, the answer is C (3.35).

Just Camshafts Sells Auto Parts