Which one of the following statements about the inventory turnover ratio is NOT correct?
A) It is calculated by dividing inventory by cost of sales.
B) It measures how many times the inventory is turned over into saleable products.
C) The more times a company can turn over the inventory, the better.
D) Too high a turnover or too low a turnover could be a warning sign.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing cost of sales by average inventory, not by dividing inventory by cost of sales.

Which One of the Following Statements About the Inventory Turnover