Efficiency ratio: Jason Traders has sales of $833,587, a gross profit margin of 32.4 percent, and inventory of $178,435. What is the company's inventory turnover ratio?
A) 4.67 times
B) 3.16 times
C) 4.1 times
D) None of the above

Question

Quizplus · Accepted Answer

Inventory turnover ratio = Cost of Goods Sold / Average Inventory

We don't have the exact cost of goods sold, but we can calculate it using the gross profit margin:

Cost of Goods Sold = Sales - Gross Profit

= $833,587 - ($833,587 x 0.324)

= $564,157.28

Now we can calculate the inventory turnover ratio:

Inventory turnover ratio = $564,157.28 / ($178,435/2)

= 3.16 times

Efficiency Ratio: Jason Traders Has Sales of $833,587, a Gross