A company that has average inventory of $500 and cost of goods sold of $2,000 would have an inventory turnover ratio of 0.25.The inventory turnover ratio equals cost of goods sold ($2,000)divided by average inventory ($500),which equals 4.0 in this example.

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated as cost of goods sold divided by average inventory, which in this case equals 4.0, not 0.25.

A Company That Has Average Inventory of $500 and Cost