Asked by Jhane Hemingway on May 11, 2024
Verified
Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: The company's inventory turnover for Year 2 is closest to:
A) 3.89
B) 1.04
C) 3.97
D) 4.05
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a specific period, indicating the efficiency of inventory management.
Financial Data
Numerical information reflecting the financial status of an entity, including income, expenses, assets, liabilities, and equity details.
Income Statement
A financial report that summarizes a company's revenues, expenses, and profits over a specific period, usually a fiscal quarter or year.
- Learn the process for determining and understanding inventory turnover.
Verified Answer
Average inventory = (Beginning Inventory + Ending Inventory) / 2
In Year 2,
Cost of Goods Sold = $4,500,000
Beginning Inventory = $700,000
Ending Inventory = $800,000
Average Inventory = ($700,000 + $800,000) / 2 = $750,000
Inventory turnover = $4,500,000 / $750,000 = 6
Therefore, the closest value to the inventory turnover is answer choice C, 3.97.
Learning Objectives
- Learn the process for determining and understanding inventory turnover.
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