Asked by Sygie Lamigo on May 28, 2024
Verified
The inventory turnover is computed by dividing cost of goods sold by
A) beginning inventory.
B) ending inventory.
C) average inventory.
D) 365 days.
Inventory Turnover
A ratio showing how many times a company's inventory is sold and replaced over a particular period, indicating the efficiency in managing stock.
Cost Of Goods Sold
Expenditures directly borne from manufacturing a company’s goods, including those for labor and materials.
- Calculate the rate of inventory turnover and comprehend its effects on the functioning of business operations.
Verified Answer
CS
Chaos SparkJun 01, 2024
Final Answer :
C
Explanation :
The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. This formula helps to assess a company's efficiency in managing its inventory by measuring the frequency at which the inventory is sold and replaced. Using beginning or ending inventory alone may not provide an accurate assessment of inventory management as it does not account for fluctuations in inventory levels throughout the year. Dividing by 365 days is also incorrect as it does not provide a ratio of inventory turnover.
Learning Objectives
- Calculate the rate of inventory turnover and comprehend its effects on the functioning of business operations.
Related questions
The Following Information Was Available for Paul Company at December ...
The Following Information Is Available for Miguel Company at December ...
A Company's Cost of Goods Sold Was $15,500 and Its ...
It Can Be Expected That Companies Selling Perishable Goods Have ...
True Blue Stores Had a Beginning Accounts Payable Balance of ...