Asked by Aline Rugira on Jul 20, 2024
Verified
Which of the following measures the relationship between cost of goods sold and the amount of inventory carried during the period?
A) inventory turnover
B) fixed asset turnover
C) retail method of inventory costing
D) gross profit method of inventory costing
Inventory Turnover
A financial ratio indicating the number of times a company's inventory is sold and replaced over a specific period.
Fixed Asset Turnover
A ratio in finance that evaluates how effectively a business utilizes its fixed assets to produce sales.
Inventory Costing
The process of assigning costs to inventory items and determining cost of goods sold, using methods like FIFO, LIFO, or weighted average.
- Analyze the efficacy and efficiency of inventory management with targeted metrics.
Verified Answer
AN
Amadi NkosiJul 24, 2024
Final Answer :
A
Explanation :
Inventory turnover measures how efficiently a company is using its inventory to generate sales. It is calculated by dividing the cost of goods sold by the average inventory held during the period. This ratio helps to determine how often a company is selling its inventory and restocking it. A high inventory turnover ratio is generally considered positive as it indicates that a company is efficiently managing its inventory and generating sales.
Learning Objectives
- Analyze the efficacy and efficiency of inventory management with targeted metrics.