Question

Inventory turnover measures a.the relationship between cost of merchandise sold and the amount of inventory carried during the period. b.both of these are measured by inventory turnover. c.neither of these are measured by inventory turnover. d.the efficiency and effectiveness of inventory management.

Answer 1

Answer: The correct answer is (b): Both of these are measured by inventory turnover.

Explanation: Inventory turnover shows the number of times the inventory has been replaced and sold during the year, which is also known as cost merchandising.It also measures the effectiveness and efficiency of the inventory management. It helps the businessman to make plans and take appropriate decisions of pricing, marketing,purchasing and manufacturing. Low inventory turnover implies excess inventory and less sales and vice- versa.