Question

Compute the inventory turnover ratio using the following information: Net sales is $100,000 for the year, costs of goods sold are $40,000, last year's assets in place were $900,000, and this year's assets in place are $1,100,000. Receivables for both years are $50,000. Inventory changed from $30,000 last year to $10,000 this year.

Answer 1

2

Step-by-step explanation:

The formula for calculating inventory turn over :

Costs of goods sold/ average inventory

In this case:

Opening stock: $ 30,000.00

Closing stock: $ 10,000.00

Costs of goods sold : $ 40,000.00

Average inventory = Opening stock + closing stock/2

= $ 30,000+ $ 10,000/2

=$ 40,000/2

=$ 20,00.00

Inventory turnover = $ 40,000.00/$20,000.00

=2