Question

agnes company reported the following data: quick assets $58,000 current assets 153,000 total liabilities 303,000 average net receivables 12,900 beginning inventory 41,000 long-term liabilities 203,000 net credit sales 129,000 cost of goods sold 87,000 ending inventory 49,000 what was the inventory turnover ratio?

Answer 1

To calculate the inventory turnover ratio for Agnes company, divide the Cost of Goods Sold ($87,000) by the Average Inventory ($45,000) to get a ratio of 1.93, which indicates the inventory was turned over nearly two times.

Step-by-step explanation:

The inventory turnover ratio is a measure of how many times a company's inventory is sold and replaced over a period. To calculate this ratio, you use the following formula: Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory. In this case, the Cost of Goods Sold is $87,000, as provided. The Average Inventory is determined by adding the beginning inventory to the ending inventory and dividing by two. Therefore, Average Inventory = (Beginning Inventory + Ending Inventory) / 2 = ($41,000 + $49,000) / 2 = $45,000. Now, calculate the Inventory Turnover Ratio = $87,000 / $45,000 = 1.93. This means that Agnes company's inventory was turned over nearly two times during the period.