Question

a company reports annual sales of $5 million, cost of goods sold of $2 million, inventory of $0.5 million, and net income of $0.75 million. what are the company's annual inventory turns? group of answer choices 4 0.25 10 0.1

Answer 1

The company's annual inventory turns are calculated by dividing the cost of goods sold by the inventory, which in this case is 4. The correct answer is option: 4

Step-by-step explanation:

To calculate the company's annual inventory turns, you need to divide the cost of goods sold (COGS) by the average inventory. In this case, the company reports annual sales of $5 million, COGS of $2 million, inventory of $0.5 million, and net income of $0.75 million.

Using the given figures:

• Cost of Goods Sold (COGS) = $2 million
• Inventory = $0.5 million

The formula for inventory turns is:

Inventory Turns = COGS / Average Inventory

Since the average inventory is not provided, we will use the end of period inventory as a substitute, which is $0.5 million. So:

Inventory Turns = $2 million / $0.5 million = 4

Therefore, the company's annual inventory turns are 4.