Question

If a retailer had an average inventory of 80,000 (retail) and annual sales of 480,000, how many times has that retailer turned over its inventory?

1) Four times a month
2) Six times a month
3) Four times a year
4) Six times a year
5) Eight times a year

Answer 1

The inventory turnover ratio for the retailer is six times a year, calculated by dividing annual sales by the average inventory.

The correct answer is 2. Six times a month

Step-by-step explanation:

To calculate how many times the retailer has turned over its inventory, we need to use the formula for inventory turnover, which is the annual sales divided by the average inventory. So, the inventory turnover ratio is 480,000 / 80,000, which equals six times a year.

Since inventory turnover measures how many times a company sells and replaces its stock of goods during a period, this retailer has turned over its inventory six times over the course of the year.