Question

The inventory turnover is computed by dividing cost of goods sold by:

A) beginning inventory.

B) ending inventory.

C) average inventory.

D) 365 days.

Answer 1

The inventory turnover is computed by dividing the cost of goods sold by the average inventory. It helps measure the efficiency of inventory management.

Step-by-step explanation:

The inventory turnover is computed by dividing the cost of goods sold by the average inventory. Inventory turnover is a financial ratio that measures the number of times inventory is sold or used in a given period. It is a measure of how efficiently a company is managing its inventory.

For example, if a company has a cost of goods sold of $100,000 and an average inventory of $20,000, the inventory turnover would be calculated as $100,000 / $20,000 = 5 times. This means that the company sells or uses its inventory 5 times during the given period.

Inventory turnover is an important metric for businesses as it helps them understand the efficiency of their inventory management and identify areas for improvement. A higher inventory turnover generally indicates better sales and inventory management.