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?

Answer 1

The retailer has turned over its inventory 6 times during the year.

Step-by-step explanation:

To determine how many times the retailer has turned over its inventory, we can use the inventory turnover ratio formula. The formula is:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory

In this case, we will use the retail sales values instead of the cost of goods sold. If the average inventory is $80,000 (retail) and the annual sales are $480,000, the inventory turnover ratio would be:

Inventory Turnover Ratio = $480,000 / $80,000

Simplifying this, we get:

Inventory Turnover Ratio = 6

This means that the retailer has turned over its inventory 6 times during the year.