Final answer:
Inventory turnover is calculated by dividing cost of goods sold by average inventory, which aids businesses in assessing the speed at which they are selling their inventory.
Step-by-step explanation:
The correct formula for inventory turnover is cost of goods sold divided by average inventory. Inventory turnover is a measure used in accounting and business to assess how quickly a company is selling its inventory in a given period. Understanding inventory turnover is crucial for managing cash flow and maintaining a profitable balance of stock levels. The formula helps in evaluating the efficiency with which a firm is managing its inventory. It is an essential metric for business performance analysis.