Final answer:
The statement about the inventory turnover being calculated using the annual cost of goods sold and average inventory is true, and it reflects how efficiently a company manages its inventory.
Step-by-step explanation:
The statement that inventory turnover is calculated using the annual cost of goods sold and the aggregate inventory value on average is true. Inventory turnover is a measure of how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold (COGS) by the average inventory during a period. This ratio indicates how many times a company's inventory is sold and replaced over a specific time frame. A higher turnover rate implies that the company is selling goods rapidly and indicates good inventory management.
However, it's important to differentiate between this ratio and profit measurements such as accounting profit, which is the total revenues minus explicit costs, including depreciation. Concepts like average profit, average total cost, and average variable cost also relate to profitability but are distinct from the inventory turnover ratio, which focuses solely on inventory efficiency.