Question

Inventory turnover is calculated as a.Sales/Cost of Goods Sold. b.Average Inventory/Average Daily Cost of Goods Sold. c.Average Inventory/Sales. d.Cost of Goods Sold/Average Inventory.

Answer 1

d.Cost of Goods Sold/Average Inventory.

Step-by-step explanation:

Inventory turnover is a financial ratio that shows how many times an entity sold and replaced inventory during a given period

It is the ratio of the cost of goods sold to the average inventory of the entity (that is the sum of the beginning and ending inventory divided by 2).

Hence inventory turnover is calculated as Cost of Goods Sold/Average Inventory.

Answer 2

D) Cost of Goods Sold/Average Inventory.

Step-by-step explanation:

The inventory turnover ratio can be calculated by dividing the cost of goods sold by average inventory.

Inventory turnover ratio shows how many times a company has sold its inventory completely during the year (or accounting period).

You can use the inventory turnover to determine the amount of days it takes the company to sell its total inventory:

days inventory = (1 / inventory turnover) x 365 days

The higher the inventory turnover, the more efficient the company is at selling its goods, and the shorter the time it takes them to sell their total inventory.