Question

A small company that trains executives on how to act when working in Japan had $70,000 worth of inventory on January 1, 2018, and it had $50,000 worth of inventory on December 31, 2018. If its cost of services provided for that period was $30,000, and its net profit was $90,000, what was its inventory to turnover ratio

Answer 1

0.5

Step-by-step explanation:

Firstly, we need to calculate the average inventory by the company. This is obtainable by adding the beginning inventory to the end inventory and finding the average.

This is mathematically equal to (70,000 + 50,000)/2 = 120,000/2 = 60,000

The inventory to turn over ratio is thus calculated as cost of services sold/average inventory

That is 30,000/60,000 = 0.5