Question

The inventory turnover ratio is representative of which of the following: A measure of how effectively the firm is managing its inventory. The number of times inventory is sold and restocked during the year. The total value of all inventory sold. The number of times that accounts receivable is turned over during the year. Choices a and b only (answers 1 and 2) All of the above.

Answer 1

Choices a and b

Step-by-step explanation:

It is a representative of:

A measure of how effectively the firm is managing its inventory and The number of times inventory is sold and restocked during the year

The Inventory turnover is a ratio showing how many times a company has sold and restocked it's inventory during a given period of time.

Inventory turnover can help a firm manage it's inventory through making better decisions on pricing manufacturing, marketing and purchasing new inventories.

We calculate this by dividing the cost of goods sold by average inventory.