The inventory turnover ratio is computed by dividing the cost of goods sold by
A)beginning inventory.
B)ending inventory.
C)average inventory.
D)number of days in the year.

Question

Quizplus · Accepted Answer

The inventory turnover ratio measures how efficiently a company is managing its inventory by dividing the cost of goods sold by the average inventory. It gives an idea of how quickly a company is selling its inventory and restocking it. Both beginning and ending inventory do not accurately represent the inventory turnover during the period, while the number of days in the year is not relevant to the calculation. Therefore, option C, average inventory, is the best choice.

The Inventory Turnover Ratio Is Computed by Dividing the Cost