The inventory turnover ratio is represented by which of the following formulas?
A)net credit sales / average inventory
B)average inventory / net credit sales
C)cost of goods sold / average inventory
D)average inventory / cost of goods sold

Question

Quizplus · Accepted Answer

The inventory turnover ratio is calculated by dividing cost of goods sold by average inventory. This helps in evaluating how efficiently a company is managing its inventory and how quickly it is selling the goods. Option A and B are incorrect as they involve net credit sales, which is not related to the inventory turnover ratio. Option D is also incorrect as it is the inverse of the correct formula.

The Inventory Turnover Ratio Is Represented by Which of the Following