Which of the following is the best explanation of a company's inventory turnover of 12.0 for the year 2013?
A)the company averages about 12 months' sales in inventory.
B)The company averages about 12 days' sales in inventory.
C)The company averages about one month's sales in inventory.
D)The company averages about 12 days from the time an item is sold until the cash is collected.
E)None of the answer choices is correct.

Question

Quizplus · Accepted Answer

Inventory turnover is calculated by dividing the cost of goods sold by the average inventory during a specified period. In this case, the inventory turnover of 12.0 means that the company sold its entire inventory an average of 12 times during the year. Therefore, the company holds about one month's worth of inventory on hand (12 months divided by 12 inventory turns per year). So, option C is the best explanation.

Which of the Following Is the Best Explanation of a Company's