The average number of times a company's inventory is sold during an accounting period,calculated by dividing cost of goods sold by the average inventory balance,is equal to the:
A)Accounts receivable turnover.
B)Inventory turnover.
C)Days' sales uncollected.
D)Current ratio.
E)Price earnings ratio.

Question

Quizplus · Accepted Answer

The calculation described in the question is for inventory turnover, which measures how quickly a company is able to sell and replace its inventory. Option A measures how quickly a company is able to collect payments from its customers, option C measures the average number of days it takes for a company to collect payments from its customers, option D measures a company's liquidity, and option E measures the company's profitability.

The Average Number of Times a Company's Inventory Is Sold