Inventory turnover can be calculated by:
A)adding beginning and ending inventory; divide by two
B)dividing the cost of goods sold by average inventory
C)dividing average inventory by the cost of goods sold
D)multiplying average inventory by 1.5
E)none of the above

Question

Quizplus · Accepted Answer

The most accurate way to calculate inventory turnover is by dividing the cost of goods sold (COGS) by the average inventory. This formula shows how many times a company's inventory is sold and replaced over a period of time. Adding beginning and ending inventory (A) and dividing by two can result in an inaccurate calculation, as it doesn't consider any fluctuations in inventory levels throughout the year. Dividing average inventory by COGS (C) would also provide an inaccurate result, as it doesn't take into account the value of the inventory sold. Multiplying average inventory by 1.5 (D) has no basis in accounting principles and is not an appropriate way to calculate inventory turnover. Therefore, the best choice is B.

Inventory Turnover Can Be Calculated By