The inventory turnover ratio:

a. is used to analyze profitability.

b. is used to measure solvency.

c. reveals how many times a company sells its merchandise inventory during a period.

d. reveals how many days a company can sell inventory if no new merchandise is purchased.

e. calculation depends on the company's inventory valuation method

Question

Jayla Price

Business

3 January, 08:25

The inventory turnover ratio:

a. is used to analyze profitability.

b. is used to measure solvency.

c. reveals how many times a company sells its merchandise inventory during a period.

d. reveals how many days a company can sell inventory if no new merchandise is purchased.

e. calculation depends on the company's inventory valuation method

+1

Answers (1)

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Nikki · Answer 1

The inventory turnover ratio reveals how many times a company sells its merchandise inventory during a period.

To find the inventory turnover you measure the number of times inventory is sold in a period of time. When you do this, you are seeing how much inventory a company has on hand and how it relates to how much they've sold during that period. By calculating this companies are able to see how profitable their items are and how much they have on hand versus what they "turnover" to generate a profit.