Compute the inventory turnover ratio using the following information: Net sales is $100,000 for the year, costs of goods sold are $40,000, last year's assets in place were $900,000, and this year's assets in place are $1,100,000. Receivables for both years are $50,000. Inventory changed from $30,000 last year to $10,000 this year.

Question

Esteban Lynch

Business

6 July, 03:04

Compute the inventory turnover ratio using the following information: Net sales is $100,000 for the year, costs of goods sold are $40,000, last year's assets in place were $900,000, and this year's assets in place are $1,100,000. Receivables for both years are $50,000. Inventory changed from $30,000 last year to $10,000 this year.

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Clyde · Answer 1

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Explanation:

The formula for calculating inventory turn over:

Costs of goods sold / average inventory

In this case:

Opening stock: $ 30,000.00

Closing stock: $ 10,000.00

Costs of goods sold : $ 40,000.00

Average inventory = Opening stock + closing stock/2

= $ 30,000 + $ 10,000/2

=$ 40,000/2

=$ 20,00.00

Inventory turnover = $ 40,000.00/$20,000.00

=2