Inventory Ratio Calculations

Delroi, Inc. provided the following data for 2008 and 2009:

Inventory

December 31, 2007 $201,000

December 31, 2008 191,100

December 31, 2009 182,600

Cost of goods sold

2008 $632,000

2009 731,000

Gross margin

2008 $320,000

2009 440,000

Calculate the inventory turnover ratio for 2008 and 2009.

Inventory Turnover Ratio for 2008 = 3.223 Times

Inventory Turnover Ratio for 2009 = 3.91 times

Explanation:

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventories

Inventory Turnover Ratio for 2008 = $632,000 / $201,000 + 191,100/2

Inventory Turnover Ratio for 2008 = $632,000/196,050

Inventory Turnover Ratio for 2008 = 3.223 times

Inventory Turnover Ratio for 2009 = $ 731,000/191,100 + 182,600/2

Inventory Turnover Ratio for 2009 = $ 731,000 / 186,850

Inventory Turnover Ratio for 2009 = 3.91 times