Question

The revenue for a firm is $2,500,000. its cost of revenue is $850,000, and its average inventory for the year is $62,000. (round your answer to the nearest 0.00.) the firm's inventory turnover is:____.

Answer 1

The inventory turnover ratio is 13.71

The inventory turnover is a measure of the variety of instances inventory is sold or used in a time period which includes a year. it is calculated to look if a commercial enterprise has an immoderate stock in contrast to its income degree.

Inventory turnover is the charge that inventory is sold, used, and replaced. The stock turnover ratio is calculated by dividing the price of goods by way of the common inventory for the identical period. A better ratio tends to point to strong income and a lower one too vulnerable income. an awesome inventory turnover ratio is between 5 and 10 for maximum industries, which suggests that you sell and restock your inventory each 1-2 months. This ratio moves great stability among having sufficient stock reachable and no longer having to reorder too frequently.

Inventory turnover ratio

= cost of goods sold / average inventory

= $ 850,000/$62000

= 13.71

∴ The inventory turnover ratio is 13.71

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