Question

For the current year, Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. Cost of goods sold for the year is $240,000. What is the company's inventory turnover ratio?

Answer 1

Answer:

Inventory turnover ratio= 4.8

Explanation:

Giving the following information:

Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. The cost of goods sold for the year is $240,000.

The inventory turnover is the number of times the inventory gets replaced in a period.

The formula to calculate the inventory turnover ratio, we need to use the following formula:

Inventory turnover ratio= cost of goods sold/ average inventory

Average inventory= (beginning inventory + ending inventory)/2

Average inventory= (40,000 + 60,000)/2= 50,000

Inventory turnover ratio= 240,000/50,000= 4.8