Question

Asset management ratios are important - firms need to manage assets efficiently because capital obtained to acquire those assets is expensive. These ratios include the: (1) Inventory turnover ratio, (2) Days sales outstanding, (3) Fixed assets turnover, and (4) Total assets turnover. The inventory turnover ratio indicates how many times during the year inventory is and restocked. Its equation is:

Answer 1

Answer:

Inventory turnover ratio  =  Cost of Goods sold / Average Inventory

Explanation:

To calculate this we need to take same time period for both cost of goods sold and average inventory. Average inventory is used instead of ending inventory because of inventory fluctuations in many companies.