Question

Consider a firm with an annual net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover? A) 12.50 B) 10.00 C) 42.00 D) 4.16 E) 20.00

Answer 1

Answer:

12.50 times

Explanation:

Inventory Turnover = Cost of Sales / Inventory

                                = $25,000,000/ $2,000,000

                                = 12.50 times

Answer 2

Answer:

A) 12.50

Explanation:

Inventory turnover is the ratio that how many time a business has sold or replaced the inventory during a given period. A business is considered more profitable if it has high inventory turnover.

Inventory turnover = Cost of Goods Sold  / Inventory value

Inventory Turnover = $25,000,000 / $2,000,000

Inventory Turnover = 12.50 times

The firm can can sell 12.5 times the same value of inventory i a year.