Question

Wagon Department Store had net credit sales of $16,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,000,000. Inventory turnover for the year is:

Answer 1

Answer:

7.5 times

Explanation:

Inventory turnover = $\frac{Cost \: of\: goods\: sold}{Average\: Inventory}$

We have been provided that,

Cost of goods sold = $15,000,000

Average inventory for the year = $2,000,000

Therefore, Inventory Turnover ratio = $\frac{15,000,000}{2,000,000}$

= 7.5 times

It means on an average how many times the inventory is sold, and replaced during the period.