Question

How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:a. Price earnings ratio.b. Accounts receivable turnover.c. Current ratio.d. Inventory turnover.e. Days' sales uncollected.

Answer 1

Answer:

d. Inventory turnover

Explanation:

The formula to compute the inventory turnover is shown below:

= Cost of goods sold ÷ average inventory

where,  

Average inventory = (Opening balance of inventory + ending balance of inventory) ÷ 2

The inventory turnover should always be expressed in times

Hence, the most appropriate option is d.