Question

"Assuming that PDQ Corporation has annual net sales of $303,000,000 and annual cost of goods sold of $202,000,000, what is the inventory turnover ratio for PDQ Corporation?"

Answer 1

Answer:

2

Explanation:

The inventory turnover ratio is defined as the ratio of the cost of goods sold to the average inventory.

Average Inventory = annual net sales - annual cost of goods sold

Average Inventory  = $303,000,000 - $202,000,000

Average Inventory = $101,000,000

Given cost of goods sold = $202,000,000

Inventory turnover ratio = cost of good sold/average inventory

Inventory turnover ratio = $202,000,000/$101,000,000

Inventory turnover ratio = 202/101

Inventory turnover ratio = 2

Hence the inventory turnover ratio for PDQ Corporation is 2