ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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How is inventory turnover calculated?
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Carrying Cost ÷ Cost of Goods Sold
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Cost of Goods Sold ÷ Average Inventory
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Carry Cost ÷ Average Inventory
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Cost of Goods Sold x Average Inventory
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Explanation:
Detailed explanation-1: -The inventory turnover ratio is calculated by dividing the cost of goods by average inventory for the same period. A higher ratio tends to point to strong sales and a lower one to weak sales.
Detailed explanation-2: -Inventory turnover = COGS / Average inventory value For example, if your COGS was $200, 000 in goods last year, and your average inventory value was $50, 000, your inventory turnover ratio would be 4.
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