Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Ratios: Inventory Turnover

Financial Accounting

14. Financial Statement Analysis

Ratios: Inventory Turnover

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Multiple Choice

Which of the following types of businesses would you expect to have the highest inventory turnover ratio?

A jewelry retailer

A furniture store

A grocery store

A luxury car dealership

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Verified step by step guidance

Understand the concept of inventory turnover ratio: It measures how efficiently a company sells and replaces its inventory over a specific period. The formula is Inventory Turnover Ratio = \( \frac{\text{Cost of Goods Sold (COGS)}}{\text{Average Inventory}} \).

Consider the nature of the businesses listed: Jewelry retailers, furniture stores, grocery stores, and luxury car dealerships. Each has different inventory characteristics, such as turnover speed and product demand.

Analyze the inventory turnover for each type of business: Grocery stores typically sell perishable goods with high demand, leading to frequent inventory replenishment. Jewelry retailers, furniture stores, and luxury car dealerships deal with higher-value items that sell less frequently.

Relate the inventory turnover ratio to the business type: Businesses with fast-moving inventory, like grocery stores, tend to have higher turnover ratios because their products are sold and replaced quickly compared to luxury or high-value items.

Conclude that grocery stores are expected to have the highest inventory turnover ratio due to the nature of their products (perishable and high-demand), which aligns with the correct answer provided in the problem.