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

Inventory turnover measures __________.

the ratio of net income to average inventory

the average number of days it takes to collect receivables

the percentage of sales made on credit

how many times a company's inventory is sold and replaced during a period

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Verified step by step guidance

Understand the concept of inventory turnover: Inventory turnover is a financial ratio that measures how efficiently a company manages its inventory by calculating how many times the inventory is sold and replaced during a specific period.

Recognize the formula for inventory turnover: The formula is \( \text{Inventory Turnover} = \frac{\text{Cost of Goods Sold (COGS)}}{\text{Average Inventory}} \). This ratio helps assess the efficiency of inventory management.

Clarify the purpose of inventory turnover: A higher inventory turnover indicates that a company is selling and replenishing its inventory more frequently, which can be a sign of strong sales or efficient inventory management. Conversely, a lower turnover may suggest overstocking or weak sales.

Differentiate inventory turnover from other metrics: Inventory turnover specifically measures the frequency of inventory sales and replacement, unlike metrics such as the average collection period (related to receivables) or the percentage of credit sales (related to sales transactions).

Relate the concept to the correct answer: Based on the explanation, inventory turnover measures how many times a company's inventory is sold and replaced during a period, aligning with the correct answer provided in the problem.