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

5. Inventory

Inventory Errors

Financial Accounting

5. Inventory

Inventory Errors

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Multiple Choice

Which of the following companies would most likely have the highest inventory turnover?

A high-end jewelry retailer

A luxury car dealership

A custom furniture manufacturer

A grocery store chain

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Verified step by step guidance

Understand the concept of inventory turnover: Inventory turnover measures how quickly a company sells and replaces its inventory over a given period. It is calculated using the formula:

\frac{Cost of Goods Sold}{Average Inventory}

. Companies with higher inventory turnover sell their products more frequently.

Analyze the nature of the businesses listed: High-end jewelry retailers, luxury car dealerships, and custom furniture manufacturers typically deal with expensive, specialized products that take longer to sell. Their inventory turnover is likely lower because their products are sold less frequently.

Consider the grocery store chain: Grocery stores sell perishable goods like fruits, vegetables, and dairy products, which have a short shelf life. This necessitates frequent inventory turnover to avoid spoilage and meet customer demand.

Compare the inventory turnover characteristics: Grocery stores have the highest inventory turnover because they sell large quantities of goods quickly and restock frequently, unlike the other businesses listed.

Conclude that the grocery store chain is most likely to have the highest inventory turnover due to the nature of its products and the frequency of sales.