For the current year, Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. Cost of goods sold for the year is $240,000. What is the company's inventory turnover ratio?

Question

Business

Denzel Ortega

29 March, 13:27

For the current year, Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. Cost of goods sold for the year is $240,000. What is the company's inventory turnover ratio?

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Answers (1)

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Jamari Colon · Answer 1

Inventory turnover ratio = 4.8

Explanation:

Giving the following information:

Theta Corporation has beginning and ending inventories of $40,000 and $60,000, respectively. The cost of goods sold for the year is $240,000.

The inventory turnover is the number of times the inventory gets replaced in a period.

The formula to calculate the inventory turnover ratio, we need to use the following formula:

Inventory turnover ratio = cost of goods sold / average inventory

Average inventory = (beginning inventory + ending inventory) / 2

Average inventory = (40,000 + 60,000) / 2 = 50,000

Inventory turnover ratio = 240,000/50,000 = 4.8