How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:a. Price earnings ratio. b. Accounts receivable turnover. c. Current ratio. d. Inventory turnover. e. Days' sales uncollected.

Question

Business

Alonso Haas

26 January, 12:55

How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:a. Price earnings ratio. b. Accounts receivable turnover. c. Current ratio. d. Inventory turnover. e. Days' sales uncollected.

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Answers (1)

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Kennedi Guerra · Answer 1

d. Inventory turnover

Explanation:

The formula to compute the inventory turnover is shown below:

= Cost of goods sold : average inventory

where,

Average inventory = (Opening balance of inventory + ending balance of inventory) : 2

The inventory turnover should always be expressed in times

Hence, the most appropriate option is d.