Question

Consider a firm with an annual net income of $20 million, revenue of $60 million and cost of goods sold of $25 million. If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover?

Answer 1

12.5

Step-by-step explanation:

Given: Cost of goods sold= $25 million.

Amount of inventory= $2 million.

Now, finding inventory turnover.

Formula; Inventory turnover=
`(Cost\ of\ goods\ sold)/(Average\ inventory)`

⇒ Inventory turnover=
`(\$ 25\ million)/(\$ 2\ million)`

∴ Inventory turnover=
`12.5`

Hence, inventory turover is 12.5