Question

Inventory Turnover Ratio can be calculated as ______?

Options

• Cost of Goods Sold/Average Stock

• Average Stock/Cost of Goods Sold

• Opening stock/Cost of Goods Sold

• All of the above

Answer 1

Inventory Turnover Ratio can be calculated as Cost of Goods Sold/Average Stock.

Explanation:

It calculates the number of times stock is sold within the accounting period under consideration. It expresses the link between the cost of products sold and the number of goods in stock.

The formula for its calculation is as follows:

Stock Turnover Ratio = Cost of Goods Sold/ Average Stock

Whereas average stock is the arithmetic mean of opening and closing stock, and cost of goods sold is sales less gross profit.