A company has cost of goods sold of Rs. 1,200,000 and average inventory of Rs. 300,000. What is its inventory turnover ratio?
Correct answer: C. 4 times
- A. 2 times
- B. 3 times
- C. 4 times
- D. 5 times
Explanation
Inventory turnover is calculated by dividing cost of goods sold by average inventory. Rs. 1,200,000 divided by Rs. 300,000 gives a turnover of 4 times.
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About Business Finance
Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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