The inventory turnover calculation: is wrong unless cost of goods sold is used i

Question

The inventory turnover calculation:

is wrong unless cost of goods sold is used in the numerator

is wrong unless sales is used in the numerator.

is an alternative way of expressing the number of days' sales in inventory

requires knowledge of the inventory cost flow assumption being used

is wrong unless cost of goods sold is used in the numerator

is wrong unless sales is used in the numerator.

is an alternative way of expressing the number of days' sales in inventory

requires knowledge of the inventory cost flow assumption being used

Explanation / Answer

Solution:

The answer to the above question is -

a.is wrong unless cost of goods sold is used in numerator.

Formula for Inventory turnover = Cost of goods sold / Average inventory.

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