
Chris G. answered 09/03/19
Patient and Creative Accounting Tutor
Hi there!
The inventory turnover ratio measures how often you "flip" inventory or sell your goods each year.
Beginning Inventory: 9,000
Ending Inventory: 7,000
Average Inventory (9,000 + 7,000)/2 = 8,000
Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory
Inventory Turnover Ratio = 46,000/8,000
Inventory Turnover Ratio = 5.75
The business "flips" their inventory 5.75 times per year.
Elvira P.
06/18/18