Question : What formula is used to compute the inventory turnover ratio?
Option 1: Cost of Revenue from Operations/Average Inventory
Option 2: Average Inventory/Cost of Revenue from Operations
Option 3: Average Inventory/Revenue from Operations
Option 4: Gross Profit/Average Inventory
Answer (1)
8th Jan, 2024
Correct Answer: Cost of Revenue from Operations/Average Inventory
Solution :
The cost of Revenue from Operations divided by Average Inventory is the inventory turnover ratio. It shows how many times the stock converts to sales during the course of the accounting quarter.
Hence option 1 is the correct answer.
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