Inventory Turnover Ratio
Inventory Turnover Ratio

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Chapter 5 ACGL

University: Miami Dade College

Course: Financial Accounting (ACG2021)

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CHAPTER 5

Chapter 5 S.B. Ratio Analysis

1. Which of the following statements correctly explains what the

inventory turnover ratio assesses.

The inventory turnover ratio assesses how quickly a company is selling its

merchandise.

2. Review the statements below and select the ones that

are correct regarding the days’ sales in inventory ratio. (Check all that

apply.)

The ratio estimates how many days it will take to convert inventory into

accounts receivable or cash.

The ratio is often viewed as a measure of the buffer against out-of-stock

inventory.

The ratio reveals how much inventory is available in terms of the number of

days’ sales.

The ratio is useful in evaluating liquidity of inventory.

3. Recall the four inventory costing methods used to assign costs to

inventory and cost of goods sold under the periodic inventory system.

(Check all that apply.)

Specific identification

First-in, first-out

Last-in, first-out

Weighted average

4. Recall the formula for figuring a company’s inventory turnover ratio.

Inventory turnover = Cost of goods sold/Average inventory

5. Recall the formula for figuring Days’ Sales in Inventory.

(Ending inventory/Cost of goods sold) x 365

6. All of the following are inventory costing methods used under a

periodic inventory system except:

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