Inventory Turnover Ratio is:
AAverage Inventory / Cost of Goods Sold
BCost of Goods Sold / Average Inventory
CSales / Total Assets
DWorking Capital / Sales
Answer & Solution
Correct answer: B. Cost of Goods Sold / Average Inventory
1. Inventory Turnover = Cost of Goods Sold (or Sales) / Average Inventory.
2. Average Inventory = (Opening + Closing) / 2.
3. Higher ratio = faster inventory movement = good liquidity.
_Source: ICAI BoS CA Inter Paper 6A, Ch 3 "Financial Analysis and Planning — Ratio Analysis", §3.3(i)_
Related questions
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