Cromwell Company Began the Year with a Balance in Inventory

question 114

Multiple Choice

Cromwell Company began the year with a balance in inventory of $110,000 and ended the year with a balance of $102,000.The net sales for the year were $983,000 with a gross profit on sales of $295,000.The inventory turnover ratio is closest to:

• A)2.78
• B)9.27
• C)6.49
• D)2.89

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Definitions:

Days To Sell

An estimate of the average number of days it takes for a company to sell its inventory.

Inventory

A complete list of items such as property, goods in stock, or the contents of a building.

Times Interest Earned Ratio

The times interest earned ratio is a financial metric used to measure a company's ability to meet its debt obligations by comparing its income before interest and tax (EBIT) to its interest expenses.

Interest Expense

The cost incurred by an entity for borrowed funds over a period of time.