Some Analysts Calculate the Inventory Turnover Ratio by Dividing Sales

question 68

True/False

Some analysts calculate the inventory turnover ratio by dividing sales, rather than cost of goods sold, by the average inventory.Using sales in the numerator will lead to correct measures of the inventory turnover ratio for calculating the average number of days that inventory is on hand until sale.

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Definitions:

Objective

A specific, measurable, attainable, relevant, and time-bound goal that an individual or organization aims to achieve.

Price Increases

Price increases refer to the action of raising the cost at which goods or services are sold, often in response to factors like inflation, increased production costs, or higher demand.

Price Decreases

A reduction in the cost at which goods or services are sold to consumers or businesses.

Consumers

Individuals or organizations that purchase or use goods and services for personal use or consumption.