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28 November, 20:36

Compute the inventory turnover ratio using the following information: Net sales is $100,000 for the year, costs of goods sold are $40,000, last year's assets in place were $900,000, and this year's assets in place are $1,100,000. Receivables for both years are $50,000. Inventory changed from $30,000 last year to $10,000 this year.

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  1. 28 November, 20:41
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    Explanation:

    The formula for calculating inventory turn over:

    Costs of goods sold / average inventory

    In this case:

    Opening stock: $ 30,000.00

    Closing stock: $ 10,000.00

    Costs of goods sold : $ 40,000.00

    Average inventory = Opening stock + closing stock/2

    = $ 30,000 + $ 10,000/2

    =$ 40,000/2

    =$ 20,00.00

    Inventory turnover = $ 40,000.00/$20,000.00

    =2
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