14. Big Four Lumber store has an average finished-goods inventory of $36,318 million. If Big Four cost of goods sold is $307, 646 million/year, what is its annual inventory turmover?
Expert Answer
Annual inventory turnover can be defined as:
Inventory Turnover = Net Sales/ Average Inventory
Or
Inventory Turnover = Goods sold cost / Average Inventory
The inventory turnover signifies many things and those are:
Reduces holding cost
Reduction in holding cost is directly proportional to increase in revenue and profit
Low turnover time means a case of overstocking
In given case;
Goods sold/ year: USD 307,646 million
Avg. finished goods inventory: USD 36,318 million
Therefore, as per the formula
Inventory
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