Question

Bosh Heat Incorporated has a gross profit margin of 23.00%. It has sales of $792,590.00, and a current inventory level of $293,110.00. What is its inventory turnover ratio?

Answer 1

Answer:

2.08 times

Explanation:

The computation of the inventory turnover ratio is shown below:

Inventory turnover ratio would be

= Cost of goods sold ÷ average inventory

where,

Cost of goods sold = Sales × cost of goods sold percentage

                                = $792,590 × 77%

                                = $610,294.30

As we know that

Cost of goods sold = Sales - gross profit

                                = 100 - 0.23

                                = 0.77

We assume the sales to be 100

So, the ratio would be

= $610,294.30 ÷ $293,110

= 2.08 times