Question

Crane Corp. has a gross profit margin of 30.00 percent, sales of $36,000,000, and inventory of $15,000,000. What is its inventory turnover ratio? (Round answer to 2 decimal places, e.g. 15.25.)

Answer 1

Answer:

Crane Corp.'s inventory turnover ratio is 1.68 times

Explanation:

Inventory turnover ratio an efficiency ratio that indicates how many times a company sells and replaces its stock of goods during a particular period

Inventory turnover ratio is calculated by using following formula:

Inventory turnover ratio = Cost of Goods Sold/Inventory

Crane Corp. has a gross profit margin of 30.00 percent.

Gross profit margin = Gross Profit/ Sales = (Sale - Cost of Goods Sold)/Sales

Cost of Goods Sold = Sales - Gross profit margin x Sales = $36,000,000 - $36,000,000 x 30% = $25,200,000

Inventory turnover ratio = $25,200,000/$15,000,000 = 1.68 times