Accounting Ratios Stock Turnover Quiz Explained
So, do you know how to calculate or arrive at stock turn over? This quiz can let you develop a general understanding of inventory turnover rate.
Understanding Inventory Turnover or Stock Turnover
Stock Turnover is calculated by dividing Cost of Goods Sold with Average Inventory, it is an accounting ratio that measures the number of times the stock is sold over a certain period.
The Solution & Explanation of Stock Turnover Quiz
In this quiz we have given cost of Goods sold amount $6,500. We have to arrive at an Average stock (inventory) amount first before we can calculate the inventory turnover.
Simply Average inventory can be calculated by dividing the sum of Opening Stock & Closing stock by 2.
(Opening Stock + Closing Stock ) / 2 = ($1000+1500)/2 =$1250.
Now we can find the stock turnover rate,
Stock Turnover = Cost of Goods Sold / Average Stock
Stock Turnover= $6500/1250=5.2
So, the correct answer of this stock turnover accounting ratios quiz is 5.2. This means the average inventory has been sold approximately 5.2 times during a period of business.