Accounting – 6.1 Calculation and understanding of accounting ratios | e-Consult
6.1 Calculation and understanding of accounting ratios (1 questions)
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Calculation:
Rate of Inventory Turnover = Cost of Goods Sold / Average Inventory
Average Inventory = (Opening Inventory + Closing Inventory) / 2
Average Inventory = (£12,000 + £15,000) / 2 = £13,500
Rate of Inventory Turnover = £90,000 / £13,500 = 6.76 (rounded to two decimal places)
Answer: The rate of inventory turnover for ABC Ltd is 6.76 times.