Practice Inventory Turnover Ratio (1.4.3.1) - Ratio Analysis

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9 questions

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6 sample questions

Question 1.
What does the Inventory Turnover Ratio measure?
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Look for what the ratio indicates about sales.
Question 2.
What is the formula for calculating the Inventory Turnover Ratio?
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Remember the acronym 'COGS over AI'.
3Question 3.
What does a higher Inventory Turnover Ratio indicate?
- Lower sales
- Effective inventory management
- Increased costs
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Think about sales performance and inventory efficiency.
4Question 4.
True or False: A low Inventory Turnover Ratio suggests that a company is managing its stock effectively.
- True
- False
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Reflect on the implications of low turnover.
Question 5.
A retail store has COGS of ₹500,000 and an ending inventory of ₹100,000. If the beginning inventory was ₹80,000, what is the Inventory Turnover Ratio?
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Calculate average inventory first!
Question 6.
Explain how a company could improve its Inventory Turnover Ratio.
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Consider operational changes to enhance efficiency.

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