Inventory Turnover Ratio

Steps:

• Calculate cost of goods sold (COGS): Opening inventory + Purchases - Closing inventory = $15,000 +$180,000 - $18,750 =$176,250.
• Calculate average inventory: (Opening inventory + Closing inventory) / 2 = ($15,000 +$18,750) / 2 = $16,875.
• Compute turnover: COGS / Average inventory = $176,250 /$16,875 = 10.4 times.

Why C is correct:

• Inventory turnover measures how often inventory is sold and replaced, using the formula COGS divided by average inventory, which equals 10.4 times here.

Why the others are wrong:

• A: Divides COGS by closing inventory alone ($176,250 /$18,750 = 9.4), ignoring the average.
• B: Divides purchases by closing inventory ($180,000 /$18,750 = 9.6), using wrong numerator and denominator.
• D: Divides purchases by average inventory ($180,000 /$16,875 ≈ 10.7), skipping COGS adjustment.

Final answer: C