The ______ measures the activity of a firm's inventory.

Average payment period

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Inventory turnover

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Average collection period

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Current ratio

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Solution

The correct option is B Inventory turnover
Inventory turnover ratio measures the activity of a firm's inventory i.e. the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold divided by the average inventory.

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Similar questions

A trading firm’s average inventory is Rs 20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a profit of 20% on sale, ascertain the profit of the firm.

The ___________ measures the activity of a firm’s inventory.

Q. The current ratio provides a better measure of overall liquidity only when a firm’s inventory cannot easily be converted into cash. If inventory is liquid, the quick ratio is a preferred measure of overall liquidity. Explain.

Q. 80% of sales of 10,00,000 of a firm are on credit. It has a receivable turnover of 8. What is the average collection period (360 days a year) and average debtors of the firm?

Q. Inventory turnover ratio

=

Cost of __________ during the period

\div

Cost of average inventory held during the period.

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The ______ measures the activity of a firm's inventory.

The correct option is B Inventory turnoverInventory turnover ratio measures the activity of a firm's inventory i.e. the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold divided by the average inventory.

The correct option is B Inventory turnover
Inventory turnover ratio measures the activity of a firm's inventory i.e. the number of times inventory is sold or used in a time period such as a year. The equation for inventory turnover equals the cost of goods sold divided by the average inventory.