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Inventory turnover is computed as cost of goods sold divided by

  • A.average inventory
  • B.closing inventory only
  • C.total assets
  • D.sales revenue

Answer: A

Correct answer: average inventory

Turnover is the number of times the stock is sold and replaced in the year, and it is computed on cost because inventory is carried at cost - using sales revenue would mix a figure including margin with one excluding it. The average is used rather than the closing figure because stock varies through the year.

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