Inventory Turnover Quiz

What does a high inventory turnover rate generally indicate for a business?

• The business is buying more stock than it sells.

• The business is not selling any stock.

• The business is selling its stock quickly.

• The business is holding stock for a longer period.

Which type of business is likely to have a faster inventory turnover?

• A real estate agency

• A furniture store

• A florist

• A car dealership

What is the formula for calculating the inventory turnover ratio?

• Sales revenue divided by average inventory

• Average inventory divided by cost of sales multiplied by 365

• Cost of sales divided by average inventory

• Average inventory divided by sales revenue

How do you calculate the average inventory?

• Divide opening inventory by closing inventory

• Multiply opening inventory by closing inventory

• Add opening and closing inventory, then divide by two

• Subtract closing inventory from opening inventory

In the example of Tom's Tops, what was the average inventory?

• £1,000

• £4,000

• £2,000

• £3,000