Which of the following inventory principles is defined as "the cost of goods sold divided by average inventory value"?

Question

Periodic automatic replacement
Inventory turnover rate
Economic order quantity
Minimum-maximum

Answer 1

Inventory turnover rate

Rationale: Inventory turnover rate is the cost of goods sold divided by average inventory value. It is used to measure the effectiveness of a business with their monetary and product investments. Few inventory turnovers indicates that the pharmacy has too much inventory on hand. If there is a high number of inventory turnovers, this may indicate there is not enough inventory, resulting in medication outages and poor customer service.