Your year-end purchases total 6,500,300 and year-end inventory is 450,700. Approximately how many inventory turns does this represent?

• A. 14.5 turns
• B. 12.3 turns
• C. 9.8 turns
• D. 18.2 turns

Answer: (A)

Inventory turnover measures how many times inventory is sold and replaced during a period. To estimate turns when only purchases and ending inventory are given, use the approximation that cost of goods sold is close to purchases, and average inventory is close to ending inventory. So you estimate turns as purchases divided by ending inventory. Plugging in the numbers: 6,500,300 divided by 450,700 equals about 14.4, which rounds to 14.5 turns. This reflects how many times the year’s inventory was turned over. If you had the exact beginning inventory and the precise COGS, the value would be a similar figure, but with minor differences.