Supply Chain Manager Exam Prep

Answer: A - One of the component measures used in computing the inventory turnover ratio is average inventory. The average inventory of a company is calculated by dividing the sum of the current level of inventory and the level of the beginning inventory by 2. For example, if an inventory at the beginning of the relevant financial period was $50,000 and inventory at the end of the financial period was $30,000, average inventory would be equal to $40,000: ((50,000 + 30,000) / 2 = 40,000).