The correct answer is: B. Cost of Goods Sold
Inventory turnover is a measure of how efficiently a company manages its inventory. It is calculated by dividing the cost of goods sold by the average inventory. The higher the inventory turnover, the more efficiently the company is managing its inventory.
The cost of goods sold is the cost of the goods that a company has sold during a period. It includes the cost of the goods that were purchased, as well as the cost of any labor or overhead that was incurred in producing the goods.
The average inventory is the average of the beginning and ending inventory for a period. It is calculated by adding the beginning and ending inventory and dividing by 2.
The inventory turnover ratio is a useful tool for comparing the efficiency of different companies. It can also be used to track a company’s performance over time. A company with a high inventory turnover ratio is generally considered to be more efficient than a company with a low inventory turnover ratio.
However, it is important to note that the inventory turnover ratio is only one measure of efficiency. Other factors, such as the type of industry and the company’s strategy, should also be considered when evaluating a company’s performance.
Here is a brief explanation of each option:
- Sales: Sales are the total amount of revenue that a company generates from selling its products or services. While sales are important, they do not directly measure the efficiency of a company’s inventory management.
- Opening stock: Opening stock is the value of the inventory that a company has on hand at the beginning of a period. It is important to consider opening stock when calculating inventory turnover, but it is not the only factor that should be considered.
- Closing stock: Closing stock is the value of the inventory that a company has on hand at the end of a period. It is also important to consider closing stock when calculating inventory turnover, but it is not the only factor that should be considered.
In conclusion, the correct answer to the question “In Inventory Turnover calculation, what is taken in the numerator?” is B. Cost of Goods Sold.