Inventory Turnover measures the relationship of inventory with:

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. A high inventory turnover ratio indicates that a company is selling its inventory quickly and efficiently, while a low inventory turnover ratio indicates that a company may be holding onto inventory for too long.

Average sales is not a good measure of inventory turnover because it does not take into account the cost of goods sold. Total purchases is also not a good measure because it includes both the cost of goods sold and the cost of goods purchased for resale. Total assets is not a good measure because it includes all of a company’s assets, not just its inventory.

Here is a more detailed explanation of each option:

• A. Average Sales
  Average sales is the total sales of a company divided by the number of months in the period. It is a measure of the company’s sales activity over time. However, average sales does not take into account the cost of goods sold. Therefore, it is not a good measure of inventory turnover.

• B. Cost of Goods Sold
  Cost of goods sold is the cost of the goods that a company sells. It is calculated by taking the beginning inventory, adding the cost of goods purchased, and subtracting the ending inventory. Cost of goods sold is a good measure of inventory turnover because it is the cost of the goods that a company has sold.

• C. Total Purchases
  Total purchases is the total amount of goods that a company has purchased. It is calculated by taking the beginning inventory, adding the purchases, and subtracting the ending inventory. Total purchases is not a good measure of inventory turnover because it includes both the cost of goods sold and the cost of goods purchased for resale.

• D. Total Assets
  Total assets is the total value of a company’s assets. It is calculated by taking the sum of the company’s current assets, fixed assets, and intangible assets. Total assets is not a good measure of inventory turnover because it includes all of a company’s assets, not just its inventory.