Assume that during the past year a company's inventory had an average cost of $10,000. (This was the average of the amounts in the asset account Inventory and the average of the amounts reported on the balance sheet during the past year.) Also assume that during the year the company has sales of $60,000 and its cost of goods sold was $40,000. On average, the inventory turned over 4 times ($40,000 of cost of goods sold during the year divided by $10,000 the average cost of goods on hand during the year.)
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