Accountancy Part BAccounting Ratios

Which of the following studies the frequency of conversion of invento…

Which of the following studies the frequency of conversion of inventory of finished goods into revenue from operations.

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Inventory Turnover

NCERT (2026-27 edition):
Inventory Turnover Ratio – “… Significance : It studies the frequency of conversion of inventory of finished goods into revenue from operations. It is also a measure of liquidity. It determines how many times inventory is purchased or replaced during a year. Low turnover of inventory may be due to bad buying, obsolete inventory, etc., and is a danger signal.”