Chartered Financial Analyst Level 1

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Explanation:

Under IFRS, inventories must be measured at the lower of cost and net realizable value. For Year 1, the inventory value is €80 million (lower of €90 million and €80 million), and for Year 2, it is €100 million (lower of €100 million and €120 million). The inventory turnover ratio is calculated as:

$\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$

For Year 2: $\text{Average Inventory} = \frac{100 + 80}{2} = 90$ $\text{Inventory Turnover} = \frac{600}{90} \approx 6.7$

Thus, the correct answer is C (6.7). This aligns with the requirement to measure inventory at the lower of cost and net realizable value, impacting financial ratios and statements.

Explanation:

$\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}$

For Year 2: $\text{Average Inventory} = \frac{100 + 80}{2} = 90$ $\text{Inventory Turnover} = \frac{600}{90} \approx 6.7$

Thus, the correct answer is C (6.7). This aligns with the requirement to measure inventory at the lower of cost and net realizable value, impacting financial ratios and statements.

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An analyst collects the following data (in € millions) for an automobile manufacturer's inventory: Year 2 Year 1 Cost of goods sold 600 700 Cost of inventory 100 90 Net realizable value of inventory 120 80 The inventory turnover ratio (using average inventory) for Year 2 is closest to:

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Last updated: March 3, 2026 at 14:05

6.0

26.3%

6.3

36.8%

6.7

36.8%