Math Savvy: Selling It! Inventory Turnover Ratio

Abstract

One of the many ratios that businesses use to analyze and improve its profitability is the Inventory Turnover Ratio. The PowerPoint presentation and accompanying Teacher Notes establish the contextual scenario around which the lesson and twelve corresponding problems are built. The lesson follows Nate Smith, a young man who was promoted to Buyer at a music store. In this role, Nate must determine whether or not new sections of the store are selling better or worse than the rest of the store. Students are asked to think about several possible courses of action. The case study walks students through the process of examining sales, comparing sales ratios, converting ratios to percentages, and examining costs and income in a ratio known as the Inventory Turnover Ratio. Students then look at the cost of goods sold on the income statement and calculate quarterly inventory turnover for comparison. Finally, students apply the new knowledge from this case study to other businesses.

Objective

Students will be able to: (1) Practice calculating ratios and percentages; (2) Work with percentages in decimal form; and (3) Apply ratios and percentages to a business case study.

Relation to Career Pathways

The lesson teaches and reinforces mathematics concepts within the context of the Business Management and Administration career cluster.

This teaching resource is part of a collection of contextual math lessons created by CORD Communications through a Small Business Innovation Research project.