If a $36,000 inventory turns three times, what is the required initial investment?

To determine the required initial investment based on the inventory and its turnover rate, you can use the inventory turnover formula. Inventory turnover is calculated as the cost of goods sold divided by the average inventory. In this case, if the inventory has a value of $36,000 and it turns three times, we can derive the initial investment.

First, we recognize that if the inventory turns three times, this implies that the cost of goods sold is three times the average inventory. Specifically, the formula for calculating required initial investment based on turnover is as follows:

Average Inventory = Cost of Goods Sold / Inventory Turnover Rate

In this scenario, we can establish that:

Cost of Goods Sold = Inventory ($36,000) x Turnover Rate (3) = $108,000

Since the turnover rate is three, this indicates that $108,000 of inventory was sold over a specific period, while the average inventory remains at $36,000.

Now, we can calculate the average inventory:

Average Inventory = Cost of Goods Sold / Inventory Turnover Rate = $108,000 / 3 = $36,000

To find the required initial investment, we take the average inventory and divide it by the turnover rate:

Initial Investment = Average Inventory