Questions: Recall the formula for computing a company's inventory turnover ratio.

The answer is the third one: Inventory turnover = Cost of goods sold/Average inventory.

Explanation for each option:

1. Inventory turnover = Cost of goods sold/Gross profit: This is incorrect. The inventory turnover ratio is not calculated using gross profit. Gross profit is the difference between sales and the cost of goods sold, and it does not directly relate to inventory turnover.

2. Inventory turnover = Merchandise Inventory/Cost of goods sold: This is incorrect. This formula does not represent the inventory turnover ratio. The inventory turnover ratio measures how many times a company's inventory is sold and replaced over a period, which requires the cost of goods sold and average inventory.

3. Inventory turnover = Cost of goods sold/Average inventory: This is correct. The inventory turnover ratio is calculated by dividing the cost of goods sold by the average inventory. This ratio indicates how efficiently a company is managing its inventory.

4. Inventory turnover = Merchandise Inventory/Average inventory: This is incorrect. This formula does not make sense for calculating inventory turnover, as it compares inventory to itself rather than to the cost of goods sold.

In summary, the correct formula for computing a company's inventory turnover ratio is the third option: Inventory turnover = Cost of goods sold/Average inventory.