Inventory Is Such an Expensive Asset That It May Account

question 74

True/False

Inventory is such an expensive asset that it may account for as much as 50 percent of a firm's invested capital.

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Definitions:

Operating Lease Method

An accounting method for leasing whereby the lease payments are treated as an operational expense, without recording the asset and liability on the balance sheet.

Straight-Line Depreciation

An approach that spreads the expense of a physical asset across its productive lifespan in consistent yearly increments.

Capital Lease

A lease classified as a purchase by the lessee for accounting purposes, as it transfers substantially all risks and benefits of ownership.

Present Value

The value today of a sum of money to be received in the future, or a series of future payments, based on a chosen rate of return.