Decreasing Inventories Leads to a Reduction in Return on Investment

question 29

True/False

Decreasing inventories leads to a reduction in return on investment (ROI).

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Definitions:

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income.

Net Income

The amount of earnings remaining after all expenses, including taxes and operational costs, have been deducted from total revenue; a measure of company profitability.

Revenues

The amounts earned and recorded from a company’s day-to-day business activities, mostly when a company sells products or provides services to customers or clients.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its owners as dividends.