When Inventory Is Valued at the Lower of Cost or Market,the

question 45

Essay

When inventory is valued at the lower of cost or market,the accountant is applying the principle or convention called ___________________.

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Definitions:

Return On Investment

A measure of the profitability and efficiency of an investment, calculated as net profit divided by the cost of the investment.

Invested Assets

Assets that have been purchased or acquired for the purpose of generating income or profit, not for immediate resale.

Minimum Return

The lowest acceptable rate of return on an investment that a manager or investor is willing to accept.

Residual Income

Residual income is the amount of net income generated in excess of the minimum rate of return. It's often used to assess the performance of business units.