A Company Purchased Inventory on Credit

question 32

Multiple Choice

A company purchased inventory on credit. The effect of this transaction is that the

• A)earnings per share decreased.
• B)earnings per share increased.
• C)working capital increased.
• D)debt-to-equity ratio increased.

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Definitions:

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its net identifiable assets, representing the value of the company's brand, customer relationships, employee relations, and patents.

Fair Value Enterprise Method

is a valuation approach used to measure the value of a business by assessing the present value of its expected future earnings.

Non-Controlling Interest

The portion of equity interest in a subsidiary not attributable to the parent company, reflecting the minority shareholders' ownership.

Shareholders' Equity

The amount that would be returned to shareholders if all the company's assets were liquidated and all its debts repaid.