If the Financial Statements Show a Trend of Increased Profit

question 30

Multiple Choice

If the financial statements show a trend of increased profit margin combined with an increase in the number of inventory turnover in days, _______.

• A)inventory may be overstated
• B)inventory may be understated
• C)inventory may be becoming obsolete
• D)inventory turnover to payables should increase also

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Definitions:

Natural Monopoly

A market situation in which a single company can provide goods or services at a lower cost than any competitor, often due to economies of scale.

Average Total Cost

The total cost of production divided by the number of units produced, used to analyze cost behaviors in economics.

Producer Surplus

The difference between the amount producers are willing and able to sell a product for and the actual amount they receive, often representing profit.

Total Surplus

The total net gain for society derived from the creation and utilization of goods or services, calculated as the combined value of consumer and producer surplus.