If a Company Recognizes a Loss Due to Inventory Write-Down

question 43

True/False

If a company recognizes a loss due to inventory write-down then the inventory value subsequently increases due to a market reversal the following year, GAAP does not permit the loss to be recovered.

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Definitions:

Treasury Stock

Shares of a company's own stock that it has reacquired from shareholders but not retired, held in the company's treasury.

Net Income

Represents the amount of money that remains from revenues after all the firm's expenses, taxes, and costs are subtracted over a specific period.

Stockholders' Equity

Stockholders' Equity represents the ownership interest of shareholders in a corporation, calculated as the difference between total assets and total liabilities.

Par Value

The nominal or face value of a bond, share, or coupon as stated by the issuer, often used in the context of bonds and stock.