If the Ending Inventory Balance Was Overstated on the Financial

question 73

Multiple Choice

If the ending inventory balance was overstated on the financial statements and the beginning inventory balance was understated, but all other items were properly reported, the calculated inventory turnover ratio would be:

• A)unaffected by these errors.
• B)too low.
• C)too high.
• D)indeterminable with the information given.

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Definitions:

Profit-maximizing Rule

A principle guiding businesses to set their output and prices at levels where marginal cost equals marginal revenue to maximize profit.

Cost-minimization Rule

A principle suggesting that firms seek to produce any given level of output at the lowest possible cost.

Wage Increase

An upward adjustment in wages or salaries, often to match inflation, improve living standards, or reward performance.

Labor Demand

The total amount of workers that employers are willing and able to hire at given wages over a certain period.