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The two-factor theory states that
Ending Inventory
The value of goods available for sale at the end of an accounting period, crucial for calculating cost of goods sold and gross profit.
Pretax Income
The income that a company earns before tax expenses are deducted, often referred to as earnings before tax (EBT).
Understatement
The act of presenting financial figures that are lower than the actual numbers, either intentionally or unintentionally.
LIFO Reserve
The difference in inventory valuation between the Last In, First Out (LIFO) method and another inventory accounting method, such as FIFO (First In, First Out).
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