Why Are Inventories Reported at the Lower of Cost and Market

question 31

Multiple Choice

Why are inventories reported at the lower of cost and market?

• A)Neutrality.
• B)Matching.
• C)Conservatism (prudence).
• D)Comparability.

---

Definitions:

Total Assets Turnover

A financial ratio that measures how effectively a company uses its total assets to generate sales revenue.

Net Working Capital

The difference between a company's current assets and current liabilities, indicating its short-term financial health.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within a year's time, such as cash, inventory, and receivables.

Current Liabilities

Short-term financial obligations that a company owes and is expected to pay within one year or its operational cycle, whichever is longer.