Why Is a Cost Flow Assumption Used

question 119

Multiple Choice

Why is a cost flow assumption used?

• A)This is a systematic method for allocating costs between beginning inventory and ending inventory.
• B)This is a systematic method for allocating costs between cost of goods available for sale and ending inventory.
• C)This is a systematic method for allocating costs between cost of goods sold and ending inventory.
• D)This is a systematic method for allocating costs between cost of goods manufactured and cost of goods sold.

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Definitions:

Security Characteristic Line

A line used in finance to represent the relation between the expected return of a security and the return of the market.

Single-Index Model

A financial model that describes the return of a security or portfolio as a linear function of the return of a single market index, accounting for both the market return and idiosyncratic factors.

Excess Returns

Returns on an investment that exceed the benchmark or risk-free return, indicating the extra value gained by taking on risk.

Index Model

A financial model that describes the return of a stock as a function of the return of a market index, plus residual factors unique to that stock.